Contract Formation

Part A Contracts ar an integral sidetrack of business and perfunctory life, and argon fundamental to construction as the industry relies on the establishment of withers for business obligations. Contracts ar base on the idea of a bargain, where each fount must put something into the bargain. A subscribe whitethorn be de hunky-doryd as an agreement which is rachis on the parties (Galbraith, 1998, pg78). There are a emergence of key components which must be pre displace in the formation of such obtains. Firstly, at that place unavoidably to be an initial fissure do by one society for the formation to begin. An put up exists when one party effectively declares his readiness to be bound by a set of end points without any pull ahead negotiation (Galbraith, 1998, pg79). It is interesting to none also that there is gener entirelyy no requirement that the strait be made in any particular form, it whitethorn be made orally, in writing or by conduct (McKendrick, 2007, pg 33). The exception to this is with speciality adopts such as the sale of land or estates or when deeds are formed between parties giving them twelve years liability instead of the sextuplet on simple contracts, and are frequently use within construction (Owen, 1998, pg47).However there is a fine line between what constitutes an spell, and an invitation to hatch. An invitation to treat is simply an expression of provideingness to enter into negotiations which will have to the conclusion of a contract at a later date (McKendrick, 2007, pg33). There is much confusion between the two, as sh professional personfess in the cases of Gibson v. Manchester City Council 1978 and Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd 1953.An example of an invitation to treat in construction is the tendering process, in which the employer will invite contractors to make an offer based on the project information, which the employer tail end then choose to accept to f orm a binding contract. In terms of the go forment of contract law, when cases are examined McKendrick (2007, pg32) states the courts adopt the mirror image rule of contractual formation, that is to say they must find a create offer which is matched by an reachly release borrowing.Acceptance is also defined as an unqualified expression of acquiesce to the terms proposed by the offeror (McKendrick, 2007, pg43). Therefore a contract can only be sanctionedly binding if the offer holds throw terms and is declared to the offeree, with communication of a clear and firm bridal to be bound by these terms given back to the offeror. These two situationors combined culminate in the agreement of the contract. However contract formation is rarely simple, and often the offeree will wish to introduce their own terms to the agreement as part of the negotiations, communicating this back to the offeror.This is known as a forbid offer. Galbraith (1998, pg80) points out that the offer cou nter offer situation arises frequently in business where each side in the negotiations may be trying to make the contract on the basis of their own pro forma standard documents. This gives rise to what us known as battle of the forms The battle of the forms scenario succinctly defines the rules of offer and acceptance, in that any counter offer destroys the original offer making it irretrievable, with agreement of contract resulting when the last offer is accredited by the offeree.An example of this is evident in the case of pantryman Machine Tool Ltd v Ex-Cell-O Corp 1979. It is also important that there is an element of certainty to the terms of the contract, with the parties expressing their agreement in a form sufficiently certain for the courts to enforce (McKendrick, 2007, pg57). If there is an element of vagueness in the terms of the contract, it could be judged there is no valid contract at all, an example being the vague use of the term hire-purchase in the case Scammell v Ousten 1941.However if the parties pose contracted with each other previously, it could be deemed as stated by Owen ( 1998, pg55) a previous course of dealings will control some of the matters not expressly hold in the present case, e. g. the amount of pay which could be the same as that paid on a prior occasion. One particular problem in construction is the letter of innovation, widely used between employers and contractors as a form of pre-contract agreement. Following on from the tendering negotiations, Adriaanse (2010, pg55) writes the purpose of a letter of intent is to express an invention to enter into a contract at a future date.These are the result of failing to negotiate on certain terms in time for the project survive date, and are introduced to allow the commencement of work, keeping within the projects completion target. As these are often not legally binding contracts they cause disputes in the future if one of the parties does not carry out their duties, as in British Steel Corporation v. Cleveland Bridge & engineer Co. Ltd (1981). Owen ( 1998, pg50) writes that all simple contracts must have consideration given by each party to the other as the price of each others promises.It may take the form of money, goods, services, promises not to sue etc. For example party A must assimilate something from party B, in return for party A providing something to party B. However McKendrick (2007, pg88) states that consideration must be sufficient but does not need to be adequate, meaning for example something must be offered to the other party in return to satisfy the rules of consideration, but does not need to be of an equal value as shown in the cases Chappell & Co Ltd v Nestle Co Ltd 1960 and doubting doubting Thomas v Thomas 1842.Consideration given also cannot be past, stated by Owen ( ) in that you cannot make a contract in which one person promises to do something for another in exchange for a consideration which has already been performed. This is clear in the cases of Lampleigh v Brathwait 1615 and Roscorla v Thomas 1842.Consideration is of huge importance in the construction industry, as Adriaanse writes this is referable to a number of factors such as the length of the contractual chain stretching beyond the parties to their subcontractors and suppliers, as well as the system of competitive bidding meaning one party may under-price the live of the work, raising the possibility that one party may wish to renegotiate the agreement. This can lead to the question of whether consideration was given when the contract was formed and whether the party is legally entitled to expect renegotiation to occur.However still when consideration has been given by parties and agreement reached this does not mean there is an enforceable contract in place. For a contract to be valid there must also be present the intention of all parties to enter legal sexual intercourses with one another. Galbraith (1998, pg91) explains there are two categories, commercial arrangements where the parties are acquired to have intended to create a contract, and family, domestic and social arrangements where they are presumed to have not.In the house of construction only the former is relevant, where the courts would initially look at a case between the parties and presume an intention to enter a contract exists. Conflict can occur when one of the parties seeks to rebut the presumption, in which the party will need to show evidence no contract was intended. An example of such a rebuttal is the case of Rose and Frank Co. v. Compton Bros where it was indicated the written document drawn up was merely a gentlemans agreement and not a legally binding contract (Galbraith, 1998, pg92). The legal capacity of the parties to enter into a binding agreement also must be present.Minors under the age of 18, and the mentally incapacitated are not able to enter into contracts to protect them from their own inability or inexperience (McKendr ick, 2007, pg348). Companies are deemed to have intact capacity to enter into legal contracts and are not restricted in any way. In conclusion, in order for the formation of a legally binding contract to occur there must be an offer from a party which is followed by acceptance from another party. Certainty must exist within the terms of the agreement, and due consideration must be given by both parties for the price of the promises received.The intentions of all parties to enter into legal relations must be present, as well as the capacity to incline as valid party to the agreement. Part B a. ) When determining if there is a legal contract agreed between two parties there needs to be examination of whether the key elements of contract formation have been satisfied. In the case of Carolean v. A. W Electrical, the question is if at any point an offer was accepted and therefrom a contract agreed between the two parties on the terms given. When A. W Electrical placed the publicizin g in the newspaper for the ZR250 Smart Television at ? 80 via situation order, this is a clear invitation to treat and should not be classed as an offer. As discussed in part A, an invitation to treat is where a party will indicate they wish to enter into negotiations which may lead to receiving an offer and an agreement if they choose to accept. Advertisements are a prime example of an invitation to treat as they are an indication of what goods or services that party may be willing to negotiate over, with the price of ? 480 an estimate to invite offers. after when Caroline saw the advertisement and sent in a cheque for the ? 80, this equates to an offer being made to A. W Electrical. As Galbraith (1998, pg79) states an offer exists when one party effectively declares his/(her) readiness to be bound by a set of terms without any further negotiation. Caroline has effectively done this by transmiting the cheque for the amount on the advertisement, the terms being if she gives ? 480, A. W Electrical will send the item without any further negotiation if they accept Carolines offer. Due to the nature of the terms, A. W Electrical will be judged to have accepted if they go ahead and send Caroline the ZR250 Smart Television.As explained in part A above, there needs to be communication of a clear and firm acceptance to be bound by these terms given back to the offeror. This will be deemed to be communicating via evaluate by conduct, in which their actions equates to acceptance of the terms. However instead of sending Caroline the ZR250 model, A. W Electrical sent a ZR200 and a letter the following day with a cheque for ? 80 explaining the ZR250 was not on hand(predicate) and unless Caroline returned the item within two weeks they would assume she was satisfied with the deal. A.W Electrical have not accepted Carolines offer, but introduced a counter offer which is binding to their terms and not Carolines. As explained by McKendrick (2007, pg43) a purported accepta nce which does not accept all the terms and conditions proposed by the offeror but which in fact introduces new terms is not acceptance but a counter-offer, which is then treated as a new offer which is capable of acceptance or rejection. Due to not being able to response as she was departing on a two week holiday, upon her return Caroline returned the item with a circular explaining it was not what she ordered, however A.W Electrical refused to accept the item or provide any further give as she had not returned the item within two weeks. This raises the question whether Caroline did actually accept the offer by not returning the item within two weeks. For this to be enforceable, the law of contract needs to govern that acceptance by silence is a valid form of coming to agreement. Galbraith states (1998, pg82) the rule that acceptance must be communicated means that silence cannot usually amount to acceptance This may mean that in the context of this case, Caroline did not accept the offer made by A. W Electrical and therefore is not bound by the terms.However, full clarity on the matter can be taken from a case law example of Felthouse v. Bindley 1862, where it was judged accepting by silence cannot equal a clear communication of acceptance, unless it is totally clear the offeree intended to do so. In Carolines case, it is most definitely not clear she wished to accept, due to A. W Electrical not providing the item she requested on the terms given in her original offer. Therefore, there was no contract formed between the two parties as at no point an offer was accepted, rendering the contract void and no terms binding on any party. . ) If however we were to assume a contract was formed between Caroline and A. W Electrical at the point the two week period elapsed, there would be terms binding and these can be separated into two types, express terms and implied terms. McKendrick (2007, pg184) explains that express terms are the terms agreed specifically by the contracting parties and implied terms are those not specifically agreed but which are implied into the contract by the courts or by Parliament. The express terms of Carolines contract include the price being ? 00 for a ZR200 television given that she sent a cheque initially for ? 480 with an ? 80 cheque sent to Caroline with the item, and that A. W Electrical reserve the right to repair or sub the goods at its discretion if any dispute over the quality of goods were to arise. The implied terms of the contract will include elements of the Sale of Goods Act 1979, which will enforce A. W Electrical to adhere to certain conditions relating to the quality of goods and defects, and the translation of the goods sold. S. 4(2) of the Act states there is an implied condition that goods supplied under the contract are of satisfactory quality. This is clearly contradicting the express term made by A. W Electrical regarding the right to repair or replace the goods, however in order to pro tect consumers rights the Unfair Contract Terms Act 1977 means that implied terms cannot be excluded in contracts with consumers (McKendrick, 2007, pg205). Therefore the express term is not valid in the contract, and A. W Electrical have busted this implied term by stating this.Furthermore the Sale of Goods Act 1979 s. 13(1) states an implied condition that goods sold by description shall correspond with the description. The advertisement was for a suffer television however the item provided to Caroline did not possess any smart features, therefore this term has been broken due to the item not matching the description advertised. In relation to the right to return the item, when Caroline sent this back to A. W Electrical they refused to accept stating the two week period has passed.We are assuming the contract came in effect and was accepted by Carolines silence at the end of this period however the Consumer Protection (Distance Selling) Regulations 2000 s. 10 and s. 11(1-2) expla ins she has the right to a cardinal day cancellation period starting from the date the contract was concluded, expiring seven days later. This is another implied term of the contract A. W Electrical have broken in refusing to accept the returned goods. c. ) There are remedies available to Caroline in order to resolve the fact A. W Electrical have broken the terms of the contract.The main(prenominal) issue to her is she is not able to return the television either in exchange for the model she asked for, or for a full refund. This breach of contract is likely to be classed as a breach of warranty, where a warranty is a term in the agreement not fundamental to its existence and therefore the contract cannot simply be terminated due to the breach. However Caroline could recruit the services of a lawyer or solicitor to take legal action against A. W Electrical in the form of a specific performance order, which will require A.W Electrical to perform their primary obligations under the c ontract (McKendrick, 2007, pg451). This would enforce the implied term from the Consumer Protection (Distance Selling) Regulations 2000. Caroline could also contact the Office of reliable Trading to make a complaint, which could lead to an application to the courts for an injunction against A. W Electrical, ultimately resulting in the same effect of enforcing the contract (Office of Fair Trading, 2012). Bibliography Reference list Adriaanse, J. (2010). Construction Contract honor (3rd ed. Basingstoke Palgrave Macmillan. Davenport, A. , Galbraith, A,. Stockdale, M. , Wilson, S. (1998). Galbraiths Building & Land Management Law For Students (4th ed. ) Oxford Butterworth-Heinemann 1998. McKendrick, E. (2007). Contract Law (7th ed. ) Basingstoke Palgrave Macmillan 2007. Office of Fair Trading. (2012). Relevant Legislation The Office of Fair Trading. Retrieved 28 November 2012, from http//www. oft. gov. uk/about-the-oft/legal-powers/legal/. ULY4v8UTDwM. Owen, S. (1998). Law For The Construction Industry (2nd ed. ) Harlow Longman 1998. Cases Gibson v.Manchester City Council 1978. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd 1953. Butler Machine Tool Ltd v Ex-Cell-O Corp 1979. Scammell v Ousten 1941. British Steel Corporation v. Cleveland Bridge & Engineering Co. Ltd (1981). Chappell & Co Ltd v Nestle Co Ltd 1960. Thomas v Thomas 1842. Lampleigh v Brathwait 1615. Roscorla v Thomas 1842. Rose and Frank Co. v. Compton Bros 1925. Felthouse v. Bindley 1862. Statutes Sale of Goods Act 1979 Unfair Contract Terms Act 1977 Consumer Protection (Distance Selling) Regulations 2000