A contract is a legally binding agreement between two or more parties. The two parties to a contract are the promisor and the promisee.
Promisor: The promisor is the party who makes a promise.
Promisee: The promisee is the party to whom the promise is made.
Example:
Alice (promisor) promises to deliver 100 widgets to Bob (promisee) by December 31st. Bob promises to pay Alice $10,000 for the widgets.
In this example, Alice is the promisor because she is making the promise to deliver the widgets. Bob is the promisee because he is the one to whom the promise is made.
In order to be enforceable, a contract must have the following elements:
- Offer and acceptance: The promisor must make an offer to the promisee, and the promisee must accept the offer.
- Consideration: Both parties must exchange something of value. In the example above, Alice’s promise to deliver the widgets is the consideration for Bob’s promise to pay $10,000.
- Capacity: Both parties must have the legal capacity to enter into a contract. This means that they must be of age and of sound mind.
- Legality: The contract must be for a legal purpose.
Once a contract is formed, both parties are legally bound to their obligations. If either party breaches the contract, the other party may be able to sue for damages.
Contracts are essential for businesses and individuals alike. They allow us to enter into agreements with others with the confidence that our rights will be protected.
The type of tense used in a law contract depends on the specific provision and the intent of the parties. However, there are some general guidelines that are typically followed.
- Present tense: The present tense is used to describe statements of fact that are true at the time the contract is formed. For example, “The Seller is the owner of the Property.”
- Past tense: The past tense is used to describe statements of fact that were true at the time the contract was formed, or to describe actions that have already been completed. For example, “The Buyer has paid a deposit of $10,000.”
- Future tense: The future tense is used to describe promises or obligations that the parties will undertake in the future. For example, “The Seller will transfer title to the Property to the Buyer on or before January 1, 2024.”
Here is an example of how the different tenses might be used in a law contract:
1. Purchase Price
The Buyer agrees to pay the Seller a purchase price of One Hundred Thousand Dollars ($100,000.00) for the Property. The purchase price shall be paid in full at the closing of the sale.
In this article, the present tense is used to describe the agreement of the parties to the purchase price. The future tense is used to describe the obligation of the Buyer to pay the purchase price and the obligation of the Seller to transfer title to the Property. ( posted on lawneu.com )
Revocation of offer process –
1. The offeror must communicate the revocation to the offeree before the acceptance is communicated. 2. The revocation can be communicated by any reasonable means, such as in person, by phone, email, or mail. 3. The revocation is effective when it is received by the offeree.
Illustration:
Offeror: I offer to sell you my car for $10,000. Offeree: I accept your offer.
Before the offeree communicates their acceptance, the offeror can revoke the offer by saying:
Offeror: I revoke my offer to sell you my car.
If the offeree receives the revocation before they communicate their acceptance, then the offer is no longer valid.
It is important to note that there are a few exceptions to the general rule that an offer can be revoked at any time before acceptance. For example, an offer cannot be revoked if it is made in writing and signed by the offeror, or if the offeror has given the offeree a reasonable amount of time to accept it.
An offer can be revoked in the following ways:
- By communication: The offeror can revoke the offer by communicating the revocation to the offeree before the offeree accepts the offer.
- By lapse of time: If the offeree does not accept the offer within the time specified by the offeror, or within a reasonable time if no time is specified, the offer is automatically revoked.
- By death or insanity: If the offeror dies or becomes insane before the offer is accepted, the offer is revoked.
- By counter-offer: If the offeree makes a counter-offer, the original offer is automatically revoked.
- By subsequent illegality: If the subject matter of the offer becomes illegal after the offer is made, the offer is revoked.
In simple words, an offer can be revoked verbally, in writing, or by any other means of communication, as long as the revocation reaches the offeree before the offeree accepts the offer. An offer can also be revoked by the passage of time, the death or insanity of the offeror, or by a counteroffer from the offeree.
A void contract is invalid from the start, while a voidable contract is valid until one party cancels it.
Void contract illustration: A minor agrees to buy a car. This contract is void because minors cannot enter into binding contracts.
Voidable contract illustration: A person is coerced into signing a contract. This contract is voidable because the person did not consent freely.
Void contract: A contract that is invalid from the start, and cannot be enforced in court. Examples include contracts with minors, contracts for illegal activities, and contracts that are impossible to perform.
Voidable contract: A contract that is valid until one party cancels it for legal reasons, such as fraud, coercion, or misrepresentation.
Illustration: A person buys a car from a dealer, but later discovers that the car has a hidden defect. The person can void the contract if they can prove that the dealer knew about the defect and did not disclose it.
Fundamental breach of contract – is when a party to a contract fails to perform a term of the contract that is essential to the agreement. This allows the other party to rescind the contract, which means that they can cancel it and claim damages for any losses they have suffered.
In the case of Alexander v Railway Executive, the plaintiff deposited his luggage at the parcel office of a railway station. He received a ticket that contained a term exempting the railway from liability for any loss of luggage. However, the railway staff allowed a friend of the plaintiff to take the luggage without producing the ticket. This was held to be a fundamental breach of contract, and the plaintiff was entitled to claim damages from the railway.
In simple terms, a fundamental breach of contract is when one party to a contract breaks a promise that is so important that the other party cannot get what they wanted out of the contract. In Alexander v Railway Executive, the railway broke their promise to keep the plaintiff’s luggage safe, and this meant that the plaintiff could not get what he wanted out of the contract, which was to have his luggage safely transported.
Misrepresentation: A false statement of fact that one party makes to another party to induce them into a contract.
Fraud: A misrepresentation made intentionally or recklessly, with the intent to deceive the other party.
Remedies for misrepresentation and fraud:
- The injured party can rescind the contract, meaning they can cancel it and get their money back.
- The injured party can sue for damages.
Example: A car seller tells a buyer that a car has never been in an accident. The buyer buys the car, but later finds out that it has been in a major accident. The buyer can rescind the contract and get their money back, or they can sue the seller for damages.
Essentials To be valid, an acceptance must be:
- Absolute and unqualified: The offeree must agree to all the terms of the offer without any changes or conditions.
- Communicated to the offeror: The offeree must let the offeror know that they have accepted the offer. This can be done verbally, in writing, or through conduct.
- Made by the person to whom the offer was made: Only the person to whom the offer was made can accept it.
- Made within a reasonable time: The offeree must accept the offer within a reasonable time after receiving it.
An acceptance is valid when the offeree agrees to all the terms of the offer without any changes or conditions, and tells the offeror that they have agreed. The acceptance must be made by the person to whom the offer was made, and within a reasonable time after receiving the offer.
Essentials of a valid contract –
- Offer and acceptance: One party must make an offer, and the other party must accept it.
- Consideration: Both parties must exchange something of value.
- Capacity: Both parties must be legally competent to enter into a contract.
- Free consent: Both parties must agree to the contract without coercion or undue influence.
- Lawful purpose: The purpose of the contract must be legal.
A valid contract is an agreement between two competent parties to exchange something of value freely and for a lawful purpose.
