Contracts
Formation
A contract requires offer, acceptance, consideration, intention to create legal relations, and capacity. An offer must be definite and communicated; invitations to treat (advertisements, price lists, auctions) are not offers. Acceptance must be unqualified (a counter-offer destroys the original offer) and communicated; the postal rule may deem acceptance effective on dispatch. Consideration must be bargained-for and sufficient but need not be adequate; past consideration is no consideration. Promissory estoppel may enforce a promise relied on to the promisee's detriment.
Terms, vitiation, discharge
Terms may be express or implied; conditions are essential, warranties minor. Exclusion clauses are construed strictly and may fail for notice or unconscionability. A contract may be void (no legal effect, e.g., illegality), voidable (rescindable, e.g., misrepresentation, duress, undue influence), or unenforceable. Frustration discharges where performance becomes impossible through no fault. Breach entitles the innocent party to damages (expectation or reliance), specific performance, or injunction; mitigation limits recovery.
Traps
- Treating an advertisement as an offer.
- Confusing void with voidable.
- Assuming any promise is consideration; past acts are not.
- Missing that acceptance by silence is generally ineffective.
- Forgetting that liquidated damages must be a genuine estimate, not a penalty.
Rule of thumb
Check formation in order - offer, acceptance, consideration, intention, capacity - then ask whether any vitiating factor or defense applies.
Worked example
A shop displays a television at a low price. That is an invitation to treat; the customer's offer can be refused. If the shop accepts and the customer pays, a binding contract exists with consideration in the price paid.