The formation of a contract

Is there agreement?
To form a binding contract, the essential requirement is that the parties
are like-minded over the basis of their contract.We say that there should
be consensus ad idem, which is a meeting of minds, and to a pure theorist
that is all which should be required.The problem lies in finding evidence of
this agreement. It is a little like convincing a teacher or an examiner of
your knowledge of the law (or anything else). Evidence is required of your
knowledge in an agreed way.
Through case law a pattern has evolved of finding evidence of
agreement, and it is by requiring the parties to have communicated in
some way, one of them making an offer and the other making an
acceptance. In most cases this is not too difficult, although it will be seen
in Chapter 2 that there are a few difficult and non-standard cases.
The benefit obtained or ‘bargained’
If offer and acceptance were the only requirements, we could in theory
have some very one-sided agreements. If I offer to give you a present of
£20 next week, and you agree to this, we have an offer from me and an
acceptance from you. If I then do not give anything at all next week, I will
have broken my promise. Is this something that the law should enforce?
The law is quite strict on not generally enforcing one-sided promises,
feeling that it becomes very much a problem of morals when people break
such promises.
The law will, however, enforce an agreement if something has been
bargained by both parties, and both sides have contributed to the
agreement in a recognisable way, for example by paying in exchange for
goods. This does not have to be the actual handing over of goods, so a
promise to pay could be given in exchange for the promise to hand over
goods.This exchange is known as consideration, and is another
requirement in forming a contract.The intention to be bound by the agreement
A third requirement is that the parties do really intend to be bound by
whatever they agree. In a shopping context this is likely to go without
saying, as a seller is unlikely to intend to give away goods without really
expecting payment! However, if I offer to pay for my friend’s drink if he
buys my sandwich, I do not seriously expect to sue him if he only buys his
own sandwich. To distinguish between serious contracts and social
agreements the law requires an element of legal intention in forming a
contract.
Capacity
A further factor to consider in the legality of a contract is whether the
parties are of the standing required by the law to make a binding
agreement. If a child in a playground agrees to sell one of his toys, this
would not normally be binding. The law requires a legal capacity to
contract, and generally adults over the age of 18 are said to have this. A
further formation requirement examined in this part of the book, then, is
the capacity to contract.
If all four of these requirements are present, then there will normally be a
binding contract.

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