Contract Law and its Legal Principles

Introduction

A contract refers to an agreement formulated voluntarily by two or more people, the main intention being the desire to create a legal obligation. A contract, in most cases, has elements in writing. However, on some occasions, it may be made orally, provided the parties involved come into a fair agreement. If a person breaches a contract to which he had accepted to commit, the remedy is compensation in monetary form (Wishart 2007, p 240).1 This paper will outline various legal principles and issues in the contract law.

Part One

In this part, Angelo has leased an on-site caravan to Christie for 12 months at $150 weekly. After the expiry of the first year of the contract, Angelo’s increases the rental fee from $150 to $200, an amount that Christie is not prepared to pay. Nevertheless, they reach an oral agreement that she can remit $175 on a weekly basis. Unfortunately, Angelo does not hold onto the oral agreement for long as he issues her with a notice demanding that she pays the rent arrears, which is the difference between the $200 proposed amount and the value she had been paying that was agreed upon in their oral conversation.

Legal Issues and their Application in the Case

There are several legal issues that emanate from this, the first one being the element of mutual assent. Mutual assent refers to an agreement reached through offer and acceptance. An agreement is termed as a mutual assent in the common law only if an offer is met with an acceptance, which should not cause any variations to the offer’s terms; otherwise, it becomes a counteroffer (Schaffer, Agusti & Earle 2009, p. 120).2 In the case in which Angelo increases the rent to $200, the offer is a counteroffer since it is rejected by Christie, one of the parties.

It is not an obligation for the element of the mutual to be written down or expressed orally, as it can also be expressed as an implied contract. An implied contract is one that the parties have an agreement without expressing it orally or writing it down (Schaffer, Agusti & Earle 2009, p. 123).3 However, in this case where Angelo had already accepted that Christie pays $175 per week is an oral agreement; this is enforceable in the court of law or civil court.

Another legal principle in Angelo and Christie’s case is the intention to be legally bound by the law. Unlike social and domestic agreements, commercial agreements are legally bound and are, therefore, enforceable (Lando & Beale 2003, p 104).4 The case in which Angelo leases an on-site caravan to Christie qualifies to be a commercial contract and for that reason is enforceable by law.

Oral contracts, which fail to meet the requirement of the common law, are not automatically rendered null and void. In any case, there is no legal principle, which requires that all contracts be in written form. Unlike in the sale of property, which strictly requires a written contract, leasing can either be in written form or just expressed orally (Wishart 2007, p 240).5 For instance, the case in which Christie offers to pay $175 and Angelo assents to it is an example of a contract expressed orally, and it is actually enforceable.

The agreement between Angelo and Christie, in which Christie is supposed to be paying $175, is a bilateral contract. A bilateral contract is one in which a party offers to pay the other party a certain amount of money in exchange for an item or space, and the other party also accepts to lease the property in exchange for the offered amount (Schaffer, Agusti & Earle 2009, p. 126). In this case, Christie offers to pay the $175 in exchange for the on-site caravan, and Angelo agrees to lease the caravan in exchange for the cash offered by his client.

An example of a court case similar to the scenario of Angelo and Christie is the case of Smith v. Hughes (1871) LR 6 QB 597. In the case, Hughes, a racecourse trainer, was sued by Smith for refusing to pay for the oats, which he had sold him. Hughes argued that the oats delivered to him were new and yet he wanted old ones. The Court of Queen’s Bench ruled in favor of Mr. Smith, it held that the issue was not a mere consensus ad idem, but one in which the leading principle was the kind of communication Smith and Hughes had made to each other (Hacker 2008, p. 180).6

In conclusion, Christie has no obligation under the law to pay Angelo the money he is claiming as arrears. The contract, even though orally formulated, is binding and hence, is enforceable. Christie had proposed the $175 as her offer in exchange for the caravan, and Angelo accepted to lease the property for that amount. The case in the scenario is more of what the two had communicated to each other than the principle of consensus ad idem.

Part Two

The second part is about Angelo and Ali, another tenant. Ali has also signed a contract of 12 months with Angelo. Before signing the lease contract, Ali seeks to know from Angelo if his caravan offers a peaceful and quiet environment that would suit his family’s needs.

In his attempt to assure Ali that his caravan was the ideal one, Angelo shows him a document stating that all the residents are entitled to respect and consideration for others and are expected to conduct themselves in a civilized way to avoid posing a nuisance to others. However, this is not the case when he leases the caravan and as a result of that, Ali opts to quit and look for another one, which will suit his needs. Angelo insists that even if Ali vacated his caravan, he still has to pay for the rent covering the period of the agreement.

Legal Issues in the Scenario and how they apply in the Case

The first element is an offer, which is the basis for all contracts. An offer denotes a spoken, written or implied communication that would help the parties involved reach an enforceable agreement. In the case of Angelo and Ali, the offer is the on-site caravan, which Ali can either assent to or reject (Finnis 2011, p. 344).7

Acceptance, another element, depends on the party to whom the offer has been made. On many occasions, an offer can be accepted by accomplishing the action indicated in the offer or by making a promise to the owner of the offer. In Ali’s case, he accepts the offer made to him by Angelo and in so doing he agrees to forfeit the amount of money indicated in the offer as the rent (Finnis 2011, p. 347).

The third principle, consideration, is essential when it comes to binding an agreement in which each party is expected to obtain a benefit and suffer a loss as a result of accepting to undertake what is indicated in the offer. In the scenario described above, Angelo obtains the rent as the benefit for leasing the caravan to Ali. Ali, on the other hand, forfeits some of the money in order to rent Angelo’s caravan (Murdoch & Hughes 2007, p. 305).8

Another important part of contract law is promissory estoppels, a principle that is extremely essential when the need to enforce a contract without consideration arises. The principle states that if two or more parties enter an agreement, there is no excuse for any of the parties to do anything contrary to what is contained in the contract. In the case of Ali, vacating Angelo’s caravan before the end of the twelve months is a violation of promissory estoppel (Heidemman 2006, p 129).9

The last legal issue in the case is the parol evidence rule, which is a rule that prevents any party from bringing in external evidence that is regarded as a modification of the original contract to justify a breach. Ali’s feeling that Angelo has failed to ensure that there is total silence around the caravan, is external evidence that he wants to use to justify his departure from it before the term spelled in the contract elapses (Murdoch & Hughes 2007, p. 311).10

An example of a court case that relates to the case of Ali and Angelo is the case of Lucy v. Zehmer, 196 Va. 493; 84 S.E.2d 516. This court case is evidence for the enforceability of such a pact, by means of its superficial outlook as the main point of reference. In this case, Zehmer accepted to sell a piece of land to Lucy at $50,000 and she later declined to conceal the deal, insisting that the contract was merely but a joke. The Supreme Court of Virginia ruled in favor of Lucy, citing that mental assent of the two parties cannot be a basis for the contract between two parties (Cross & Miller 2007, p. 199).11

In conclusion, if Ali chose to move from Angelo’s caravan, he should still pay the full rent for the 12 months since that is what they both assented to. His claim that Angelo has failed to provide a quiet environment does not hold and is a violation of the parole of evidence rule, since it was not a part of the original contract. In addition, Ali needs to pay the full amount even if he does not intend to stay for the 12 months, as required under the promissory estoppel.

References

Cross, FB, & Miller, RL 2007, West’s legal environment of business: text and cases: ethical, regulatory, international, and e-commerce, Thomson, Mason OH.

Finnis, J 2011, natural law and natural rights, Oxford University Press, Oxford.

Hacker, B 2008, Consequences of impaired consent transfers: a structural composition of English and German law, Mohr Siebeck, Tubingen.

Heidemman, M 2006. Methodology of uniform contract law: the unidroit principles in international legal doctrine and practice, Springer, New York, NY.

Lando, O, & Beale, H 2003, Principles of European contract law, Kuwer Law International, Boston, MA.

Murdoch, J, & Hughes, W 2007, Construction contracts law and management, Taylor and Francis, New York, NY.

Schaffer, R, Agusti, F, & Earle, B 2009, International and its environment, South-Western Cengage Learning, Mason, OH.

Wishart, MC 2007, Contract law, Oxford University Press, New York, NY.

Footnotes

  • 1 For more information on contract law, see Wishart 2007, pp. 240-245.
  • 2 See Schaffer, Agusti & Earle 2009, pp. 120-127 for details on legal issues in the contract law.
  • 3 For more details on how mutual assent applies in contract law, see Schaffer, Agusti & Earle 2009, pp. 123-131.
  • 4 See Lando & Beale 2003, pp. 104-106 for a detailed description of special treatment accorded to commercial contracts under contract law.
  • 5 See Wishart 2007, pp 240 and 241 for procedures followed in determining whether a contract is void.
  • 6 For details regarding the case of Smith v. Hughes (1871) LR 6 QB 597, see Hacker 2008, pp. 179-185.
  • 7 For more information on spoken, written, and implied contracts, see Finnis 2011, pp. 342-345.
  • 8 For more information on how consideration is applied in contract law, see Murdoch & Hughes 2007, pp. 305-308.
  • 9 See Heidemman 2006, pp 129-130, for more details on promissory estoppel.
  • 10The Parol evidence rule has been explained in Murdoch & Hughes 2007, pp. 311-313.
  • 11 See Cross & Miller 2007, pp. 199-203 for more information on the case of Lucy v. Zehmer, 196 Va. 493; 84 S.E.2d 516.