Law of contract - SS2 Commerce Lesson Note

The law of contract governs the formation, interpretation, and enforcement of agreements between parties. In simple terms, a contract is a legally binding agreement between two or more parties that outlines their rights and obligations. 

The law of contract ensures that promises made between parties are enforceable and that parties honor their obligations. It provides a legal framework to determine the validity and enforceability of agreements and provides remedies in case of breach or non-performance. The law of contract helps establish trust and fairness in business transactions by giving parties confidence that their rights will be protected.

Basic Elements/Essentials of a Valid Contract:

For a contract to be legally valid, it must contain certain essential elements. These elements are as follows:

Offer and Acceptance:

An offer is a proposal made by one party to another, expressing a willingness to enter into a contract. Acceptance occurs when the other party agrees to the terms of the offer. Both offer and acceptance must be clear, unambiguous, and communicated between the parties.

Intention to Create Legal Relations:

For a contract to be valid, the parties must have a mutual intention to create legal relations. In other words, they must intend for their agreement to be legally enforceable. Contracts between family members or friends in social settings may lack this intention.

Consideration:

Consideration refers to something of value exchanged between the parties. It can be money, goods, services, or a promise to do or not do something. Each party must provide consideration to the other party as a benefit or detriment.

Capacity:

The parties entering into a contract must have the legal capacity to do so. This means they must be of legal age and sound mind. Minors, individuals with mental incapacities, or those under the influence of drugs or alcohol may lack the capacity to enter into a contract.

Legal Purpose:

The contract's purpose must be legal and not contrary to public policy. Contracts that involve illegal activities or are against public interest (such as contracts to commit a crime) are considered void and unenforceable.

Consent:

Consent refers to the voluntary agreement of the parties to enter into the contract. It must be free from fraud, duress, undue influence, or mistake. If consent is obtained through improper means or there is a lack of genuine agreement, the contract may be voidable.

These basic elements form the foundation of a valid contract. If any of these elements are missing or if there is a breach of the contract, the affected party may have legal remedies available to seek redress.