Explain, using examples where appropriate, the essential elements of a valid contract. - Leaving Cert Business - Question B - 2003
Question B
Explain, using examples where appropriate, the essential elements of a valid contract.
Worked Solution & Example Answer:Explain, using examples where appropriate, the essential elements of a valid contract. - Leaving Cert Business - Question B - 2003
Step 1
Agreement
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An agreement may be made in various forms, such as in writing (formal or informal) or orally (e.g., at an auction). For example, a written contract to purchase a car signifies an agreement. An oral agreement to buy groceries can also be valid. However, it must be clear and definite.
Step 2
Offer
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An offer is a proposal by one party to enter into a contract with another. It must be communicated clearly and have specific terms. For example, if a person offers to sell their bicycle for $100, that is a clear offer. The offeree has the option to accept or reject it.
Step 3
Acceptance
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Acceptance involves agreeing to the terms of the offer without modifications. This can be done verbally, in writing, or by conduct. For instance, if the offeree agrees verbally to purchase the bicycle for 100,acceptanceisconfirmed.Iftheycounter−offer80 instead, that is not acceptance but a new offer.
Step 4
Intention
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The parties must intend to create a legal relationship. This intent can be inferred from their behavior or the context of the agreement. For example, parties signing a business contract clearly intend to create legally binding relations, whereas an agreement between friends to meet for lunch may not carry such intent.
Step 5
Consideration
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Consideration refers to something of value exchanged between the parties. It can be money, services, or goods. For instance, if one party pays $100 for a bicycle, the money is the consideration for the bicycle. Consideration must be lawful and not void.
Step 6
Consent
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Consent requires that both parties agree to the terms voluntarily and without undue pressure. For instance, if one party was forced to sign under duress, the contract may be invalid. Genuine consent is essential for a valid contract.
Step 7
Capacity
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Parties entering into a contract must have the legal capacity to do so. This generally means they must be of legal age and sound mind. For instance, minors or individuals under the influence of drugs may not have the capacity to contract. Therefore, agreements involving these individuals may not hold.
Step 8
Contracts must not be Illegal
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Any contract that involves illegal activities is not enforceable. For example, a contract to sell illegal drugs cannot be upheld in court. If a contract’s purpose is illegal or it facilitates illegal actions, no legal recourse exists for either party.
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