Explanation of contract elements

There are four main elements, which are required in the establishment of the existence of a contract.

They are Offer, Acceptance, Consideration and Legal intent. Each of these are explained as follows:

Offer: An offer is a clear and concise statement of the terms, which the seller/ offerer is, will to do business. The offer must be clearly understood and must also be informative. The buyer/offeree must fully understand what he/she is actually doing and also what the contract entails. An example of this is ‘ I’m thinking ofof advertising a job for my company with a salry of around €20,000’.The above statement is not classed as a contract as it is not clear on the terms. However if the following was stated ‘ I am advertising an accountant role within my prganisation and the salary will be €60,000 per annum’. This statement is classifed as a contract.

“ An offer is a clear and unambiguous statement of the terms upon which the offering party (offerer) is willing to do business".

Also it is very important to ensure it is an offer and not other requests such and advertinsing, an invitation to treat, requests for tenders, information or price information. A case example of this is ‘ Tansey v College of Occupational therapists Ltd (1986) Ire’.

An advertisment may be a marketing exercise to which an offer is ttached or just method of giving information. A case example is ‘ Carhill v Carbolic Smokeball Co. (1893).

Likewise an invitaion to treat is for example, A good in a shop window, shop display or a catalogue does not form an offer its merely an invitation for a customer to come into the shop or order via catalogue to buy the good or service. A case example of this is ‘ Fisher v Bell’(1961).

“ An invitation to treat is said to be a statement made by one person asking the other to make the first person an offer"

Also a request for tender is a request for offers or prices for a job. An example of this is A contractor of a new project to build an airport will request tenders from sub contractors to supply, fit and maintain a fire alarm system in the terminal.

An offer can be made by to any person and only they can decide to accept it.

An offer is a proposition put by one person to another person made with the intention that it shall become legally binding as soon as the other person accepts it

The formation of an offer can be made vy various means such as written, oral or by the conduct of the offerer.

There are four main elements to which an established offer can be terminated these are Lapse of time, rejection, death and revocation.

With lapse of time this means that an offer can not stay open forever. For example and introductory offer to a gym where by if you join the gym by the end of March 2010 the gym will offer two months free to the new member. Also a personcan reject the offer by saying no to it. “A rejection terminates an offer". An counteroffer is also a method to which an offer is cancelled. This is because it changes the conditions of the offer.

Another reason an offer can be rejected is if the offerer or the offeree dies than mostly the offer dies too. However the final method which an offer can be terminated is if the offerer decides to withdraw the offer. This must be communicated clearly to the offeree.

The second element to the establishment of a contract is acceptance.

“Acceptance by the offeree brings the offer to an end and creates an agreement between the parties. Acceptance can be as simple as ‘I agree’ although unfortunataley, as in the case offers, life is rarely that simple".

An acceptance to an offer is a clear and concise statement to accepting an offer. An offer and acceptance must be clearly stated. An acceptance can be made the same way an offer can be made. They are written and oral. An acceptance must acknowledge and cannot be done with silence or doing nothing. As in the case of ‘Felthouse V Brindley (1862). There should be complete agreement between an offer and acceptance. The acceptance of an offer is not legitimate unless it is corresponded to the offerer. However there are two exemptions of this. Firstly if there is a waiver. This is if the offerer does not require an acceptance. The offer made to the world at large. Secondly there is an old exemption which is known as the postal rule. This was when post office recorded all post. Therefore it was believed that once the letter was posted it was thought to have been a form of communication acceptance. A case example of this was ‘ Household Fire Insurance v grant (1879).

The third part of the establishment of the existence of a contract is consideration.

“ Consideration is the price to be paid under a contract. It is what identifieis the difference between a contract and a promise, gift or favour. All contract require consideration. There is only one exemption of this and that is a deed under seal. This makes the promise real and must be carried out as it a legal document. The main example of this a deed of covenant.

There are three forms of consideration. Hey are executed consideration, executory consideration and past consideration. Each one will be explained as follows.

Executed consideration a guarantee that by doing something, that in return a gesture or token will be received. An example of this is by doing extra work/overtime for a boss that extra money will be paid.

Executory Consideration is a promise, gift or favour in return for a promise, gift or a favour.

Past Consideration is an unacceptable type of consideration. This is if offer and acceptance was made in the past and has nothing to do with the contract. A case example of this Roscarla v Thomas (1842). An exeption of this is a cheque written to pay a past debt. This is known and clased under the bills of exchange act 1882.

There are three rule of consideration which must be followed at all times. These rules are Consideration must be sufficient but need not be adequate, Consideration must be given by a party to the contract and The doctrine of promissory estoppel. These rules are explained as follows.

Consideration must be sufficient but need not be adequate. This means that there should be some legal value to the consideration. However this doesn’t actually mean that the value of the consideration has to be inline with other similar considerations. An example of this I could sell my house for €1million euro yet the value is €500,000 equally I could sell my house for €20,000.

“As long as there is some legal consideration, it does not matter whether it is a good bargain or not".

Also an illegal consideration is not a valid consideration.