For the inaugural blog post I thought it would be of benefit to discuss the elements of what constitutes a contract between parties. This post shall explain the following:
- What a contract is
- Elements required for a contract to be in place
What is contract?
In its simplest form, a contract is a legally binding agreement between two or more parties.
People make contracts every-day in life, as in, when a customer buys something from a company, they are making a contract. In other words an agreement has been made that your company will supply the goods and the customer will pay the price. Should either party fail to honour their obligations then it can be said that that there is a breach of contract and the party who has suffered the breach can claim damages for the breach.
Section 104 of the Housing Grants Construction & Regeneration Act 1996 (“HGCRA”) defines a construction contract to be an agreement with a person for executing either construction operations, arranging for the carrying out of construction operations by others and providing labour or labour for others, for carrying out construction operations. A construction contract includes an agreement to do architectural design or surveying work and to provide advice on building, engineering, interior or exterior decoration or on the laying out of landscaping. So this covers most if not all elements of construction.
What are the elements required for a contract to be in place?
The following elements are critical for any legally valid contract:
The Offer
An offer must consist of a definite promise by one party to another, to be bound on specified or ascertainable terms and is legally obliged to carry out. When a contractor submits a tender this constitutes an offer which the client may accept or not.
Acceptance of an Offer
Any offer by a party can be accepted in writing or orally, or may even be inferred from the conduct of the parties. The acceptance must meet the offer. If an acceptance does not accept all parts of the offer or attempts to add new conditions or qualifications to the offer, this not an acceptance but a counter-offer.
Consideration
Each party to a contract must give consideration. What this means is that each party to a contract must receive something of value. The most common forms of consideration are payment of money, provision of goods, or performance of work.
Intention to create legal relations
In some circumstance, despite there being an offer, acceptance and consideration existing, one party may allege that the contract is not legally binding as there was no intention to create a legal relationship.
Final Thoughts
When entering into any contract, you must ensure that it is legally sound to avoid possible issues, and a further post shall be dedicated concerning the review of contracts and the benefits in doing so. If you are unsure about anything, then you should consider obtaining legal advice from a contract law specialist.
Disclaimer
The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Contract Bites accepts no responsibility for the content of any third party website to which this site and/or webpage refers. Please see my terms and conditions page for a full disclaimer.
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