Task 1 (a)
Now, Mr Alpha Locksmith has asked you to prepare a factsheet for a new client where you need to explain the importance of the essential elements required for the formation of a valid contract.
A contract may be defined as an agreement between two or more parties, but it is not just an agreement, it is composed of 5 more elements.
In order for the contract exist, it must have an offer, acceptance, consideration, intention to create legal relation, certainty and capacity.
The first requisite of a contract is an agreement; it consists of an offer and acceptance. The offeral makes the offer and the offeree is free to accept or reject it.
An offer is something that invites you to make an offer. It is capable of acceptance but an invitation to treat is not.
An offer can be made to one individual or to a group of people or even the whole world. It can be expressed as oral, written or implied. It can be terminated, as the offeral can take back his/hers offer. The offer can be revoked any time before an acceptance happen, even if the offeral says that he will keep it open for a period of time. (Routledge v Grant)
The Revocation must be communicated to the offeree (RuClake Case). It was only effective when the revocation was notice to ready about it. (Byrne v Van Tienhoven).The Revocation can be communicated by the offeral or a reliable third party.
Invitation to treat
An invitation to treat is declaration of the intention into the negotiation. It is not an offer, so it cannot be accepted or rejected. An agreement is not created if there is an acceptance of the invitation to treat.
In Fisher v Bell (1960), the defendant was accused of selling limitation of offensive weapons – flick knife. The plaintiff claimed that the knife is placed a price tag of the window. The court held, in a similar way to Partridge v Crittenden (1968), that this was an invitation to treat, rather than an offer, and hence the defendant was not guilty.
Only what is offered can be accepted. So the offer must be accepted exactly as it is offered, without any negotiation. If the offeree try to negotiate the offer, than the offer is considered as a counter offer which can be accepted or rejected by the offeral.
There may have many offers and counter offers before an agreement happen. The acceptance of the offer is very important as it brings the negotiation to an end. When the negotiation ended then we can set up the terms and condition of the contract. An acceptance can be written, oral or inferred by action.
The acceptance must be reader and followed by the terms and conditions of the offeree. If the offeree rejects the offer it is the end of it.
The postal rule is where the offeree accepts by post, the acceptance is complete by the moment he posts.
To protect himself; the offeral can insist that he has notice in writing. This means that even if the offeree accepts by post, the acceptance is not completed on posting, but is completed when the offeror reads it. (Household fire insurance v Grant, Holwell Securities v Hughes)
INTENTION TO CREATE LEGAL RELATION
A contract requires that both parties have the intention of a legal agreement. They must intend to create legal relations and understand that the agreement can be enforced by law. A legal agreement is only forced when the contracting parties is deemed by court.
On Mr John Case, shows the intention to create legal relations when he decided to do some window shopping at SOGO.
A good contract is made up of a valuable consideration. The consideration value consists of benefits of value, it is usually the payment of money but can be anything else of value including promise or refrain from exercising some right.
An example is when a party promise to the other of doing something valuable instead of paying with money. The second party may consider it. The courts usually do not intervene when a payment is not fair enough; unless happens fraud.
Roscorla and Thomas contracted to buy a horse for £30. After the sale, Thomas promised Roscorla that the horse was sound; the horse turned out to be vicious. It was held that Roscorla could not enforce the promise, as the consideration given for entering into the contract to buy the horse had been completed by the time the promise was made; in a sense, the consideration was “used up”.
People who have an agreement are expected to be capable of doing a contract. Usually people over 18 are considered to have full capacity to enter into contracts. Because they must be aware of what they are doing in making the contract, so if they are drunk at the time the contract could be set aside.
The law also provides special protection for those who have limitations, as a mental disability.
The age of majority is 18 years (Family Law Reform Act 1969 s 1); and the contractual incapacity of minors was much reduced by the Minors’ Contracts Act 1987.
At this stage I can conclude saying that is not easy to create a contract, it requires knowledge and understanding. Before doing a contract you need to understand the objectives of it. But following the law conditions you can do a great contract.
Task 1 (b)
Mr Alpha Locksmith has asked you to discuss the impact of different types ofcontract in a factsheet on types of terms of a valid contract with focus on:
– Types of contract; face-to-face, written, distance selling and impact
The terms are the statement of a contract. The term can be oral, written or by conduct. It can be classified in two ways: implied or express terms and conditions or warranties.
Express terms are terms which have been agreed to orally, by writing or by conduct. It is in contrast with implied terms, which are terms that are assumed. Factors of assumption can be from the industrial general practises, Parliament or the Court. The Courts and Parliament usually look at SOGA 1979, especially Section 12,13 and 14 for implied terms of the contract.
Implied terms are usually terms that has being not agreed between the parties, this type of term is usually implied by the courts and parliament. Examples of implied terms are:
At the case of Liverpool City Council v Irwin  AC 239 shows an example where the terms of the contract is applied by the courts.
Case Study: Liverpool city council owned a block of flats in which the defendant was a tenant. The common parts of the flats, the lifts, stair cases, rubbish chutes etc., had fallen into disrepair. A rent strike was implemented by many of the tenants including the defendant. The council sought to evict the defendant for non-payment of rent and she counter claimed for breach of an obligation to repair. However, the tenancy agreement did not mention any obligation to repair. In fact the tenancy agreement only imposed obligations on the tenant with no mention of the obligations of the landlord. The defendant asked the court to imply a term that the council had an obligation to repair the common parts of the block of flats.
At this example, the courts did imply a term. The implied term arose as a legal incident in contracts of a defined type between landlord and tenant that the landlord was to take reasonable care to maintain the common parts. However, there was no breach of this duty.
There was nothing stated at the contract, the landlord at this example only applied terms that was beneficial to him and not to the tenants. The warranty wasn’t at the contract but the court has the right to imply terms into the contract if there is reasonable and unexpected actions occurring between parties. There is not how to have a breach of duty as there was nothing stated there and the tenants agreed with it, but it wasn’t reasonable under the law.
Terms of a contract can also be conditional or of warranties. Breach of condition allows the party to claim for damages and terminate the contract. Breach of warranties only allows the party to claim for damages. The distinction between them is at the Court’s decision by looking at the importance of the term of the contract. Sometimes Parliament decides by way of status such as SOGA 1979, that a term is a condition.
Parliament when the contract was made between parties of unequal bargaining positions. It needs to pass the Parliament’s control by looking at status and then the Court’s strict interpretation and incorporation controls before it could be consider valid.
An example is the Case of Esso Petroleum v Mardon  QB 801 Court of Appeal
Mr Mardon entered a tenancy agreement with Esso Petroleum in respect of a new Petrol station. Esso’s experts had estimated that the petrol station would sell 200,000 gallons of petrol. This estimate was based on figures which were prepared prior to planning application.
The planning permission changed the prominence of the petrol station which would have an adverse effect on the sales rate. Esso made no amendments to the estimate. The rent under the tenancy was also based on the erroneous estimate. Consequently it became impossible for Mr Mardon to run the petrol station profitably. In fact, despite his best endeavours the petrol station only sold 78,000 gallons in the first year and made a loss of £5,800.
The Court of Appeal held that there was no action for misrepresentation as the statement was an estimate of future sales rather than a statement of fact. However, the claimant was entitled to damages based on either negligent misstatement at common law or breach of warranty of a collateral contract. Order Now