Lesson 03 - Contracts

I Formation of Contract

Pre-reading:

1. Brainstorm various collocations with the word CONTRACT and create a word map using the teacher as a guide and source of the appropriate expressions.

2. In pairs, create a definition of a contract. Then discuss what types of contract you know. Have you ever formed a contract? If yes, give examples.

3. READING. Read and the text and fill in the table below.

Contract law may be considered one of the cornerstones, along with torts, of the law. Except for criminal law, most legal institutes and concepts seem to be derived from this area of law. It is all about rights or obligations arising from agreements among persons, both natural and artificial legal ones. A contract is a kind of agreement, but mind you, not every agreement is a contract. In order to be such, it must be legally binding, i.e. the parties must intend to be legally bound by the contract, which is one of the essential elements of each and every contract. In fact, this was the issue in a well-known precedent in the English legal history, Carlill vs. Smoke Balls Comp. The company advertised a miraculous cure for influenza saying that anyone who would use their smoke balls in the prescribed manner and in spite of that would contract influenza would be rewarded. The cure did not work but Mrs. Carlill’s legal action did. It was held that the company’s reference to the deposit in the bank having been made for the contingent unsuccessful users of this cure was sufficient for proving the company’s intention to make a legally binding offer that Mrs. Carlill accepted. By the way, this case is an example of a unilateral contract. This does not mean as one might think that there is only one party to the contract. The difference lies in the number of promises made and not in the number of the parties. It is quite obvious that the opposite must be a bilateral contract where the parties exchange promises; for example, I promise to sell you my car and someone promises to give me a certain amount of money.

Speaking of the elements, the first, and utterly natural one, is offer and acceptance. The offer must be communicated in a clear and unequivocal manner. The same applies to the acceptance even if it may have various forms. In fact, it is not necessary to say a word as starting doing something may be considered a legally binding form of acceptance. The offer may be, of course, revoked, i.e. taken back, or a counter-offer may be made.

When something goes wrong in the process of communication this may result in the contract being invalid or, in other words, null and void. If I lie to my would-be employer when applying for a job and after concluding the contract the truth turns out the employer may claim the contract to be invalid and discharge it due to misrepresentation, i.e. stating an untrue fact, thus misleading someone. Other factors that may invalidate a contract are a mistake, or duress, i.e. being forced to enter into a contract.