Table of Contents

Introduction................................................................................................................... 2
LO. 1. Understand the essential elements of a valid contract in a business context..................3
1.1 Explain the importance of the essential elements required for the formation of a valid
contract..................................................................................................................... 3
1.2 Discuss the impact of different types of contract.....................................................4
1.3 Analyse terms in contracts with reference to their meaning and effect.......................8
LO. 2. Be able to apply the elements of a contract in business situations...............................9
2.1 Apply the elements of contract in given business scenarios.....................................9
2.2 Apply the law on terms in different contracts........................................................10
2.3 Evaluate the effect of different terms in given contracts.........................................11
Conclusion.................................................................................................................. 12
Reference................................................................................................................... 13
Introduction
This report will help clients to understand the law of contract. The important of three
essential elements are agreement, consideration and intention to create legal relations.
A success contract cannot without one of them so people need to know about it. In
addition, the effect of term is also necessary for party to ensure their benefit and avoid
the breach of contract and to apply to cases study to use in reality.
LO. 1. Understand the essential elements of a valid contract in a business context

1.1 Explain the importance of the essential elements required for the formation of a
valid contract
1.1.1 Agreement
The first essential feature of a contract that all the parties had agreed. This is (usually)
is determined by the rules of offer and acceptance:
1.1.1.1 Offer
The first element will be referring which is offer; an offer is a definite to be bound on
specific terms (BPP, 2010). An offer must be specific, clear and communicated to avoid
the misunderstanding or trick between people.
Offeree: The offeree is a person or a party that is a person or party give offer to
make a contract with them.

Offeror: The offeror is a person or a party - another two main parties in contract,
who give a specific offer for two parties to sign the contract.
1.1.1.2 Acceptance
Acceptance is the unqualified agreement to the term of the offer, and the acceptance
can be express by word or a specific action (BPP, 2010). The acceptance is only valid if
it satisfies the following condition:
* Launched in time according to the provisions of the contract
* Accept all the content of the offer
Accept the offer may be by writing, orally or by specific action. However, it should be
noted that silence is not considered agreed in the contract
1.1.2 Consideration
Consideration is usually described as being something which represent either some
benefit to the person making a promise or some detriment to the person to whom the
promise is made (Elliott&Quinn, 2007)
Consideration is valid when both patties exchange the benefit or something of value
such as a thing, a promise, money or service. For example: A will pay $100 for B to
clean As house, a give B money and B provide the service. However, something illegal
and impossible cant count as consideration
1.1.3 Intent to create legal relations
If two or more parties make an agreement without any intention of being legally bound
by it, that agreement will not be regarded by the counts as a contract (Elliott&Quinn,
2007)
The parties to the agreement must intend to enter into a legally binding agreement. This
will rarely be stated explicitly but will usually be able to be inferred from the
circumstances in which the agreement was made. Commercially based agreements will
be seen as including a rebuttable intention to create a legally binding agreement. The
fact that the parties are husband and wife does not mean that they cannot enter into a
binding contract with one another. (Balfour v Balfour, 1919)
1.1.4 The important of the essential elements.
A contract is much more than an agreement between two people. There must be an
offer and acceptance, intention to create a legally binding agreement, a price paid (not
necessarily money), a legal capacity to enter a contract of your own free will, and proper
understanding and consent of what is involved. Any duress, false statements, undue
influence or unconscionable dealings could make a contract illegal and void.
There are 5 factors that have made a contract to be invalid, even three elements appear
sufficient:
- Form of contract
- Genuie consent
- Capacity
- Content
- Legality

1.2 Discuss the impact of different types of contract

The different forms of contract.
 Oral or
verbal

Type of
Contra Inferred
ct from
Written conduct
of the
parties

- Oral or verbal

Oral contract can be expressed by words or by specific behavior of the parties. But an
oral contract is any agreement that two or more parties make based entirely on spoken
or orally communicated terms. For example, if a contractor shows up at your home,
says it will take $10,000 to remodel your bathroom and both of you agree to the terms of
the remodeling, you have entered into a contract. If you fail to pay the $10,000, or the
contractor fails to perform the work, you can go to court and ask the court to enforce the
contract provisions. (Oral Contract, 2016)

Characteristic:

* Common but perjury, trick and misunderstanding between both patties usually happen

* Accept by specific action such as buy item

* Could be supported with written evidence of terms

- Written

A written contract is often used to refer to a document outlining an agreement between

two parties. The parties can be individuals, businesses or organizations. All the
elements or parts of the agreement should be included in the agreement, and each
party has signed the document for it to be considered valid. (Reuters, T., 2016)
 - Inferred from conduct of the parties

Action of two parties had shown would be consider to be a contract. That action may be
a rule or a customs that been accepted. For example, if a customer go to a store, if he
take something to the cashier to charges, action of customer will be consider of willing
to have a contract.

The different types of a contract

Type of contract in which only one of the contracting parties is under an

enforceable obligation. For example, under an insurance contract, only the
insurer makes a promise (to make a loss good or pay compensation) whereas
the insured does not make any promise and, to keep his part of the deal, only
pays a premium.

- Simple contract

Written contract not made by a deed. Under English legal system, a simple contract
may be implied by conduct of the parties involved.

- Standard contract

Boilerplate contract (such as a bank loan agreement or an insurance policy) with fixed
terms and conditions, offered almost always on 'take it or leave it' basis. Also called
standard form contract.

- Contract by Deed

A contract in which a property title is transferred only after the buyer makes a certain
number of monthly payments. also called contract sale.

- Unilateral contract

Contract arising where one party (the promisor) makes an offer to pay another party
(the promisee) in return for the performance of an act, and the promisee gives his or her
assent by performing the said act. A reward offered for providing certain information is
an example of a unilateral contract.

- Bilateral contract

Reciprocal arrangement between two parties under which both parties promise to
perform an act in exchange for the other party's act. Each is an obligor on its own
promise, and an obligee on the other party's promise.
 Impact (effect) of each form and type of contract

- Face to Face
Face to Face contract is an oral contract but not written and it is a valid and enforceable
contract. Oral agreements rely on the good faith of all the parties involved. The impact
of face to face contract is that each party can face to many difficulties to prove the
existence of the terms which is discussed by oral form. When a project occur difficulties
or a party have breached contract, other party cannot sue or require claim damage
because they do not have evidences to prove these breaches. And the parties will often
cause disagreement together. Therefore, when making a face to face contract, parties
need have witnesses to ensure existence of terms and agreements of the contract.
(Greg Artim, 2012).

Face to face contract is carried out in the local area such as dealing goods with a
company in the domestic market..
- Written contract
A written contract is usually businesses using for an agreement and cooperation
between parties. The contract has been formally written and signed by the parties, there
is an assumption that all the terms of the agreement are contained in the written
document regardless of what may have been verbally agreed. A written contract is a
precise evidence between both parties singed and it create awareness and acts about
their authority and obligation in the contract. There is less opportunity for
misunderstandings and conflicting assumptions. (Toolkit, 2013). The impact this contract
is that a party can sue if other party do not carry out one of condition term or has
breached in written contract through written documents.

Written contract is used in cooperation with foreign companies such as JSC want to
export products in Europe market. After discussion, both parties have signed by written
contract together condition which they wish.
- Distance Selling

A distance selling contract is dealing goods through internet such as shopping on the
internet, mail order, phone or television that no face to face or written between sellers
and buyers (Contract, 2013). When a buyer want to use a distance sale contract, sellers
must force provide for customers about essential information of products or services,
arranging delivery and prices (Smallbiz, 2013). The impact of distance selling is that the
buyer is difficult to test the goods before buying and paying money. If one party
breaches contract, they can be sued because demandant has some clearly evident as
email letters.

1.3 Analyse terms in contracts with reference to their meaning and effect.
1.3.1 Representation
It is something which making the establishment of the contract and is not a term of
contract.
Term
1.3.2 Condition
This is an important term of the contract, which is to go to the root of the contract.
1.3.3 Warranty
It is a less important terms. It does not go to the root of the contract, but is subsidiary to
the main purpose of the agreement.
o Effect of condition and warranty: Non-compliance a condition will affect the main
purpose of the agreement. Violating a condition of non-breaching party
beneficiaries to handle the contract as discharged and claim damages. Violation
of the warranty only to aid the injured party compensation for damages. It mean
breach a condition can terminate the contract but cant when breach a warranty.
(What Are Material Contract Terms?, 2016.)
1.3.4 Innominate term
Where the term broken was not clearly intended to be a condition, and neither statute
nor case law define it as such, it cannot necessarily be assumed that the term is a
warranty. Instead, the contract must be interpreted in the light of the specific situation;
only if it is clear that in no circumstances did the parties intend the contract to be
terminated by breach of that particular term can it be classified as a warranty. (What
Are Material Contract Terms?, 2016.)
1.3.5 Express
Provision in a contract that is clearly, directly, and unmistakably communicated in written
or spoken words (Tutor2u, 2016)
1.3.6 Implied
Provision in a contract that is not directly stated in written or spoken words but is
introduced into the contract by the courts as necessary to give effect to the obvious
intentions of the contracting parties, or by a statute such as sale of goods acts.
(Tutor2u, 2016)
 1.3.7 Exclude clause
Its a provision in a contract under which one party's liability (that would arise by
implication of law) is excused in the listed conditions, circumstances, or situations (also
called exemption clause). (Exclusion Clauses, 2016)
1.3.8 Remedies
Remedies for breach condition are claim damages and able to terminate the contract
but breach warranty cannot cancel the contract but still can claim damages less than in
condition. In innominate term, the court will decide follow the actual effect of its breach.
If the nature and effect of the breach is such as to deprive the injured party of
substantially the whole benefit which it was intended he should obtain under the
contract, then it will be treated as a breached condition, so that the injured party may
terminate the contract and claim damages.

LO. 2. Be able to apply the elements of a contract in business situations

2.1 Apply the elements of contract in given business scenarios.

Case 1:

o Related area of law: Law of contract and term.

o Specific topic involved: Offer and Agreement

o Problems or issues:

Was there a valid offer?

Was there a valid acceptance?

Was there a valid consideration?

Was there an intention to create legal relationship?

Was there a valid cancel of Marriot?

o Analysis

Was there a valid offer?

 In my opinion theres no valid offer because on March 1 there is just a
supply of information from Macy to Marriot. According to Harvey v Facey
1893. Because, on March 1, the fax of Macy only just providing that her
kitchen tool would price $1000 each that the minimum price if a sale were to
be agree. Therefore there is no valid offer on march 1.

On April 1 Marriots offer to buy from Macy is a valid offer and not an
acceptance because the fax of Macy like the inviting customer to make offer
according to Bigg v Boyd Gibbons 1971. Therefore there is valid offer from
Marriot.

Was there a valid acceptance?

Your fax is receiving our attention. Thank you. Macy said. So that in my
opinion Macy had shown her interesting in the offer of Marriot. It proof that
Macy tent to have a valid acceptance base on letter of intent. But until she
had deliver the kitchen tool because she only said that she interest that the
acceptance would be valid.(British Steel Corp v Cleverland Bridge and
engineering Co Ltd 1984)

Was there a valid consideration?

Both side had benefit each other by profit of the trade. Which was profit
by an act to a promise, that was executed consideration. Because Macy just
said that sheve got attention to the promised of Marriot, Macy not promise
that she will bring. Also it still a valid consideration as long as Macy had
delivered the kitchen tool to Marriot.

Was there an intention to create legal relationship?

They both had enter into a commercial agreement it was presumed that
there was an intention to create legal relationship. Base on Rose and Frank v
Crompton 1923.

Was there a valid cancel of Marriot?

At May 1, Marriot had cancel the contract but goods havent been send by
Macy. According to revocation by the offeror that while an offer meant to be
accepted by conduct, it has been held that it can be revoked until Macy has
begun to try and perform that delivered kitchen tool. Base on Errington v
Erington 1953.

o Conclusion

Marriot had not Breach the contract because there was a valid cancel of Marriot, that
she can cancel before the transfer vehicle set out.
 2.2 Apply the law on terms in different contracts
Case 2

o Related area of law: Law of contract and term

o Specific topic involved: term and representation.

o Problems or issues:

What statement is term?

What statement is representation?

o Analysis

Guarantees for six months from the date of purchase are consider as term because it
was agreement between Mavy and Car Ltd. that it was a part of a contract had been
agree. It was a warranty because it a minor category of that contract.

Extra guarantee for two years was a representation because it not appear in contract,
an extra category from Car Ltd. to Mavy.

o Conclusion

Mavy cant cancel the contract because the contract had been expire and have to pay
for the repair.

2.3 Evaluate the effect of different terms in given contracts.

- The effect
If something said in negotiations proves to be untrue, the party misled can claim
for breach of contract if the statement became a term of the contract
If the pre-contract statement was merely a representation then the party misled
can claim misrepresentation; this usually results in a lesser remedy than in cases of
breach of contract.
- The remedies
Warranty: consider to breach of contract. Can sue to claim damages but cant
terminate the contract.
Representation: consider to misrepresentation.
Conclusion
To applied to reality that we have to use many of what we had studied.
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