Contract and Offer as an Integral Part of Business Law

A contract is a legally binding agreement containing features required to make it valid and proof is required (Black, 2018). There must be a consensus in idem, a meeting of minds and so there must be an understanding on what is agreed. In today’s society anyone has the freedom of entering into a contract however there are limitations. There are 3 categories which fall under the capacity to enter into a contract: Age, Reason Impairment and insufficient mental capacity. The act of Legal capacity (Scotland) Act 1991 states those who are below the age of 16 have no legal capacity to enter into a transaction with exceptions of commonly entered into by persons of their age or circumstances under reasonable terms. (Legislation.gov.uk, 2019) For example, people under 16 could buy a sandwich from a shop and so allows them to buy the necessities of life, known as deemable contracts. The transaction includes both contract and promise. It states that persons over the age of 12 have the legal capacity to the testamentary writing any power of appointment and consent to adoption making relating to themselves. Furthermore, they can consent to procedures and treatments such as medical and dental but with the audience of a medical practitioner. This ensures the person is capable of understanding the contract they are entering, and the consequences related to it.

Children under the age of 16 also have the right to instruct a solicitor in relation to any civil matter, showing under the age of 16 has limited capacity in entering a contract. This law is in place to protect children and young persons interests by restricting the permission of entering contracts. From the age of 16-17 until the persons 18th birthday, the law is put in place to protect them in circumstances in which there is a prejudicial transaction. This means they can enter into almost any contract, but they are protected by the law if they don’t know what they have got themselves into and that wouldn’t have been entered into an adult, preventing them from having to seek legal health. However, such a case which seems to be prejudicial must be presented to the courts before the young person reaches the age of 21. When reaching the age of 16 or above the law deems a person capable of looking after their own affairs and so gain legal capacity. The capacity is known as qualified. An example of this is if the young person buys a car from a u unreliable dealer this piece of legislation protects them from people, they are prejudice from. If a person doesn’t have legal capacity the contract is void which means it has no legal effect at all and is regarded as an absolute nullity. Another category is Intoxication which means the impairment of reason. This can be due to the influence of alcohol and /or drugs and result in people becoming intoxicated without their knowledge and so deprived of exercise of reason. Consequently, they lack the capacity to enter into a contract. In attempt to get out of their contractual obligations, the court undertake great consideration into releasing people from their contracts when they plead that they were intoxicated. Under these circumstances a significant level of evidence must be put before the court that the person was in fact highly intoxicated and were unaware of the nature of the obligations. This is shown in the case Taylor v Provan (1864) where Provan went to Taylors farm with the offer to buy his cattle for fourteen pounds each but Taylor refused. Provan then returned, under the influence of alcohol and offered fifteen which was accepted by Taylor. Later, Provan deemed he was incapable of entering into a contract due to intoxicated circumstances. The decision of the court was that Provan was still of ability to know what he was doing and so the contract was bound as a contract must be repudiated when the person regains their senses. (McLaren, Y., 2016). Another limitation to entering into a contract is those who lack mental capacity and are deemed in law as “insane”. For example, they are seen as vulnerable in respect to aging illnesses such as dementia or are deemed incompetent. The effect given depends on whether the person has entered into the contract of mind and has the capacity to understand and co-operate with the business involved. This doesn’t mean that people suffering from mental illnesses cannot enter into contracts, it will just be known they lack legal capacity and there are procedures in existence which allow guardians to look after the persons interests.

An offer is a specific proposal to do/ give something. It must contemplate acceptance which means to be seen as an offer it would be met with a qualified acceptance forming a contract without further negotiation. Offers can be withdrawn until they are accepted. This means if the acceptance is received before you are going to withdraw, the offer cannot be withdrawn as it was an acceptance was received first. On the contrary is a withdraw arrives before the acceptance the court will not give effect to the contract. Offer must be communicated to become effectual therefore must be written or articulated and cannot just remain inside the persons mind. An offer must also be given authorization by the offeror to show it isn’t ineffectual. If an offer isn’t accepted within the time frame given, then the offer will lapse. This means that there is no longer any offer and so is like it was never there in the first place. Rejection of an offer is a cause of it lapsing. There are also counteroffers which is a response where terms have been removed and new conditions are expressed. It is another way of forming a new offer without expressly rejecting the first one. When considering if an offer has been made with legal intention the court takes an objective approach. Robertson v Anderson 2003 shows the objective approach of the court as both were friends who went to bingo together where they agreed they would share winnings equally. When Anderson won the highest prize, she said they didn’t have that agreement and that gambling wasn’t a sporting agreement. The court, however, when looking at the information took the objective approach that there was a contract about money and the splitting of profits therefore enforcement of a contract and so winnings were to be split. (Scotcourts.gov.uk, 2019)

Overall an offer must be intended to be legally bounding and have sufficient definite terms for example the subject matter and price must be clear or shall not be accepted. An acceptance is a form of statement conducted by the offeree which indicates assent towards the offer. Acceptances can be given by words, oral or written or by conduct. If it is regarding land, the acceptance must be in writing. For an agreement to occur there must be agreement on terms which are essential, and it must not show signs of uncertainty. It needs to be a clean acceptance that is issued and received. There must be a careful analysis on if an offer is capable of acceptance, it must be known when an offer is made and accepted for example how much is the doggie in the window, neither the question or display of goods are viewed as an offer that can be accepted. Unlike offers, acceptances cannot be taken back. Acceptances must be absolute and unconditional and are unqualified they don’t have any exception of acceptances for example the offeree can’t say they will accept on certain terms, if. So, this is known as qualified which then becomes a counteroffer.

An invitation to treat is a pre-offer. It is different as it is inviting the idea of an offer for example shop displays, adverts or car parks. When you go to buy a good for example water that is you offering to pay for it at the price that is on the shelf. It is an announcement that an offer would like to be made. Sometimes adverts are treated as offers if the advertiser Is seen clearly to be bound by an acceptance like in the case of Carlill v Carbolic Smoke Ball Company (1893) in. which they said they would pay 100 pounds to anyone who contracted the flu and still had it after using their remedy for three times a day for two weeks. Carlill did this and still had the flu, she contacted them, and they said no as no contract was formed. The company relied on it being an invitation to treat yet the court said it was far too specific due to the terms being specific in that it was to be taken 3 times a day for two weeks and so the company had to pay her the money.