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Business Law 1
Module 3
Formation of the contractual relationship - 1
Lectures and handouts by:
Barbara Cox
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Formation of the contractual relationship
3.1: What is a contract?
3.2: Types of contracts
3.3: Offer
3.4: Termination of an offer
3.5: Acceptance
3.6: Communication of acceptance
3.7: Consideration
3.8: Invalid forms of consideration
3.9: The use of a seal
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Module 3.1: Formation of the contractual
relationship
Pages 170-171, page 173 (Consensus) & page 174
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Role of Contract Law
What is a contract?
– A voluntary promise that the law will enforce
– A contract does not come into existence until an offer
has been made by one party and accepted by the
other party
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Freedom of Contract
• Contracts are entered into voluntarily
• Free to choose our obligations
• Freedom limited for economic & social
reasons
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Limits on freedom of contract
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Intention of the parties considered – what would the
reasonable person have intended?
2. Reasons of public policy have restricted the scope of
freedom of contract.
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Legislation can affect contractual rights, such as
consumer protection acts.
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What is a contract?
Contracts have required elements to by binding:
• Intent
• Offer
• Acceptance
• Consideration
• Capacity
• Legality
• Writing ( only applies to certain kinds of contracts)
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What is a contract?
Contract law is flexible
Contracts can be :
» Written
» Oral
» by conduct
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What is a contract?
Offeror or Promisor: makes the offer
Offeree or Promisee: accepts the offer
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Module 3.2: Types of Contracts
• Pages 171-173, page 181 (Standard form contracts only)
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Types of Contracts
• Contracts may contain express terms
• Contacts may contain implied terms
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Unilateral Contract
Only the offeror has promised to do something & the
offeror is only bound to perform the promise once
the offeree has done the required act, for example,
offering a reward
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Bilateral Contract
-Contains 2 promises – these are the “usual” contracts
For example, I promise to sell you my car for $500
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