The Law of Contract

THE LAW OF CONTRACT

A contract is a legally binding agreement between two or more people or parties with the intentions of creating legal obligations, which may have elements in writing. Therefore contract sometimes are referred to as ‘enforceable agreements (Keith, 2012). The purpose of this assignment is to define the essential elements of a contract in details, and the following are the essential elements which must be present and these are an offer, acceptance, consideration, capacity, intention to create legal relations, form and content and gist. In order to decide whether a contract has come into being, it is necessary to establish that there has been agreement between the parties. And in consequences, it must in general be shown that an offer was made by one party which was accepted.

An offer according to Keith (2012) is ‘a statement of willingness to contract on specified terms made with the intention that if accepted, there will arise a binding contract. An offer may be expressed or implied from conduct. It may be addressed to one particular person, a group of persons, or the world at large, as in an offer of a reward. An offer is different from an invitation to treat; therefore an offer must be carefully distinguished from an invitation to another person to make an offer. An offer can be converted into a contract by acceptance. An offer may be made to a particular person or class of persons or to the public at large as in a case of CARLLIL v CARBOLIC SMOKEBALL CO (1893). The defendant company manufactured a patent medicine, called a ‘smokeball’. In various advertisements they offered to pay K100 to any person who caught influenza after having sniffed the smoke ball three times a day for two weeks. They also stated that they had deposited K1000 at the Alliance Bank in Regent Street to show their sincerity. Mrs C used the smokeball as advertised and contract influenza after more than 2 weeks treatment, and while still using the smokeball. She claimed her K100. The company raised several defaces. An example of an invitation to treat is in the case of FISHER v BELL (1961). The display of goods in a shop window with price tags on them is not an offer to sale but an invitation to treat. Therefore, this is the display of goods on the shelves of a self-service shop or super market like Shoprite, for example in case of pharmaceutical society of GREAT BRITAIN v BOOTS CHEMISTS (1953). Therefore the rule of law in the mentioned case provides that display of goods on the shelves of a self-service shop or super market with price tags on them is not an offer to sale but an invitation to treat.

According to Smith (2003), an acceptance is consent to the terms of an offer”. And Keith .A (2012) explains that acceptance may be written or oral, or it may be inferred from conduct. Acceptance must be unqualified and must correspond to the terms of the offer. Rules of acceptance, it must be communicated to the right person; it must be communicated within stipulated or reasonable time. In the law of contract, acceptance is one person’s compliance with the terms of an offer made by another. It is one of the elements required for the formation of a legally binding contract, in other words its agreeing to receive something or the act of receiving it. Acceptance is not effective until communicated to, and received by the offer or. It must be communicated by someone with his authority. The postal rule of acceptance is where the partner contemplate acceptance by post, acceptance is complete when the letter is posted, even if the letter is not in the post. Example in the case of HOUSEHOLD FIRE INSURANCE CO v GRANT (1879) D applied for shares in the company. A letter of allocation (the acceptance) was posted to him but it never reached. The company later went into liquidation and D was called upon to pay the amount outstanding on his shares. It was held that he had to do so. There was contract between himself and the company which was completed when the letter or allotment was posted, regardless of the fact that it was lost in the post.