4ContractFormationandcontent2011.pptVIP

Contract Formation and Content Helen Gubby Definition Not all agreements are contracts. A contract is: An agreement between two or more parties that is legally enforceable; It generates legally recognized rights and obligations. The Form of a Contract Simple Contracts: can be written, oral or partly written and partly oral But certain types of contracts must be in writing - a deed to transfer land - hire purchase - transfer of shares - transfer of copyright - bills of exchange Formation of a Contract For the formation of a contract, 3 elements must be present: Agreement consisting of offer and acceptance; Intention to create a legally binding relationship; Presence of consideration. Offer The offer must be unequivocal It must be communicated The terms of the offer must be certain The offer must not have terminated Note: compare the use of ‘firm offer’ in English law, the American UCC and Dutch law. Offer v Invitation to Treat An invitation to treat is not an offer. It is merely a step in negotiations. For example, a price list circulated by a wine company. An invitation to tender is usually classed as an invitation to treat. It invites people to say how much they would charge. When a person responds by making a tender, that is an offer. Acceptance There must be unconditional assent to all the terms of the offer. Otherwise it is not acceptance but a counter offer: Hyde v Wrench 1840 Note: the American UCC deviates from this classic common law position. The ‘battle of the forms’: the situation Butler offered to sell a machine tool for ￡75,000, delivery in ten months. Its standard terms contained a price variation clause. Excell agreed to buy, but replied using its own standard contract, stating the sale was on its conditions. The Excell conditions did not allow price variation. Ten months later, the machine tool was delivered and accepted. The ‘battle of the forms’ Where parties use standard forms for contracting, whose conditions govern the contr