Table of Contents
The Law of Contract 2
1. Offer and acceptance
of a contract: 3
A. Offer: 3
B. Acceptance: 4
2. Elements of a
3. Rules of a
4. Kinds of a
5. The significance of a contract: 13
research covers the majority of the law of contract by explain every aspect of
the subject and providing illustrations and brief examples. The methods that
were used to extract the information were. First, the course book to get the
main ideas and aspects of contract law. Second, books that were researched and
extracted from to reference the points. Finally, internet research for further
explanation and examples of the work.
Furthermore, we as a group understood the requirements of the assignment
and research rules that were provided to us during the workshop conducted in
class. The main argument of this research is to show how the law of contract or
the contract itself is something that we cannot survive without in both the
business and legal environments. After all, this abstract is a descriptive abstract
that shows an overview of this research.
The Law of Contract
you know that traditionally, a contract was an enforceable legal document only
if it was stamped with a seal? The history
of contract law dates back to Ancient civilizations before becoming the
contract that we know and use now. Although a contract seems like an agreement
written on paper for individuals that are not aware of law. However, a contract
is abstracted into offer and acceptance and has several elements, kinds and
rules. Plus, a contract has a significant importance in legal science.
and acceptance of a contract:
explain the offer and acceptance we have to keep in mind that every contract is
an agreement but not every agreement is a contract
We can define an offer as “An
indication of readiness to proceed in a
contract with certain terms, it is made through the willingness that it
shall become necessary as soon as it is accepted by the person to whom it is
spoken”, As known as the “offeree”.1 An
offer is one of the basic elements of a contract which makes it valid. To enter
a contract the first thing that occurs is the offer, an offer can be
communicated by several forms such as letter, newspaper, website, Fax, Email
and behavior. Most importantly, an offer is not recognized until it is
communicated by the offeree. In other words, the offeree must be able to read
or hear the offer and know that the offer exists. In addition, there are
additional things to consider to determine the validity of the offer. Such as,
time limitation. To illustrate, some offers have an expiry date to be accepted
by the offeree before the expiration time ends. If not, therefore the offer
will not be valid for the parties. Hence, the offer can be revoked by the
offeror at any time before the offeree’s acceptance. Finally. An offer can be
terminated in case of death, craziness or the termination of the thing that is
offered in the contract or a counter-offer. To illustrate, a counter offer is a
new offer by the offeree as a result of undesirability of the previous offer by
the offeror. A case in point, Mr. Matt the offeror has a website selling sport
cars in Riyadh, by putting the prices of the cars on the website he is
basically making an offer, If and only if to the customers see this add with
the price to satisfy the communication element. To emphasis, if there is a sale
going on in the website for a limited time it will only be for the limited
specified by the Mr. Matt. So, if a customer comes after the sale date they
will not be able to have the deducted price even if the money was sent. Because
it contradicts the validity of the contract between them
Acceptance can happen when an offeree agrees to all of the terms in
the contract by giving consideration. In other words, an offer is accepted
when all of the policies are met by giving back what is agreed on in the
contract (consideration) which is something of value like money or anything
that seals the deal. Giving an example of acceptance, Faisal advertises his mobile
accessories business on Haraj.com, one of the products is an IPhone charger for
the price of SR 90.Then, Mohammad sees the advertisements and is interested in
buying the charger. So, he communicates with Faisal by messaging him. Then, the
acceptance of Mohamad occurs when he offers the SR 90 to Faisal which is
considered as the consideration.
of a contract:
contract is far more than an agreement among two people. There must be an offer
and acceptance, intention to create a legally binding agreement, a price paid
(not necessarily money can be an act or promise), a legal capability to enter a
contract of your own free will, and appropriate understanding and consent of
what is involved. Any duress, false statements, undue influence or unconscionable
dealings may perhaps make a contract illegal and void.2
Offer: the offer
is considered as the core of the contract, An offer is an expression by one
individual or group of people, or by agents on his behalf, made to another, of
his willingness to be bound to a contract with that other on terms certain or
capable of being rendered certain.3 An offer isn’t bound to
one person it can be made also to a group of people or the whole world. For
example, Abdullah (offeror) offers to sell Ahmed (offeree) a car, before any
agreement is reached on price Ahmed decides not to continue, at this stage
there is no legally binding contract between Abdullah and Ahmed because there
is no definite offer for Ahmed to accept until the essential terms of the offer
have been decided.
Acceptance means the signification by the offeree of his willingness to enter
into a contract with the offeror on the terms offered to him by the offeror.
Without an acceptance there can be no contract4 acceptance does not have
to be verbal it can be in a gesture such as a handshake.
something of value or something bargained for in exchange for a promise, which
is both parties in the contract give up something for something5 it can be in the form of
money, interest, right or benefit. So long as consideration exists, the court
will not question its adequacy, provided that it is of some value. For example,
the promise to pay a candy rent in return for the lease of a house would be
good consideration. Of course, the consideration must not be illegal or
impossible to perform.
of a contract:
Before getting to the
types of contract each type should contain requirements or elements:
1- Agreement: which is one party
should offer an agreement and the other one must accept.
2- Consideration: it is a value promised
to convince a party to agree.
3- Contractual Capacity/ competent parties: Both parties must be competent to
enter into the agreement.
4- Legality: the purpose of the
contract must be legal and not agent public policy.
of Assent (Arguably part of agreement): the apparent consent of the parties
must be genuine.
6- Form : the contract must be
at a form such as: written, under seal …erc.
Then, there are two types
UNILATERAL AND BILATERAL CONTRACTS
FORMAL AND INFORMAL CONTRACTS
First one is unilateral
and bilateral contract. It is promisor who makes the offer or promise to
perform to whom this promise is made.
This type can be divided
to small types so it can be more specific and avoiding the issues of getting
contract : it arises when an promise can be accepted only by offers
contract: it arises when a promise is given in exchange for another in return.
Third, Express contract:
it is a contract that has been shown clearly even stated orally or written.
Fourth, Implied-in- fact
contract: it’s a contract the has been formed in whole or parts. In order to
establish this type the plain tiff must have:
some service to the defendant.
expected to paid from both sides (first one will pay for any service that the
other side offers)
opportunity to reject the services.
The second type is the
formal and informal contract
Which is a contract that
requires a special method or format in order to be enforceable.
Also, it can be divided
First Contract under
seal: formalized writing with a special seal attached.
Second, Recognizance: “An acknowledgment in court by a person that he or she will
perform some specified obligation or pay a certain sum if he or she fails to
perform (e.g., personal recognizance bond).”
Third, Negotiable instrument : it is a note, check or
certificate of deposit each of which requires certain formalities to be
Letter credit: “An agreement to pay that is contingent upon the receipt of
documents (e.g., invoices and bills of lading) evidencing receipt of and title
to goods shipped.”
Informal contract: it is a contract that does not require a special format ant
it is the majority of contracts.
these types of contract has the same rules that any party would like to do a
contract has to follow .
When a contract contains ambiguous
or unclear terms, a court will resort to one or more of the following rules in
order to determine and give effect to the parties’ intent.
Insofar as possible, the contract’s terms will be given a
reasonable, lawful, and effective meaning.
The contract will be interpreted as a whole various and its
various provisions will be “harmonized”
to yield consistent expression of intent.
Negotiated terms will be given greater consideration than
standard-form, or “boiler-plate,” terms.
A non-technical term will be given its ordinary, commonly-accepted
meaning, and a technical term will be given its technical meaning, unless the
parties clearly intended something else.
Specific terms will prevail over general terms.
Handwritten terms prevail over typewritten terms, which, in
turn, prevail over printed terms.
When the language used in a contract has more than one
meaning, any ambiguity is construed against the drafting party.
An ambiguous contract should be interpreted in light of
pertinent usages of trade in the locale and/or industry, the course of prior
dealing between the parties, and the parties’ course of prior performance of
Express terms are given preference over course of prior
performance, which is given preference over course of dealing, which is given
preference over usage of trade.
given preference over numbers or symbols.
of a contract:
to (Gulshan & Kapoor, 2009),”when the person to
whom the proposal is made signifies his assent thereto, the proposal is said to
be accepted. A proposal when accepted, becomes a promise.” From the above
definition of promise, it is obvious that an agreement is an accepted proposal.
The two elements of an agreement are: (i) offer or a proposal; and (ii) an
acceptance of that offer or proposal”
can be classified based on their enforceability, formation and performance. In
the coming paragraphs, the types of contracts will be explained with their
subcategories and the main differences.
1. Based on point of view of enforceability
may be divided based on their cogency (Gulshan & Kapoor, 2009) as following: valid,
voidable, void contracts or agreements, illegal, or unenforceable. To initiate
a valid contract, it must has all the essential elements argued earlier. If one
of the element is missing, the contract is voidable, void, illegal or
(a) Valid contracts
contracts are the contracts that have all the required components and without
them the contract is not valid (Gulshan & Kapoor, 2009). The components are as follow:
Intention to create legal relationship.
Free and genuine consent.
4. Parties competent to contract.
5. Lawful consideration.
7. Agreements not declared void or illegal.
Certainty of meaning.
9. Possibility of performance.
Necessary Legal Formalities.
(b) Voidable contracts
Voidable contract is one
which may be denied at the will of one of the parties, but until it is so
denied it remains valid and binding. Meaning the contract will be valid until
one party deny the validity or terms, otherwise the contract will be valid as
the first one. It is affected by a flaw. There are some examples for this kind
of contract such as misrepresentation, fraud, coercion, undue influence (Gulshan & Kapoor, 2009). It shows that the
consent of the party who has the discretion to repudiate it was not free.
(c) Void contracts or agreements
This kind of contracts
happened to be enforceable by law and totally depend on the law.
(d) Illegal agreements
Illegal agreements are
the agreements which occur between parties and they are based on criminal or
(e) Unenforceable Agreements (Certain contracts must be in
unenforceable contract is neither void nor voidable contracts. This agreement
cannot be presented in court since it missing evidences such as writing or
2. According to Mode of Formation
are three main different types of contracts based on the mode of formation.
There types are as follow (Gulshan & Kapoor, 2009):
(a) Express contract
Express contract refer to
the contract occur when spoken or written agreement between parties.
(b) Implied contract
kind of contract is referred to the conditions of the conduct of the parties or
from the situation of the case.
This contract is considered as “not a
contract in certain level”. No
intentional entering for agreement on the contract is there. A good example for
this kind is the following: delivery company deliver goods to AAA store by
mistake and the store owner treat this good as his own. The AAA owner have to
pay for that good later. Keep in mind,
the AAA owner from legal perspective, does not have to pay for the goods.
According to Performance
Executed contract both parties have completed
their corresponding duties. For example, if you agree with a painter to paint
your house and the painter completed his task and you paid his money.
contract is the opposite of executed contract where both parties have not
completed their assigned tasks. For example, if the painter has not painted the
house and you have not yet paid the price, the contract is executory.
Unilateral Contract is expressed as one where at the time the contract is
concluded there is a commitment to do a part of one party only
the word stated, both parties are committed to do a particular job or refuse to
do so at the time of contract.
significance of a contract:
provides a written document that shows the business association
with the work so that no one can claim any misunderstandings, the contracts are
legally enforceable and their work is to protect each party and give each party
its right within the guidelines of the contract and they minimize risk .
Contracts are one of the best ways to protect a business. Contracts aren’t jus
important in business’s its also important in our daily life, for example :
when traveling you make a contract with the airline, when the airline receives
the payment they’ll provide you with a seat and its their part of the contract
and by paying you accepted their rules and guidelines, breaking the rules and
guidelines has consequences, For example: they give you a limit of 23KG’S for
each bag and you carry a bag that weighs 30KG’S in this case you’ll be fined
for a certain amount if you insisted to take the bag. One of the biggests
mistakes that people get caught in is not reading the contract especially a
business contract, a contract should be looked at as a buying a house, when you
buy a house you know every detail in it and the same thing should go for
contracts, no one would buy a house which is semi destroyed or fully destroyed.
In business contracts consists of an offer and acceptance, and consideration,
these are important in a business contract because it’ll make them serious
about their job because there will be penalties for not doing their job and the
employee wil become serious about their actions and goals.” Employment laws
that stipulate broad conditions on the hiring and firing of employees, and the
benefits that employees qualify for aside from salaries, exist in most
countries, but national regulations do not always provide either the employer
or employee with a clear agreement. An employment contract between the business
and an employee sets out an employment offer, the responsibilities of the job,
its salary and benefits, and a probation period during which the employee may
be dismissed. A detailed contract protects both employee and employer from
spurious claims by the other party.”
are important in business also because they provide security and peace of mind
for everyone in the business, For example: a written employment contract sets
the terms between the employer and the employee with regards to their responsibilities,
payment and overall relationship, and the contract works as an official record
for what the employer and the employee agreed on. A written contract is
enforceable in court for a longer period than a verbal contract, written
contracts are more efficient than the verbal contract because one party can
change their story in the court which make things a lot harder for the judge
but in written contracts the judges decision will be a lot easier because its
based on the paper, but still this doesn’t mean that the verbal contract isn’t
enforceable for example : you and a worker agree on 1000$ for repainting a room
if you paid and he didn’t paint it then you can go to the court but if he
painted it and you didn’t pay he can go to the court in both cases its
enforceable by law