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Week 2 Chap 2 Notes Slide 4-10

The document discusses the importance of contracts in business and their essential elements. It covers topics like privity of contract, the objective theory of contracts, essential elements for a valid contract like offer, acceptance and consideration, and different types of contracts like express, implied, bilateral and unilateral contracts. It also provides an example of contract formation between two parties.

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Beera Kazi
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18 views

Week 2 Chap 2 Notes Slide 4-10

The document discusses the importance of contracts in business and their essential elements. It covers topics like privity of contract, the objective theory of contracts, essential elements for a valid contract like offer, acceptance and consideration, and different types of contracts like express, implied, bilateral and unilateral contracts. It also provides an example of contract formation between two parties.

Uploaded by

Beera Kazi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Business And Corp Law

WEEK 2
LECTURE 3-4
DATE 01-03-2024

Title: Importance and Essentials of Contracts in Business


1. Importance of Contracts in Business:
 Contracts play a crucial role in clarifying business dealings, avoiding unexpected and
undesirable results, and providing a structured dispute resolution process.
 Contract law governs disputes and ensures that parties adhere to their agreed-upon
obligations.
2. Privity of Contract:
 Privity of contract refers to the relationship between the parties to a contract, where only
these parties have rights and obligations under the contract.
 However, there are exceptions to privity of contract, such as the Objective Theory of
Contracts.
3. Objective Theory of Contracts:
 The Objective Theory of Contracts determines the intent of parties objectively, based on
outward facts like statements made, actions taken, and surrounding circumstances.
 Personal or subjective intent does not govern contract formation; instead, objective
indicators are used to ascertain intent.
4. Essentials of a Valid Contract:
 Free Consent: Parties must enter into a contract voluntarily and without coercion.
 Legal Relationship: The contract must create a legal relationship between the parties.
 Legal Object/Purpose: The object or purpose of the contract must be legal.
 In Writing (Legal Formalities): Some contracts require written form to be legally
enforceable.
 Possibility of Performance: The terms of the contract must be capable of being
performed.
 Certainty: The terms of the contract must be clear and definite.
 Competency/Capacity of Parties: Parties must have the legal capacity to enter into a
contract.
 Consideration: There must be something of value exchanged between the parties.
 Acceptance & Offer: There must be a valid offer and acceptance of that offer.
 Not Declared as Void: The contract must not be declared void under law.
5. Types of Contracts (Formation):
 Express Contract: Parties explicitly state the terms of their agreement.
 Implied Contract: The terms are inferred from the parties' conduct or circumstances.
 Bilateral Contract: Both parties exchange promises.
 Unilateral Contract: One party promises something in exchange for the performance of an
act by the other party.
 Formal Contract: Contracts that require a specific form or format for validity.
 Informal Contract: Contracts that do not require any specific formality.
6. Quasi Contract:
 A legal fiction used to prevent unjust enrichment, where one party confers a benefit on
another without an enforceable contract.
7. Example:
 Jamal offers to buy Adnan's smartphone for Rs. 20,000, promising payment on Friday.
Adnan accepts. This forms a bilateral and express contract, where both parties exchange
promises explicitly.
Understanding the importance and essentials of contracts in business is crucial for ensuring smooth and
legally enforceable transactions.

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