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Contract Law Coursework 2001-2002

Introduction

This scenario presents different aspects of Contract Law, though the underlying points made are that consideration must not be past, identifying the offer and acceptance in a contract and the use of estoppels.  

A contract is a legally binding agreement enforceable in a court of law. However, not every agreement between two parties is a legally binding contract. The law imposes certain requirements on contracts. The fundamental requirements for forming a binding contract are:

  • offer
  • acceptance
  • consideration

The first part of the scenario clearly identifies a simple offer and acceptance.  Tim offers Mary to repair her bike and she accepts.  This now creates a contract between Tim and Mary.  Each contract requires an offer and acceptance of that offer.

"... to constitute a contract, there must be an offer by one person

to another and an acceptance of that offer by the person to whom

it is made. A mere statement of a person's intention, or a

declaration of his willingness to enter into negotiations is not

an offer and cannot be accepted so as to form a valid contract"

An offer must be an understandable, explicit and direct approach to another party to contract. For this reason, advertisements, catalogues or store flyers are not offers. Nor is a "for sale" sign on a used car. The law calls these "invitations to treat"; essentially invitations to the general public to make an offer on a particular item.  In the scenario, an offer is made, with an acceptance agreed.  There is no problem in identifying this, or mistaking it as an invitation to treat.  

Acceptance validates the contract; it gives it life. It is at that moment that a contract exists; that there is consensus ad idem (assuming a valid offer and consideration). It also must be clear, unequivocal, unconditional and made by the person to whom the offer is intended.

It is not enough to say that you find the offer to be "agreeable"; you must "accept" the offer although your acceptance can be implied by your conduct. It must also be brought to the direct attention of the offeror before a valid contract exists.

The offeror can dictate the terms of the acceptance. Offers may set certain conditions on acceptance and to these, the acceptor is bound. For example, the offer may require acceptance in writing (if such a requirement has not been made, then a written offer may be accepted verbally).

Consideration can be defined as:

"… some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other."

As such, a contract differs from a gift. This also explains why you sometimes hear of very expensive objects sold for £1; which is done to ensure that what is essentially a gift, comes with the legal protection of contract law.  Under contract law, there is no contract if there is no consideration.  There are many laws set out about consideration to be abided by, in order for the contract to be legal.  One of these set rules is that consideration must not be past.  

Past consideration is not good consideration. This is because the general  underlying past consideration is one of exchange/bargain between the parties.

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Past consideration is consideration constituted by an act that has already been performed prior to the relevant promise so that there is no value to support the promise e.g. Bob builds a wall. Tom then promises to pay Bob £10 in consideration of building the wall Eastwood v Kenyon.

Past consideration is therefore distinguishable from:

* executory consideration e.g. B promises to pay A £10 if A will build a wall , here both the promise and the act remain executory ( i.e. outstanding )

* executed consideration e.g. B promises to pay A £10 if A will build a wall and A ...

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