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Illustrate your understanding of the following terms in relation to a valid contract: Agreement; Legality of form; Consideration. - Leaving Cert Business - Question C - 2013
Question C
Illustrate your understanding of the following terms in relation to a valid contract: Agreement; Legality of form; Consideration.
Worked Solution & Example Answer:Illustrate your understanding of the following terms in relation to a valid contract: Agreement; Legality of form; Consideration. - Leaving Cert Business - Question C - 2013
Step 1
Agreement
Answer
For an agreement to be legally valid, it must consist of a clear, complete, and unconditional offer along with acceptance by the other party.
Offer
An offer is a promise to be bound by specified terms if those terms are accepted. It can be made in writing, verbally, or implied by conduct. For example, if Joe (the buyer) offers €9,000 for a second-hand car, this constitutes an offer.
Acceptance
Acceptance must occur exactly as proposed, without any alterations. For instance, if Michael (the seller) accepts Joe's offer of €9,000, a valid contract is established.
Step 2
Legality of form
Answer
To form a valid contract, the agreement must encompass lawful considerations. Some contracts are required to be in a certain form for their legality.
Examples of contracts that usually require a specific format include:
- Insurance policies
- Hire Purchase agreements
- Sale of property or land
- Bank loan agreements
Any contract not abiding by these stipulations may be deemed invalid.
Step 3
Consideration
Answer
Consideration refers to what each party gives to the other, which must involve something of value. It's essential for a contract to be legally enforceable.
For example, if Joe pays Michael €9,000 in exchange for a car, the money is the consideration from Joe, and the car is the consideration from Michael. While consideration usually involves currency, it might also include other forms of value, as long as it is adequate and agreed upon by both parties.