Essential Elements of Valid Contract

Understanding About Aspects and Negligence for Business

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The English Legal System is one of the major European Legal systems and it is spread to different nations such as Australia, USA, New Zealand and Canada. The unique feature of this system is the doctrine of judicial precedents whereby decisions of court form a binding source of law in future decisions. The English Legal system is divided into two parts i.e. civil and criminal law (Tallman and Bruning, 2008). This research report is prepared to evaluate the aspects of contract as well as negligence in business. A legal agreement between two or more individuals with specific terms is known as contract. Here in the report essential elements of valid contract, types and terms of contract are discussed. In addition to this, tort liability is differentiated with contractual liability and elements of tort applied in given business scenarios.

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Legally binding agreements between two or more parties that have intention to create legal relationship and involve particular clauses are known as contract. It is the promise between two or more individuals in which one person promise to another to do something in return of valuable benefit is known as consideration (Partington, 2013). There are different types of contracts that take place between two or more parties and some of them are as follows:

Face to face contract: In this type of contract, parties are physically present at the time of agreement. They can solve all their issues in context of terms or clauses at the time of formation of contract. For instance Tom went into a book shop and buys a book than it will be face to face agreement as both the contracting parties will be physically present during the sale of book and they can solve their issues regarding price or any other at the time of transaction (Deaki and 2007). These types of contract help to protect interest of both the parties.

Written contract: A legally binding agreement between two or more parties which is made on printed document and signed by both the parties is known as written contract. Terms of agreement are in written format which can use as proof in case of default of any party. For example Joseph and Harry wanted to start up a business as joint venture and for this they enter into an agreement. The contract will take place on printed document which will be sign by Joseph and Harry. This will involve terms of agreement such as capital invested by parties and their share in profit of business (Nysten-Haarala, Lee and Lehto, 2010).

Distance selling contract: This contract takes place between two or more individuals through internet. In these types of agreement, parties are not physically present at the time of contract. Distance selling contract is highly used by people in the modern era as it save time of people. For instance Arnold bought a watch through internet and made payment through debit card than there will be distance selling contract among parties. Government developed various laws and regulations in context of online shopping in order to protect customers for any sort of harm or dangers as there are various frauds taking place in distance selling contract (Curry, 2008).


A contract is a legally, voluntary and deliberately agreement between two or more competent individuals that have intention to create legal relationship. It is necessary that parties entering into the contract should be aware about important fundamentals of legitimate agreement as it will help them to protect their interest from any harm (Gray, 2010). The essential elements of valid contract are as follows:

Offer: An offer involve two parties i.e. offeror and offeree. Offer is a proposal which is made by offeror and when it is accepted by offeree than it completes the contract. It bind both the parties legally i.e. the person who made proposal and the person who accept it (Mote, 2013).

Acceptance: When offer made by offeror is accepted by offeree and comply with terms involved in the offer than it is known as acceptance. Offeree can give his acceptance by an express actor by conduct that signifies consent to the clauses of offer.

Capacity of parties: The parties entering into the contract are required to be competent as they should be age of majority and needs to be of sound mind. Both the parties should not be disqualified by any law. It is essential that parties should be competent while they enter into any agreement (Staudenmayer, 2003).

Intention of create legal relationship: Both the parties entering into the contract should have intention to develop lawful relationship in order to make agreement valid. This will helps parties to protect their interest from any harm (Chadwick, 2011).

Consideration: A contract must involve legal consideration as it must be exchangeable in the eyes of law. It is something of value given by both the contracting parties. It is also an essential element for formation of valid contract (Jennings, 2010).

Mini-case A: In this scenario, an offer for sale of dental equipment was made by Arnold as he was retired from his London practices. The note was received by Fiona about sale of equipments. She was interested to accept offer but she was unsure to raise such large amount. The parties entering into the contract were competent as they were of age of majority and are of sound mind. There was legal consideration as offeree required to pay £15000 Arnold in exchange of dental equipment (Faure, 2009). Arnold was away at conference and hence Fiona leaved a message with his scarcity. In the given scenario all essential elements of valid contract were present but there was lack of acceptance as Fiona did not gave her acceptance on time and due to this Arnold sold his dental equipments to another party

Mini-case B: Under this mini case study, an offer was made by Mrs. Smith on local paper. She promises to give a £10 reward in exchange of Lucky black and white cat. On the other hand David sees the advertisement and accepts the offer. He fined the luck cats and spends £15 for a taxi to return cat to Mrs. Smith. He explained Mrs. Smith about taxi rent and claims £25. In the given case study all essential elements of valid contract were present as on offer was made by Mrs. Smith which accepted by David. There was legal consideration as Mrs. Smith rewarded £10 in exchange of Lucky black and white cat (Bowyer, 2000). In addition to this, both the parties were competent and have intention to create legal relationship. All essential elements were present in the contract but a counter offer was made by David as he demanded £25 in return of cats which was rejected by Mrs. Smith and she was not liable to pay additional money claimed by David.

Mini-case C: In the given case study an offer was made by Mrs. Harris was the owner of three rented houses. She made an offer to her next door neighbor, Ted, to collect rent from tenants while she is abroad on business (Luo, 2002). Ted accepted the offer and collected rent and when Mrs. Harris returns she says that she will give £50 to Ted for his work but later Mrs. Harris refused to pay Ted. Hence there was an offer as well as acceptance but there was absence of legal consideration and parties were not intended to create legal relationship so there were no valid contract between Mrs. Harris and Ted.

Mini-case D: Under the given scenario, Lynx Cars Ltd entered into a five year dealership agreement with Roadstar Ltd. An initial order for 2,000 cars to be delivered by the end of 2007 was placed by Roadstar Ltd which was accepted by Lynx Cars Ltd. Manufacturer informed Roadstar Ltd that owing to production difficulties organization estimates that they will be able to deliver only 200 cars. Hence there was an offer and acceptance takes place between Roadstar Ltd and Lynx Ltd. The legal consideration was also there and both the parties were intended to create legal relationship by entering into five year dealership agreement but manufacturer withdrawing from dealership agreement due to production difficulties (Camenisch, 2001). Hence Roadstar Ltd can ask for damages from Lynx Cars Ltd because this may impact on market image of organization.

Case law

  1. Spencer v Harding Law Rep. 5 C. P.561, in this scenario, the defendants made an offer by advertising a sale by tender of the stock in trade belonging from Eilbeck & Co. The goods must be paid for in cash at the time of opening for tenders. Highest amount was submitted by tender but defendant refused to sell him. Hence the advertisement was an invitation to treat but tender was an offer. Further defendant could select, whether to accept the offer of claimant or not.
  2. Tweddle v Atkinson, (1861), in this scenario, a couple was getting married and father of bride entered into an agreement with the father of groom that each pay couple a sum of money but the father of bride was died without having paid. Further father of groom also died and hence he was unable to pay money. The claim was made by groom against the executor of will. Both the party of agreement was died and groom was not party to the agreement and therefore he was not entitled to enforce the contract.

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Terms into an agreement gives rise to contractual obligations and it is the forming art of contract. Further representation is facts which are inserted at the time of negotiation but not included in drafting of contract. It does not give rise of any contractual liability or obligations. Terms are clauses that vary from one contract to another and breach of term allow injured party to ask for damages from defaulting one (Goldman, 2013). There are different types of terms such as warranty, condition and innominate etc. If there is condition takes place as term of contract and one party breach the clauses than in that case injured party is allowed to release the contract. On the other hand in case of warranty, if terms of contract breached by one party than n that situation innocent party is allowed to ask for damages. The injured party have right to claim for compensation they cannot discharge the agreement. Apart from condition and warranty, innominate terms are intermediate which cannot be defined as warranty or condition. These are those terms that can be broken with serious consequences than in that case clause will act as condition and if it broken with minor penalty than in that situation in will act as warranty (Moriarty and Manthorpe, 2013).

Mini-case E: In the given case study, an offer was made by Slick Car Sales Ltd in local evening paper which was seen by Paul. He was looking for a second hand car and for this he visits the showroom of Slick Cars. Paul selected a car which prices at £3,995 and salesman tells him that it is a 1994 Mondeo which has done 30,000 miles and had only one owner. A sales agreement was signed by Paul that describes the car as Cayman Blue, 1994 Ford Mondeo and registration number was L931 AJU. In the given scenario, the term of contract was condition as model, color and registration number was condition that was given in sales agreement (Whincup, 2008). If any of the condition not fulfill by organization than in that case Paul is allowed to breach the contract and can take his money back. In addition to this, representation was made by salesman of company as he told him that car had only one owner which may not be true.

Mini-case F: In this context, Jim takes his family to Fun Park and pays £1 to park his car on a car park which was run by the Stand Council. At the entrance of car park a notice was given by council which states that cars parked entirely at owner's risk. He paid £7 for admission to ticket to Fun Park which was managed by Leisure Ltd. The ticket contain exclusion clause of its backside which states that company does not accept liability for personal injury or death of visitors. Jim and his watching their children's and a metal bar flies off and injured Jim and his wife. They were allowed to ask damages for expenses suffered by them as per Unfair Contract Terms Act 1977. This act states that defaulting party cannot exclude their liability in case of personal injury or death of innocent party (Owen, 2007). When Jim return to his car after receiving hospital treatment he discover that it was damaged by a Council refuse van. The Strand Council also used exclusion clause and exclude their liability but the notice given by council at the entrance was partly obscured by overgrown shrubs. Hence in this situation Jim is allowed to claim against Council and ask for damages as warning was not given by council in appropriate manner.



A contract is an agreement in which parties must enter knowingly and without being forced. On the other hand tort is never based on consent of parties. In case of contract, the aim of damages award is to restore parties to their position before occurrence of breach. On the other hand in case of tort, damages are generally awarded to compensate the victim for their loss. A contract is a legally enforceable agreement in which two parties enter with mutual consent and if one party fails to perform terms of contract than in that case contractual liability takes place (Hernandez, 2010). Besides tort is a civil wrong which is based on failure of one party to perform duty of care in answerable manner so as not to injure others.
Barnett v Chelsea & Kensington Hospital, (1969), in this scenario, Mr. Barnett went to the hospital for complaining of severe vomiting and stomach pains. A nurse seen him and telephoned the doctor on duty. The doctor told nurse to send Mr. Barnett home and contact his GP in the morning (Wheare, 2003). Five hours later, Mr. Barnett was died from arsenic poisoning. The doctor could save him if he examines him on time and hence doctor was failure to examine the patient. In the given scenario, tort liability will takes place which states that doctor was liable for death of Mr. Barnett.

Lampleigh v Braithwaite, (1615), under this scenario, a man was killed by defendant due to be hung for murder. In order to obtain pardon from the king, the defendant asked claimant to do everything in his power. The great efforts made by claimant and managed to get the pardon requested. The promise made by defendant to pay £100 to claimant for his efforts but never paid up. There was valid consideration and due to this defendant was obliged to pay the claimant. In this scenario, contractual liability takes place which states that defendant is liable to pay £100 to claimant for his efforts as there was valid consideration (Pull, 2002).


The duty of care can be defined as relationship and circumstances which the law identifies as giving rise to a legal duty to take care. If one party fails to take duty of care than in that case defendant being liable to pay compensation to the injured party who suffered losses. The presence of duty of care depends on different types of legal tests that are applicable on diverse losses. There are four elements of tort such as presence of duty, existence of an injury, breach of duty and immediate cause (Hussain and Ishaq, 2008).

Donoghue v Stevenson, (1932), AC 562 House of Lords, in the given scenario, Mrs. Donoghue and her friend went to a cafe and they offered a ginger beer and an ice cream. The beer came in an opaque bottle so that contents could not be seen. Mrs. Donoghue drank some from the bottle and remaining contents poured over the ice cream and a decomposed snail emerged from the bottle. Personal injury was suffered by Mrs. Donoghue and she claim against manufacturer of the ginger beer. Her claim was successful and received compensation. In the given scenario, all elements of tort take place as there was present of duty which was breached by manufacturer (Postema, 2001). In addition to this there was personal injury to Mrs. Donoghue and immediate cause.


Vicarious liability can be refers as a legal doctrine that allocate liability to a person who did not cause the damage but who has legal relationship with the person who did the act negligently. It is the form of secondary liability that takes place under common law and the superior is liable for the acts of subordinates (Levinson, 2005).

Mersey Docks and Harbour Board v Coggins & Griffiths (Liverpool) Ltd (1946), in this scenario, Mr. Newell was appointed by board to unload a ship. During the course of unloading a ship, a person was injured because of negligence of Mr. Newell and the court had decided that Board were vicarious liable for the act of their employees along with Mr. Newell for the negligent. In the given scenario, there was legal relationship between Board of Coggins & Griffiths and Mr. Newell as he was their true employee. Hence vicarious liability takes in the given scenario which states that superior is held liable for negligent act of their subordinates. The Board was vicarious liable for negligent act of Mr. Newell and were required to pay damages to the injured person (Harpwood, 2009).

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From the above report it can be concluded that parties should have better understanding about aspects of contract and negligence in business while they enter into the contract. They should be aware about essential elements of valid contract so as to protect their interest. There are different types of terms of contract that takes place upon the nature of agreement. Further, parties are required to perform their duty with care.


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  • Camenisch, P., 2001. Business Ethics: Getting to the Heart of the Matter. Business & Professional Ethics Journal. 1(1).pp. 59-69.
  • Chadwick, A., 2011. The English Legal System. Straightforward co Ltd.
  • Curry, K. E., 2008. MBA Fundamentals Business Law., Kaplan Publishing
  • Deaki, and, 2007. Markesinis and Deakin's Tort Law. Oxford University Press
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