Commerce, SS 2, Week 2
Topic: Law of Contract
Contents:
- Definition of contract
- Classification of contract
- Characteristics of contract
Definition of Contract
Contract can be defined as an agreement between two or more parties which is intended by them to have a legal backing. It is an agreement creating an obligation.
It is a written or spoken agreement, especially one concerning employment, sales, or tenancy, that is intended to be enforceable by law.
Not all agreements are contract, an important thing to note is that an agreement becomes a contract when the parties intend to be legally bound to carry out their agreement.
Classification of Contract
Contract can be classified into formal contract and informal contract.
Formal Contract
Formal contract can also be categorized into
a. Contract of Deed (speciality Contract) This is a kind of formal contract whereby promises are written on a paper,signed, sealed and delivered. The contract is under seal is carried out by putting a seal on it. They do not usually require considerations .
b. Contract of Records: These are obligations imposed by the court. They are not true contract but contracts which are acknowledge before the law court.
Informal Contract
Informal contacts are simple contracts which must possess all the essential characteristics of a valid contract. All contracts that do not belong to the formal mentioned above are referred to as informal contract and because of its flexibility it may be difficult to execute e.g contract of sales.
Essential characteristics of Contract
- Offer and Acceptance: For a contract to be valid, there must be an offer made by one member of the party to the other party and the offer must be unconditionally acceptable. Acceptance must be absolute and once it is completed it cannot be revoked
Characteristics of an offer
- An offer must not be mistaken with the answer to a question or the supplying of information.
- An offer must be communicated to the offeree
- An offer may be expressly made or implied by the conduct of the parties
- An offer may be made to a specific person, a group of persons or the world at large
Termination of an offer
An offer can be terminated in the following way
- When the offeree notifies the offeror that he does not wish to accept the offer
- Lapse of offer
- Withdrawal of the offer (revocation)
- A refusal or counter offer
Rules of communication of Acceptance
- The offeree must positively accept the offer
- It must be communicated by the offeree or someone with his authority
- Acceptance is not effective until communicated to by the offeror and received by the offeree
- Acceptance is not effective if communicated in ignorance of the offeror
2. Intention to create legal relations: it must be clearly stated that the parties intend to create a legally binding contracts.there must be no clause that will exclude the court.
3. There must be valuable consideration: All valuable contract must be supported by valuable consideration.This is to say that an agreement can become contract when each of the parties give or promises to give something of value to the other party.
4. Certainty of terms: The terms of contract must be clearly stated, the parties can expressly state every term of their contract. A contract may contain two types of clauses namely:express and implied terms
5. Possibility of performance: The parties to a contract can enter into a contract once they are sure that they can do the job.It must be possible to carry out the contract
