Contract Law: Elements and Principles

• A contract constitutes a legally binding agreement between at least two parties.
• Contract law presides over the formation, interpretation, and enforcement of contracts.
• Core contract law principles ensure agreements are upheld predictably and fairly.

Elements of a Contract

• Offer entails a clear, definitive proposal for entering into an agreement.
• Acceptance involves unconditional agreement with all offer terms.
• Consideration: Each party exchanges something of value, be it a promise, an act, or forbearance.
• Intention necessitates that parties intend their agreement is legally binding, generally presumed in commercial contexts.
• Capacity requires parties possess the legal competence to enter agreements, excluding minors or those mentally incapacitated.
• Legality stipulates that a contract's purpose and subject matter must be legal.

Offer

• An offer represents a declared willingness to be bound by specific terms.
• Offers must be communicated to the intended recipient, known as the offeree.
• Invitations to treat, such as advertisements or goods displayed in shops, do not constitute offers.
• Offers can be revoked or withdrawn before acceptance, provided this revocation is communicated to the offeree.
• An offer lapses if it is not accepted within the specified timeframe or a reasonable period.
• A counter-offer signifies a rejection of the original offer while creating a new one.

Acceptance

• Acceptance must be unconditional, mirroring the offer's terms exactly, adhering to the "mirror image" rule.
• Communication of acceptance to the offeror is required, except when waived in unilateral contracts.
• Under the postal rule, acceptance occurs the moment a letter of acceptance is properly posted, applicable solely when postal acceptance is contemplated.
• Silence does not typically imply acceptance.
• Conduct can signify acceptance, provided it clearly indicates the offeree's intention to accept.

Consideration

• Consideration is the valuable exchange between parties within an agreement.
• Sufficiency is required, ensuring legal recognition of value, but adequacy, or equal value, is not mandatory.
• Past consideration, referring to acts completed before a promise, is not valid.
• The promisee must be the one providing the consideration.
• Performing a pre-existing contractual duty does not qualify as valid consideration unless an additional benefit is conferred.
• Partial debt payment typically does not validate a promise to waive the remaining balance, unless new consideration is involved.

Intention to Create Legal Relations

• Commercial deals include a strong presumption of intending legal relations.
• Clear counter-evidence, such as an "honour clause," can negate this presumption.
• Social or domestic agreements, such as those among family, presume no intention to create legal relations.
• Proof indicating an intent to be legally bound, like a written agreement on significant finances, can rebut this.

Capacity to Contract

• Minors, those under 18, are generally restricted from entering contracts.
• Minors are bound by contracts for necessities, like essential goods or services, for which they must pay fairly.
• Contracts involving employment, apprenticeship, or education can bind minors, provided they are advantageous.
• Individuals with mental incapacities or those intoxicated may lack contractual capacity if they do not comprehend the agreement and the other party recognizes their incapacity.
• Corporations can contract, provided their constitution does not limit their power.

Legality of Object

• Contracts with illegal intentions are void and unenforceable.
• Examples include contracts that facilitate crimes, violate public policy, or restrain trade.
• Restraint of trade clauses, limiting business or work conduct, are generally void unless they reasonably protect legitimate interests.

Contract Terms

• Express terms: Terms explicitly stated in the contract, either verbally or written.
• Implied terms: Terms not expressly stated but are implied by law, custom, or presumed intention of parties.
• Terms classified: Conditions (major, fundamental terms) or warranties (minor terms).
• Condition breach: Injured party can terminate and claim damages.
• Warranty breach: Injured party may claim damages but cannot terminate.
• Exclusion clauses: They aim to exclude or limit liability for breach or negligence.
• Interpretation: Strictly construed against the party seeking reliance ("contra proferentem" rule).
• Requirements: Exclusion clauses must be communicated before or as the contract is made.

Misrepresentation

• Misrepresentation is a false factual statement that induces a party into a contract.
• Opinions are not misrepresentations unless not genuinely held.
• Future intentions are not misrepresentations if genuinely intended.
• Silence is generally not misrepresentation, unless a disclosure duty exists, such as in insurance contracts.
• Fraudulent misrepresentation: Knowingly false, without belief in truth, or recklessly careless.
• Negligent misrepresentation: Carelessly made, breaching duty for accuracy.
• Innocent misrepresentation: Honestly made, with reasonable belief in truth.
• Remedies: Rescission and damages are available.

Duress and Undue Influence

• Duress involves coercion or pressure depriving free will, inducing contract entry.
• Types include physical threats, property threats, or economic duress involving illegitimate pressure.
• Undue influence abuses trust to induce contractual agreement.
• Forms of undue influence: Actual (direct evidence) or presumed (trust-based relationship with manifestly disadvantaged transaction).
• Rescission: Available remedy for duress and undue influence.

Discharge of Contract

• Performance: Full obligation fulfillment by both parties discharges contract.
• Agreement: Mutual consent to terminate.
• Breach: Severe breach by one party allows the other to terminate.
• Frustration: Contract discharged if unforeseen event renders performance impossible, illegal, or radically altered.
• Operation of law: Discharge may occur through bankruptcy or merger.

Remedies for Breach of Contract

• Damages: Compensation for the injured party's loss.
• Expectation damages: Compensation to place injured party in position as if contract was fulfilled.
• Reliance damages: Cover expenses from reliance on contract.
• Specific performance: Court order enforces contractual obligations, typically in land sale contracts.
• Injunction: Court order preventing breach.
• Rescission: Sets aside contract, restoring original positions.
• Liquidated damages: Contract clause specifies breach damages; enforceable if genuinely pre-estimated, not a penalty.