CompanyINTRODUCTION TO CONTRACT ASPECTS
Business or personal contracts in English law are legally binding agreements between two parties who agree to comply with the obligations that are set in the terms and conditions of the contract through mutual consent. There are different types of contract formation which depend on the availability of two parties. The following report is carried out to understand the significance of essential elements of contracts and the impact of different types of contracts in legal terms. The report also includes case examples to explain the various liabilities in the contract.
TASK 1: ESSENTIAL ELEMENTS OF A VALID CONTRACT
1.1 Importance of essential elements in the formation of a valid contract
A contract is considered an agreement that gives rise to a set of obligations which are enforced by the law to be fulfilled by both parties. The basic elements of the contract are agreement, contractual intention and consideration which are required to be fulfilled with the valid formation of a contract in legal terms. The significance of elements is described as follows -
Offer - It is the willingness of one party to enter into a contract on specified terms with the other. It is made with the intention that it is binding after being accepted by the party or person to whom it is addressed. The offer can be made to a single person or maybe a group of people as well as the business or world (Mondal, 2014).
Acceptance - In order to complete the agreement, it is just that the offer is accepted in its original form. Acceptance from the other party can be in the form of writing or an act. But in case, the other party give additional terms and conditions on top of the original offer, it is then considered a counteroffer which discards the original offer.
Consideration - The consideration element refers that each party in the contract agrees or promises to do something in return. A valuable consideration consists of interest, profits, rights accruing to the other party or some form of losses that are suffered by the other party ((Thomas v Thomas)(1842) 2 QB 851). It is important that consideration must be sufficient to put forward in order to be legally recognized by the court (Riley, 2012).
Contractual Intention – It is already mentioned in the acceptance element that an offer must be made with the intention that it will be binding upon acceptance. It is here essential that all parties in agreement have an intention to enter into legal relations. It can be said that parties agree to accept the legal consequences that are attached to the agreements. In other words, parties are very well aware of the fact that the agreement is legally binding with recourse to an external party i.e. court. It is thus required that parties to the agreement must intend to enter into a legally binding agreement. This may be rarely considered explicitly but usually concluded from the situations in which the agreement has been made (Appleman, Appleman and Holmes, 2013).
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1.2 Impact of different types of contract
Contract formation can take many forms depending on the consent and mutual agreement between the parties.
Face to Face Contract - This form takes place when both parties of the contract are present in front of each other and agree to the terms and conditions to enter into a legally binding agreement (Deaki and et. al., 2007).
Written Contract - The terms and conditions of the contract are written in precise form and are understood and signed by both parties. The agreement includes terms, conditions, and clauses of the
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