English Law of Contract: Theory and Examples

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Table of Contents

Requirements of a Legally Valid Contract
Terms, Representation, Warranties, and Intermediate Terms in contracts
Rules of Privity and Capacity to Contract
References

Requirements of a Legally Valid Contract

Unilateral and Bilateral Contracts and their Formation

A contract is either unilateral or bilateral. Bilateral contracts involve making a legally binding agreement between two people or groups of persons. Under bilateral contracts, one party promises a given action on precondition of execution of a given action by the second party. For unilateral contracts, only a single party to a contract gives promises. An example of this contract involves a promise by a party A to a party B to pay a reward when party B does something for party A, for example, finding a stolen item. Under unilateral contracts, offers can be made to the world (Adams 2). This means that Party B may be known or unknown to Party A. The case of Georgette telling a police officer that she would pay a reward amounting to £ 50.00 after finding her painting amounts to unilateral contract if such a promise was made when the painting was still missing, with the consideration being provided for in the communication of the offer. This means that the finding of the painting preludes the obligation for paying the reward without the necessity of proof of offer acceptance.

Requirements for Offer, Acceptance, Consideration, and Intent

In common law, contracts arise from the creation of a legally binding agreement, evidence of contractual intention, and the existence of consideration in an agreement that is purported to constitute a contract. Not all agreements between two parties amount to a contract. For an agreement to constitute a contract, there must be evidence of existence of an offer and offer acceptance in the agreement. Offer encompasses “an expression of willingness to contract on specified terms with the intention that it is to be binding once accepted by the person to whom is addressed” (Adams 3). The 125 lots presented by Felix in the auction auditorium amount to an offer. It also implies the intent to enter contractual terms with successful bidders.

Any amounts quoted by the potential buyers are offers, which Felix, through his appointed agents, can choose to accept or not based on the price (considerations) provided for by the bidder. For instance, when Georgette promises to buy lot 69 at £85.00 and lot 70 at £45.00, such a promise amounts to a legally binding bilateral contract entered between Georgette and Felix through Felix’s appointed agent. The validity of this contract is akin to the fact that an offer was made, accepted, and sale price (consideration) agreed. However, this contract becomes fully executed when Georgette pays for the two lots as promised when Felix delivers the lots to Georgette as promised.

Although Georgette is the highest bidder for the lot 68 (£650.00), this does not mean that he has entered a contract for the sale of the lot with Felix through his appointed agent. As claimed before, this tender is merely an offer to purchase lot 68. As Marrs claims, similar to other sale agreements through action banging of the gavel on the table, this context marks the acceptance of the offer made by the bidder. Hence, now, no acceptance is made for sale of lot 68 at the price (consideration) offered by Georgette. No contract exists between the two parties. Georgette is perhaps aware of non-existence of a contract to purchase lot 68 when she approaches Felix with an offer for £800. Stating that he would think about the offer implies that Felix intends to sell the painting through a legally binding agreement. However, this condition is not sufficient to imply acceptance of the offer of £800. In fact, a letter sent to Georgette informing her that Felix could sell the painting at £950 amounts to a counter offer, which implies a rejection of the £800 offer made by Georgette.

Communication and Revocation of Offer and Acceptance

When a tender is made, the common law on contracts requires that the approval be talked about through the offeror’s selected agent. The appointed agent by Felix is poster. Hence, the appropriate legal provisions for acceptance of offers made through poster apply. Accordingly, “the general rule is that a postal acceptance takes effect when the letter of acceptance is posted (even if the letter may be lost, delayed or destroyed), but the postal rule will not apply if it is excluded by the express terms of the offer” (Adams 4). No exclusion applies in the offer made by Felix through poster.

Although Georgette communicates her approval by delivering acceptance letter to the premises of Felix, she fails to use the offeror’s appointed agent. She even forgets to indicate the postal address, which may create the intent of the offeree to communicate the acceptance of the offer through the offeror’s appointed agent. Hence, her acceptance remains not communicated. Thus, the painting cannot be legally considered hers although she finally acquires it from Felix and hides it under her bed. Indeed, even if Felix found the acceptance letter in his business premises, he could revoke the offer anytime without any legal consequences when Georgette sues him on the grounds of revocation of an offer after acceptance.

Application of Rules of Communication and Revocation of Offer and Acceptance

An offer for sale of the painting to Peter at £1,150.00 implies entering a contract without any consideration on the part of Georgette for the contract if the offer is accepted with her not communicating her acceptance through Felix’s appointed media. However, since the painting came to her possession, and on making the offer to Peter through Fax, Peter communicated the acceptance through the same phone. However, upon leaving the message on Georgettes answer phone, the acceptance is adequately communicated. The intention to enter legally binding contractual terms is clear. Considerations for both parties are also provided. In this case, Peter would incur value of £1,150.00 while Georgette would incur the value associated with owning the painting in honour of the contract.

After making an agreement upon making offer and acceptance, with consideration and intent to enter legally binding relations being provided when the form of a contract is legally acceptable in the execution process, a contract can still be terminated. This happens when items for sale are no longer available due to unavoidable circumstances such as theft or damage by calamities such as earthquakes and fire (Pearce and Halson 24). When this happens, a contract is considered frustrated and in effect terminated. Even though Georgette later found the painting, if Peter sues for damages, the case cannot be granted on the grounds of frustration of the contract since the frustrating event was beyond the control of offeror, Georgette.

Good Consideration and Requirements for Intent to create Legal Relations

The decision on whether Georgette’s failure to pay the reward promised to the police officer amounts to breach of contract relies on resolution of the legal question whether the police officer engaged in search of the villain’s house because of communication of the offer through the advertisement made by Georgette over the local newspaper. Even if this was the case, no contract exists between the two parties since no consideration was provided for in the advertisement.

No contract was entered between the police officer and Georgette. The discovery of the painting was part of the police officer’s daily obligations. It is also legally inferable that the police discovered the painting as a coincidence implying that he did not break the villain’s house purposely in search of the painting. Therefore, he was not acting in a manner implying the execution of an action of a party engaged in a contract. The agreement also fails in the subjective test of the intention of Georgette to enter a legally binding relationship with the police officer. The discovery of the painting was not a precondition for payment of the promised reward since the promise was made to the police officer after the painting was discovered.

Terms, Representation, Warranties, and Intermediate Terms in contracts

Representations and Terms

Negotiations involving purchase and sale of goods fall into the representation or the terms categories. Terms are either expressed or implied. Express terms encompass terms that are set out in an agreement by parties engaging in a contract (Adams 7). Implied terms are not set out expressly in the contract. However, law, usage, and even customs imply them. For instance, the car bought by John should serve his needs with reliability. For John to take any legal action against Cars4U Ltd, it is crucial for him to understand whether the negotiations during buying of his car amounted to contractual terms or representations as discussed in the section on incorporation of terms in contracts.

Warranties, Conditions, and Intermediates

Terms provided for in a contract are warranties, conditions, or intermediate terms. Conditions encompass all terms that are key to the contract as in the case of Poussard v. Spiers determined in 1896. In the case of John v.Cars4U Ltd, the provision to repair the car subject to identification of defects within 3 months of purchase is a condition that is central to the performance of the obligation to repair the car. If Cars4U Ltd refused to repair the car when failure of transmission system and engine occurred within 3 months, John would have sued for damages for breach of contract including claiming compensation for the costs incurred in towing the car to the garage.

Warranties encompass minor terms, which do not form part of chief necessities for the existence of contract. In case of breach of warranties, aggrieved parties sue for damages. However, they do not end the contract. Intermediate terms fall in between warranties and conditions. Such terms have their status, which qualifies them as conditions or warranties that are undefined in the manner of construction of wording of the statements or the contracting parties’ intentions. Breach of intermediate terms may amount to termination of a contract if they are serious or payments of damage without necessarily terminating a contract (Webb 52). For the case of John, his legal options are limited since the first and the second conditions of the contract for repair of the vehicle are breached. The only option available for him is to pay for the repair of the vehicle

Incorporation of Terms into Contracts

Terms are incorporated in contracts to regulate the manner in which parties conduct themselves during performance of the contracts. As claimed before, agreement statements for sale or purchase of goods are incorporated in contracts as either representations or terms (McKendrick 27). In the event that a statement encompasses a term, the plaintiff can sue for breach of contract. Another remedy available for John is to sue for misrepresentation. In the process of determining whether a statement incorporated in purchase and sale negotiation is a representation or a term, four rules apply.

In case John decides to sue for either misrepresentation or breach of contract, under English law, the court would apply time factor, statement importance, the rule on parole evidence, and relativity in parties’ expertise levels to determine whether the statements in the negotiation for purchase of the car are representations or contractual terms (Peel 18). As set out in the case of Routledge v. McKay, where large amounts of time pass between the time of making a statement and the time of entering a contract, the statement is more likely to take the form of a representation.

In the case of Bannerman v. White, the court held that in situations where the representee emphasises the significance of a given statement, the statement amounts to a contractual term. Upon applying this precedence to the case of John, the sales person, who is a representative of Cars4U Ltd emphasises the significance of the first provision of the guarantee claiming his willingness in staking his life if the car fails to be reliable. Based on the precedence of the case of Bannerman v. White, assurance of reliability is a contractual term. As spelt in the case of Dick Bentley v. Harold Smith Motors, the sales person has more knowledge in relation to John. Hence, promise of reliability of the car is more likely to amount to a contractual term. Consequently, the only legal remedy available is for John to sue for misrepresentation, but not breach of contractual terms.

Rules of Privity and Capacity to Contract

Ability of Minors to enter Contracts

English law defines parties, which can enter legally binding relations amounting to contracts. The step of Queen Burgers Head office writing to Mr. King informing him that Leroy “is too young to enter contracts” refers to the general rule that all contracts entered with minors are invalid on the grounds of lack of legal capacity to contract. However, Mr. King needs to understand that not all contracts entered with minors are invalid and void. For instance, a contract entered with a minor in the supply of necessities, which are defined as food, clothing, and commodities that are central in education furtherance and/or apprenticeship is valid (Koffman and Macdonald 85). A legal remedy exists as opposed to suggestions made by Queen Burgers.

The Doctrine of Privity

In English rulings, the principle of privity takes care of contractual dealings entered between parties involved in an agreement together with the representatives of the agreement. Mr. King’s and Queen Burgers contract, in matters of duty of care for his son, is a good example of the applicability of doctrine of privity in English law. Leroy is a third party to the contract. Since eating chicken leads to food poisoning, the breach of duty of care owed to Mr. King’s son resulted in damages on Mr. Kings, and hence the poor contract performance.

Inroads made by Courts and Statutes to the Doctrine of Privity

In case Mr. Kings sues Queen Burgers for compensation, courts can apply various inroads in settlement of the case. Chicken falls under the class of foods. Leroy is the only one who eats the chicken. When Queen Burgers delivered the chicken to him where he accepted and began to eat, already the first preconditions for a contract (offer and acceptance) were fulfilled. The second party (Mr. King) provided for the consideration in the contract. This does not imply that Queen Burgers escapes liability. It owes the person consuming the chicken duty of care whether a minor or not.

Even if the minor may not be bound by the contract, since he is less than statutory age of 18 years that are required for one to enter a contract, such a relation binds the adult, in this case the Queen Burgers, with whom the contract is entered. Mr. King should sue for breach of duty of care on part of his sick son. This advice is vital even though the doctrine of privity provides that “a contract can neither give rights to, nor impose obligations on anyone who is not a party to the original agreement-a third party” (Jacobs 315). The case of Jackson v. Horizon Holidays Ltd provides an exception to the applicability of this rule. This forms a railroad that the court can utilise as precedence. The court held in 1975 that even though Jackson had booked for a holiday in the hotel in his name, the Hotel was liable for paying damages even to Jackson’s family. Any damages to the family amount to harm on the part of Jackson.

References

Adams, Guy. Proprietary estoppels and contracts for the sale of land or: The Parliamentary Paradox, 2012. Web.

Jacobs, Edward. “Judicial reform of privity and consideration.” Journal of Business Law 3.2(1986): 312-335. Print.

Koffman, Laurence and Elizabeth Macdonald. The Law of Contract. Oxford: Oxford University Press, 2007. Print.

McKendrick, Ewan. Contract Law.London: Palgrave Macmillan, 2011. Print.

Peel, Edwin. The Law of Contract. London: Sweet and Maxwell, 2011. Print.

Webb, Charlie. “Performance And Compensation: An Analysis Of Contract Damages And Contractual Obligation.” Oxford Journal Of Legal Studies 26.1 2006): 41-71. Print.

Pearce, David and Roger Halson. “Damages for breach of contract: compensation, restitution, and vindication”. Oxford Journal of Legal Studies 9.1(2007): 1-30. Print.

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