I will be identifying the legal criteria for offer and acceptance in a valid contract. Case study examples.

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Bader SherbajiUnit 21 – Assignment 1Task 1 & 2

In the first task of my assignment I will be identifying the legal criteria for offer and acceptance in a valid contract. Then for the second task I will explain the law in relation to the formation of a contract in the above situation.

Offer:

“An offer is a definite promise from one of the parties to the agreement made. They make this promise with the intention that it shall become binding or legally enforceable as soon as it is accepted by the person receiving the offer.” (Dooley, 2010)

Contract-offers:

One of the main rules of acceptance is that the offer has to be accepted on the same terms of which it was made. One of the factors that indicate an offer hasn’t been accepted is when a counter-offer is made. The main effect of a counter-offer is to terminate and end the original offer and create a new one.

Communication of Offers:

Offers must be communicated with to the other party. This usually happens in many means, either verbal or written, both of which are valid. If the offer isn’t certain, and is too vague, then it comes invalid. When a person enters contract negotiations with another, they must be aware of the terms to which they are agreeing to.  There is an exception to this rule however, when a person makes an offer to a contract with many people, or theoretically speaking, to the entire world. This is known as reward cases.

Acceptance:

“The formal agreement to accept an offer.” (Dooley, 2010) There are several factors that must be considered when looking at acceptance, these factors are;

  • Under normal circumstances, the acceptance of the offer has to be communicated with the person who made the offer, who is also known as the offeror.
  • The acceptance of the offer has to be in the form which is specified in the offer, such as written, verbal or so on. If there isn’t any form specified in the offer, then a written or an oral acceptance will be enough.
  • The acceptance doesn’t have to be in the specified form that is listed in the offer as long as the method of acceptance which is used satisfies the offer and the offeror isn’t prejudiced in any way.
  • The acceptance of an offer has to be absolute, unqualified and without any conditions. The effect of any changes in acceptance will have the effect of the cancelling of the original offer and the creation of a counter-offer.

Acceptance through post is an exception to the rule which states that acceptance has to be communicated with the person making the offer. When the acceptance is posted, it’s considered to be immediately effective only if it is correctly addressed, stamped, and posted in the letterbox. If the letter is delayed, or never actually reaches its required destination, the acceptance is still valid as long as there is proof of the postage as it is required to show that the acceptance was actually posted.

Considering the increased use of the new technology among all businesses around the world, there has been quite a lot of problems faced with offers and acceptances that are sent using forms of communication such as emails or fax. However, the postal rules still apply in these situations. The Electronics Commerce Regulations 2002, however, states that contracts which are created and sent by any electronic means, for example the internet, will only be formed when the offeror has been made aware of the acceptance.

There is however, a way around the postal rules which parties can use in a contract. This can be either;

  • Asking for proof of postage and receipt
  • Stating in the contract that acceptance is only upon confirmation

Battle of Forms:

Difficulties are known to arise within business law when companies are dealing with each other using the standard form contracts. When businesses go into a contract with one another they each make an offer and acceptance on their own forms. These standard form contracts contain the terms that are usually in conflict with one another. When businesses rely on standard form contracts, disputes arise between them. It’s not easily decided and is usually found very difficult determining which terms are chosen and sometimes there might not be a valid contract at all due to the conflicts that arise. Modern approaches today in courts take the most recent counter-offer as the one being accepted by the offeror, and that means that the contract will be concluded and agreed on those particular set of terms.

Consideration:

Under the contract law, the agreement itself made between the parties is not considered to create a legally binding contract. There has to be a degree of consideration between the parties in order for a valid contract to be created. Consideration is something of value given, done or promised in exchange by each party to the agreement. Something that is already completed by a party however, isn’t deemed as a consideration since a consideration is a promise for something to happen, not something that has already happened.

Consideration comes in two forms, which are;

  1. Executed Consideration: An executed consideration is an act in exchange for a promise, which in some cases could be a reward case where the offeror promises to pay the reward when the act is completed.
  2. Executory Consideration: An executory consideration is when parties exchange promises to perform acts in the near future. Most of the contracts usually begin that way, a good example is this is when a seller promises to deliver the goods to a buyer due to the buyer’s promise to buy the goods at the price agreed.
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Consideration however, must not be illegal. A contract isn’t valid if the consideration involved in it is illegal or immoral. Consideration also can’t be one-sided, it has to always move from the promise to the promisor, and that emphasizes the idea that there is a consideration in form from both the parties in a contract. Hence when one person makes a promise to the other, the other has to show consideration for that promise. Now in all valid contracts, consideration has to have some value, but there is no requirement needed for that value. It’s usually agreed upon both parties, ...

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