Valid Agreement
1. A contract may be defined as an agreement that results in contractual obligations on the contracting parties which are legally binding and hence enforceable under law. There are a host of pre-requisites that need to be fulfilled before a legally binding contract is put into place as per the English Law (Andrews, 2011). These have been briefly outlined below along with the key points to consider for the fulfilment of each of these conditions.
From the definition of contract, it is apparent that the backbone of any contract is an agreement. The agreement essentially consists of the following two components.
Offer – An offer may be defined as the communication of willingness to enter into a contractual relationship based on highlighted terms which are extended towards the offeree with the underlying intention that in case the offeree provides acceptance, then the terms would be binding (Stover v Manchester City Council[1974] 1 WLR 1403). It is noteworthy that even if the offeror does not intend to be bound but the offeree has reasonable reason to believe the contrary, then the offer would be considered binding (Stone, 2002). Further, for an offer to be valid, it needs to be communicated either to a particular person or the world at large. The offer may be withdrawn by the offeror before acceptance is granted by the offeree. It is essential to segregate an offer from an invitation to treat. The latter is a means to invite offers from interested parties as highlighted in the Carlill v Carbolic Smoke Ball Company [1893] 2 QB 256 (Cavendish and Devenney, 2013).
Acceptance – Acceptance may be defined as an unqualified communication indicating assent to the offer terms. It is imperative that the acceptance must not be conditional and all the terms stated in the offer must be agreed to. A conditional acceptance by the offeree is referred to as a counter offer directed towards the original offeror (Hyde v Wrency[1840] 3 Beav 334). The original offer tends to expire in case of a counter offer. The formation of agreement in such cases would depend on acceptance to the counter offer being granted by the original offeror (Taylor and Taylor, 2015). However, it is essential to differentiate counter offer from the attempt on the part of the offeree to gain more details about the contract. Also, it is noteworthy that for acceptance to be considered legally valid, it needs to be communicated to the offeror through appropriate means. While the electronic mediums are instantaneous, the postal mail has a significant time delay before it reaches the offeror. In case of acceptance communicated by postal mail, the acceptance tends to become valid at the instance the letter of acceptance is posted by the offeree (Paterson, Robertson and Duke, 2015).
For the enactment of a binding contract, it is essential that mutual consideration must be present. It is defined as a valuable thing which is offered in return for a promise and requires to be given for making any given promise legally binding in the form of a contract. Those promises that lack consideration are known as ubiquitous promises and are not considered enforceable by law. It is essential that consideration has to sufficient in value and there is no necessity for it to be adequate (Edlin, 2007). The sufficiency of the underlying consideration is determined by the contracting parties and the court would not intervene unless there is unconscionable conduct on the part of either of the parties. Past consideration is not considered to a valid consideration, thus, the consideration must be extended either in the present or in the future. Any illegal object or favour does not amount to legal consideration and does not lead to execution of the contract. Besides, the consideration must normally move from the end of the promisee directed towards the promisor (Gibson & Fraser, 2015).
Presence of Legal Consideration
It is essential that the parties who have entered into a contract intend to be bound into a contractual relationship. In the absence of this element, the above elements would not lead to enactment of an enforceable contract. For the commercial transactions of ordinary nature, the courts tend to assume that there is an implicit intention to be bound in legal relations unless there is a significant proof which suggests otherwise. However, the situation is tricky is case of domestic agreements and social agreements (Cavendish and Devenney, 2013). Here, promises are made on account of mutual affection, love, concern and the parties concerned do not intend to pursue the fulfilment of contractual obligations legally. Thus, it has been established that in case of domestic or social agreements, the courts are driven by the tacit assumption that there is no intention to enter into legal relationship. There needs to be explicit evidence to suggest otherwise in such arrangements as highlighted by the verdict in the Balfour v Balfour [1919] 2 KB 571 (Carter, 2012).
The accepted rule in this regard is that the contracts in order to be binding can be either entered into orally or in written form. Additionally, in case of presence of both an oral agreement and a written agreement, the latter would be considered to be more superior and it would be reasonable to assume that all terms, conditions of significance and material value would have been captured in the written form of agreement. And if some term which was present in the oral agreement but is not present in the written form, then it might not have been considered significant and thus the same cannot be enforced later (Stone, 2002). However, as per the Statute of Frauds, there are indeed certain types of contracts which are required to be necessarily in writing. One example of such contracts are those which deal with land transactions (Andrews, 2011).
It is imperative that all the contracting parties must have the capacity to enter into a contract. A minor or individual lower than 18 years in age is considered to lack capacity in relation to executing contract as he/she might not be able to safeguard their interests. Besides, persons who are deemed mentally ill or insane are also considered not fit for contract execution because of their state. Similarly, a contract executed by a severely drunk person is also not considered valid. However, for all the above cases, there is an exception when the contract would be considered as enforceable. This would be when the contract deals with necessary goods and the concerned parties may be legally obliged to pay a reasonable amount. However, it is best if entering into contract with such persons if avoided all together as such contracts may be termed as voidable by the honourable court (Gibson & Fraser, 2015).
The key issue is to opine Simon of the potential consequences and remedies available in case the sisters do not turn up for the show’s finale.
Contract Law states that breach of contract refers to a particular situation where any one given party fails to fulfil their contractual obligation as outlined in a legally binding contract. As this kind of conduct on the part of the defaulter party could be disastrous for the innocent party. Hence, there are a host of remedies that the contract law offers in order to make up for the losses and damage borne by the innocent party (Stone, 2002).
Presence of Intention to Enter into a Legal Relation
They refer to primarily the monetary loss or total loss expressed in monetary terms incurred by the innocent party because of the breach of contract by the defaulting party. As highlighted in the Addis v Gramophone (1909) case, the courts have advocated the common law position of the innocent party being entitled to compensation from the defaulting party so as to make up for the losses incurred. The dual intentions behind awarding damages are as follows (Taylor and Taylor, 2015).
- It safeguards the aggrieved party’s interest and thus ensures that the party who has fulfilled the contractual obligations does not stand to lose as it would deter other parties from obliging with the contractual terms.
- It acts as a deterrent for the defaulting parties as they would be aware that damages can be levied on them in case of breach of contract.
The above intentions are critical as contractual relationships form the lynchpin of global commerce and trade and hence legal remedies are requisite. The extent of damages that are rewarded are in line with the loss actually incurred by the aggrieved party. Since the objective is not to punish but rather to reimburse the party at loss, hence excess damages cannot be awarded by the court (Carter, 2012).
The aggrieved party may also avail another remedy in the form of specific performance. As per the ruling in the Nutbrown v Thornton (1805) case, specific performance may be defined as the court order whereby the defaulting party would be required to discharge those contractual obligations which would have been discharged in case of absence of any breach (Paterson, Robertson and Duke, 2015). Hence, as part of the order, the defaulting party is directed to perform a particular activity which was outlined in the original contract. This measure of compensation for the innocent party is used when the monetary compensation would not adequately make up for the potential losses or may not be feasible under the given situation. It is noteworthy that if the original contract contains terms that are ambiguous and thus non-definitive with regards to the scope of the activity, then specific performance may not be availed as the court objectively cannot determine the contractual liability mandated from the original contract (Taylor and Taylor, 2015).
Another possible remedy that is permissible in case of breach of contract is injunction. This essentially refers to an order from court which is equivalent of a restraining order for the future so that the defaulting party does not commit a similar behaviour or breach in the future till the time the given contract does not expire. A case in point which needs to be highlighted is the Lumley v Wagner (1852) case (Gibson And Fraser, 2015). In accordance with the relevant details, there was a legally binding contract between Benjamin Lumley and Mile Wagner in accordance with which, Mile was to perform exclusively for only a given theatre till the expiry of three months. But during the three months, the artist (Mile) was contracted by another theatre and she decided to perform for the other theatre which would have clearly hurt the interest of Benjamin Lumley and his theatre. The court provided relied through the use of injunction which effectively required her not to perform in other theatres before contract expiry (Cavendish and Devenney, 2013).
It is clear that based on the relevant facts, there is a legally binding contract between Simon and the celebrity sisters i.e. Kim, Khloe and Kourtney. All the conditions outlined for the formation of a legally binding contract have been met in the given case. A consideration amount of £1,000,000 to be paid to each of the three sisters has been agreed to by both the parties. The sisters on their part have to necessarily appear in each episode of the show and also the finale. It is expected that the appearance of the sisters would enhance the popularity of Simon’s show and thus help in enhancing the advertisement revenues.
If the sisters do not turn up for the finale of the show, it is apparent that great financial loss would be caused to Simon in terms of the show popularity being adversely impacted. Clearly, it would be termed as a breach of contract. Injunction would not be applicable as after the finale there are no anyways no future appearances scheduled. Specific performance is also not feasible in the given case as the show has already been aired and now the damage cannot be undone. Thus, the only relevant remedy for breach of contract by the sisters would be that damages would be awarded to Simon in line with the extent of damages suffered by him in monetary terms.
References
Andrews, N. 2011, Contract Law, 3rd edn., Cambridge, UK: Cambridge University Press
Carter, J 2012, Contract Act in Australia, 3rd edn., Sydney: LexisNexis Publications,
Cavendish S. R. and Devenney, J. 2013. The modern law of contract 10th edn., London: Taylor & Francis.
Edlin, D. 2007, Common law theory, 4th edn, Cambridge, UK: Cambridge University Press
Gibson, A., and Fraser, D. 2015. Business law 2nd edn., Melbourne, Australia: Pearson Education Australia.
Paterson, J., Robertson, A., and Duke, A. 2015. Principles of contract law 5th edn., Australia: Law Book Co of Australasia.
Stone, R. 2002 The modern law of contract. 5th edn., London: Routledge
Taylor, P. R., and Taylor, D. 2015. Contract law directions 4th edn., Oxford, United Kingdom: Oxford University Press.
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