THE ESSENTIAL ELEMENTS OF A CONTRACT

BRAINSTORM
 Why do people conclude contracts?
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 Do you think a binding contract always needs to be in writing?
 Which clauses do you think are included in a typical contract?
 What should be done if one of the parties to a contract breaches it?

1 Two or more parties must enter into an agreement and bind themselves to
certain legal obligations on both sides. The parties much agree to exchange
considerations, which hold some value. Examples of considerations include
providing personal property, performing certain tasks, or agreeing to take care of
certain responsibilities upon the meeting of conditions.
contract is an agreement between two or more parties that outlines legally
enforceable obligations. The involved parties will set out the rules,
responsibilities, and mutual rights.

2 Some contracts are written because it’s hard to remember everything. Especially
when large sums of money are involved it’s important to be able to rely on
something other than memory. Or, even when the amount of money is small and
the contract ends in minutes, still, it’s good to have a written contract when you
are dealing with tonnes of persons (e.g. a parking garage where you park for 15
minutes). You should also have a contract where life/death situations are likely
especially when unintended (e.g. airline flights, theme park rides, etc.).

4 The contract includes a mandatory condition on the responsibility of the

customer and the supplier (contractor, contractor) for non-performance or
 improper performance of the obligations provided for in the contract

Task 1. Read the text below and explain the meaning of the law-related
words and expressions given in bold. Use the Glossary for Part II or an online legal
dictionary if necessary.

BASIC PRINCIPLES OF CONTRACT FORMATION

UNDER ENGLISH LAW
1 The basic principles of contract law in the English system arise from established
custom and rules and are fundamental to all areas of law in practice. Reference is made to
these principles in drafting and interpreting the provisions of any legal agreement, such as
a lease, a loan agreement, a sales agreement, a consultancy agreement, a hire purchase
agreement, a hire contract, or a service contract, etc.2 The principles of contract law will
determine whether and at what point a binding agreement has been made between the
parties concerned. Formation of a contract requires the presence of four essential elements:
offer, acceptance, consideration and intention.
3 The contract must contain the basic terms of the agreement and be capable of
acceptance without further negotiation. This does not mean that the initial communication
between parties will in itself constitute an offer. For example, in an auction situation, the
seller, known as the vendor, may make an invitation to treat - invite an offer - by setting
out the conditions of sale (for example when payment will be made) with the exception of
the price. The offer is submitted by the purchaser, who offers to purchase at a specified
price and will usually incorporate the terms of the invitation to treat into his/her offer.

5 There must be an unqualified agreement to proceed on the basis set out in the offer
and it must be communicated to the offeror - the person making the offer - in order to be
effective. If the offeree - the person receiving the offer - states that he or she accepts the
offer subject to contract, that is, some variation of the terms, then no contract is formed.
This would be a qualified acceptance, which constitutes a counter offer.
Issues may arise as to whether the acceptance has been communicated. Two rules
determine this:
 The reception rule applies to instantaneous [ɪnstənˈteɪnɪəs] forms of communication,
for example telephone calls. The contract is said to be formed when the acceptance is
received by the offeror.
 The postal acceptance rule, where there is a delay between the communication being
sent and received, for example by post. The contract is formed when the acceptance is sent
by the offeree.
To avoid uncertainty, the offeror may specify the method and timing of acceptance.
Agreement on essential terms, for example price and delivery, must be certain and not
vague. For a contract to be enforceable something of value must be given, for example a
price, even if it is of nominal value, say £l. It is assumed that contracting parties intend to
create legal relations, particularly in commercial circumstances. This is, however a rebuttal
presumption - an assumption that can be contradicted - if there is contrary evidence.

Основные принципы договорного права в английской системе вытекают из

устоявшихся обычаев и правил и являются основополагающими для всех областей
права на практике. На эти принципы ссылаются при составлении и толковании
положений любого юридического договора, такого как договор аренды, договор
займа, договор купли-продажи, договор консультирования, договор купли-продажи
по найму, договор найма или договор оказания услуг и т. Д. Принципы договорного
права будут определять, было ли и в какой момент заключено обязательное
соглашение между заинтересованными сторонами. Заключение договора требует
наличия четырех существенных элементов: оферты, акцепта, рассмотрения и
намерения.
Договор должен содержать основные условия соглашения и быть способен к
принятию без дальнейших переговоров. Это не означает, что первоначальное
сообщение между сторонами само по себе будет представлять собой предложение.
Например, в аукционной ситуации продавец, известный как продавец, может сделать
приглашение к угощению - пригласить предложение - изложив условия продажи
(например, когда будет произведена оплата), за исключением цены. Предложение
подается покупателем, который предлагает приобрести товар по указанной цене и
обычно включает в свое предложение условия приглашения к угощению.
Должно быть безусловное согласие действовать на основе, изложенной в оферте, и
оно должно быть доведено до сведения оферента - лица, делающего оферту, - чтобы
быть действительным. Если адресат оферты - лицо, получившее оферту, - заявляет,
что он принимает оферту на условиях договора, то есть с некоторыми изменениями
условий, то договор не заключается. Это будет квалифицированный акцепт, который
представляет собой встречное предложение.
Могут возникнуть вопросы относительно того, было ли сообщено о принятии. Это
определяется двумя правилами:
• Правило приема применяется к мгновенным формам связи, например к телефонным
звонкам. Договор считается заключенным, когда оферент получает акцепт.
• Правило почтового приема, когда существует задержка между отправкой и
получением сообщения, например по почте. Договор заключается в момент отправки
акцепта получателем оферты.
Чтобы избежать неопределенности, оферент может указать метод и сроки акцепта.
Соглашение о существенных условиях, например о цене и доставке, должно быть
определенным, а не расплывчатым. Для того, чтобы контракт мог быть исполнен,
должно быть дано что-то ценное, например цена, даже если она имеет номинальную
стоимость, скажем, £l. Предполагается, что договаривающиеся стороны намерены
создавать правоотношения, особенно в коммерческих условиях. Это, однако,
опровергающая презумпция - предположение, которое может быть опровергнуто, -
если есть противоположные доказательства.

Draft - to write down a document for the

first time, including the main points but not all the details:

a statement within an agreement or a law that a particular thing

must happen or be done, especially before another can happen or be
done:

binding agreement which cannot be broken, agreement which cannot be violated

Task 2. Read the text below and answer these questions:
1. How do you think customs influence contract conclusion practices of a country?
2. What do the principles of English contract law determine?
3. Which essential elements are required to form a valid contract? Give a definition of
each element.
4. Explain the essence of an “invitation to treat” in your own words. The legal term
“invitation to treat” refers to a statement indicating that someone is interested in negotiating
a business deal.

5. Describe the offer – acceptance procedure under English law. Compare it with the
similar procedure in your jurisdiction.

1. Как, по вашему мнению, таможня влияет на практику заключения контрактов в той

или иной стране?
2. Что определяют принципы английского договорного права?
3. Какие существенные элементы необходимы для формирования действительного
договора? Дайте определение каждому элементу.
4. Объясните суть “приглашения к угощению” своими словами.
5. Опишите процедуру акцепта оферты в соответствии с английским
законодательством. Сравните это с аналогичной процедурой в вашей юрисдикции.

Task 3. Now you know that to form a binding contract under English law, four
elements must be present: offer, acceptance, consideration, intention. Read the
information below about the elements of a contract. Write the correct element of a
contract after its description.
 In order to make the contract valid, the parties must exchange something. Each of
them must give something to the other, such as money, work or goods. If one party
promises the other a gift (in return for nothing) then in a situation like this the parties do not
usually have a contract. This element of a contract is________ _____________.
 It is absolutely necessary that a person accepting an offer does not change the terms
of the original offer. This is___________________acceptance ________.
 One of the parties makes a proposal to the other party on absolutely certain terms.
This proposal is known as_______________________.
 If a dispute arises, the court looks at the relationship between the two parties and
decides if the parties really wanted to make things legally binding in this particular situation
or not. In other words, at the ______________of the parties.

• Чтобы сделать договор действительным, стороны должны чем-то обменяться.

Каждый из них должен дать что-то другому, например, деньги, работу или товары.
Если одна сторона обещает другой подарок (взамен ничего), то в подобной ситуации
у сторон обычно нет договора. Этот элемент контракта
является_____________________.
• Абсолютно необходимо, чтобы лицо, принимающее оферту, не меняло условий
первоначальной оферты. Это___________________________.
• Одна из сторон делает предложение другой стороне на абсолютно определенных
условиях. Это предложение известно как_______________________.
• Если возникает спор, суд рассматривает отношения между двумя сторонами и
решает, действительно ли стороны хотели сделать вещи юридически обязательными в
данной конкретной ситуации или нет. Другими словами, на ______________сторон.

Task 4. Match these words to make verb-noun or adjective-noun partnerships. Some

words can be used more than once. Use articles where necessary. Make your own
sentences with the active expressions.
Draft contract проект контакта agreement
Interpret provisions толкование положений
essential terms существенные условия provision
legal terms юр условия contract agreement
loan agreement contract кредитный договор contract
sales contract контракт на продажу provision обеспечение на продажу
terms
binding agreement relations
form provision a contract

Task 5. Find English equivalents of the following Russian words and phrases:
Разрабатывать положения; толковать; юридическое/правовое соглашение; арендный
договор; кредитное соглашение/договор займа; договор купли-продажи;
консалтинговый договор; договор об аренде с правом выкупа; договор проката;
договор об оказании услуг; соглашение, имеющее обязательную силу;
предложение/оферта; акцепт/принятие; вознаграждение/оплата; цель договора;
являться офертой; предложение вести переговоры о заключении договора;
установленная цена; включать условия; безоговорочное согласие; доводить до
сведения кого-либо; оферент; адресат оферты/акцептант; акцепт с
оговорками/неполный акцепт; встречная оферта/контроферта; существенные условия
договора; создавать правовые отношения; встречный аргумент/контрдоказательство.

Develop provisions; interpret; legal/legal agreement; lease agreement; loan agreement/loan

agreement; purchase and sale agreement; consulting agreement; lease agreement with the
right to buy out; rental agreement; service agreement; binding agreement; offer/offer;
acceptance/acceptance; remuneration/payment; purpose of the agreement; be an offer; offer
to negotiate a contract; set price; include terms; unconditional consent; bring to the attention
of anyone; offeror; addressee of the offer/acceptor; acceptance with reservations/incomplete
acceptance; counter-offer/counter-offer; essential terms of the contract; create a legal
relationship; counter-argument/counter-proof.

Use the words and expressions above to describe the contract-making procedure in
England.

Task 6. Let’s play! Divide into teams. Look in the grid below and find as many words
related to contract as you can. The words can be found in any direction. The team
which finds more words wins the competition.
 UNDERSTANDING CONTRACTS
Which meanings of the verb shall do you know? Give examples to illustrate its usage.
NOTE! In modern English legal documents (laws, statutes, court rulings, agreements,
instructions, etc.) the verb shall is usually used for denoting legally-binding actions
(recommended, forbidden, preventive, etc.). The verb shall expresses strong modality
and is to be rendered into Russian through Present Tense forms.
Model
 The Debtor shall receive a copy of this Agreement.
Должник получает копию настоящего Договора.
 This Agreement shall be governed by the laws of the Russian Federation.
К настоящему Договору применяется право Российской Федерации.
 All taxes in the Executor's country shall be paid by Executor, all taxes in the
Customer's country shall be paid by Customer.
Все налоги в стране Исполнителя оплачиваются Исполнителем, все налоги в стране
Заказчика оплачиваются Заказчиком.

Task 7. Now you need to complete the sentences by using the auxiliary verb shall and
the words and word combinations in brackets. Use the model above to help you.
1. The present Agreement (вступает в силу) from the date the Parties duly signed the
Agreement and (действует) till complete fulfillment of all duties under this Agreement.
2. Payment (производится) in US Dollars by bank transfer to Executor's bank account.
3. The Bank (открывает и обслуживает) bank accounts for individuals on the basis of
its Articles of Incorporation and License No.__issued by the Russian Federation Central
Bank as of (date).
4. The power-of-attorney vested abroad and/or in a foreign language (должна быть
переведена) into Russian and duly legalized.
5. Either Party (имеет право) to terminate this Agreement by notice in writing to the
other Party upon happening of any of the following events.
6. This agreement (регулируется) by the laws of England and Wales.
7. All members (разрешают) their disputes by peaceful means.
8. If any party to a dispute refuses to take part in the arbitration, the arbitration
(осуществляется) notwithstanding such refusal or failure.
9. In case of the liquidation of a legal entity the creditors’ claims (удовлетворяются) in
a certain order of priority.
10. The Distributor (оплачивает) for all the Products purchased hereunder not later than
thirty days from the date of the Invoice.

Task 8. Render the following text into English, paying attention to the specific use of
the auxiliary verb shall.
Все уведомления и иные сообщения, направляемые одной Стороной в адрес
другой Стороны в связи с настоящим Договором, оформляются в письменной форме
и подписываются отправителем уведомления или от его имени. Уведомления и
сообщения могут быть доставлены лично, отправлены оплаченным
зарегистрированным сообщением, срочной доставкой или заказным письмом по
адресу, указанному в пункте 7.2, и в любом из случаев на сообщении проставляется
отметка «вниманию лица», указанного в пункте 7.2 (или иначе, в соответствии с
положениями настоящего пункта 7). Любое уведомление, направленное лично, по
факсимильной или почтовой связи, считается доставленным надлежащим образом.

OVER TO YOU

Task 9. Discuss the facts of the case and the legal issues raised in relation
to offer and acceptance with your groupmates. Think of the possible court ruling and
reasoning for it.
It is as if the facts of this case have been devised for an examination question on the law of
contract for first year law students. They raise some basic questions
CASE: Pickfords Ltd v Celestica Ltd, the Supreme court of Judicature (the Court of Appeal
(Civil division) [2003]
FACTS: The claimant carries on business in the provision of move management services.
The defendant is an IT company and, at all times material to these proceedings, has carried
on business from premises at Bradwell Wood, Stoke-on-Trent, Staffordshire. It wished to
move some or all of its undertaking from Bradwell Wood to Telford in Shropshire. There
were a series of faxes before work was carried out, and the issue for the Court of Appeal
was when the contract came into existence, and on what terms. On September, 13 2001 Mr
Dawson, the claimant's managing director faxed Mr Spencer, a member of the defendant's
engineering team to inform him of the estimated budget figure of £100K for the provision of
moving services. During the following fortnight the claimant carried out a survey and on
September, 27 2001 sent the defendant the document entitled "Proposal to Undertake the
Move Managed Relocation" containing a well-planned and resourced move program at a
fixed price of £98760.00. The sum included packing materials, crate hire for the duration
period and the standard transit insurance cover. Both the documents of the 13th and of 27
September 2001 were offers that were capable of being accepted so as to give rise to a
contract. On October, 15 2001 Jean Condliffe, the defendant's administrator sent a fax
marked for the attention of Mike Dawson confirming the relocation order for the price not
exceeding £100K. The claimant carried out the work and provided the relocation services
between 1 September 2001 and 29 January 2002.The claimant claims that Pickfords Ltd was
entitled to the fixed sum of £98,760 plus VAT for this work but of this sum only £33,000
plus VAT has been paid by Celestica Ltd, the defendant. The claimant's case is that there
was a contract and that it was contained in the proposal of the 27 September 2001 and the
fax of 15 October 2001. The defendant believes that the claimant was not entitled to the
fixed sum referred to in the proposal document of 27 September, but only to a sum
calculated in accordance with the charging rates set out in the fax of 13 September 2001.
LEGAL ISSUES: Was the fax of 15 October an acceptance of the first or the second offer?
Did the second offer revoke the first offer?

Task 10. Role-play the dialogue between the representatives/lawyers of

both parties (Pickfords Ltd & Celestica Ltd). Exchange your arguments and try to
reach an out-of- court settlement. Use the active vocabulary of Unit 2.

Task 11. Online research. Read the law report Pickfords Ltd v Celestica Ltd
[2003] at www.bailii.org/databases.html to find out what the court decided. Share the
information with your groupmates.