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.
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 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.
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.
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.
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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