The law of contract

Contract
An agreement which legally binds the parties

You contract with someone

When you buy a house
When you buy from a shop
When you start working in a company

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Different types of business agreement
Employment contracts
Buying and selling goods
Renting or buying a property
Franchise agreement
Export or import of goods
Use of software licensing agreement
Sub-contracting agreement, etc
 Elements of a contract
Agreement
The rules of offer and acceptance
Consideration
The obligations assumed by each party must be
supported by consideration by the other party
Intention to create legal relations
Intention of their promises to be legally binding
If one of the three elements of contract is absent,
there is no contract
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 Validity of a contract
Form
Written or oral
Genuine consent
No misled into a contract
Capacity
E.g. limited by age
Content
Must be complete and precise in its terms
Legality
Illegal contracts are not enforceable legally
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 Invalid contract- Page 53
Invalid contracts may be
Void
A void contract is not a contract
Voidable
A party may void (i.e. to terminate his contract)
Unenforceable
It is valid contract
But, if either party refuse to perform the contract, the
other party cannot compel him to do so
 Importance of key elements
A valid contract is one contain certain key elements.

A contract without key elements may become an invalid contract.

An invalid contract may be:

Void: The parties are not bound by it.
Voidable: A party may terminate at his option.
Unenforceable: It is a valid contract but if either party refuses to perform the
contract, the other party cannot compel him to do so.

In case of a invalid contract, an organization may not recover, for example,

property that was transferred to a third party. Both time and money may
be lost dealing with an invalid contract.

It is therefore important that key elements are required for the formation
of a valid contract.
 The life of a contract
A valid contract will remain in existence until
discharged in one of the following ways
Performance
Breach of contract
A binding contract is formed when
There is an offer by the offeror, and
There is an acceptance by offeree
Offer and acceptance can be in
Oral form or
In writing

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 Invitation to treat
Where a party is initiating negotiation, he is said
to have made an invitation to treat
It is an indication that someone is prepared to receive
offers with the view to forming a binding contract
It is not an offer itself
E.g.
Auction sales
Advertisements
Exhibition of goods for sale
An invitation for tender Page 57
 Discuss
Activity 2, page 59
 Termination of an offer
By
Being accepted
Counter-offer
Lapse of time
Rejection
Revocation by offeror
Failure of a condition
Death of one of the parties
 Discuss
Explain briefly the different types of agreement

Give and explain 5 7 different types of business

agreement

E.g.
Employment contract This is the agreement between
employee and employer for the terms of employment.
Terms usually include salary, working hours
..
 Discuss
Explain the importance of key elements
required to formulate a valid contract

1. What are the key elements required to

formulate a valid contract? page 51
2. What will happen to the contract if these key
elements are absent? page 52, 53
3. How will that affect contracting parties?
4. Conclusion