UK Law: Contract Instructions

Contracts are legally binding agreements that regulate relationships between two parties, which are called an offeree and an offeror. A contract cannot exist without four features, including an offer, acceptance, consideration, and intention to create legal relations. The present paper aims at providing specific instructions concerning the establishment of legal relationships between Simon and Kim. The instructions include requirements of a binding contract under UK law and discussion about whether Simon can make the contract conditional upon Kim passing her final legal exams. The present paper provides in-depth information about all the required sections of a contract and concludes with a summary of central considerations.

Offer

The offer is the first integral part of any contract that includes clear information about the proposed conditions. A contract can be bilateral, which is a promise made in return for a promise, or unilateral, which is a promise made in return for the completion of a specified act (Adams, 2018, p. 64). A legally binding offer is to include clearly stated terms, confirm the intention to do business, and be communicated to the offeree. These three parts are discussed in more detail below.

States Terms

Every contract should include terms and conditions included in the offer. In the case of the discussed contract between Kim and Simon, it should include information about what services are expected from Kim, what she will get in return when the contract starts, and the contract is terminated. Particular attention should be paid to describing the condition under which the relationships will take effect. In Gushing v. Lynn (1831), the buyer of a horse promised to pay an extra £5 “if the horse is lucky for me.” The court held that the condition was too vague to be enforceable. Therefore, the contract between Kim and Simon should describe what “passing her final legal exams” means.

Intention to Do Business

The offer represents the final considerations about the terms of the agreement without the ability to change them. It should not be confused with the invitation to treat and negotiation. In Harvey v. Facey (1893), one of the parties asked for the lowest possible price on the land. When the price was stated in a telegram by the other party, the first one tried to accept the offer. The court held that “no contract had been formed since the statement of price was merely an early step in negotiations” (Adams, 2018, p. 67). At the same time, advertisements do not imply that a contract should follow. In Pharmaceutical Society (GB) v Boots Cash Chemists (Southern) Ltd. (1968), the court held that the fact that medications were displayed did not confirm the pharmacist’s intention to create a contract. The pharmacist was there and could refuse any customer’s offer. Therefore, the contract between Simon and Kim should have a clear indication of the intention to do business and should not include vague phrases like “we have a position that can be offered to the offeree” or “the maximum salary will be £50,000.” Such phrases will be treated as either an invitation for treatment or negotiation correspondingly.

Communication to the Offeree

The contract should make it clear that the offer is made specifically to the offeree. In Bloom v American Swiss Watch Company (1915), the claimant wanted to receive a reward for providing information that led to the arrest of some jewel thieves. Even though the defendant promised a reward for the information, the court held that no contract was formed as “the offer of the reward had not been communicated to the claimant prior to his giving the information” (Bloom v American Swiss Watch Company, 1915). Therefore, the contract between Kim and Simon should make it clear that the offer is made specifically to Kim using acceptable methods for communications, such as formal letters and documents.

Acceptance

In acceptance, an offeror agrees to all the terms and conditions mentioned in the offer. For the contract to be legally binding, the acceptance should follow specific rules. First, it must be a ‘mirror image’ of the offer; second, it should be firm; and finally, it is to be communicated to the offeror. These three matters are reviewed below.

Mirror Image Principle

Mirror image principle implies that acceptance should not include any additional information about the terms of the contract. In other words, the promises made by both parties should be precisely the same in the offer and the acceptance. In Jones v Daniel (1894), Daniel offered a price for Jones’s land. Jones accepted the offer with additional terms by sending a final letter. The court held this final letter could not be treated as an acceptance; instead, it was treated as a counteroffer (Jones v Daniel, 1894). Therefore, when writing a contract between Kim and Simon, the mirror image principle should be followed; otherwise, the contract will not be binding because it will not have acceptance. This could lead to legal issues and termination of the contract.

Firmness Principle

The acceptance must clearly indicate that the offeree agrees to all the terms mentioned in the contract. Therefore, the contracts, including phrases like “subject to contract” are not binding (Adams, 2018, p. 73). Additionally, documents stating that the offeree intends to agree to the offer made by the offeror are not considered a viable acceptance. However, there are some exceptions to this rule present in the history of the practice. In Branca v Cobarro (1947), the parties agreed to “a provisional agreement until a fully legalised agreement is signed.” This agreement was held to be a viable acceptance as it represented a firm agreement to all the terms and conditions of the contract. In short, the future contract should not use vague phrases that add a degree of uncertainty to the fact that the offeree agrees to the offer.

Communication to the Offeror

The final rule is that acceptance should be communicated to the offeror using acceptable means of communication. Even though there are different valid ways of accepting an offer, such as verbal communication, electronic communication, and post, it is preferred that the acceptance is clearly documented (Adams, 2018, pp. 74-78). The acceptance should be made by offeree (Kim) herself or by her legal representative. In Powell v Lee (1908), the claimant was notified that his job application was accepted; however, the person who had told the claimant about his success had no authority to do so. The court held that the contract was not viable since the acceptance was not clearly communicated to the offeror. Therefore, when signing a contract with Kim, Simon should make sure that the acceptance is communicated (or signed) by a person who has the legal rights to do so.

Considerations

Consideration refers to the mutuality of a contract, which implies that both parties receive some benefits in exchange for some detriment. It is vital to understand that a contract cannot oblige one party to do something without getting anything in return. Therefore, a contract between Kim and Simon should include clear information about all the benefits and detriments for both parties. The rules governing consideration are discussed below.

Must not Be Past

The first principle of making considerations is that it should not refer to past events. In other words, parties should make offers before they fulfill them. In the case Re McArdle (1951), a house was to be sold and the money split between children of Mrs. McArdle. The wife of one of the children spent some money on house improvement, and after the fact, all the stakeholders agreed that the money should be recovered from the proceeds of the eventual sale. Later, the contract was disputed, and the court held that the contract was not valid because home improvements were past considerations, as they were done before the contract was agreed upon. Therefore, when preparing a contract for Kim and Simon, it is vital not to include any past considerations, such as payments that were made before signing the contract.

Must Move from the Promisee

The second principle states that consideration must move from the promisee. In other words, it should be clear that only Kim can perform her duties in return for benefits. At the same time, benefits cannot be received by third parties, such as Kim’s legal representatives. The rule prevents a party from enforcing the contract unless he or she has contributed consideration. The future contract should clearly follow this principle to be viable.

Must Be Sufficient

All considerations are to be sufficient, which implies that they should have financial value. Considerations such as motives or promises not to bother do not have material value, and the law cannot regulate such things. For instance, in the case of Thomas v Thomas (1842), the court ruled that honoring the memory of one’s husband is not sufficient consideration for obtaining a house. At the same time, adequacy of consideration is not disputable. In other words, the court will not discuss if the benefits acquired by both parties are fair as long as they are sufficient. Therefore, when writing a contract between Simon and Kim, it is vital to avoid, including immaterial benefits, such as respect, honor, popularity, and others. A contract that includes such considerations may be considered invalid.

Must not Be Something Promisee Is Bound to Do

The UK law supposes that a consideration are to be unique, which implies that it should not be something a promisee is already obliged to do. For instance, in the case Collins v Godefroy (1831), the defendant promised to pay the claimant if he attends a trial as a witness. However, the claimant was already bound by the court order to attend the proceedings. Therefore, the court held that the contract was not binding. Similarly, offers of additional benefits for the same amount of service and vice versa are not considered valid. In other words, when writing a contract, it is vital to include all the considerations that are expected from both parties. If Simon decides that he needs more services to be performed by Kim, additional benefits will need to be offered for the contract to be binding. In summary, before signing a contract, both parties should carefully review the content in terms of listing all the expected benefits and detriments.

Must Be Legal

Contracts are not considered binding if they include considerations that are illegal. Even though this may be common knowledge, it can become a matter of dispute when the legality of consideration is questionable. In the case of Wyatt v. Kreglinger & Fernau (1933),

Kreglinger & Fernau Company promised to pay an increased pension to Mr. Wyatt if he promised not to enter wool trade. When the company decided to stop paying the pension, Mr. Wyatt was unable to claim it back, because restricting competition is against public policy. Therefore, all the considerations included in the contract should be carefully reviewed for legality.

Intention to Create Legal Relations

Every contract is binding only if the intention to create legal relations is present. When determining if the parties intended to create legal relations, the judges are usually guided by two presumptions. On the one hand, “parties to a domestic or social agreement do not intend to be legally bound” (Adams, 2018, p.92). In Buckpitt v Oates (1968), the Buckpitt was injured as a passenger in Oates’s car. Buckpitt wanted to return the money for medical services from Oates’s insurance company. However, the court held it was not a valid claim because the friends (Buckpitt and Oates) did not enter a legally binding relationship. On the other hand, parties of a business agreement always intend to enter legally binding relations, unless it is clearly stated otherwise. Therefore, if Simon and Kim want to create a contract that should not be subject to.legal jurisdiction in the law courts. Otherwise, it will be assumed that all contracts between parties are intended to create a legal relation.

Conclusion and Recommendations

The contract between Kim and Simon should include four parts to be legally binding. First, it should include an offer with clearly stated terms and conditions and intention to do business. It is also supposed to be communicated to the offeree in a proper matter. Second, the contract should have an acceptance that needs to follow the mirror image principle, be firm, and be communicated to the offeror in an acceptable manner. Third, the contract should include considerations that are sufficient, moved from the promisee, and legal. At the same, the considerations must not be something the promisee is bound to do by another contract and should not relate to the past. The review of law did not reveal any restriction concerning writing the order on the condition that Kim passes her final exams in the law school as long as it is clearly stated in the contract

It is recommended that the contract should include information that it surpasses all any written or verbal communication between the parties. The law agrees that certain promises can be made without a formal contract; therefore, no promises should be made after signing the contract unless an additional legal document is created. Both Kim and Simon should ensure that the considerations are legal and described holistically. The contract should be written in a firm and unambiguous matter so that it cannot be interpreted in an unintended way.

References

Adams, A. (2018). Law for Business Students. Harlow, United Kingdom: Pearson Education Limited.

Bloom v American Swiss Watch Company, AD 100 (1915).

Branca v Cobarro, 2 All ER101 (1947).

Buckpitt v Oates 1 All ER 1145 (1968).

Collins v Godefroy 1 b & ad 950 (1831).

Guthing v. Lynn, 2 B&AD 231 (1831).

Harvey v. Facey, AC 552 (1893).

Jones v. Daniel, 2 ch 332 (1894).

Pharmaceutical Society (GB) v Boots Cash Chemists (Southern) Ltd., 1 QB 401 (1953).

Powell v. Lee, 99 LT 284 (1908).

Re McArdle, Ch. 669 (1951).

Thomas v Thomas 2 qb 851 (1842).

Wyatt v. Kreglinger & Fernau 1 K.B. 793 (1933).