Study 7 – The Law of Contract – Common Law

Five elements of a valid contract

1. Offer and acceptance (agreement)
2. Capacity of parties to contract

1. Consideration
2. Genuine Intention
3. Legality of Object

Contract definition: a contract is an agreement (1) between legally capable parties (2) for a consideration (3) demonstrating intent (4) to do something which is legal. (5)

Offer and Acceptance

Offers must be definite and communicated. A price tag or an advertisement, are not considered offers but rather invitations to do business.  An offer can be lapsed for the following reasons:

• The offer is not accepted within the time specified in the offer.
• The offer is not accepted after the passing of a reasonable amount of time if none specified.
• The offer is not accepted before either party dies or becomes incapacitated.
• An offer can be revoked by the offeror at any time prior to acceptance but must be communicated.

Acceptance must be absolute. Any new term added is considered a counter offer, which may be accepted or declined by the originating party and invalidates the original offer. Acceptance must be communicated either in writing, orally or by performance. Lack of action can not be deemed consent.