Elements Of Contract Formation: Legal Intention And Consideration

Applicable law

Main issue

To discuss the elements of intention and consideration required for establishing a contract amid Carol and Max?

Applicable law

To make a valid contract, an offeror should make a proposal to other persons communicating his intentions and is called an offer. This offer must be accepted by another person called offeree, without bringing any changes to the terms of the offer. The exchange of offer and acceptance results in agreement formation (Gibson v Manchester City Council, 1979). (Lawskool, (2017))

To convert an agreement into contract, there are two other elements which are required:

1. Legal intention;
2. Consideration

The contractual relationship amid Carol and Max can only be established by evaluation the principles of legal intention and consideration.

Legal Intention

Legal intonation is one of the basic principles which segregates a normal relationship fro a contractual relationship amid the parties.

When two or more persons enter into a contractual transaction, then, they mutually agree over a set of terms and there is reciprocated exchange of promise between the parties to a contract in the form of offer and acceptances. When parties exchange promises then, they have intention that the promises that are exchanged amid them should be performed adequately (Edwards v Skyways , 1964). It is not the exchange of the promises that establishes a contractual relationship amid them, but, the intention with which the promises are exchanged. (Peter, 1988.)

When the parties have intention to bind themselves while making the promises then it implies that the parties are serious in the performance of a contract and if any party does not performs its part then the sufferer party has option to move to court. The simple intention of the parties is that when they transact with each other then they are not entering into a gracious transaction, the non- performance of which will not bring any legal consequences. Rather, the parties must be aware that the promises which are exchanged if not performed will bring serious legal consequences. (L & P.H.T, 2016)

In general it is assumption of law that in social and family transaction between the parties, there cannot be a contract as there is no legal intention (Jones v Padavatton , 1969). On the basis of same assumption, it is believed that when there are commercial transactions, then, the promises are exchanged with legal intentions. This presumption is rebuttable on the basis of evidence lay by the parties proving the contrary (Rose & Frank Co v Crompton Bros , 1925). (O’Sullivan & Hilliard, (2016))

Legal Intention

Presence of all the elements will not make a contract valid if there is absence of legal intention. Thus, even if parties sign a contract but the intention of the parties at the time of signing the contract is non-contractual then there is no contractual relationship amid the parties.

Consideration

The presence of offer, acceptance and legal intention makes a valid contract but in order to make such a contract enforceable in law, there is requirement of another essential called consideration.

Consideration is something which is provided by the promisor to the promisee in exchange of the acts/omissions which are undertaken by the promisee in behalf of the promisor. It is a benefit which is moved from the promisor to the promisee (Coulls v Bagots Executor & Trustee Co Ltd , 1967). A valid consideration is sufficient in law and must not be adequate. A contract formulated between the parties without any consideration cannot be categorized as a contract as it is a friendly transaction and cannot be enforced. (Katy & Harder, 2014.)

Consideration is valid only for transaction of present or future. No past consideration will make any contract enforceable in law (Currie v Misa, 1875).

There are four essentials which are required for the formation of contract:

Offer – It is presumed that the same is present in the given case.

Acceptance – It is presumed that the same is present in the given case.

Intention – as per the facts, Carol and Max were mere acquaintance as they met for the first time when max approached Carol. Max submitted to Max that he is facing problems in his business and needs her help. Carol with no intention to make any contract agreed to help Max and gave him advices.

Till now there is no legal intention to establish any contract amid them.

Now, when Max proposes to Carol that he needs her help every fortnight and thus proposed the same to her then at this time Max has showed his intention to establish a contract with Carol. But, till now there is no intention that is portrayed by Carol.

But, when Carol called Max and agreed to held Max at the agreed terms and consideration that are exchanged amid them, at that time, Carol has expressed her legal intention to be in a binding contract with Max.

Thus, there is presence of legal intention amid the parties.

Consideration

In order to held Max, he has offered Carol $ 600 for every fortnight and Carol ahs agreed on the same. Thus, $ 600 for every fortnight is the benefit that is gained by Carol for performing on behalf of Max. This is a valid consideration. The consideration can be give for future promises. Thus, carol has promised to serve Max for four months. Thus, consideration if provided for four months though not paid in advance which will not render the consideration invalid.

Consideration

Thus, there is presence of consideration.

Conclusion

So, the legal intention and consideration are present to make a valid contract amid Carol and max.

Main issue

To discuss the elements of offer and acceptance required for establishing a contract amid Carol and Max?

Applicable law

Any valid contract requires offer, acceptance, consideration and intention. In case any of the ingredients are missing, then, there is no contract between the parties. (L & P.H.T, 2016) 

An offer

In any contract, an offer is communicated by an offeror wherein he states his desired terms and conditions to an offeree. An offer is the intent of an offeror which he communicates to an offeree for the establishment of an agreement.

An offer is considered to be communicated by an offeror when it is received by an offeree and attains notion of the same. An offer must be clear and definite. An offer can be oral or written, but, whatever may be the form, it is necessary that it must reaches to the knowledge of an offeree to make it valid in law.  

An offer can be made to a specific person or to public at large. If an offer is made to a specific person then it is he who can only accept the offer. Bur if it is made to public at large then the same can be accepted by any of person by acting as per the terms of the offer (Carlill v Carbolic Smoke Ball Co , 1893). (G. Rowland, 2016.)

Acceptance

An acceptance occurs when an offer which is made by an offeror is assented by an offeree without bringing any kind of change to the terms of the offer (Hall v Maritek Bahamas Ltd, 2015). Any deviation in an acceptance will make it a counter offer and which makes an original offer lapses redundant and which cannot be accepted again to make a valid contract. An acceptance is valid when it is made in proper shape and by proper procedure and with proper intention of the offeree (Crown v Clarke , 1927).

Acceptance is only considered to be binding and legal when the same is made by the offeree and is communicated to an offeror and is discussed in (Brinkibon Ltd v Stahag Stahl GmbH , 1983). But when an acceptance is made then it is valid and binding. An acceptance by telephone is concluded when the acceptance is heard by an offeror. In case of acceptance made to an answering machine, then, then same is concluded when the business opens despite of the fact when the offeror hears the same and is held in (Mondial Shipping and Chartering B.V v Astarte Shipping Ltd, 1996)

Application of law

When the offeror defines the method of acceptance then the offeree should follow such method of acceptance. A mere change in the mode will not cancel the acceptance made by the offeree and is held in (Tinn v Hoffman , 1873)

Application of law

There are four essentials which are required for the formation of contract:

Legal intention– It is presumed that the same is present in the given case.

Consideration – It is presumed that the same is present in the given case.

Offer –  Max in order to seek the services of Carol has proposed to her that if she will provide her services to him then he is willing to give $ 600 for every fortnight. He needs the services of Carol for next four months.

Thus, Max has communicated his desire and intends that Carol must perform as per his desires.

Thus, a valid offer is made wherein the terms of the offer are that Carol must serve Max for next 4 months for $ 600 for every 15 days service. He also submitted that Carol must accept the offer of Max through mail

The proposal that is made by Max is validly received by Carol.

Thus, there is communication of proposal that took place.

So, there is valid offer that is made by  max to Carol.

Acceptance

When an offer is made by Max to Carol then he submitted that Carol can give her acceptance though mail. Thus, a mode of communication is desired by Max. But, Carol has communicated her desire though telephone. Thus, the communication through telephone is also a valid form of communication and variation in mode will not make the acceptance is invalid and is held in Tinn v Hoffman.

The acceptance by Carol is deem to be compete when the same is communicated by her over telephone which is duly received by Max, as Max has heard the acceptance of Carol and is rightly held in Brinkibon Ltd v Stahag Stahl GmbH.

Later when the email is sent by Carol to Max specifying the terms of the offer will not affect the previous acceptance of Carol as there is a concluding acceptance that is made by Carol to max when the same is communicated through telephone.

Conclusion

So, the offer and acceptance are present to make a valid contract amid Carol and max. 

Brinkibon Ltd v Stahag Stahl GmbH (1983).

Carlill v Carbolic Smoke Ball Co (1893).

Coulls v Bagots Executor & Trustee Co Ltd (1967).

Crown v Clarke (1927).

Currie v Misa (1875).

Edwards v Skyways ((1964)).

Edwards v Skyways (1964).

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Gibson v Manchester City Council (1979).

Hall v Maritek Bahamas Ltd (2015).

Jones v Padavatton (1969).

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L, W., & P.H.T, K. (2016). Retrieved May 5, 2017, from Singapore Law: https://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-8

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Mondial Shipping and Chartering B.V v Astarte Shipping Ltd (1996).

O’Sullivan, J., & Hilliard, J. ((2016)). The Law of Contract. Oxford University Press.

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Rose & Frank Co v Crompton Bros (1925).

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