Contract Law: Acceptance and Consideration

Acceptance

• Acceptance by post is effective when the letter is stamped and posted
• Acceptance by telephone, fax, or modern means of communication is effective only when received by the offeror, not when sent

Consideration

• A fundamental element of a contract
• A promise or action made by one party in exchange for the promise or action made by another party
• Must be real (has value and can be converted into cash)
• Must be lawful
• Can be executed (when both parties have completed their part as required by the contract) or executory (a promise to be completed in the future)
• Must be possible
• Need not be adequate but sufficient
• Must not be past (an act performed before a promise of payment or consideration is made)

Capacity

• Both parties must be eligible to enter into a contract
• Must be 18 years or over
• Not drunk
• Not insane
• No aliens or prisoners can enter into contracts

Legality

• Terms and conditions must conform to the laws of the land

Possibility

• Each party must be able to carry out their obligation

Genuineness and Good Faith

• Both parties must enter a contract freely, willingly, and not by force

Types of Contracts

• Simple contracts: require no special form, may be oral, in writing, or implied by conduct
  • Examples: traveling, purchase of personal needs, assignments of copyright, insurance contracts, hire purchase or credit sales, lease of land or property for three years
• Specialty contracts: contracts dealing with mortgages and the sale of land, also known as contracts by deed

Characteristics of a Contract

• Agreement: offer and acceptance
• Offer: a proposal or bid by a party or their agent to another party
• Counteroffer: rejecting the original offer and replacing it with a new offer
• Invitation to treat: an advertisement to make an offer
• Acceptance: exists when the offeree agrees to all the terms and conduct of the offer

Discharging and Terminating Contracts

• By performance: both parties do their part
• By agreement: both parties agree to cancel
• By breach: one party decides to complete their obligation, but the other does not
• By renunciation: one party carries out a portion and fails to go any further
• By lapse of time: one party fails to carry out their obligation within a reasonable time
• By frustration: a change in circumstances after the contract was made, which is not the fault of either party, rendering the contract impossible to perform or depriving it of its commercial purpose
• By death
• By bankruptcy