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FORMATION OF CONTRACT




 To form a binding contract, the essential requirement is that the parties are like-minded over the basis of their contract.We say that there should be consensus ad idem, which is a meeting of minds, and to a pure theorist that is all which should be required.

The problem lies in finding evidence of this agreement. It is a little like convincing a teacher or an examiner of your knowledge of the law (or anything else). Evidence is required of your knowledge in an agreed way. Through case law a pattern has evolved of finding evidence of agreement, and it is by requiring the parties to have communicated in some way, one of them making an offer and the other making an acceptance.

The benefit obtained or ‘bargained’ If offer and acceptance were the only requirements, we could in theory have some very one-sided agreements. If I offer to give you a present of £20 next week, and you agree to this, we have an offer from me and an acceptance from you. If I then do not give anything at all next week, I will have broken my promise. Is this something that the law should enforce? The law is quite strict on not generally enforcing one-sided promises, feeling that it becomes very much a problem of morals when people break such promises.

The law will, however, enforce an agreement if something has been bargained by both parties, and both sides have contributed to the agreement in a recognisable way, for example by paying in exchange for goods. This does not have to be the actual handing over of goods, so a promise to pay could be given in exchange for the promise to hand over goods.

This exchange is known as consideration, and is another requirement in forming a contract. CHAR_C02.QXD 14/9/07 10:36 Page 5 The intention to be bound by the agreement A third requirement is that the parties do really intend to be bound by whatever they agree.
In a shopping context this is likely to go without saying, as a seller is unlikely to intend to give away goods without really expecting payment! However, if I offer to pay for my friend’s drink if he buys my sandwich, I do not seriously expect to sue him if he only buys his own sandwich.

 To distinguish between serious contracts and social agreements the law requires an element of legal intention in forming a contract. Capacity A further factor to consider in the legality of a contract is whether the parties are of the standing required by the law to make a binding agreement. If a child in a playground agrees to sell one of his toys, this would not normally be binding.

The law requires a legal capacity to contract, and generally adults over the age of 18 are said to have this. A further formation requirement examined in this part of the book, then, is the capacity to contract. If all four of these requirements are present, then there will normally be a binding contract.

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