Definition
of a Contract
Under the Uniform Commercial Code (UCC),
a contract is defined as a legally binding agreement (Twomey&Jennings,
2011, pp.265-283). Other definitions view it as a set of promises for which the
law accords remedies in case of breach or recognizes their performance as legal
obligations.
Elements
of a Contract
A number of elements
are needed to satisfy the requirements of a contract: agreement; competent
parties; genuine assent; consideration; lawful objective; required form (Twomey&Jennings,
2011, pp.265-283).
Offer
and Acceptance
Offer
An agreement exists when one party makes
an offer which is accepted by the other. The person making the offer is the
offeror while the one accepting is the offeree (Twomey&Jennings, 2011,
pp.265-283). It is through the offer that the offeror expresses the willingness
to enter into a contractual relationship. Several cases including Glass Service Co. v State Farm Mutual
Automobile Ins. Co., have held that the standard for determining the
contractual intention is the objective standard. An offer must, however, be
distinguished from other statements incapable of acceptance. Those other
statements are generally referred to as invitation to negotiate. Thus, an
advertisement in the newspaper would normally fall in this category. It follows
from above that the law insists on definiteness for an offer to be valid. In
addition, the offer must be communicated by the offeror or his/her direction. A
person who becomes aware of the offer in an indirect way cannot purport to
accept it.
Acceptance
It simply means assenting to the express
terms of the offer. The law does not insist on any particular for through which
acceptance must be made (Twomey&Jennings, 2011, pp.265-283). If all the
other requirements are satisfied, acceptance acts to create a binding
relationship between the parties. According to Jones v Frickey,
acceptance must be absolute and unconditional. Any attempts to introduce new
terms into an acceptance amounts to a counter-offer.
In many cases, the offer may specify the
manner and time of acceptance. In those cases, acceptance in any other form
will not suffice. This rule has been emphasized in a number of cases. Thus, Contacts, Inc v Weigner held that the
offeror is the master of the contract.
Consideration
Even when there is a valid offer and
acceptance, the courts will not enforce an agreement unless there is
consideration. This can be seen as what each of the parties to a contract gives
up in exchange of the agreement. In Brooksbank
v Anderson, it was held that that
something must be of value. It need not be money.
There are cases where it would appear
that something of value has been given up but still fail to meet the
requirements of consideration. For instance, performing a preexisting legal
obligation does not suffice for purposes of consideration. Thus, a debtor fails
to supply consideration in promising to pay existing debt. Secondly, past
consideration does not suffice just as promises hinged on moral obligation also
fail to provide consideration.
Breach
of Contract
Failure by either party to perform as
required by the contract amounts to breach. Upon breach of the contract, the
innocent party may waive their rights as against the party in breach. In all
other cases, however, a number of remedies are available (Twomey&Jennings,
2011, pp.265-283). An award of monetary damages is one of the remedies. One may
also seek for specific performance where the party in default is made to comply
with the requirements of the contract. In the event of a material breach, one
can also seek the remedy of rescission. This remedy releases both parties from
any further obligations in the contract.
References
Glass
Service Co. v State Farm
Mutual Automobile Ins. Co., 530 NW2d 867 (Minn App 1995)
Twomey,D.P.&Jennings,M.M.(2011).Anderson’s Business Law and the Legal Environment.Mason,OH:Cengage
Learning.
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