There are several types of contracts that must be in written form. For example, contracts containing a guarantee must be in writing. A
guarantee is an agreement where one party agrees to pay the debt of another individual or company in the event that the third party defaults on the debt.
Contracts relating to the sale, transfer, option or lease of land should always be in writing. Another common situation
where writing is required is for contracts for the assignment or
exclusive licensing of certain intellectual property rights.
I believe everyone knows the meaning of a Contract. However, According to Sagay ” A contract is defined as an agreement which the law will enforce or recognize as affecting the legal rights and duties of the parties”. It must be noted that not all agreements will be enforced by law. For example, social agreements are generally not binding in law.
The requisites for formation of an effective Contract are parties that is competent parties who have legal capacity to contract, an offer, acceptance, subject matter, terms & conditions and signature.
1. Parties
For a Contract to be more effective there must be existence of parties who are to be involved in the contract. A preliminary point to bear in mind is that behind every effective Contracts the parties to the contract must have capacity to contract. The most basic rule of contract is that they are binding on the parties to them. Therefore, the parties must have capacity to bargain. The parties must be competent and have legal capacity to contract. A natural person who agrees to a transaction has complete legal capacity to become liable for duties under the contract unless he or she is an infant, insane, or intoxicated.
2. Subject
Matter
The existence of the subject – matter of the contract renders it effective. Thus, where there is a mistake as to the existence of the subject – matter of the contract renders it void.
A point to bear in mind is that the absence of the subject matter at the time of the contract is no contract. This view was subsequently followed in section 6 of the Sale of Goods Act 1893 which provided as follows ” where there is a contract for the Sale of specific goods and the good without the knowledge of the seller have perished at the time the contract is made, the contract is void.
Therefore, for an effective contract the subject matter must be in existence at the time of the conclusion of the contract.
3. Offer
The purpose of a contract is to establish the agreement that the parties have made and to fix their rights and duties in accordance with that agreement. However, before this purpose of a contract could be met there must have been in existence the basic element of contract which are offer and acceptance.
An offer is a promise that is, by its terms, conditional upon an act, forbearance, or return promise being given in exchange for the promise or its performance. It is a demonstration of willingness to enter into a bargain, made so that another party is justified in understanding that his or her assent to the bargain is invited and will conclude it.
Any offer must consist of a statement of present intent to enter a contract; a definite proposal that is certain in its terms; and communication of the offer to the identified, prospective offeree. If any of these elements are missing, there is no offer to form the basic of a contract. A preliminary point to bear in mind is that preliminary negotiations are clearly distinguished from offers because they contain no demonstration of present intent to form contractual relation. No contract is formed when prospective purchasers respond to such terms, as they are merely invitations or requests for an offer.
Therefore, for an effective contract to exist, there has to be an offer by one party to another, and an acceptance by the person to whom the offer is addressed.
4. Acceptance
Acceptance of an offer is an expression of assent to its terms. It must be made by the offeree in a manner requested or authorized by the offeror. An acceptance would be effective in a contract only if the offeree knows of the offer, the offeree manifests an intention to accept; the acceptance is unequivocal and unconditional; and the acceptance is manifested according to the terms of the offer.
However, the determination of an effective acceptance in every contract is governed by whether a promise or an act by the offeree was the bargained for response. Since the acceptance of a unilateral contract requires an act rather than a promise, it is unnecessary to furnish notice of intended performance unless the offeror requested it. In bilateral contracts, the offer is effective when the offeree receives it. The offeree may accept it until the offeree receives notice of revocation from the offeror.
Interestingly, as a general rule, an offer may be accepted only by the offeree or an authorized agent. In contracts that do not involve the sale of goods, acceptance must comply exactly with the requirements of the offer ( this is known as the ” mirror – image rule ”) and must omit nothing from the promise or performance requested.
5. Terms and Conditions
Parties to a contract are bound only by its terms, not by other statements made in pre – contract talk. If inducements were promised, they can sit alongside the main contract as ” collateral contract “. Contracts will always contain different types of terms, with ” conditions ” being more important than ” warranties ”. It’s possible to have a term that excludes one party from responsibility but the courts generally view exclusion clauses as unfair.
Therefore, for an effective contract there must be terms and conditions, also the terms and conditions must be in writing. This will determine the extent of the obligations undertaken by the parties to the contract.
6. Consideration
Consideration is a legal detriment that is suffered by the promise and that is requested by the promisor in exchange for his or her promise. An effective contract requires some exchange of consideration.
As a general rule, in a bilateral contract, one promise is valid consideration for the other. In a unilateral contract, the agreed performance by the offeree furnishes the necessary consideration and also operates as a acceptance of the offer.
Therefore, for an effective contract consideration must move from the promise. There must be an exchange, either of promises or of a promise for an act. Thus, something of value in the eye of the law must be given for a promise in order to make it enforceable as an effective contract. Love and affection are not permissible forms of consideration. A promise to make a gift contains no consideration because it does not entail a legal benefit received by the promisor or a legal detriment suffered by the promisee. Because a promise to give a gift is freely made by the promisor, who is not subject to any legal duty to do so, the promise is not enforceable unless there is promissory estoppel.
7. Signature
Sometimes, signatures aren’t even required. Business people with existing relationships can be considered to be in
agreement when they exchange form contracts. A simple assent from your email account may also be considered a “signature” because it indicates your personal agreement to something.
Whatever method you choose, courts will consider whether you made the “signature,” intended to make the signature, and whether you intended the signature to signify your agreement
to the contract. If the court can find these three things, that it will consider your contract binding.
There are several key things to know about signing a contract.
Signing a contract means you’re agreeing to the terms within, including, of course, what end of the bargain you’re holding up. But did you know that some contracts don’t even need to be signed? It’s true. Verbal contracts can, in some cases, be legally binding, though if you want to protect yourself, it’s obviously a great idea to put it in
writing.
Here are a few things you should know about signing a contract:
The term signature is generally understood to mean the signing of a
written document with one’s own hand.
However, it is not critical that a signature actually be written by hand for it to be legally valid. It may, for example, be typewritten, engraved, or stamped. The purpose of a signature is to authenticate a writing, or provide notice of its source, and to bind the individual signing the writing by the
provisions contained in the document.
Because a signature can obligate a party to terms of a contract or verify that the person intended to make a last will and testament, the law has developed rules that govern what constitutes a legally valid signature.
Ordinarily a signature can be affixed in a number of different ways. It can be hand written, printed, stamped, typewritten, engraved, or photographed. This allows, for example, a business to issue its payroll checks with the signature of its financial officer stamped rather than handwritten.
Copyright ©2016 Lawyersview All rights reserved.
This article contains general legal information and does not contain
legal advice. Lawyersview is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often.
