Analyse the elements required for the formation of a valid contract.

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Analyse the elements required for the formation of a valid contract.

A contract intends to formalize an agreement between parties (contract law). The three key elements that should be available for a contract to be valid and enforceable by law are agreement, consideration, and intention to create legal relations. The first element ensures that the parties bound by the contract have made an agreement, which is determined by the rules of offer and acceptance (37). The second element is that the agreement or “obligations assumed by each party” must be supported by sufficient consideration from the other party. The third element is the intention of the agreed parties to make their promises legally binding (38). If one of the three key elements is not present, there is no contract. However, even if all these elements are available, the validity of a contract may still be affected by ‘vitiating factors’ such as genuine consent, which is the fact that no one was misled into the contract, and the legality of the contract, which would make it void, voidable or unenforceable (38). The rules for these elements and their exceptions evolved in case law.

Offer and acceptance create a ‘concurrence of will’ or a ‘meeting of the minds’, offer and acceptance act as the evidence that there is mutual consent (wikipedia, Contract). “An offer is a definite promise to be bound on specific terms” (42). The reason this element is required is to ensure that the two parties of the contract acknowledge that one made an offer and one accepted it with those terms. It also makes sure that the offeror has intentionally made an offer. For example, if an offer is seen to be too vague, the courts will judge whether there is an offer at all, depending on previous dealings that shows the party’s sufficient intention to be bound for there to be an offer which was accepted and a contract or not (42). Contracts could also be is implied by fact, which occurs when the circumstances imply that “the parties have reached an agreement even though they have not done so expressly (wikipedia, Contract). An invitation to treat in contract to offers, by auction sales, advertising, the circulation of a price list, exhibiting goods for sale, or an invitation for tenders, is seen as an indication that a party is ready to receive offers “with the view to forming a binding contract” and is not an offer in itself (Common Law, 44).

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The second part of an agreement is the acceptance of an offer by an offeree. “Acceptance is the unqualified agreement to the terms of the offer” (49). An agreement to an offer is considered valid if it was made by express words or by action, or inferred from conduct of the parties. For example, if the conduct of the parties, such as two parties doing business between each other, indicates that they both agreed to or worked based on certain terms that are only a draft, then that draft creates a binding contract. To make it clear between offeror ...

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