Business Law: Contract Formation, Terms and Remedies
The building blocks
A contract needs offer, acceptance, consideration, intention to create legal relations, and capacity. An offer must be definite and communicated; an invitation to treat (advertisement, display of goods, auction call, tender notice) is not an offer. Acceptance must be unqualified and communicated by the offeree - the mirror image rule - so a purported acceptance adding new terms is a counter-offer that destroys the original offer (the classic battle-of-the-forms trap). Watch for the postal rule: acceptance by post is effective on posting, not receipt, but only where post is contemplated; instantaneous methods (phone, email) generally bind on receipt.
Consideration and intention
Consideration must be sufficient but need not be adequate; past consideration is no consideration. Performance of an existing duty owed to a third party can be good consideration, and practical benefit may support a promise to pay more (Williams v Roffey). Promises to accept less need part-payment by a third party or a fresh practical benefit. Commercial agreements carry a presumption of intention; domestic and social ones do not.
Terms, exemption clauses and remedies
Distinguish representations from terms, and conditions from warranties. Exemption clauses must be incorporated (reasonable notice, before or at contracting) and construed contra proferentem; statutory controls may strike down unreasonable terms. Remedies: damages aim to put the claimant in the position as if the contract had been performed, subject to remoteness (reasonably foreseeable) and mitigation. Equitable remedies include specific performance and injunction.
Worked rule of thumb
A shop window displaying a camera at £50 is an invitation to treat; the customer's offer can be refused. If the shop accepts by post having requested post, acceptance is complete on posting - even if the letter is lost.
Common traps
Confusing counter-offers with requests for information; forgetting that silence is not acceptance; assuming all pre-contractual statements are terms; ignoring the requirement that notice of an exemption clause be given before contracting.