Formation of contract
1. A valid contract is a legally binding agreement, formed by the mutual consent of two parties.
2. The law seeks to protect the idea of ‘freedom of contract’, although contractual terms may be regulated by statute, particularly where the parties are of unequal bargaining strength.
3. The three essential elements of a contract are offer and acceptance, consideration and intention to enter into legal relations.
4. As a general rule, a contract may be made in any form.
5. The first essential element in the formation of a binding contract is agreement. This is usually evidenced by offer and acceptance. An offer is a definite promise to be bound on specific terms, and must be distinguished from the mere supply of information and from an invitation to treat.
6. An offer may only be accepted while it is still open. In the absence of an acceptance, an offer may be terminated in any of the following ways.
7. Acceptance must be an unqualified agreement to all the terms of the offer. Acceptance is generally not effective until communicated to the offeror, except where the ‘postal rule’ applies. In which case acceptance is complete and effective as soon as posted.
8. The general rule is that acceptance must be communicated to the offeror and that it is not effective (and hence there is no contract) until this has been done. However this rule does not apply in all cases.
9. In certain circumstances, the courts may infer the existence of a contract without the formalities of offer and acceptance. This type of contract is a collateral contract.
10. Consideration is an essential part of most contract. It is what each party bring to the contract.
11. Consideration may be executed (an act in return for a promise) or executor (a promise in return for a promise). It is nor be past, unless one of three recognized exceptions applies.
12. The long-established rule is that consideration need not be adequate but it must be sufficient.
13. The principle of promissory estoppels.
14. Privity of contract.
15. The pace of technological change raises issues for modern contract law. Problems arise as contracts are often electronic, are digitally signed, are accepted by email and consideration is often provided by credit card.
