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A
contract is a legally-enforceable promise or promises which
may be written or spoken.
Contracts are the vehicles by which persons voluntarily
create obligations upon themselves.
The basis of a contract is the “agreement,” which
must be supported by consideration and an intention to create
legal relations.
Agreement
A contractual agreement is said to exist when a valid offer
is followed by a valid acceptance.
An offer is the presentation of terms by the offeree to
be accepted or rejected by the person to whom the offer
is made, the offeree.
The terms of the offer must, therefore, be communicated
to the other person.
An advertisement, a display of goods in a store window with
a price tag, or items in a self-service store is not an
offer. Rather, it is what is called an “invitation
to treat.”
An invitation to treat cannot be accepted, because essentially
it is an invitation to make offers. The offer comes from
the customer who offers to purchase the item.
An offer may be cancelled before the other person accepts;
it may be rejected; or one may present a counter-offer that
nullifies the original offer.
Acceptance of an offer creates a contract. The acceptance
must correspond with the terms of the offer. Note that one
cannot accept an offer one did not know about.
For example, if you return a lost dog to the owner without
knowing that a reward had been offered, then a claim to
make the dog owner honour that promise would fail. Silence
does not amount to acceptance of the offer.
Acceptance may be in the form of expressed words—spoken,
written or implied from conduct.
When sent by mail, acceptance of an offer is considered
complete from the time the letter is posted. This postal
rule does not apply to instantaneous modes of communication
(fax, e-mail, text messages) as easily.
In today’s technological environment, acceptance is
complete on reaching the receiver’s machine, where
the sender has done everything correctly and the recipient
or members of his staff have failed to read the message.
Consideration
An agreement is not generally binding unless supported by
some consideration. Consideration means that something of
value in the eyes of the law must be given for a promise
to make it enforceable.
The party who wants to sue on a promise must provide consideration,
which must not have been given before the actual promise
was made and must be legal.
Consideration is the universal requisite of contracts not
made by deed; it need not be adequate, but must be sufficient.
That is to say, the courts are not interested in making
sure that a good or bad bargain was made, but enforces the
bargain, once it is agreed upon by the parties.
Intention to create legal relations
An agreement, though it is supported by consideration, is
not binding on the parties if it was made without intent
to create legal relations.
The court considers whether a reasonable man, ie the ordinary
man in the maxi taxi, would consider that the parties intended
that their agreement should have legal effect.
Although intention is decided on the facts of individual
cases, there are two general presumptions. The court does
not presume that domestic/social arrangements are intended
to be subject to litigation. Agreements between husband
and wife, parent and child are not initially viewed as legally-binding.
With respect to commercial arrangements, there is a presumption
that the parties intended to create legal relations.
These presumptions can be rebutted. The court, for example,
would view the agreement between a happily-married couple
differently than where the husband and wife are separated.
The latter may be taken to have legally-binding effect.
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