Contracts

Date: 15 September 2022
Pg.113 in the Ramsingh
Contracts.
A contract is a legally binding agreement between two or more persons that is enforceable
by law. The difference between contract and a social agreement is that the contract:
❖ Must be enforceable by law
❖ Must give rise to rights and obligations
❖ Parties must have the information and ability to create a legal relationship between
them.
Social Agreement – An agreement between two or more people to cooperate for the benefit
of society that is enforced by morals and not the law.
Types of Contracts
Simple contracts – this requires no special form and may be written or oral.
Speciality contracts – this type of contract is also called a deed or a contract under seal and
must have the following.
❖ Seal
❖ Signature of party
❖ Delivered to the parties involved
❖ Testimony of one or more witnesses
E.g. hire-purchase agreements, sale of land, insurance contracts, mortgage
contracts.
A contract of record – this is a court of judgement requesting parties to abide by certain
obligations.
E.g. restraining orders, child support etc.
Characteristics of a contract
Offer and Acceptance
An offer has to be made and there must be clear and unconditional acceptance. These must
be done orally, by writing or by conduct (carrying out the terms of the agreement through
your actions).
Offer – an offer is a proposal made by one party to another, establishing his or her
willingness to enter into a legally binding agreement.
- Offerer: the person making the proposal/offer.
- Offeree: the person accepting the offer.
Acceptance – The act of agreeing to take up an offer.

Counter offer – a counter offer occurs when the offeree makes an alternative offer
rather than accepting the original offer. When a counter offer occurs, the offeree
becomes the offerer and the offerer becomes the offeree.
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Form or Consideration
Form – the solemn formalities of a contract under seal, which compensates for a lack of
consideration.
Consideration – This is the price for which one party gets the legal obligation. E.g. Charles
offers Mike $1500 for his car. The money is the consideration.
Capacity of Parties
In the eyes of the law, the parties must be able to bind themselves to a contract, e.g. not to
be insane or underage.
A minor cannot legally bind themselves to a contract, however in the case of minors items
that are suitable and necessary for their existence or education can be considered to be
legally binding.
See pg 114 ITQ2
Legality
A contract should not be illegal.
Good faith
There should be no fraud or any undue influence on any party.
Genuineness of the Consent of Parties

All parties should agree and enter of their own free will.
Possibility Parties
Parties must be able to carry out their side of the contract.
Offer vs. Invitation to Treat

An invitation to treat is only a declaration(let them be known) of the intention of a person(s)
to make an (e.g. an ad on the television) offer. However, the actual offer is what can be
accepted and what the offerer is bound by.
An offer directly allows the other party to enter into a contract as soon as it is accepted. An
invitation to treat mainly invites the other party to make negotiations and make an offer to
the seller.
Offer vs Invitation to Treat: Fisher v Bell

(video explanation)
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The Rules Of Offer And Acceptance:
The Conditions For An Offer:
❖ The offer must be communicated to the other party.
❖ The offer may be general, but must be accepted by a specific person.
❖ The offer can be revoked at any time before acceptance, unless consideration has
been made to keep the offer open.
❖ All conditions must be known to the offeree.
- Make sure you always read the fine print or get a lawyer to read it over before
you accept the offer.
The Conditions Of Acceptance:

❖ Acceptance must be unconditional, if not a refusal and a counter offer is said to have
been made.
❖ Acceptance must be made in a reasonable time.
❖ An offer lost in the post is NOT an offer.
- Suppose you made an offer to sell your vehicle, and you email your offer to
Anya. However, if you type the wrong email address and Anya never receives
the email, it is not an offer because she cannot accept the offer. But if Anya
does receive the email from the time she hits send to accept the offer, you
have entered into a contractual agreement.
❖ Acceptance is made when the letter is actually posted or the email has been sent.
Termination and Discharge of a contract

❖ Mutual agreement - (all parties agree)
➢ Satisfaction - the terms of the contract have been carried out, i.e. the contract
has come to an end
➢ Waiver - When both or all the parties involved agree that certain terms in the
contract are no longer needed.
➢ New agreement formed in place of old agreement - The parties come
together and decide to make a new contract and the old one is terminated.
❖ Breach - One party breaks his/her side of the contract - Once a party breaks a section
of the contract, it is breached and is terminated. A breach is when a party breaks one
of the terms of the contract.
❖ Performance - Contract is fulfilled - once both parties fulfil their side of the contract.
The contract is fulfilled and can be terminated.
❖ Impossibility -
➢ Contract was illegal.
If any part of the contract is suspected to be illegal, it is immediately
terminated.
➢ One or both parties find it humanly impossible to comply.
❖ Bankruptcy
❖ Death
❖ Time - Non-performance during a specified time period.
Remedies(penalties) for breach of contract:
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❖ Damages - Compensation for losses incurred.
❖ Rescission - Cancellation of a contract and the non-breaching party must be
compensated.
❖ Restitution - Returning the goods, property, or money previously conveyed. (restoring
the person to the position they were in before the contract)
❖ Waiver of breach - Non-breaching party accepts substandard performance.
❖ Limitation to liability - A clause that states that the only remedy for breach is
replacement, repair, or refund of the purchase price.
❖ Specific performance - An order to perform a specific act.
❖ Liquidated damages - Damages of an amount that the parties designate during the
formation of the contract, for the injured party to collect.

Contracts

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Date: 15 September 2022

Pg.113 in the Ramsingh

Acceptance – The act of agreeing to take up an offer.

Genuineness of the Consent of Parties

Offer vs. Invitation to Treat

Offer vs Invitation to Treat: Fisher v Bell

The Conditions Of Acceptance:

Termination and Discharge of a contract

Remedies(penalties) for breach of contract:

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