1. Mevan Kiriella Bandara
LAW OF CONTRACT
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2. MAIN COMPONENTS OF A CONTRACT
INTENTION TO CREATE AN AGREEMENT BETWEEN PARTIES
AGREEMENT BETWEEN PARTIES: Offer and Acceptance
CONSIDERATION/ REASONABLE CAUSE
CAPACITY TO ENTER IN TO A CONTRACT
AGREEMENT MUST NOT BE DEFECTIVE: cannot be affected by factors such as mistake, fraud, misrepresentation etc,
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3. 1. INTENTION TO CREATE LEGAL RELATIONS
DOMESTIC/SOCIAL AGREEMENTS –
General Rule - no legal intention
Balfour v Balfour [1919] 2 KB 571
Exception
Simpkins v Pays [1955] 1 WLR 975
PRESUMPTION IN FAVOUR OF LEGAL INTENTION IN AGREEMENTS BETWEEN BUSINESS PEOPLE
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4. 2. AGREEMENT BETWEEN PARTIES
OFFER –
What constitutes an Offer?
Invitation to make an Offer Vs. Offer
Pharmaceutical society of GB Vs. Boots [1953] 1 QB 401
Auction Sale – Payne Vs. Cave (1789)
Lapse/Revocation/Rejection of an Offer
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5. 2. AGREEMENT BETWEEN PARTIES
ACCEPTANCE –
Offer must still be in force
Acceptance must be absolute and unqualified
Acceptance by acting on the Offer
Postal Rule on Acceptance
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6. 2. AGREEMENT BETWEEN PARTIES
Tenders: Invitation to treat - Tenderer’s reply to a Notice is an Offer
Rewards: Acting in the offer without prior Notice of Acceptance. But knowledge of the “Reward” is mandatory
Crown v Clarke (1927) 40 CLR 227
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7. 3. CONSIDERATION / REASONABLE CAUSE
The money value passed.
To distinguish between moral and serious promises / Reasonable cause to contract
Mutual benefit of Parties
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4. CAPACITY TO CONTRACT
All persons have the Capacity to Contract. But the Law provides Protection to certain persons:
Minors [below 18 years]
Persons who supply “necessities” to Minors are entitle to recover a reasonable price
Ratification of Contract by the minor after becoming a Major.
Mentally Unsound Persons
At the time of Contracting if insane, then Contract is null and void even though the other party has entered into the Contract without knowing – Soysa v Soysa 19 NLR 314
Persons who supply “necessities” to such persons are entitle to recover a reasonable price
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WHAT IS IN A CONTRACT
CONDITIONS AND WARRANTIES
Condition – Vital term going to the foundation of the Contract.
Warranty – a terms that is subsidiary – an obligation is something which must be performed but is not vital that a failure to perform will not affect the substance of the Contract
TERMS AND REPRESENTATIONS
Couchman v Hill 1947 KB 554
IMPLIED TERMS
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10. FORMAL REQUIREMENTS IN A CONTRACT
Certain Contracts must be in writing and notarially executed – S. 2 Prevention of Frauds Ordinance
Sale, Transfer etc. of immovable property
Contracts dealing with Guarantee or suretyship, mortgage of a Policy of Insurance must be in writing and signed by the person undertaking liability – S. 18 of Prevention of Frauds Ordinance
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11. 5. FACTORS AFFECTING A CONTRACT
1. MISTAKE
A Contract is void on the grounds of mistake only when the mistake is such that there was no real Agreement. Eg:
Mistake as to the Nature of the Contract
Mistake as to the identity of the persons contracted with
Mistake of the Quality has no effect
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12. 5. FACTORS AFFECTING A CONTRACT
2. MISREPRESENTATION:
A Misrepresentation is relevant only if the following conditions are present
Must be a representation of a material fact
Must be made before conclusion of Contract to induce the Party
Intention to misrepresent
Misrepresentation must be acted upon
Three types of misrepresentation
Innocent Misrepresentation
Negligent Misrepresentation
Fraudulent Misrepresentation
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13. 5. FACTORS AFFECTING A CONTRACT
3. DURESS AND UNDUE INFLUENCE 4. LEGALITY OF CONTRACT
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PRIVITY OF CONTRACT
ie- Only Parties to a Contract may sue or be sued upon.
Dunlop Tyre Company v Selfridge (1915) AC 847 – Third Parties are not subject to liabilities or restrictions under a Contract
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15. DISCHARGE OF CONTRACTS
Performance
By Agreements
Frustration
Breach
By Law
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