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Chapter

Cover Business Law

5. Establishing an Agreement: Offer and Acceptance  

This chapter identifies the essential features necessary in the establishment of a legally binding contract. Most contracts need not be given in writing, and a contract could be regarding as something as simple as buying a newspaper or a cup of coffee. In fact, many contracts that are established are not done so in writing, even if a receipt is received. However, each of the essential features noted in this chapter is present in forming those contracts. Before the essential features are considered, it is important to note that contracts can be established by the parties exchanging promises, or by one party promising to perform an act in return for some action by the other. In the latter scenario, the second party has no obligation to take any action unless it wishes to enter into a contract.

Chapter

Cover Business Law

6. Establishing the Contract: Consideration, Intention to Create Legal Relations, and Certainty Of Terms  

This chapter is a continuation of the previous one, and further discusses the essential features of a legally binding, or valid, contract. It puts particular importance on the meaning of ‘consideration’, which is what makes a promise or agreement a ‘bargain’ and, therefore, enforceable. The courts are not bound to, and will not, consider a ‘bare promise’. Parties to a contract must intend it to be legally binding, and not just be social or domestic agreement, and such contracts must contain certain terms that identify the rights and obligations of both parties. Without an understanding of these crucial elements, agreements may be concluded but they will not create an enforceable contract. Also, although a contract is enforceable by those parties to it, this right can be extended to third parties if the contract has been made for the benefit of these parties.