Contract by Deed and Simple Contract

A contract intends to form an agreement between two or more persons, in relation to a particular subject or in the words of (Sir Frederick Pollock) “A promise or set of promises which the law will enforce”. Contracts can cover an extremely large extent of matters, including the sale of goods or real property, although the terms of ‘contract’ and ‘agreement’ are often used to mean the same thing, actually the term ‘contract’ can be distinguished from the term ‘agreement’. The agreement will create rights and obligations that may be can apply in courts. Contract divided in two division, Contract by deed and Simple contract. ‘Contract by deed’ is a deed of formal legal evidence that is signed, witnessed and delivered to create a legal obligation and for ‘Simple contract’ is a contract that are not deeds. They are informal contract that can make in many ways such as orally, writing, and conduct.

Formation of a Contract

INTENTION TO CREATE LEGAL RELATION

OFFER + ACCEPTANCE = AGREEMENT/CONTRACT

CONSIDERATION

OFFER

The general principles in a formation of contract consist of invitation to treat, offer, acceptance, consideration and intention to create legal relations. An offer must be made by an offeror with intention to another party who accept the offer, furthermore an offer is an expression of willingness to be bound by a terms of contract when the offer is accepted by the offeree. An offeror is a person who makes an offer to the other party and the offeree is the one who accept the offer who made by the offeror. An offer can be made to one person (bilateral) or to a group of person or everyone (unilateral). Another way to classify a contract that whether there are ‘bilateral’ and ‘unilateral’. A ‘bilateral’ contract is where a promise is made by a party and exchange for a promise by the other party. In contract of goods, the promisor pays the money and the promisee delivers the goods and for ‘unilateral’ contract is a one-sided promise to reward or pay someone for performing an act. It is a one-sided promise because it is a promise that made without the promisor knowing who the promisee is. For example, in the case of ‘Carlill v Carbolic Smoke Ball Co’ (1893) 1 QB 256, CA. A health company advertise his product on a newspaper that if anyone after uses his smoke ball as directed will be cured, if not will be paid £100. The advertisement also said that, to show his sincerity he deposited £1000 in a named bank. After that, a lady bought a smoke ball and used as directed but still got flu so she sued the company for the £100 as promise. The court said in this case the advertisement was an offer. The meaning of the advertisement clearly states an intention to be bound to anyone accepting the offer.

INVITATION TO TREAT

In general, an invitation to treat is an expression of willingness to enter into negotiations. An auction of sale, price tag on a displayed item or advertisement that is print into newspaper is not offer but is an invitation to treat. For example, according to the case of ‘Partridge v Crittenden’ in this case is a about an appellant published an advertisement in a magazine ‘Bramble finch cocks and hens, £1.25 each’. He was charge for that advertisement with offering for sale a wild bird, contrary statute, but the high court said he must be discharge for the obligation because the advertisement was an invitation to treat, not an offer to sell and with limited stock only, the advertiser could not reasonably intend to sell to all those people who might accept. But if the advertiser point out that he was willing to sell to the first person accepting, there would be no such problem. The court discharges his crime because he was not selling or offering the sale it was an invitation to treat contract. It must require an expression of self willingness to make a legally binding contract.

ACCEPTANCE

In the formation of contract, acceptance is from one party’s conformation with the term of an offer that made by the other party. An acceptance, whether it is written or orally it must be communicated with the person who made the offer to make a legally binding contract or acceptance in the form of email, fax or telex it must be communicated with the offeror for the contract to be binding. For example, in the case of ‘Carlil v Carbolic Smoke Ball Co’ (1893) 1 QB 256, CA. A company published his product on a newspaper advertisement and promising to pay £100 to anyone that contracted flu after buying one of their products and use it as directed. The advertisement also said that he deposited £1000 to a named bank to show his sincerity. A customer bought one of the smoke ball products and uses it as direct but she still got flu and she sued the company for the £100. The court of Appeal said the customer accepted the company offer by buying the product and using it as accordingly with the instruction given. It was not compulsory for the customer to notify the company of her acceptance because the advertisement did not mention of notification and had indicated to all customers that all they need to do was to buy and use the smoke ball.

CONSIDERATION

In common law, without consideration there will be no legally binding contact. Consideration is something of a value that received by a promisor from the promisee. Consideration will happen if the existing contract of both parties experienced some changes. There are two types of consideration and that is ‘Executory’ and ‘Executed’ consideration. Executory consideration is an exchange of value to perform an act in the future. Whereas, executed consideration happens if one of the parties makes a promise for an exchange to do something in return by the other party. For example, see the case of ‘Chappell v Nestlé’ (1959) 2 All ER 701, HL. Chappell was the owner of a musical copyright, and nestle wants to promote chocolate sales, therefore, nestle advertised to anyone who exchange for 1s 6d and three chocolate wrappers will get a promotion offer. The question was, is the wrappers were part of the sale price. The House of Lords said there were, the party who made the contract can stipulate for what kind of consideration he chooses, and a peppercorn discontinue being valuable consideration just because of the promisee had intention to throw it away.

INTENTION TO CREATE LEGAL RELAITIONS

Intention to create legal relations could not happen unless the parties must intended to be a legally bind by their agreement. The law divides agreement in to two category and that is social and domestic agreement and commercial and business agreement. Social and domestic agreement is about agreement between family members, friends and workmates. Whereas, commercial and business agreement is about assuming that the parties have the intention to create a legal relations and make a binding contract. For example, see the case of ‘Balfour v Balfour’ (1919) 2 KB 571, CA. This case is about a husband and wife. The husband working in Ceylon and left his wife in England and he promises the wife that he will pay her £30 per month until he returns. But in exchange for her agreement to support herself without depending on him for any other maintenance fees and because of that they finally divorced. After they divorced, the wife still wants the husband to enforce his promise. The Court of Appeal said even though there was a consideration in her promise but there was no a legal binding contract.

REMEDIES FOR A BREACH OF CONTRACT

All the legal system which is recognises by a law of contract have the solution to solve the problem of the possibility of current claims arising under the two areas of law. The two solutions are, to obligate the owner to claim in contract or allow the party to choose which remedy the party prefer. Remedies relieve the plaintiff rather than to punish the defendant. The remedies available are damages, specific performance, injunction, restitution and rescission of contract.

Damages is about when an innocent party encounter financial loss according another’s breach of contract, the court must consider whether the breach is actually caused the loss or is the party’s fault is legally liable for it and how much payment is payable. For example in the case of ‘Hadley v Baxendale’ (1854) 156 ER 145, Alderson B, in this case is about Hadley were a firm of millers which is contracted with baxendale carriers and to take a broken mill-shaft to a place for repairing. The shaft was delayed because of baxendale clumsiness and the mill lost five days production. Hadley claims damages for their loss. Alderson B said in the Court of Exchequer that the damages are allowed to claim and reasonably be considered from the breach of a contract but in a thoughtful observation of both parties supposed they have a spare shaft in stock. In this case, the total loss of production was not a natural consequence of delay and the carries had not been in this special situation before, so that is why they failed to claim back the loss.

Furthermore, specific performance reward the plaintiff what he actually bargained for in a contract rather damages for not receiving anything, thus specific performance is an equitable remedy rather than legal remedy. It is compulsory for the parties to perform exactly what they agreed in the contract. It is also more easy and perfect for justice to achieved than by rewarding damages in a breach of contract. For example, according the case of ‘Flight v Bolland’ (1828) 38 ER 817, Leach MR. In this case is about an infant rustling specific performance of a contract. To terminate his application, the Master of Rolls said it is a general principle of court to posed only where the remedy is mutual. Since specific performance cannot charge against an infant, it follows that it cannot be agreed in favour for an infant against another.

In addition, rescission is to protect an injured party to the contract as a result of misrepresentation or any circumstances where the contract voidable as a result of some stain element to avoid the contract being bind and be restored to the position of the party was in prior to the contract.

Besides that, an injunction maybe prohibitory or orders a party to do something or refrain from doing something as opposed to a money judgement. Generally, injunctions can fall into that category of decisions that are immediately appealable without a final judgment having an issued.

Lastly of remedies of a breach contract is restitution. Restitution is an equitable remedy to restore a party to the position that they would have been in or else the improper action of another. Recompense ordered by courts as part of a criminal sentence or administrative penalty. Restitution is a general remedy for a breach of contract and for the return of specific property and money paid.