Welcome back from the holidays. Just hoping you all had good times with your loved ones. I have put together a series of articles on the law of obligations, the law of contract, which I will be sharing with you for several weeks on The Legal Corner, starting with the present instalment.
Largely, economic activity is all about contracts. There would be no “business” to talk about if there were no contracts.
When people say they are going out to make money or to deal, they are actually saying they are going out to make contracts! R. H. Christie (1985: P33) observed that a businessman who tells his children that he goes to the office to make money could as truthfully explain that he goes to the office to make contracts, and if any of his contracts gives him difficulty, and he seeks the services of a lawyer, the businessman might ask his lawyer:-
- Is there a contract? – Formation of contracts
- What does it say? – Terms
- Who is involved in it? – Parties
- Is it enforceable? – Enforceability
- How is it to be performed? – Performance
- Is it still operative? – Termination
- Has it been broken? – Breach
- What remedies are available? – Remedies
These questions cover the broad principles of the law of contract, and the series of articles I have put together will address these questions. Be sure to follow The Legal Corner every week to get the full bouquet of the articles on the law of contract.
Formation of Contracts
A contract is “an agreement which is, or is intended to be, enforceable at law” (Christie, 1985! P. 34). When we talk of agreement, we mean consent, true agreement, a meeting of the minds. In Latin they call it consensus ad idem. To ask, “is there a contract”, is to ask whether there is agreement. Where there is express agreement, there is little difficulty.
However, agreement might still be found from the conduct of the parties. This is known as the doctrine of Quasi – Mutual Assent. It states that if a party’s words or actions make another reasonably to think that they were agreeing, then there was a contract, even if in truth their minds had not met. In the case of Diamond v Kernick 1947 (3) SA 69 (A), the doctrine was described thus:
“If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting (agreeing) to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms”.
This doctrine recognises that the internal workings of people’s minds cannot be perfectly known. So, what should be of concern are the outward manifestations of people’s minds.
Offer and Acceptance
Mostly, contracts are made by one party accepting an offer made to him by another party. An offer is when one party asks the other party to accept the terms proposed by him.
For an offer to be valid, it must be made with the intention that its acceptance will give rise to a legally binding relationship. In other words, a valid offer is such that by its acceptance, without more, a contract is made. In other words again, the offeror has put the conclusion of the contract out of his power, and enabled the offeree, by mere acceptance, to conclude the contract. We can thus say an offer is a firm, unconditional business proposition which, if accepted, results in a contract.
Acceptance is acceptance of the offer that was made. If the offered introduces his own terms, he is said to have made a counter-offer, and that amounts to a rejection of the initial offer.
It is important to distinguish offers from invitations for offers, commonly referred to as invitations to treat. So, invitation to tenders, advertisements, and displays of prices on shop windows are usually not offers, but invitations to treat.
In the old case of Crawley v Rex (1909), a shopkeeper had advertised a certain brand of tobacco at a cheap price, displaying a placard outside his shop on which the price was shown. Crawley entered the shop, bought some tobacco and left. He came back to buy more of the tobacco. The shopkeeper refused, and Crawley refused to leave. The court ruled”…the display of an article with a price on a shop window is merely an invitation to treat.” In other words, the shopkeeper would be asking potential customers to make offers to him, which he could accept or reject.
Part 2 next week!
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