Contract Formation Overview - Business Law PDF

Principles of Business Law TOPIC 4: CONTRACT FORMATION 4.1 CONTRACT OVERVIEW Contract law topics: overview (TEST TWO and Final exam) Topic 5: Topic 6: Topic 4: Identifying and Contractual Formation of I...

Principles of Business Law TOPIC 4: CONTRACT FORMATION 4.1 CONTRACT OVERVIEW Contract law topics: overview (TEST TWO and Final exam) Topic 5: Topic 6: Topic 4: Identifying and Contractual Formation of Interpreting Performance and Contracts Contractual Terms Breach Topic 8: Topic 7: Remedies Invalidating for Breach of Contracts Contract (vitiating factors) Topic 4: Contract formation: overview 1. Contract law overview (video 4.1) 8. Formation requirement: certainty overview (video 4.3) 2. Why are contracts important? (video 4.1) 9. Formation requirement: 3. The objective approach consideration/deed (video 4.4) (video 4.1) 10. Formation requirement: intention (video 4.4) 4. Executory/bilateral v unilateral contracts (video 4.1) 11. Privity of contract (video 4.5) 5. Capacity to contract (video 4.2) 12. Estoppel (video 4.6) 6. Formation requirements overview 13. Case study: general guidance (video (video 4.3) 4.7) 7. Formation requirement: 14. Case study: contract formation(video agreement (video 4.3) 4.8) Contracts: Overview  A contract is a legally enforceable agreement between two or more persons or corporate entities. These persons or entities are called the ‘parties’ to the contract.  When a contract is made, the parties become legally obliged to honour promises contained in the contract.  Contractual obligations are typically discharged by voluntary performance.  A party who fails to perform the contract is in breach. They can be taken to court and ordered:  to pay compensation for loss caused by the breach (damages).  (in some instances) to perform their promise (specific performance) Why are contracts important?  Contracts allow parties to make legally enforceable commitments to each other.  This allows businesses to plan:  T-shirts R Us Pty Ltd receives an order for 1,000 t-shirts  Before committing to the order, T-shirts R Us Pty Ltd can enter contracts to ensure it is able obtain needed supplies such as material or labour.  This minimises the risk that T-shirts R Us Pty Ltd will commit to supplying the t- shirts but find itself in a position where it is unable to do so. The objective approach Whether a contract has been formed is determined on an objective basis. What does this mean?  Let’s take intention as an example  The aim is not to determine whether the parties actually/subjectively intended their agreement to be legally binding.  Rather, we ask whether a party’s behaviour would indicate, to a reasonable person in the position of the other party, that the party said to be bound intended to assume legally binding obligations.  Thus, a party may be bound by a contract based on their words and actions, even if they did not subjectively intend to commit to the contract. Executory / Bilateral v Unilateral Contracts An executory/bilateral contract is one in which performance remains to be completed by both parties after acceptance of the offer.  A makes a promise to B in exchange for B making a promise to A.  The contract is formed when the promises are exchanged.  After formation, both parties have outstanding obligations (that is, they must honour the promises made).  Eg, Thomas v Thomas  Executor of Mr T’s estate entered into an agreement with Mrs T  Executor promised to allow Mrs T to occupy the house.  Mrs T promised to pay £1 per year and keep the house in good repair. Executory / Bilateral v Unilateral Contracts (ctd) A unilateral contract is one in which only one party’s performance remains to be completed after acceptance of the offer  A makes a promise to B in exchange for B performing some act.  The contract is formed when B performs the requested act.  Eg, Carlill v Carbolic Smoke Ball Co  CSBC promised to pay the reward.  The contract was formed when C used the ball as directed. Executory / Bilateral v Unilateral Contracts (ctd) Source: https://courses.lumenlearning.com/masterybusines slaw/chapter/basic-taxonomy-of-contracts/