Elements Of A Valid Contract PDF

ELEMENTS OF A VALID CONTRACT SERVICE EXCELLENCE Elements of a Valid Contract Offer (what amounts to a valid offer, offers distinguished from invitation to treat, communication of the offer, termination of an offer) Acceptance (what it means to accept, distinguished from counter offe...

ELEMENTS OF A VALID CONTRACT SERVICE EXCELLENCE Elements of a Valid Contract Offer (what amounts to a valid offer, offers distinguished from invitation to treat, communication of the offer, termination of an offer) Acceptance (what it means to accept, distinguished from counter offer, communication of acceptance and the postal rule) Consideration (what is consideration, the common law doctrine of consideration and how the Contract Act of Ghana has modified it; executory and executed consideration SERVICE EXCELLENCE 1  OFFER WHAT AMOUNTS TO A VALID OFFER An offer refers to a proposal which a person, called the offeror, makes to another person, called the offeree, in which the offeror expresses his willingness and intention to do business (enter into a contract) with the offeree if he accepts the offer. Case: NTHC Ltd v Antwi, an offer was defined as an indication in words or by conducts by an offeror that he or she is prepared to be bound by a contract in the terms expressed in the offer, if the offeree communicates to the offeror his or her acceptance of those terms. – An offer creates a power of acceptance in the offeree and a corresponding liability on the part of the offeror. – Offer must have terms – The terms of an offer must be clear, and definite An agreement which is vague is not binding and does not constitute a valid contract. (Scammel v. Ouston), (Falcks v. Williams) (Raffles v. Wichelhaus) 3  OFFER OFFERS DISTINGUISHED FROM INVITATION TO TREAT, – An offer may be contrasted with an ‘invitation to treat’ which is merely an invitation to negotiate on the terms proposed. The following three questions must be asked in determining whether there is an offer: – 1. Was there an expression of a promise, undertaking, or commitment to enter into a contract ? – 2. Was there certainty and definiteness in the essential terms ? – 3. Was there communication of the above to the offeree ? Advertisements, catalogs, circular letters, and the like containing price quotations are usually construed as mere invitations to treat. 4  OFFER OFFERS DISTINGUISHED FROM INVITATION TO TREAT. The acceptance of or response to an invitation to treat does not , therefore, result in a contract, but results in negotiation, which may or may not result in a contract. The difference between the two is seen in the fact that the acceptance of an invitation is not intended to immediately result in a contract. Significance being that…….. This leads to a negotiation – Display of goods (Fisher v Bell) (Pharmaceutical Society of Great Britain v. Boots Cash) – Advertisement (Harris v. Nickerson) – Auction sales 5  OFFER Communication of the offer, – Communication of the offer to the offeree connects the offeror and offeree and brings them into the business relationship which the offeror, by his offer, seeks to create. – For a communication to be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms. Communicating of an offer must be made to a particular individual, groups etc. – What happens if the communication is made to an individual that the offeror does not in tend to contract with? – Where the contract is made to a specified person but is accepted by another person? – Where an offer is communicated to a class or group of persons. – Where an offer is communicated to the general public or the whole world. Carlill v. Carbolic Smoke Ball, …….although the offer is made to the whole world, the contract is made with that limited portion of the public who come forward and perform the condition…… 6  OFFER TERMINATION OF AN OFFER The power of acceptance created by an offer ends when the offer is terminated. Termination by offeror – Revocation: revocation before the offeree unconditionally accepts the contract. A purported revocation of an offer which has been accepted by the offeree is legally ineffective. Revocation has to be done in good time before acceptance. Effective when received;(by post) this is contrary to the communication of the contact where communication is effective when the letter is properly posted. (Burne v. Tienhoven) Limitations on offeror’s power to revoke – where the offer is said to be open for a specified time. However where the offeror has agreed or received some consideration to keep the offer open for the specified time, he cannot revoke it before the time elapses. Auction sales Public Affairs Directorate 7  TERMININATION BY AN OFFEREE Rejection – – Express rejection Counter-offer as Rejection – Lapse of Time-(Manchester Diocesan Council for education v. Commercial and General Investment Ltd) Termination by operation of law – death or insanity of parties Termination by destruction of subject matter (frustration) 8  ACCEPTANCE An acceptance has been defined as a final and unqualified manifestation of assent to the terms of an offer in the manner prescribed or authorized in the offer. Acceptance of an offer may be express or implied from the conduct of the offeree The effect of an acceptance is that it transforms the offer into contract Through this manifestation of assent, the offeree exercises the power given her by the offeror to create a contract. – Acceptance must be absolute The offeree must not just accept the contract but must agree to all the terms and conditions within the contract as they appear without changes. – Counter offers are not acceptance Expression of willingness by the offeree to do business with the offeror but not based on the terms and conditions provided and therefore the offeree makes counter suggestions with respect to the terms of the offer. (Deegbe v Nsiah) (Hyde v. Wrench) – Acceptance must be communicated Must be communicated by the offeree or his agent to the offeror for the contract to come into force. (Re National savings bank Associated) (Powell v lee) In the case of Holwell Securities v. Hughes, Russell L. J stated that acceptance of an offer must be communicated to the offeror. Carlill v. Carbolic Smoke Ball and Robophone Facilities Ltd v. Blank Public Affairs Directorate 9  ACCEPTANCE Where an offeror specifies the method for communicating an acceptance. – Where the offeror specifies the mode in which the acceptance must be communicated, the acceptance must be communicated through that such mode by the offeree or otherwise provided the other mode used by the offeree is as swift as the one prescribed by the offeror. The offeree does this at his own expense. (Manchester Diocesan Council for education v. Commercial and General Investment Ltd) – Exception to the General rule: where the terms of the offer expressly or impliedly waived or dispenses with the requirement of communication, the acceptance will be deemed to be effective even if it is not brought to the notice of the offeror. In general offers or offers for unilateral contracts the law implies from the nature of the offer that requirement of actual communication of acceptance is waived. (Carlill v Carbolic Smokeball) Where the offer requires the performance of an act or the fulfillment of a condition. – In such instances, the offeree does not have to communicate to the offeror that he has accepted the offer to performing the act in questions. (Carlill v. carbolic Smoke ball) 10  ACCEPTANCE Knowledge of an offer is necessary for its acceptance to create contract – The offeree must have known of the existence of the offer at the time he purports to accept it. (R v. Clarke). Where the acceptance of the offer is communicated through the post – Acceptance is effective when the offeree posts his acceptance, and not when the offeror actually receives it. (The postal rule) (Insurance Company v. Grant, ) – In the case of Holwell Securities Ltd v Hughes, the courts held that there is an exception to the general rule. (what is that exception?) Situations in which the postal rule does not apply. – acceptance by call, fax, text or similar means create a contract at the moment of reception by the offeror 11  CONSIDERATION The inducement, price or motive that causes a party to enter into an agreement or contract. Something of value that is given in exchange for getting something from another person. For example, rent payments paid to receive the right to rent an apartment. The consideration must be some benefit to the party by whom the promise is made, or to a third person at his instance; or some detriment sustained at the instance of the party promising by the party in whose favor the promise is made. They are legal, which are sufficient to support the contract or illegal, which render it void. If the performance be utterly impossible, in fact or in law, the consideration is void. 12  CONSIDERATION A mere moral obligation to pay a debt or perform a duty is a sufficient consideration for an express promise, although no legal liability existed at the time of making such promise. But it is to be observed that in such cases there must have been a good or valuable consideration; for example, every one is under a moral obligation to relieve a person in distress, a promise to do so, however, is not binding in law. One is bound to pay a debt which he owes although he has been released; a promise to pay such a debt is obligatory in law on the debtor and can therefore be enforced by action. In respect of time, a consideration is either: Executed, or Something done before the making of the obligor's promise. In general, an executed consideration is insufficient to support a contract but an executed consideration on request or by some previous duty, or if the debt be continuing at the time, or it is barred by some rule of law, or some provision of a statute as the act of limitation, it is sufficient to maintain an action; Executory, or something to be done after such promise; Concurrent, as in the case of mutual promises, and; A continuing consideration 13  CONSIDERATION When the consideration turns out to be false and fails there is no contract Public Affairs Directorate 14 SERVICE EXCELLENCE 15