LO1: Understand the essential LO1: Understand the essential

elements of a valid contract in elements of a valid contract in elements of a valid contract in elements of a valid contract in
a Business Context a Business Context
By: Ananta Kar By: Ananta Kar
Email: anantakar@rocketmail.com Email: anantakar@rocketmail.com
Essential Elements of a valid contract Essential Elements of a valid contract
Essential Essential elements elements:: Offer Offer and and acceptance acceptance;;
intention intention to to create create legal legal relations relations;;
consideration consideration;; capacity capacity;; privity privity of of contract contract
Types Types of of contract contract:: face face to to face face;; written written;; Types Types of of contract contract:: face face to to face face;; written written;;
distance distance selling selling;; impact impact
Types Types of of terms terms:: condition condition;; warranty warranty;;
innominate innominate term term;; express express;; implied implied;; exclusion exclusion
clauses clauses and and their their validity validity
18/12/2013 2
Outcomes and assessment criteria Outcomes and assessment criteria
Learning outcomes
On successful completion of
this unit a learner will:
Assessment criteria for pass
The learner can:
LO1: Understand the essential
elements of a valid contract
in a business context
1.1 explain the importance of the
essential elements required for the
formation of a valid contract
in a business context
1.2 discuss the impact of different
types of contract
1.3 analyse terms in contracts with
reference to their meaning and
effect
2/25/2005 3
What is a What is a contract contract
A contract may be defined as an agreement A contract may be defined as an agreement
which legally binds the parties which legally binds the parties
2/25/2005 4
Essential Elements of a valid contract Essential Elements of a valid contract
Agreement Agreement::
The The first first essential essential feature feature of of aa contract contract is is
that that the the parties parties have have made made an an agreement agreement..
This This usually usually determined determined by by the the rules rules of of
Offe Offer r and and acceptance acceptance.. Offe Offer r and and acceptance acceptance..
Consideration Consideration
The The second second essential essential element element is is the the
agreement, agreement, or or the the obligations obligations assumed assumed by by
each each party, party, must must be be supported supported by by
consideration consideration from from the the other other party party
2/25/2005 5
Essential Elements of a valid contract Essential Elements of a valid contract continued.. continued..
The The principle principle is is that that the the parties parties to to aa contract contract
must must each each provide provide something, something, whether whether
money, money, the the provision provision of of aa service service or or some some
other other form form of of contribution contribution to to the the contract contract
Intention to create legal relations: Intention to create legal relations:
The last essential element is that the parties The last essential element is that the parties
to the agreement intend that their promises to the agreement intend that their promises
be legally binding be legally binding
2/25/2005 6
Void Contract Void Contract
An An agreement agreement to to carry carry out out an an illegal illegal act act is is an an
example example of of aa void void contract contract or or void void
agreement agreement..
For For example, example, aa contract contract between between drug drug
dealers dealers and and buyers buyers is is aa void void contract contract simply simply dealers dealers and and buyers buyers is is aa void void contract contract simply simply
because because the the terms terms of of the the contract contract are are illegal illegal..
In In such such aa case, case, neither neither party party can can go go to to court court
to to enforce enforce the the contract contract..
2/25/2005 7
Validity Factors Validity Factors
Form Form:: Written Written or or Oral Oral
Genuine Genuine Consent Consent:: Misled Misled into into aa contract contract
Capacity Capacity:: Limited Limited capacity capacity to to enter enter into into the the
contract contract ii..e e.. minors minors
Content Content:: Contract Contract must must be be complete complete and and Content Content:: Contract Contract must must be be complete complete and and
precise precise in in its its term term
Legality Legality:: The The courts courts will will not not enforce enforce aa
contract contract which which is is deemed deemed to to be be illelgal illelgal or or
contrary contrary to to public public policy policy
2/25/2005 8
Privity of Contract Privity of Contract
If you dont provide consideration, you If you dont provide consideration, you
cannot sue on the contract. This is the cannot sue on the contract. This is the
critical rule in contract law, and reflects the critical rule in contract law, and reflects the
fact that consideration is essential fact that consideration is essential
Case Study Case Study- - Page 90 Page 90 Case Study Case Study- - Page 90 Page 90
2/25/2005 9
Conditions, warranties & Innominate terms Conditions, warranties & Innominate terms
http://www.e http://www.e- -
lawresources.co.uk/Conditions, lawresources.co.uk/Conditions,- -warranties warranties- -
and and- -innominate innominate- -terms.php terms.php
2/25/2005 10
Thank You Thank You Thank You Thank You
2/25/2005 11