The existence of a contract is based on the principles of contract law as set out in various legal instruments depending on the country of origin of the persons. In the process of business dealings, the existence or non-existence of a contract could be the difference between injustice and the application of correct principles of law to gain a just income. As such, this paper looks at the pre-requisites of a valid contract to determine whether there was a contract between the couple, Jim and Laura, and Stan concerning the car they were interested in buying.
Essentials of a valid contract
In the application of law, there is the standard constitution of a contract, which includes the offer which is made by the party introducing the contract, and the unequivocal acceptance of the terms of the offer. It is a general principle that the offeree should communicate their acceptance of the terms of the contract for the legal agreement to become complete and legally binding. In most cases, a prescribed method of acceptance is normally communicated. However, it is possible that people would assent to a contract silently (Gardner, 2002). For example, in the case of Brodgen V Metropolitan Railway Company (1877), the respondent company had been conducting themselves as if they were in business with the claimant. However, they had sent no formal letter to the claimant concerning their assent or rejection of the offer made to them. This relationship continued for two years and the court found that a contractual relationship existed.
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Another requirement for the engagement to contract is the capacity for the parties to contract. This will include among other things, the age of the parties, the soundness of mind and other necessary legal requirements that would qualify them to engage in the contract. When considering the age of the person, this means that the person engaging in the contractual relationship is not under age, that is a minor (Ibbetson, 1984). Depending on the statutory limitation of the different countries, different ages will be applied to provide the minimal contractual ages for the persons engaged in contractual relationships. On the other hand, soundless of mind will refer to the person’s sanity during the time of the creation of the contract, including their sobriety at that time. The intention of these elements is to ensure that there was a meeting of the minds at the time of the making of the contract. The meeting of the minds is simply a situation where the person making the offer ensures that the person receiving it has done so with the same exact intentions that the offeror was posing to them. The content that the offeror is posing should be the exact same content that the offeree was receiving in the eyes of the objective person.
Lastly, there must be a consideration that is deposited for the sealing of the contract. A consideration is a detriment to both of the parties to the other parties as a sign of their commitment to the terms of the contract. At the deposition of a consideration, the contract is enforceable by both parties so long as the content of the contract is not illegal. For example, in a hire purchase contract for the purchase of a car, the deposit amount is the consideration that the purchasing party parts with, while the car is the consideration that the selling party parts with. Therefore, the detriment occurs to both parties. It is important to note that it is not necessary for the consideration to be adequate, it only needs be sufficient (Fuller, 1941).
Was there a contract?
Having tested some of the requirements of a valid contract, we would assess the contractual capacity of the couple to enter into a contract with Stan. At first instance, it is assumed that if the couple was married, they were in full capacity to enter into the marital contract and therefore have all the necessary requirements of capacity to contract. This means that the age and mental capacity factors have been settled. Moreover, the facts of the case do not present a situation where there was any undue influence to enter into the contract.
However, there appears to be a failure in the meeting of the minds of the individuals in the supposed relationship. At first instance, Stan assumed that the $100 was made in partial payment for the vehicle that would be purchased while the couple was depositing this pending an agreement between themselves on whether or not to purchase the car the next day. Moreover, the couple felt that Stan had equally represented this to be the case as he didn’t provide any receipts as to the payment of the car, if indeed this $100 was a payment. As such, there appears to be an element of fraud as there was concealment of information pertinent to the performance of the contract.
Moreover, the sure sign that this was going to be a contract for the car through the deposit of the $100 would have become apparent should the salesman have deposited signed documents to this effect. Due diligence on his part required that he must have produced documents and receipts to the effect that the couple had made payments for the vehicle in the amount of $100. This was not the case. The couple was expecting that the advancement of the payment would be on a money-back guarantee pending their decision the next day.
In addition, English law has considered the existence of fragmentary supply of guarantees. The nature of a fragmentary guarantee is that it runs through only a specified time for goods being intended to be supplied. As such, this is also subject to the elements of a contract. Therefore, there should be offer and acceptance having satisfied all the elements of a valid contract so that the contract can be legally binding. As seen in this case, there was a failure of the meeting of the minds – an offer and an unequivocal acceptance of the same. Moreover, information was concealed from the customers concerning the real nature of the agreement, leading to the disagreements that occurred the next day.
Having assessed the circumstances, I would conclude that there was a contract, but this was not as to the intention of buying the car. It was only to hold it pending the decision by the couple on whether or not to buy the car the next day. Moreover, the defense of misrepresentation and fraud by concealment is available to the couple as the salesman didn’t explain his full intention after receiving the deposit either verbally or explicitly through the issuance of receipts.
References
Brogden v Metropolitan Railway Company, 2 AC 666 (Chancery 1877).
Fuller, L. (1941). Consideration and Form. Columbia Law Review , 799.
Gardner, S. (2002). Trashing with Trollope: A Deconstruction of the Postal Rules in Contract. Oxford Journal of Legal Studies , 170.
Ibbetson, D. (1984). Sixteenth Century Contract Law: Slade's Case in Context. Oxford Journal of Legal Studies , 295-96.
