Understanding the Law
May 5, 2006
A look at Contract law

Agreements are made everyday in our market directed economy. In most cases something of value is exchanged for money. The law of contract provides for these agreements to be fair and reasonable so that the parties involved could benefit from their transactions. A contract is an agreement that is legally binding on the parties involved. This means that each person has rights and duties owing to the other. The contract is generally marked with a promise for a promise and the law gives a remedy to the person who suffers a loss for breach (premature end of the contract) by the other party.{{more}}

A contract is described from the manner in which it is formed, that is, it could be express or implied. An express contract could be oral, that is, where persons speak about the transaction without writing down the terms and conditions. It could be written in a simple document or in a highly technical document as in the case of deeds or it could be implied by the conduct of the parties.

For a contract to be legally binding it must meet certain requirements of the law. It must have an offer, acceptance and consideration. In addition the persons making the contract must have intention to create legal relations and capacity.

What is an offer?

An offer suggests a willingness to be bound in law. The seller makes an offer to sell to the buyer and not merely invite the buyer to treat with a display of goods. The seller is regarded as the offeror and the buyer the offeree.

Very often persons misinterpret an invitation to treat for an offer. Advertisements in magazines and newspapers and window displays are not offers they are merely invitation to treat. It still remains an invitation to treat even though there is a price tag on the item. If you ask the price of an item and you are told the price by the offeror this is not an offer it is merely a statement of the price. Invitation to treat is usually the step before the offer. Many offers are contracted at the cash desk when the buyer decides to buy an article or accept the agreement, otherwise when a customer puts back an item he would have breached the contract.

If for some reasons the items put up for sale were withdrawn the offeror will not be liable on the basis that an offer was made. The public at large could be informed of the item but only one or several persons can accept the offer depending on the number of items put up for sale.

There is an old English case which ably illustrates the nature of an offer. It is the case of Carlil v Carbolic Smoke Ball Co. Ltd. The Company offered the smoke balls for sale and undertook to pay one hundred pounds to anyone who contracted influenza while using the medicine. To show the sincerity of the offer, it claimed that it had already deposited one thousand pounds in the bank as reward. Carlil bought the smoke ball and used it as directed for eight weeks and while doing so contracted influenza. The Company denied having made an offer claiming it was just a puff or a sales promotion but the Court maintained that it was an offer to the whole world which Carlil accepted. Hence a contract may be challenged in court as to the validity or existence of an offer.

•Ada Johnson is a solicitor and barrister-at-law.

E-mail address is: exploringthelaw@yahoo.com