Formation of a valid contract
3. Law of Contract – Formation of a Valid Contract
Key Elements of a Contract
- Offer – A clear, definite proposal (like a menu card at a restaurant). 🤝
- Acceptance – An unequivocal agreement to the offer (the waiter taking your order). 📋
- Consideration – Something of value exchanged (money for a book). 💸
- Intention to Create Legal Relations – Parties must intend the agreement to be legally binding (not a casual promise to meet for coffee). ☕️
- Capacity – Parties must be legally able to contract (not minors or mentally incapacitated). 👶
- Consent – Agreement must be free from mistake, duress, undue influence or misrepresentation. 🧠
- Formalities – Some contracts must be in writing (e.g., land sales). 📝
1. Offer
An offer is a clear, definite statement that shows the offeror’s intention to be bound by the terms if accepted. Think of it as a “ticket” you give to the court: once you hand it over, the court will enforce it if the other party accepts.
- Must be communicated to the offeree.
- Can be revoked before acceptance.
- Can be terminated by counter‑offer or rejection.
2. Acceptance
Acceptance must be:
- Unconditional and unequivocal.
- Communicated to the offeror (or through conduct).
- Made within the time specified or, if no time, within a reasonable period.
Analogy: If the offer is a “pizza order,” acceptance is the waiter confirming the toppings and size.
3. Consideration
Consideration is the “price” paid by each party. It can be:
- Money, goods, services, or a promise to do or not do something.
- Must be sufficient but need not be equal.
- Cannot be based on a past act.
Example: You give your bike to a friend for their promise to help you move next week.
4. Intention to Create Legal Relations
Most commercial agreements automatically carry this intention, whereas social or domestic agreements usually do not unless stated otherwise.
Analogy: A business contract is like a signed contract for a school project, while a promise to share a snack is a friendly gesture.
5. Capacity
Capacity means the legal ability to contract:
- Minors (under 18) generally lack capacity, except for necessities.
- People with mental incapacity cannot contract.
- Corporate bodies must act through authorized representatives.
6. Consent
Consent must be:
- Free from mistake (about the subject or terms).
- Free from duress (physical or economic pressure).
- Free from undue influence (exploiting a relationship).
- Free from misrepresentation (false statements).
Exam tip: Identify the type of mistake or duress in case studies.
7. Formalities
Some contracts must be in writing to be enforceable (e.g., land, marriage, certain consumer contracts). The Statute of Frauds is the main source.
Example: A lease longer than 12 months must be written.
| Element | Key Points | Exam Tip |
|---|---|---|
| Offer | Clear, communicated, revocable before acceptance. | Check if the offer was actually communicated. |
| Acceptance | Unconditional, communicated, within time. | Look for counter‑offers or partial acceptance. |
| Consideration | Something of value, sufficient, not past. | Identify what each party gave or promised. |
| Intention to Create Legal Relations | Commercial = yes, social/domestic = no unless stated. | Determine the context of the agreement. |
| Capacity | Minors, mentally incapacitated, corporations. | Check age or mental state of parties. |
| Consent | No mistake, duress, undue influence, misrepresentation. | Identify any pressure or false statements. |
| Formalities | Written requirement for certain contracts. | Check if the contract type requires writing. |
Examination Tips
- Read the question carefully to identify the type of contract (commercial, domestic, etc.).
- Use the checklist of elements to structure your answer.
- Show cause and effect – explain why each element is necessary.
- Include analogies or examples to demonstrate understanding.
- Keep your answer concise and focused – aim for 200–250 words.
Revision
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