In common law, there are five key requirements for the
creation of a contract. These are offer and acceptance
(agreement), consideration, an intention to create legal
relations, capacity and Formalities. In civil law systems,
the concept of consideration is not central. In addition,
for some contracts formalities must be complied with
under what is sometimes called a statute of frauds.
Offer
and acceptance:
The most important feature of a contract is that one
party makes an Offer and Acceptance offer for a arrangement
that another accepts. This can be called a 'concurrence
of wills' or a 'meeting of the minds' of two or more
parties. There must be evidence that the parties had
each from an objective perspective engaged in conduct
manifesting their assent, and a contract will be formed
when the parties have met such a requirement.An objective
perspective means that it is only necessary that somebody
gives the impression of offering or accepting contractual
terms in the eyes of a reasonable person, not that they
actually did want to form a contract.
Consideration
and estoppel:
Consideration is a controversial requirement for contracts
under common law. It is not necessary in all civil law
systems,and for that reason has come under increasing
criticism. The idea is that both parties to a contract
must bring something to the bargain (for example, money).
This can be either conferring an advantage on the other
party, or incurring some kind of detriment or inconvenience
towards oneself. Three rules govern consideration.
*Consideration
must be sufficient, but need not be adequate. For instance,
agreeing to buy a car for a penny may constitute a binding
contract. While consideration need not be adequate,
contracts in which the consideration of one party greatly
exceeds that of another may nevertheless be held invalid
for lack of sufficient consideration. In such cases,
the fact that the consideration is exceedingly inadequate
can be evidence that there was no consideration at all.
Such contracts may also be held invalid for other reasons
such as fraud, duress, unequal bargaining power, or
being contrary to public policy. In some situations,
a collateral contract may exist, whereby the existence
of one contract provides consideration for another.
Critics say consideration can be so small as to make
the requirement of any consideration meaningless.
*Consideration must not be from the past. For instance,
in ''Eastwood v. Kenyon'', the guardian of a young girl
obtained a loan to educate the girl and to improve her
marriage prospects. After her marriage, her husband
promised to pay off the loan. It was held that the guardian
could not enforce the promise because taking out the
loan to raise and educate the girl was past consideration--it
was completed before the husband promised to repay it.
*Consideration
must move from the promisee. For instance, it is good
consideration for person A to pay person C in return
for services rendered by person B. If there are joint
promisees, thenconsideration need only to move from
one of the promisees.
Civil
law (legal system) systems take the approach that an
exchange of promises, or a concurrence of wills alone,
rather than an exchange in valuable rights is the correct
basis. So if you promised to give me a book, and I accepted
your offer without giving anything in return, I would
have a legal right to the book and you could not change
your mind about giving me it as a gift. However, in
common law systems the concept of ''culpa in contrahendo'',
a form of 'estoppel', is increasingly used to create
obligations during pre-contractual negotiations.
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