Importance Of The Elements In The Formation Of A Contract Bus115 Business Law

1198 words - 5 pages

Our daily life is full of contractual relationships, ranging from contracts used by ordinary customers to business contracts. For instance, whenever a consumer goes shopping, orders food, borrows books or top-ups card, etc., he or she is already involved in some kinds of implied contracts. In the same manner, when a company purchases or rents materials and machines, borrows or lends capital, builds new instructions, etc., they are actually bound by legal relations. Therefore, it is important to comprehend all the essential elements of a contract which is necessary for both consumers and businesses to be confident when making any types of legal decisions.
Particularly, the formation of a contract must base on these four essential elements which are the offer, acceptance, consideration and intention to create legal relations. Those vital elements play a key role in forming a contract as without them, the contract cannot be enforced under law. In the real context of business, it is highly likely that different kind of issue may arise when the contract is implemented, which causes loss or damage to one party. That party can only sue the other when it is a valid contract. If the contract is invalid, once missing any of the essential elements required above, the injured party cannot bring the case to court. Thus, it is crucial to ensure the presence of all those necessary elements in the formation of a contract, and all party must adhere to all the contract’s requirements or conditions.

Legal Principal

Kelvin v. Linda

The issue, in this case, shows concern of offer and acceptance in the contract. The case turns upon the question whether there is a valid offer or acceptance to form a contract between Linda and Kelvin.

(i) Applicable Law 1:
As a general rule, an “invitation to treat”, which is not an offer, is only a declaration of willingness to negotiate, and therefore cannot create a binding contract. There should not be any confusion between Invitation to treat and offer. For instance, most advertisements (Partridge v. Crittenden 1968), tenders (Spencer v. Harding 1870), a display of goods at a fixed price (Pharmaceutical Society v. Boots Chemist 1853) and supply of information (Harvey v. Facey 1893) are not “offers”. However, there is a case (Carlill v. Carbolic Smoke Ball Co 1873) which is exceptional. Although at first, it looks like an invitation to treat, in facts, it is regarded as a unilateral contract which can be accepted by anyone through making an agreement to bargain.

(i) Application of Facts to Law:
According to the case, Linda placed an advertisement in the New Nation with the purpose of selling her laptop at an accurate price of $2000. Her ad on the website is deemed to be an invitation to treat because Linda invited people to make an offer or commenced negotiation, without any intention to be bound. It is similar to the Partridge V. Crittenden 1968 case. In addition, when Kelvin...

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