Law Of Contracts

Contract Law:

In the commercial world, goods or services are normally purchased for consumption or resale. First the buyer and seller will negotiate the terms of the purchase, and then they must enter a transaction which will result in the sale. The parties to such transactions include commercial undertakings, public corporations, local authorities and private individuals, but the legal mechanism by which they transact is always the same: they enter a 'contract'. Freedom to contract for a greater range of goods and services is crucial to the market economy. Trading in any sort, involves financial risk, therefore it is in the interest of all to have a recognizable set of rules by which the parties involved, agree to abide from. Form the simplest to the most complex transaction the parties to a contract enter common agreements that involve obligations. In a straightforward contract of, for example, the sale of goods, a seller will agree to sell specific goods to a customer for a stated agreed amount. This kind of contract involves an obligation upon the seller to transfer the goods to the buyer in return for the transfer payment to the seller. In a more complex transactions like international trade deals, detailed and multiple groups of promises are exchanged. A fundamental issue that should be kept in mind is whether the agreement imposing the obligations constitutes a contract or not and is it therefore legally binding. This can be determined by examining whether the elements of a simple contract are present in the agreement. Most trading is effected by means of "simple" contract but for certain purposes like interests in land, the more "formal" contract (contract under seal) is used (1). The requirements of a formal contract include:

1. that it must be in writing

2. it must be signed by the parties to be bound

3. must be independently witnessed

4. must have been formally sealed and delivered

5. that it does not require consideration

Simple contracts are agreements intended by the parties to have legal consequences and to be legally enforceable. As a general rule, simple contracts do not need to be in any particular form therefore they may be oral or written, or both. A contract for the sale or transfer of an interest in land, there must be written evidence containing the main terms of agreement.

A contract can be made only if certain elements are present. The elements which must be present to constitute a legally binding simple contract are that:

1. the parties intend to contract;

To create a contractual relationship, the parties must intend their agreement to have legal consequences. In cases where the parties to an agreement have not expressed their intentions clearly, it will then be left to the courts to judge whether the parties intended to enter into a contract.

2. they have reached a precise agreement through the process of offer and acceptance;

- There must be an offer and its acceptance. If there is no offer, there is no contract, because there is no meeting of minds. Again, if there is an offer by one party, but it is not accepted by the other party or if the ostensible acceptance of the offer is defective, then also, there is no agreement and therefore no contract.

3. they have provided consideration to support the contract they made;

- Consideration is a legal concept which describes something of value that is given in exchange for a performance or a promise to perform. The presence of consideration distinguishes contracts from gifts. Consideration can be a promise to do something there is no legal obligation to do, or a promise to not do something there is a legal right to do. Promises to exchange money, goods, or services are forms of consideration. All parties in an agreement must give consideration in order to create a contract, but courts typically do not look at the adequacy of consideration unless there is evidence of some type of wrongdoing by the party benefiting most from the contract (2).

- Consideration is not required for a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor or something which the promisor was legally compellable to do. It is also not required for a written and signed promise by the debtor to pay a time-barred debt to the creditor (2).

4. they have the legal capacity to contract.

- The term 'legal capacity' means the legal authority to enter into a contract in question. Adults, being persons of at least 18 years of age are considered legal to complete contractual capacity and can enter into contracts of any kind. Minors, Mentally incapable and criminals in prison would be considered