I am employed as a legal executive in a firm of solicitors. A clients (Mr. Tuan) has come and seeking advice on several claims and legal issues, which have recently arisen. For this reason, I write a report for claims.
Sources of information:
I often collect information from some course books such as Common Law or Contract Law. Beside them, information on the internet also is useful. Through accessing legal website helps me have extra knowledge, which is more expansive. However, not always, I can understand almost knowledge in books or on the website; therefore I ask my friends or my lecturer.
Limitations of report:
Because all of lectures is English, therefore some information or words is difficult to know in Vietnamese. Furthermore, we do not have tutorial class, so confusions cannot avoid. It also means that is difficult to find consistent data from sources. It leads to the report is not fully accurate. Moreover, the word count is limited. It is a restriction for add more data.
Explain the different types of business agreement and the importance for the key elements required for the formation for a valid contract.
The Different types of business agreement:
Definition of Unilateral Contract:
According to Legal Dictionary (2010), the Unilateral Contract is: “A contract in which only one party makes an express promise, or undertakes a performance without first securing a reciprocal agreement from the other party.”
Rule of Unilateral Contract:
Furthermore, the rule of Unilateral Contract is that offers can be revoked at any time prior to completion of the requested performance. Other than that, the classical approach to a unilateral contract holds that a promise is enforceable only upon completion of the requested performance.
Case example and Application of rule:
Refer to Appendix A
The other element is the consideration. In order to consideration to be valid, it must contain three elements (executed consideration, executory consideration and past consideration), one of them is the executed consideration. Executed Consideration is a performed, or executed, act in return for a promise (BPP Professional Education, 2010). For example, A offers a reward for the return of lost property, his promise becomes binding when B performs the act of returning A’s property to him.
Definition of Bilateral Contract:
According to Legal Dictionary (2010), a Bilateral Contract is: “A bilateral contract is distinguishable from a unilateral contract, a promise made by one party in exchange for the performance of some act by the other party”. In other words, a bilateral Contract is a contract which binds two parties. Two promises are given, one in exchange for another.
Rule of Bilateral Contract:
The rule of bilateral contract is that both parties are bound by their exchange of promises.
Case Example and Application on case example:
Refer to Appendix B
Executory Consideration is a promise given for a promise, not a perform act.(BPP Professional Education, 2010). For example, a customer orders goods which a shopkeeper undertakes to obtain from the manufacturer, the shopkeeper promises to supply the goods and the customer promises to accept and pay for them.
Definition of Specialty Contract:
The Specialty Contract is made under seal. According to Legal Dictionary (2010), “A specialty contract is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt”. On the other words, a specialty contract is one where consideration is not a compulsory element (BPP Professional Education, 2004).
Rule of Specialty Contract:
The rule of specialty contract is that no consideration is necessary to give it validity, even in a court of equity.
Case example and application on case example:
Refer to Appendix C
Definition of Simple Contract:
According to Lectlaw.com (2010), Simple contract is one, the evidence of which is merely oral, or in writing, not under seal, nor of record.
Rule of Simple Contract:
The rule of simple contract is that the law requires that there be some good cause, consideration or motive, before they can be enforced in the courts. (BPP Professional Education, 2004)
Case example and application on case example for simple contract:
Refer to Appendix D
Standard form contract:
Definition of Standard Form Contract:
The standard form contract is a standard document prepared by many large organizations and setting out the terms on which they contract with their customers. The individual must usually take it or leave it (BPP Professional Education, 2004). Furthermore, the standard form contract can be known is “A type of contract, a legally binding agreement between two parties to do a certain thing, in which one side has all the bargaining power and uses it to write the contract primarily to his or her advantage” (legal-dictionary.com, 2010).
Rule of Standard form contract:
As the same as the other types of contract, standard form contract has the own rule. As a general rule, the common law treats standard form contracts as any other contract. It must contain the essential elements of a contract.
Case example and application of rule on case example for standard form contract:
Refer to Appendix E
Importance for the key elements required for the information for a valid contract:
In order to constitute a contract there must be an agreement. An agreement is composed of two elements—offer and acceptance. The party making the offer is known as the offeror, the party to whom the offer is made is known as the offeree. Thus, there are essentially to be two parties to an agreement. They both must be thinking of the same thing in the same sense. On the other hand, an offer is a definite promise to be bound on specific terms (BPP Professional Education, 2004).
Firstly, Offer has three elements such as certainty of offer, invitation to treat and termination of offer. Certainty of offer can be known that an offer must be clear, certain, definite and absolute which is completed in all terms condition and consequence and no doubt. The offer must be firm. There must be definite intention to adhere to the offer (lawofcontract.com, 2010). Furthermore, an offer must be distinguished from an invitation to treat. An invitation to treat invites people to make offers. It is not an offer but a sort of preliminary communication which passes between the parties at the stage of negotiation and not capable of being turned into a contract. According to BPP Professional Education (2004), an invitation to treat is an indication that someone is prepared to receive offers with the view to forming a binding contract. It is not an offer in itself. There are four types of invitation to treat which are auction sales, advertisements, exhibition of goods for sale and an invitation for tenders. Other than that, the key way that an offer is terminated is by being accepted or creating agreement. So that an offer is terminated and it may no longer be accepted in any case such as rejection, lapse of time, revocation by the offeror, failure of a condition to which the offer was subject, and death of one of the parties (BPP Professional Education, 2004)
Secondly, according to BPP Professional Education (2004), acceptance is the unqualified agreement to the terms of the offer. There are three elements of acceptance including: term of acceptance; counter offer and communication of acceptance. Firstly, counter offer is an offer made in response to a previous offer by the other party during negotiations for a final contract (legal-dictionary.com, 2010). Firstly the counter offer is the acceptance which purports to introduce a new term. If a counter offer is made, the original offeror may accept it but if he rejects it his original offer is no longer available for acceptance (BPP Professional Education, 2004). On the other hand the acceptance must be communicated. The general rule is that acceptance must be communicated to the offeror and is not effective until this has been done. Furthermore The acceptance must be communicated by the offeree or someone authorized by the offeree. If someone accepts on behalf of the offeree, without authorization, this will not be a valid acceptance (Doti Chee, 2009). The offeror may waive the need for communication of acceptance by marking an offer to the entire world. Moreover he may indicate that he expects acceptance through the post. There are also three exceptions to the communication rule which are terms of offer, conduct of the offeror and postal rule (BPP Professional Education, 2004). Furthermore as the term of the order, it can state or imply that acceptance needs not to be communicated to the offeror.
The case example for agreement is referred to Appendix F.
Consideration is also one of the three essential elements of a binding contract. According to BPP (2004), a valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.
In order to consideration to be valid, it must contain three elements including executed consideration, executory consideration and past consideration. Firstly, one of them is the executed consideration. Executed Consideration is a performed, or executed, act in return for a promise (BPP Professional Education, 2010). For example, A offers a reward for the return of lost property, his promise becomes binding when B performs the act of returning A’s property to him. Next, the other one is executor consideration, executory Consideration is a promise given for a promise, not a perform act (BPP Professional Education, 2010). For example, a customer orders goods which a shopkeeper undertakes to obtain from the manufacturer, the shopkeeper promises to supply the goods and the customer promises to accept and pay for them. The last one element is that consideration cannot be past considerations that mean anything which has already been done before a promise in return is given is past consideration which, as a general rule, is not sufficient to make the promise binding (BPP Professional Education, 2004). The case example for past consideration is referred to Appendix G.
Adequacy means the quality of being able to meet a need satisfactorily. The sufficiency means the quality or state of being sufficient, or adequate to the end proposed; adequacy. The law says that consideration need not be adequate but it has to be sufficient. This means that the consideration need not be of equal value to the parties to the contract, but it must be of some value to the parties involved. This does not have to be financial or monetary value (BPP Professional Education, 2004). The case example for sufficiency is referred to Appendix H.
The last is privity of contract. According to BPP Professional Education (2004), privity of contract is the relation between the two parties to a contract. Third parties who are not privy to the contract generally have no right of action. This is true even if they receive benefits under it. If you do not provide consideration, you cannot sue on the contract. This is a critical rule in contract law, and reflects the fact that consideration is essential. This maxim means that only the person who has paid the price of a contract can sue on it.
Intention of legal relations:
One of important key element is intention of legal relations. An agreement is not a binding contract unless the parties intend to create legal relations and have the capacity or ability to do so. Legal relations can be defined as the willingness to be bound by the terms of the contract. Where there is no express statement as to whether or not legal relations are intended, the courts apply one of two presumptions: social, domestic and family arrangements are not usually intended by the parties involved to be binding. On the other hand, commercial agreements are usually intended to be legally binding (BPP Professional Education, 2004). The case example for legal intentions is referred to Appendix I.
Legal Capacity to contract:
The other important element is legal capacity to contract. Capacity refers to the fact that the law regards some groups as being unable to enter into binding contractual arrangements, because they might not be in a position to fully understand the agreement they have entered into. The groups unable to enter into binding contractual arrangement are including minors, mental disorders and drunkenness.(BPP Professional Education, 2004). The case example for legal capacity to contract is referred to Appendix J.
Form of a contract:
The other key element of contract is the form of a contract. A contract can be made by written, oral or implied by conduct. Writing makes it easier to prove the contents of the contract, but it is not usually necessary unless related to the one of each type: some contracts must be by deed, some must be in writing and some must be evidenced in writing or contracts made through the internet and by e-mail. There are formalities of the contract (BPP Professional Education, 2004). Contracts which must be by deed include the following: Leases for three years or more; a conveyance or transfer of a legal estate in land or a promise not supported by consideration. Contract made by deed are also referred to as specialty contracts. Some types of contract are required to be in the form of a written document, usually signed by at least one of the parties. Contracts which must be in writing include the following: a transfer of shares in a limited company; the sale or disposition of an interest in land; bills of exchange and cheques or consumer credit contracts. Other than that, contracts which have to evidenced in writing, certain contracts may be made orally, but are not enforceable in a court of law unless there is written evidence of their term. The most important contract of this type is the contract of guarantee. A signed note of the material terms of the contract is sufficient. The case example for form of contract is referred to Appendix K.
The next key element of the contract is consent.
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