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The formation and enforceability of contract

The formation and enforceability of contract
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T he current English law, in assessing the f ormation and enf orceability of contract, at f irst glance appears to take a rigidly technical and schematic approach. However, it is questionable whether this rigid approach ref lects legal reality, and this view has been ref lected by various commentators who have considered the approach of contract law largely practically motivated. In order to discern if the law of contract in f act adopts a practical approach, the governing law in this area and the decisions of the courts in the context of the rationale provided f or the decisions, must be intimately examined. Moreover, if a pragmatic approach is in f act undertaken by the courts, it is essential to consider f urther the extent of this. For a valid contract to f orm there needs to be an of f er, acceptance, intention to create legal Relations (ICLR) and a consideration. A contract is an agreement in which an of f eror (the person making the of f er) makes an of f er to an of f eree (the person accepting the of f er) to enter into the contract under certain circumstances. A contract is f ormed when the of f eree accepts the of f er made by the of f eror under the mentioned terms and conditions; the of f eree has to communicate with the of f eror f or the contract to bind entirely; silence does not constitute acceptance, unless stated otherwise, (f or instance in Re Selectmove Ltd). An of f er can be def ined as a manif estation by the of f eror (whether orally, in writing, or by conduct) of a willingness to be bound by the terms proposed to the of f eree (the addressee) as soon as the of f eree signif ies acceptance of the terms. Moreover acceptance is def ined as an unequivocal expression of consent to the proposal contained in the of f er and has the ef f ect of immediately binding both parties to the contract. For the parties to rely on a contract there needs to be consideration and an ICLR. Consideration can be def ined as when one party must carry out a perf ormance or must promise to take some action specif ied by the other party in order to pay the value of his/her undertaking. Moreover an ICLR is simply the intention of the parties to create a legally binding contract. Furthermore, this way of the classical approach to contract f ormation matched the nineteenth-century but it created some criticism in the twentieth-century which were some new developments in the law of misleading conduct, unjust enrichment, misrepresentation and estoppels; theref ore the f ormation of contract is not just based on the of f er and acceptance procedure. An analysis can be carried out to determine whether or not a contract is f ormed; f irstly, is there an of f er? Secondly, if there is an of f er, is there an unequivocal acceptance f rom the of f eree? T hirdly, has the of f eree communicated his acceptance successf ully? Fourthly, is the of f er still available at the time of the acceptance? And f inally, do the courts use the traditional rules of of f er and acceptance (O&A) in all cases? However, the theoretical rules within the law of contract are of ten considered less than pragmatic. T his is because the courts of ten f ind that the contract law situation that they have to make judgement on does not f all within the strict categories of of f er, acceptance, ICLR and consideration, or that applying the rules would lead to injustice either by preventing the f ormation of contract where one is equitable to exist, or conversely by allowing the existence and enf orceability of contract where non should exist. In such situations, in light of all the considerations the courts may be lef t with no choice but to do justice by altering the theoretical rules of contract law. T he court may do this in a number of ways: Firstly, they may widen the boundaries of these categories to accommodate the situation in question; secondly, they

may widen the boundaries of these categories to accommodate the situation in question; secondly, they may interpret the rules of each category more restrictively so as to prevent the f ormation of contract where this may be considered the appropriate results; thirdly, the courts may apply the rules less strictly to allow f ormation of contract, where the court is satisf ied in light of practical all rounded consideration of the f act that such should be the result; f inally, in extreme situations the courts may entirely deviate f rom the theoretical rules of contract law to allow or disallow f ormation of contract as it considers appropriate in light of all the f acts of the case.

Firstly, we will turn our attention to situations where the rules of O&A have proved impractical. T he courts do not always f ollow the classical rule of O&A when looking at a contract; theref ore one particular problem with the traditional rule of O&A, is that the courts may deviate f rom the rule, due to the increased number of cases where there needed to be modif ication of the rules in order f or parties to enter a f ormal contractual arrangements, f or example in Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council, and the decision of the Court of Appeal in Gibson v Manchester City Council reversed by the House of Lords. Secondly, it would be easier f or the courts to distribute with the of f icial procedure of O&A where a transaction has been carried out, f or example in G Percy Trentham Ltd v Archital Luxf er Ltd. And f inally, in cases of a unilateral contract, once the of f er is promised to the of f eree, in return of an action that was to be taken by the of f eree, even if the potential of f eree has not yet accepted the of f er, the of f eror is unable to withdraw his/her of f er, f or example in Carlill v Carbolic Smoke Ball Co. Ltd. Secondly, we will look at the impractical rules of ICLR; T he courts, although not being able to make a contact f or the parties, strive to uphold a bargain wherever possible. Moreover, not all the situations f all within the categories that we have discussed earlier in this paper, and it is f or this reason that the courts sometimes have to widen the boundaries of their categories. It is not easy f or the court to decide whether there was an ICLR or not, because they cannot work out exactly what is in the minds of the parties; theref ore the law decided to divide the agreements into two groups; social and domestic agreements, and business agreements; where social and domestic agreements cover the agreements made between a f amily, f or instance between a parent and a child or a husband and his wif e, it can also be agreements between workmates or f riends; f or instance agreements to go f or a walk, or to go f or a movie, or to promise to help a workmate with their work; these agreements are unenf orceable. Examples of these agreements can be seen in a number of cases such as Lens v Devonshire Club (1914), where it involved participation in a golf club competition, or the case Coward v Motor Insurer's Bureau (1963), in which there was an agreement to share the costs of the petrol in the journey. Another example of unenf orceability of an agreement in f amily and social agreements can be seen in the Balf our v Balf our, where the agreement was f ormed while the spouses were living in amity'. However, if the husband and wif e are not living as one household, then the situation is to the contrary of the case stated f or example in Merritt v Merritt (1970), where the partners do not live together in harmony at the time of the agreement. Furthermore, in business agreements, it is said that the parties do intend to create legal relations and f orm a contract. T he courts should look at the intentions of the parties to decide whether or not the parties have in f act created legal relations. T he contract can be voided only if the courts know that there is any doubt of intention, or that the intention is unilateral; otherwise the court will declare an agreement not binding in Law, only if both parties clearly state that they wish the court to do so. In addition, when looking at unions and companies and the agreements between them, another question is brought about, involving whether or not they actually have the intention to create a legally binding contract. Furthermore, in general, collective agreements are not intended to be legally binding; however, we can make some explicit provisions of collective agreements legally binding by integrating them into

individual contracts of employment. Moreover consideration can simply be def ined as a test of enf orceability which carries out the same f unction as intent. Although consideration is an important f actor of the f ormation of a contract, abolishing it would be more practical because consideration has many problems and is vague, which leads to inappropriate results, additionally, as can be seen f rom the judgements of the courts, it is of ten the intention that is considered the most important and overriding requirement f or making the contract enf orceable. T here are various cases which demonstrate the insuf f iciency of consideration as an element which determines a contact is enf orceable, one such case is Stilk v Myrick, and another example is Hartley v Ponsonby.

We know that not all agreements are treated as enf orceable contracts. T here are certain rules (which purposes are called badge of enf orceability') to identif y the certain agreements that are to be treated as enf orceable contracts; these rules are consideration and f orm. Furthermore, the creation of a legally binding contract cannot occur just based on the agreement supported by consideration; however the parties must also have the ICLR which is a necessity of contract Law in the UK, and the existence of it is dependent upon the contracting parties and the f orm and nature of that contract. Moreover, although we know that if consideration is present then that must mean that there is the ICLR, but there are situations where it can be determined that there is no legal liability and contract if the assumption of the intention can be proven to be incorrect. Nevertheless, despite the f act that the courts did not f ollow the rules and relied just on consideration in some cases, but on the whole it appears that they do f ollow the rules and that maybe those cases were exceptions. And it can be decided that perhaps it would be best to change the rules of the law to f it the new situations so that the courts do not have to bend the law; f urthermore, it would be less problematic if the rules only consist of the ICLR as oppose to the common law which requires both consideration and the intention of both parties.

Bibliography: Art icles:

Adam Kramer, Common sense principles of contract interpretation (and how we've been using them all along)', 2003, 23(2), Oxf ord Journal of Legal Studies

Books:
Chen-Wishart Mindy, Contract Law', (2nd edn, OUP, 2008) Collins Hugh, T he Law Of Contract', (4th edn, lexisnexis butterworths, 2003) Elliott Catherine & Quinn Frances, Contract Law', (6th edn, pearson education Limited, 2007)

Faf inski S & Finch E, Contract Law', (2nd edn, pearson education ltd, 2009) Frey Martin A. & Frey Phyllis Hurley, Essentials of Contract Law', (West T homson Learning, 2001) Martin Jacqueline & Turner Chris, T he Facts at your f ingertips... Contract Law', (2nd edn, Hodder Arnold, 2001) Mckendrick Ewan, Contract Law', (8th edn, Palgrave Macmillan, 2009) Oughton David & Davis Martin, Sourcebook on Contract Law' (2nd edn, Cavendish Publishing Limited, 2000) Stone Richard, T he Modern Law of Contract', (6th edn, Cavendish Publishing Limited, 2005)

Cases:
Balf our v Balf our [1919] 2 KB 571 Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 Carlill v Carbolic Smoke Ball Co. Ltd [1892] EWCA Civ 1 Coward v Motor Insurer's Bureau (1963) 1 QB 359 Gibson v Manchester City Council [1978] 1 WLR 520 G Percy Trentham Ltd v Archital Luxf er Ltd [1993] 1 Lloyd's Rep 25 Hartley v Ponsonby (1857) 7 E & B 872 Lens v Devonshire Club (1914) Merritt v Merritt (1970) [1970] 2 All ER 760 Stilk v Myrick (1809) 2 camp 317

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