Chap 2. CONFLICT IN THE MARKET PLACE THE LAW OF CONTRACT Has been developed over the years from decisions of judges to regulate how businesses should be done. It helps to reduce conflict and ensures that business transactions are conducted in a formal manner.

Elements of a legally binding agreement 1. OFFER – The formation of a contract involves one party making an offer to another party. An offer can be made orally, in writing, by action. It must be clear, complete and it must be communicated to the person to whom the offer is being made. Offerer – person making the offer Offeree – person receiving the offer An offer can be terminated in the following ways: –if it is rejected by the offeree –withdrawn at any time by the offerer before acceptance –if the time for acceptance has expired 2. ACCEPTANCE - When the offer is accepted it is binding on all parties. The offer must be accepted with all its conditions. Sometimes an offer may be accepted subject to conditions. This is called a conditional acceptance.

3. CONSIDERATION This is something of value offered by a party to a contract in exchange for something of value received. It usually takes the form of money in exchange for goods and services received. 4. INTENTION TO CONTRACT Must be the intention of the parties to create a legally binding agreement. Personal agreements are not legally binding, if there is an agreement by two people to go to the cinema and one person does not turn up, the other person cannot sue because there was no intention to create a legal contract. 5. LEGALITY OF FORM A contract must be drawn up in the correct legal form. Contracts can be oral, but certain contracts must be written – for example hire purchase agreements and insurance policies.

6.CONSENT TO CONTRACT The parties to a contract must agree to its terms. They must both agree on what is being sold or bought and the price. The parties must be entering the contract voluntary; no person should be forced into making a contract. 7. CAPACITY TO CONTRACT In order for an agreement to be a valid contract the parties must have the legal right to do so. Some people do not have the legal right to enter into contracts. These include:  Companies acting Ultra Vires – a firm’s power is said to be limited by its objectives in the memorandum of association. If this is breached the directors have no capacity to contract.  A person under 18 cannot enter a contract except for the supply of necessaries (goods they actually need)  A person under influence of alcohol cannot enter into a contractual agreement  A person of mental illness has no capacity to contract  A bankrupt person cannot enter into a contract that is legally binding  A diplomat is a person in a position of privilege: if they break a contract they cannot be sued or prosecuted as they can plead diplomatic immunity.

TERMINATION OF CONTRACT A contract can be terminated by performance, breach, agreement or frustration 1.Performance: When the parties to the contract have carried out their side of the contract as agreed. Very common way to end a contract 2. Breach: One party to a contract has failed to perform their obligations in the contract. Breach of condition – this entitles the injured party to abandon the contract and sue for damages. Breach of warranty (less important clause) – allows the injured party to sue for damages 3. Agreement: When the parties to a contract agree to end the contract 4. Frustration: If an unforeseen event occurs and makes the contract impossible it is terminated. This frustration can also relate to death, bankruptcy or lapse of time.