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Introduction to Contract law
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Introduction to Contract law.
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Introduction to ContractWhat is a Contract?
A contract has been defined as a legally binding agreement or, in the words of Sir Frederick Pollock:
‘A promise or set of promises which the law will enforce.’ However, not all promises, or agreements
give rise to contracts; there are only certain kinds of agreements that the law recognises as creating
enforceable rights and duties.
Foundations of Contract Law
Contract Law was developed in the 19th Century. This was a time when trade and industry were
rapidly expanding, and subsequently disputes were rising.
Functions of Contract Law
There are various functions / purposes of contract law, including:
• Securing expectations
• Establishing obligations
• Facilitating business planning
• Creating certainty
Basic Principles of Contract Law
• Laissez-faire (means leave alone. A theory of contract law that persons should have freedom
of contract with minimal state or judicial interference).
o Freedom of contract (the freedom of private or public individuals and groups (of any
legal entity) to make legally binding mutual agreements without government
interference. This can be made with one or multiple people).
o Equality of bargaining power (bargaining power is the relative ability of parties in a
situation to exert influence over each other. Equality of bargaining power will arise
where both parties are on an equal footing in a situation).
o Your right to make a bad bargain! (individuals and groups have the right to make a
bad bargain e.g., if the defendant breached the contract because they regretted
selling the claimant their Ferrari for £200 that wouldn't be a reasonable defence
(assuming all other legal elements / components of a contract were present). This is
because the defendant has the right to make a bad bargain).
• Meeting of minds (refers to the situation where there is a common understanding in the
formation of the contract i.e., offer and acceptance must mirror each other). This is a
foundational principle of contract law, central to the elements of offer and acceptance.
Types of Contract
Contracts may be divided into two broad classes: speciality contracts and simple contracts.
Note: a limitation period is the period of time within which a party to a contract must bring a claim.
Unless otherwise stipulated / stated / specified, the limitation period begins either on the date on
which the breach of contract occurred, or the date the negligent act or omission occurred. This is
known as the date of accrual. The limitation period does not run from the date of the contract itself.
It is common to refer to actions which fall outside of these statutory time limits as being 'statute-
barred' (no longer legally enforceable due to the lapsing / expiring of the limitation period).
, Speciality Contracts
These formal contracts are also known as deeds. Under the Law and Property (Miscellaneous
Provisions) Act 1989 it must be clear on the face of the document that it is intended to be a deed by
the person making. It must also be signed by that person, and that signature must be witnessed and
attested (attestation involves making a statement that the deed has been signed in the presence of a
witness). However, the Court of Appeal has held that the failure to sign in the presence of a witness
will not necessarily invalidate a deed.
In accordance with the Limitations Act 1980, for speciality contracts, the limitation period for a party
to bring a claim is 12 years from date on which the cause of action accrued – otherwise statute-
barred.
Simple Contracts
Contracts which are not deeds are known as simple contracts. They are informal contracts and may
be made in any way I.e., orally, in writing, or implied from conduct (e.g., bidding in an auction).
In accordance with the Limitations Act 1980, for simple contracts, the limitation period for a party to
bring a claim is 6 years from date on which the cause of action accrued – otherwise statute-barred.
Components of a Contract
For a contract to be legally binding it must contain four essential components / elements:
• An offer
• An acceptance
• A consideration
• An intention to create legal relations
However, it may still be considered invalid if it:
• entices someone to commit a crime, or is illegal; or
• is entered into by someone that lacks capacity, such as a minor or bankrupt; or
• was agreed through misleading or deceptive conduct, duress, unreasonable / unacceptable
conduct, or undue influence.
Intention to Create Legal Relations (ICLR)
For the purpose of establishing the intention of parties, agreements are divided into two categories:
business / commercial and social / domestic agreements.
Business / Commercial Agreements
In the case of a business agreement, it is automatically presumed that the parties intended to make
a legally enforceable contract. It is possible, however, to remove the intention by inclusion of
rebuttal evidence.
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