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Introduction Of Formation of Contract Assignment

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Task 1

Offer and acceptance are the most important essential of a valid contract. Under the rules and laws prescribed for the formation of the contract, the first essential to be fulfilled by the parties to contract is to make an offer and acceptance to the offer. The party making the offer is the offeror and the party accepting the offer is the offeree. Offer and acceptance must be for the same thing that is the application of consensus ad edam is find in the formation of the contract which means that the parties contracting must agree for the same thing in the same sense. It is important in the formation of the contract that a valid offer is to be made by the party. The test of whether the offer is a valid one or not in a contract depends on the objective test which was determined by the court in the case of Smith v. Hughes (1871) LR 6 QB 597 where the court opined that it is not the intention of the party to enter into a contract but it is the situation under which how a reasonable and prudent man would react and see the situation. Further, there are also essentials in the making of the offer, for example, if a person wishes to sell his goods, the offer shall be required to mention the delivery date, the terms of payment, the time of delivery, the time of payment and the type of service provided (Monateri, 2017).

It is also important to note that the offer made by a party may be a unilateral offer that may be accepted by the other party. The offer may be a bilateral one where both the parties shall perform their obligation in return. But the offer made by the party is different from the term invitation to treat. To understand the meaning of invitation to treat or invitation to make an offer, reference of the case Harvey v. Facey [1893] can be taken into consideration, where the offeror intended to sell his property at a certain price and the offeree replied by saying that he would purchase the land for some other price, hence, where the aspect of bargaining for the price is present, the same is termed as an invitation to treat. The several offers made in such cases are not offers, rather they are invitations for the offer and the one which is accepted is the offer (Rowan, 2017).

Similarly, the case of Gibson v. Manchester City Council [1979] 1 W.L.R. 294 can be taken into consideration where the offer mentioned the words ‘may be prepared to sell’ which was held by the court that such words are to offer but they are invitations to make offers. Apart from the above-mentioned cases, the holding of the public auction is also not considered as an offer but is considered as an invitation to treat. Further, the advertisements in newspapers and shops for the sale of certain goods or services are also considered as an invitation to treat. Reference of the case Carlill v. Carbolic Smoke Ball Company [1892] EWCA 1 can be taken into consideration where the court held that the advertisement by the company was an invitation to treat as it was contained in the newspaper. Though the company was held liable as it mentioned in the advertisement that it would pay 1000 euros to the person who consumed the smoke ball and caught flu. Mrs Carlill tried the smoke ball as per the prescription and still caught the flu and hence, the court held the company liable (Smits, 2017).

As an offer, acceptance to offer is also one of the requirements for the formation of a valid contract. The offeree is required to accept the offer in a reasonable time. There are various modes through which an offer stands accepted by the party. A party may accept the expressly by words or conduct in-person or may accept the offer by post or on the telephone. But it is important to note that the offer stands accepted differently in all the modes of acceptance. While accepting the offer in person and on telephonic conversation, the offer is accepted as soon as it is expressly said by the offeree. But while accepting the offer on the post, it stands accepted against the offeree as soon as it is put in transit but for it stands accepted against the offeror as soon as the post is communicated to the offeror. It is also important to note that the offer may be at any time revoked by the offeror before it is accepted by the offeree.

The importance of these rules in the formation of the contract is seen as the formation of a valid contract depends on the free will of the parties to enter into the contract. The free will of parties making the offer and accepting it is the foundation of a valid contract and hence, its enforcement can be asked in the court. Further, in cases of breach of contract, damages can be claimed by the aggrieved party if the contract was valid and thus, all the essentials of a contract are required to be fulfilled. Hence, the rules relating to offer and acceptance are important as these rules are a base for the formation of a valid contract (Eisenberg, 2018).

Task 2

As per the facts of the case, Jo owns a mobile hairdressing service that she uses for makeups and hairdressing from Tuesday to Saturday. She always gets her car serviced by one of her neighbours Anya who has a small car mechanics service. Anya always does the servicing on Sundays or Mondays due to her schedule of Jo. One day Jo dropped her vehicle to get serviced and Anya promised to deliver it by Monday but she could not complete the servicing on time and hence, failed to deliver the car by Thursday. Due to the delay, Jo lost two of her order worth 400 euros and also could not complete one of her bookings for a wedding hairstyle on Tuesday and additionally suffered a loss of 350 euros.

The question considering the scenario is relating to consideration in a valid contract and also the intention to create a contract. Discussing, consideration for a valid contract, it can be settled that consideration is also one of the essentials for the formation of a valid contract. Consideration is something that is paid in return while forming a contract. Reference of the case Currie v. Marie [1875] can be taken into account where the definition of consideration was opined by the judge and he held that consideration can be any right, interest, profit, loss, forbearance, benefit or responsibility. It is something that is paid in return by the party when the other party fulfils his contractual obligation. It was also stated by the judge that there are three types of consideration which is dependent on when and how the consideration shall be given by the promisor to the promisee. These are executory consideration, executed consideration and past consideration. Executory consideration is to be paid by the promisor to the promisee. Executed consideration is already paid and the other party is required to fulfil the contractual obligation. Past consideration is not considered as valid as this is exchanged already in the past and the party cannot succeed a claim based on past consideration (Taylor and Taylor, 2019).

Applying the above rule on the facts of the case, it has been observed that the consideration between Jo and Anya was the money to be paid by Jo to Anya for the repairing of her vehicle. As Anya failed to fulfil her contractual obligation and did not deliver the vehicle on time, there shall be no payment of consideration by Jo.

Further, discussing the intention to create legal relation, is also a requirement in the formation of a valid contract as this determines that the party are willing to fulfil their contractual obligation. The party intends to create legal relation between them and thus, consents voluntarily to the signing of the contract. The absence of the intention to create legal relations makes the contract void and unenforceable (Kötz, 2017). Further, the presence of this intention is also important as in cases of breach of contract, the party may rely on the aspect that it did not intend to create the contract and thus has no liability of damages and may try to avoid liability. Thus, the presence of the intention to be binding in the contract is an essential element so that the party shall not escape liability. Reference of the case Carlill v. Carbolic Smoke Ball Company [1892] EWCA 1 can be taken into account where the court held that the best way to determine whether the parties intended to enter into the contract and create legal relation is the objective test. The parties should not be asked whether they had the intention to create legal relation or not as this shall be subjective and it may reply negatively to escape liability. Rather, the court should apply the subjective test that whether ordinary prudence in such circumstance create such relation or not. Since the company gave the advertisement that it had deposited 1000 euros in alliance bank for the security of the customers, it was held by the court that any man with ordinary prudence would presume to create legal relations. Thus, it is clear that the parties can only get the contracts enforced in the court if they had any intention of being legally binding for what they are agreeing on (Beale, et. al., 2019).

Task 3

Exclusion clauses are a term used in the contract especially by businessmen to get exempted from liability under the contract. This clause is included with the consent of both the parties and in case any party breaches the terms of the contract, as per the exclusion clause, the breaching party is exempted from liability or the number of damages to be paid are a minimum. This clause may also limit the availability of the remedies in case any party breaches any term of the contract. The exclusion clause is incorporated in a contract in three different ways and is implemented accordingly. The first one is true exclusion where the party is completely excluded from the liability in cases of breach. The second one is the limitation clause where the party is not completely excluded from liability but the remedies are available are limited to a minimum. The third one is time limitation, where the aggrieved party is required to claim damages within a certain period after the breach has occurred (Austen-Baker, 2017).

The importance of the exclusion clause is seen in allocating risks in business and thus, it is incorporated in business and commercial contracts to escape liability. An exclusion clause is required to be expressly mentioned in the contract. In case exclusion clause is not expressly provided the court may also rely on previous transactions and trade behaviour for the implementation of this clause as was done in the case of McCutcheon v. David MacBrayne Ltd [1964] 1 WLR 125 where the court held that exclusion clause may be implied from the previous dealings of the parties if the dealings were regular and consistent. The exclusion clause is also important as it provides an exemption from two types of liability that is strict liability and liability due to negligent act or omission. Thus, the incorporation of this clause should be proper (Jansen and Zimmermann,2018).

The case of L’Estrange v. Graucob [1934] 2 KB 394 can be considered where the plaintiff bought a cigarette that failed to work and the plaintiff signed the contract without reading that the contract provided an exclusion from the liabilities of warranty. The court provided exemption to the defendant and held that in absence of fraud or misrepresentation, the party is exempted from liability irrespective of the fact that the other party signed without reading.

Moreover, another case of Olley v. Marlborough Court [1949] 1 KB 532 can be taken into account where a mink coat of the plaintiff was stolen from her hotel room after she checked in at the defendant’s hotel. There was a notice at the back of the door stating that the hotel shall not be responsible for stolen items unless they are handed to the managers for safe custody. The court held that the hotel shall be liable as the terms were not incorporated in the contract between the parties (Knapp, et. al., 2019).Thus, to conclude it can be stated that the parties must expressly include an exclusion clause for its execution.


  • Austen-Baker, R., 2017. Implied terms in English contract law. Edward Elgar Publishing.
  • Beale, H., Fauvarque-Cosson, B., Rutgers, J. and Vogenauer, S., 2019. Cases, materials and text on contract law. Bloomsbury Publishing.
  • Eisenberg, M.A., 2018. Foundational Principles of Contract Law. Oxford University Press.
  • Jansen, N. and Zimmermann, R. eds., 2018. Commentaries on European contract laws. Oxford University Press.
  • Knapp, C.L., Crystal, N.M. and Prince, H.G., 2019. Problems in Contract Law: cases and materials. Aspen Publishers.
  • Kötz, H., 2017. European contract law. Oxford University Press.
  • Monateri, P.G. ed., 2017. Comparative contract law. Edward Elgar Publishing.
  • Rowan, S., 2017. The new French law of contract. Int'l & Comp. LQ66, p.805.
  • Smits, J.M. ed., 2017. Contract law: a comparative introduction. Edward Elgar Publishing.
  • Taylor, R. and Taylor, D., 2019. Contract Law Directions. Directions.
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