What is a contract?
Contracts are part of everyday life. They affect every person in a different way. They may arise from a great variety of situations from employment contracts to contracts relating to buying and selling goods.
Contracts do not necessarily have to be in written format, they may arise in different ways.
Contracts are legally enforceable agreements between the people who make the contract. They are form through a process of offer and acceptance.
In order for a contract to be legally enforceable the law requires the following:
Agreement + Consideration + intention to create legal relations
The Agreement element of a legally enforceable contract
Basically the agreement requirement of a contract comes on the form offer and acceptance. The one party of the contract makes an offer to the other party, for example, offers the sale of a gold ring for £150. Providing the other party agrees with this he will then accept the offer and the agreement of the contract has been established.
What is meant by consideration?
The consideration of a contract is basically the bargaining element of a contract. So for example if a person is to buy a bar of chocolate the one party’s consideration would be the chocolate bare and the other party’s consideration would be the money to pay for the chocolate bar. Both parties therefore provide a benefit in some way to the other person.
Where a contract is not performed immediately, then the promise to do something or provide some sort of consideration can itself, be enough to create a legally binding contract.
The meaning of intention to create legal relations
The intention to create legal relations is vital to establish the existence of a contract as it distinguishes between contracts create for the purpose of being legally binding with those contracts that are basically arrangements such as social agreements or decisions made in relation to family dealings.
Usually there is no requirement of writing in creating a contract and therefore most can be made orally. The one major exception to this rule is in cases involving the sale of land/ property.
What is the difference between a bilateral and unilateral contract?
Contracts are most usually bilateral. This means that both parties to a contract undertake some sort of obligation and duty.
In exceptional circumstances where a unilateral contract is formed, only one party to the contract is bound to do anything. This sort of contract could arise in situation where someone offers a reward for a missing item. E.g. ‘£100 reward for the safe return of my lost dog’.
By the one party acting upon this, offering the £100 reward payment for the safe return of his lost pet, he is the only party that is required to do anything, No person is obliged to go out and search for the dog that is completely up to the person who chooses to do so. However, both parties will receive some kind of benefit. The one party will receive the safe return of his lost dog and the other party will receive the £100 reward payment.