Elements of a valid contract

1 Offer. A contract must begin with an offer. It is made by an offer or to an offeree, and if it is accepted
by the offeree, a legally binding contract has come into existence, provided certain other requirements
are fulfilled. For example, when a seller places an advertisement in a newspaper offering to sell a car and
a buyer contacts him offering to buy it, each of them is making an offer in the everyday sense of the
word but only one is making a legal offer. English law takes the view (unlike continental law) that it is the
buyer who makes a legal offer, and the seller may then decide whether to accept or reject it. However,
because of the 1893 case of Carlill v. Carbolic Smoke Ball Co

2 Acceptance. The acceptance must mirror the offer exactly (this is called the 'mirror image' rule). There
must be no 'ifs' or 'buts'; if you say 'yes, but. .. , and name some condition, this would not be an
unconditional acceptance and therefore not an acceptance at all. In fact, it would be treated by the
court as a counter-offer, and a rejection of the first offer

3 Consideration. A legally binding agreement must be supported by consideration. It is something of

value which exchanges between the parties as a result of the agreement. For example, if a company sells
a laser printer for £900, it is supplying consideration in the form of a laser printer and the buyer is
supplying consideration in the form of £900. A promise not to sue someone, in return for some act on
the wrongdoer's side, is a common form of consideration. Without consideration an agreement is not
binding - it is a naked agreement (a nudum pactum). Consideration must have some economic value;
natural love and affection or a moral duty is not enough to render a promise enforceable. However,
although consideration must be sufficient, it need not be adequate.

Consideration must work in both directions. A promise of a gift cannot be enforced because a gift is one-
way consideration. (Only if it is made in the form of a deed - a document signed, sealed and delivered -
can such an agreement be legally binding. A deed allows consideration to be one-way and is enforceable
in the courts.) Each of the parties has to lose something and gain something else. Another rule is that
consideration must never be in the past; promises for services rendered in the past are not legally
binding. If someone promises to thank a person for some service he rendered and then changes his
mind, that person cannot enforce the promise on two grounds: first, because the promise is merely one-
way and therefore a gift and, second, because his consideration is in the past. In commercial dealings,
however, where work is done first and payment is made afterwards, the rule about past consideration
does not apply, because the promise to pay is implied in law. If someone promises to do something
which he ought to have done anyway, for example, to improve his attitude to work, he is promising to
fulfil an existing obligation, and that in law is not consideration, and therefore he cannot sue if he does
not receive the promised benefit. For this reason, new promises made by one party after the entry into
the contract are not binding if they are not matched by the other party's fresh consideration. At
common law, only the person providing the consideration could sue on a contract, in other words, only
parties to a contract could sue on it. The most notable exception to this rule was in motor insurance
cases: an injured person can sue the motorist's insurance company even though the person was not a
party to the insurance contract.

4 Capacity. To be legally entitled to contract, a person must have full legal capacity. It is attained at the
age of 18 by persons of sound mind. Capacity also includes appropriate status for making contracts: for
example, some contracts can only be signed by the directors of a company. A person who has not
reached the age of majority is known as a minor. Minors do not have full contractual capacity, so most
agreements cannot be enforced against them. However, if a minor makes a contract for necessaries -
things which a minor needs, like clothes - it is valid. Any contract of employment or training that is
advantageous to the minor is also a valid contract. If, for example, a young person signs an
apprenticeship agreement which stipulates that he must remain with the company for two years but he
decides to leave after a year, the company may 4 sue him for damages for the money they have spent
on his training (although in practice this is rarely done

5 Legal intent. This is the intention of the parties that their agreement should have legal consequences.
Indeed, there would be no contract if, for example, they were merely joking when they made the
agreement. This is supported by a case decided in 1605 (Weeks v. Tybalt) when a man joked that he
would pay money to any man who would marry his daughter. In establishing legal intent the courts
examine what the parties actually said and did (an objective test) rather than what they intended to say
or do (a subjective test), because otherwise people who appear to have agreed to certain terms may try
to escape liability by claiming that they had no 'real' intention to agree to them. In business agreements
which contain all the essential elements, legal intent is presumed by law. If, however, one party states
that the agreement is 'binding in honour only', then the legal intent has been specifically removed, and
the agreement becomes void.

6 Certainty of terms. The terms to which the parties are agreeing must be certain, they should not be
unduly vague or incomplete. A typical situation will be when one party withdraws from an agreement
before the terms have been finalised, and the other party sues them for breach of contract. The court
may well agree with the first party that there was no contract because the terms are too vague or have
not been finalised. This happened, for example, in Loftus v. Roberts (1902) where an actress was
engaged to perform in a West End play with the salary 'to be mutually arranged between us'.

However they are also factors that make a contarct invalid which are normally called vitiating fators.

No vitiating factors. Vitiating factors make a contract invalid. They can make it either void (and then
neither party can enforce the agreement) or voidable (then it is up to an innocent party whether or not
to end the contract). The factors that the law recognises as undermining a contract are illegality,
mistake, misrepresentation, duress and undue influence. All illegal contracts are unenforceable. These
include agreements: a) to commit a crime, b) to defraud the Inland Revenue, c) involving public safety
(e.g. contracts with persons living in 5 enemy territory), d) involving sexual immorality (e.g. a contract
with a prostitute for sexual services is not illegal, but it would be unenforceable in court because it is
immoral), e) tending to the corruption of public life (e.g. bribery); e) prejudicial to the administration of
justice; f) prejudicial to friendly foreign countries. Special rules exist for interpreting contracts in which
one contractor made a mistake or was tricked or pressured into making an agreement. If one party
knows that the other party made a mistake as to the terms of the offer and fails to bring it to his notice,
he will not be able to enforce the contract according to his version of its terms. If one party had
misrepresented the facts to the other, there would be 'no meeting of the minds' between the parties
(no consensus ad idem, to use an old-fashioned term), and the court would not normally uphold this
agreement. Equally voidable are contracts entered into under duress. Duress can take the form of a
physical threat to the person or an economic one, where a threat is made to break an existing contract
or to commit a tort and the injured party has no practical alternative to agreeing to the terms proposed
by the person making the threat. Undue influence is an equitable doctrine which arose independently of
common-law duress. Undue influence is presumed in certain relationships, for example, between doctor
and patient, solicitor and client, parent and child, where the weaker party might fall under too much
influence of the stronger party so that it prevents him from exercising an independent judgment. If a
client then decides to sue the professional for loss caused by wrong advice, the latter may rebut the
presumption by presenting evidence that the client had access to independent advice. 8 Form. In the
majority of cases the law is not concerned with the form in which the contract is made. However, some
contracts under English law must always be in writing in order to be legally binding, for example, sale of
land contracts, leases of three years or more, insurance contracts, loan and hire purchase agreements,
agreements to buy company shares, etc.