Contract Law - Weeks 5 & 6

Contract Law - Weeks 5 & 6

• Contract law covers the code of obligations and contracts.
• Core elements of a contract include offer, acceptance, and consideration.
• A valid contract requires intention (without duress or misrepresentation), capacity (age and mental state), and legality.
• Possibility of performance is also crucial for a valid contract.
• Breach of contract occurs when a party fails to fulfil contractual obligations.
• Remedies for breach of contract can include compensation (damages), cancellation, and specific performance.

Definition of a Contract

• A contract is an agreement between two or more people.
• It creates obligations or duties for both parties.
• Parties can be natural persons (people) or artificial persons (companies).
• Contracts are typically written.
• Common contract examples include marriage contracts, property sales, employment, commercial contracts (e.g. leasing, transportation, sales).

Basic Requirements of a Contract

• Offer: One party proposes a deal (e.g., selling a car).
• Acceptance: The other party agrees to the offer.
• Consideration: Both parties receive something of value (e.g., money, service, product).
• If these 3 requirements are present, a valid contract exists, obligating both parties to fulfil their promises.

Necessary Requirements for a Valid Contract

• Intention: Both parties must genuinely intend to enter the contract.
• Capacity: Both parties must have the legal ability to enter the contract (e.g., must be of legal age).
• Legality: The contract's purpose must be legal (e.g., cannot involve illegal activity).
• Possibility of Performance: The contract's terms must be achievable (e.g., the item to be sold must exist).

Void vs. Voidable Contracts

• Void: A contract that is invalid from the outset, lacking essential legal requirements.
• Voidable: A contract that is initially valid but can be cancelled (made void) by one party if there are defects in the agreement (e.g., duress).

Duress

• Duress involves forcing someone to enter a contract against their will through threat or coercion (e.g., violence, threats).
• Contracts entered under duress are usually voidable.
• Forcible duress involves immediate threats of serious harm, while non-forcible duress involves less severe forms of coercion.

Misrepresentation

• Misrepresentation occurs when one party deceives the other through untrue statements or omissions.
• Misrepresentation can be about the terms, specific details, or circumstances of the contract.
• A contract based on misrepresentation is usually voidable.
• Examples include fraudulent misrepresentation (lies), negligent misrepresentation (careless statements), and innocent misrepresentation (unintentional inaccuracies).

Capacity

• Capacity refers to the legal ability to enter into a contract.

• Key examples of people who may lack capacity include:

  • Minors (under 18 years)
  • Mentally disabled persons

• Minors under 13 typically have no capacity, while those between 13-17 may have limited capacity contingent on guardian approval.

• Mentally disabled persons under a restricting order have no capacity. Contracts in these situations are void.

• Mentally disabled persons without a restricting order have limited capacity and contracts are only valid if they benefit them or are for everyday transactions.

Legality

• A contract must have a lawful purpose to be valid.
• Illegal activities (like committing a crime or buying/selling stolen property) can't form the basis of a contract.

Possibility of Performance

• A contract must be capable of being performed.
• If performance becomes impossible due to external factors (e.g., destruction of the subject matter), the contract may be voided.

Breach of Contract

• Breach of contract happens when a party fails to fulfil their obligations under the contract.
• The non-breaching party can seek remedies to address the breach.

Legal Remedies for Breach of Contract

• Specific performance: Courts order the breaching party to perform the contract's terms.
• Cancellation and restitution: Reverses the contract and returns parties to their prior positions. Financial compensation (damages) may also be sought for losses incurred.

Case Examples

• Several case are provided showing scenarios applying the above rules.

Explore key concepts and core elements of contract law in this quiz. Understand the requirements for creating a valid contract, including offer, acceptance, and consideration. Test your knowledge on breach of contract and the various remedies available.