ESSENTIAL ELEMENTS OF CONTRACT
ESSENTIAL = A VALID CONTRACT MUST HAVE ALL OF THEM
1. Capacity of the parties
2. Mutual Agreement
3. Consideration
4. Legality of subject matter
NEGOTIATION
STEP-BY-STEP FORMATION
OF AN AGREEMENT
DIFFERENT INTERESTS – DIFFERENT OBJECTIVES
IS ITI POSSIBLE TO DETERMINE A MUTUAL INTEREST
IN MAKING A DEAL?
LOI – LETTER OF INTENT
N.D.A. – NON DISCLOSURE AGREEMENT
HOW DO MIND MEET?
OFFER
MEETS
ACCEPTANCE
OFFER
CAN BE TRAMSMITTED
BY WORDS
- SPOKEN
- WRITTEN
BY ACTS
REQUIREMENTS
1. IT MUST INDICATE A CLEAR INTENT TO MAKE A CONTRACT
2. IT MUST BE SUFFICIENTLY DEFINITE SO THAT A COURT CAN DETERMINE
THE ACTUAL INTENT OF THE PARTIES
3. IT MUST BE COMMUNICATED TO THE OTHER PARTY
1. CLEAR INTENT
The offer should contain the FUNDAMENTAL ELEMENTS of the contract
The use of the word ‘offer’ is not necessary.
Circumstances / Actions may indicate whether
there was a real intent to enter into a binding
agreement
2. DEFINITE
ESSENTIAL TERMS
Note – unstated terms
a) may be understood by the parties
b) may be implied
3. COMMUNICATED TO THE OTHER PARTY
IS IT AN OFFER?
ADVERTISMENT
DISPLAY OF GOODS FOR SALE
PRICE LISTS
THEY USUALLY ARE NOT OFFERS
WHY?
1. They are NOT SUFFICIENTLY DEFINITE
2. They are NOT COMMUNICATED TO A SPECIFIC PERSON
Pharmaceutical Society of Britain / Boots Cash Chemists (1953)
HOW LONG DOES AN OFFER LAST?
FUNDMENTAL PRINCIPLE
An offer may be WITHDRAWN AT ANY TIME
BEFORE IT IS ACCEPTED
SOME EXCEPTIONS
1. OPTION CONTRACT
2. UNIFORM COMMERCIAL CODE
1. OPTION CONTRACT
It commits the offeror to keep his offer open in return for a specified price
It is a contract itself
Common aim > Time
2. UNIFORM COMMERCIAL CODE
U.S.A.
THE UNIFORM COMMERCIAL CODE (UCC) IS A COMPREHENSIVE
SET OF LAWS GOVERNING ALL COMMERCIAL TRANSACTIONS IN
THE UNITED STATES.
IT IS NOT A FEDERAL LAW, BUT A UNIFORMLY ADOPTED STATE
LAW.
§ 2 Section 205
AN OFFER MADE BY A MERCHANT TO BUY OR SELL GOODS
IN A SIGNED WRINTING WHICH BY HIS TERMS GIVES
ASSURANCE THAT IT WILL BE HELD OPEN IS NOT
REVOCABLE, FOR LACK OF CONSIDERATION, DURING THE
TIME STATED OR IF NO TIME IS STATED FOR A REASONABLE
TIME, BUT IN NO EVENT MAY SUCH PERIOD OF
IRREVOCABILITY EXCEED THREE MONTHS; BUT ANY SUCH
TERM OF ASSURANCE ON A FORM SUPPLIED BY THE
OFFEREE MUST BE SEPARATELY SIGNED BY THE OFFEROR
WHAT IF THE OFFEROR SET AN EXPIRY DATE TO HIS OFFER?
PRO > Offeror does not need to remember to withdraw the offer
1. THE TERM EXPIRES WITHOUT ANY ACCEPTANCE
2. OFFER IS ACCEPTED BEFORE THE DEADLINE
3. OFFER IS ACCEPTED AFTER THE DEADLINE
4. AN ACCEPTANCE IS ISSUED ON TIME BUT IS DIFFERENT TO THE OFFER
5. OFFEREE EXPRESSILY REJECTS THE OFFER BEFORE THE EXPIRY DATE
1. THE TERM EXPIRES WITHOUT ANY ACCEPTANCE
The offer is no longer valid
No need to withdraw it
2. OFFER IS ACCEPTED BEFORE THE DEADLINE
The contract is CLOSED
3. OFFER IS ACCEPTED AFTER THE DEADLINE
The offer WAS no longer valid
No contract could be possibly and validly closed
BUT……..
… it will amount to a COUNTEROFFER
Hence, the offeror becomes the offeree
and vice versa.
The original offeror may decide to close
the
agreement
by
accepting
the
counteroffer
4. AN ACCEPTANCE IS ISSUED ON TIME
BUT IS DIFFERENT TO THE OFFER
Acceptance must be unconditional, otherwise it is not an acceptance
THERE IS NO ACCEPTANCE –
BUT IT IS A COUNTEROFFER
5. OFFEREE EXPRESSILY REJECTS THE OFFER
BEFORE THE EXPIRY DATE
May the offeree change is mind and accept the offer later
(before the original deadline)?
NO, the power of acceptance is terminated by offeree’s rejection
What if the offeree does it anyway? > COUNTEROFFER
WHAT IF THE OFFEROR DOES NOT
SET AN EXPIRY DATE TO HIS OFFER?
1. The offeree accepts the offer
2. The offeree rejects the offer
3. The offeree does not replay
FUNDMENTAL PRINCIPLE
AN OFFER WITHOUT A DEADLINE WILL LAST FOR A
REASONABLE TIME
1. The offeree accepts the offer
The contract is
acceptance has
reasonable time
only closed if the
occured within a
2. The offeree rejects the offer
NO, the power of acceptance is terminated by offeree’s rejection
What if the offeree does it anyway? > COUNTEROFFER
3. The offeree does not replay
HOW LONG WILL THE OFFER LAST?
FOR A REASONABLE TIME OR UNTIL THE OFFER IS WITHDRAWN
ACCEPTANCE
REQUIREMENTS
CLEAR
UNQUALIFIED
ANY MODIFICATION = COUNTEROFFER
CAN SILENCE CONSTITUTE ACCEPTANCE?
GENERAL PRINCIPLES
SILENCE IS NOT ACCEPTANCE
OFFEROR CANNOT IMPOSE A DUTY UPON AN OFFEREE TO SPEAK
(‘IF I DO NOT HEAR FROM YOU, I WILL ASSUME THAT YOU HAVE
ACCEPTED MY OFFER’)
UNITED NATIONS CONVENTION
ON CONTRACTS FOR
THE
INTERNATIONAL
SALE
OF
GOODS
ARTICLE 18
Silence or inactivity does not in itself amount to acceptance.