Contracts 101 – Part 4: The Agreement
Disclaimer: I’m not a lawyer and I have no claim that this advice should be taken as legal advice in replacement of seeking out professional help. What I hope to do is educate you over a series of small posts about what constitutes a contract and you should be able to figure out when you might need to see a real lawyer. Although this series is in the Australian context many of the principles apply in other countries.
Part 4 of Contracts 101 begins to take a closer look at the first of the six elements that constitute a contract – the agreement.
Agreement of a contract falls to two parts, the first part being the offer and the second entails the acceptance of the offer (Part 5 of Contracts 101 will dig further into the offer part of the agreement). In practice the law spends an awful lot of time pulling apart the essence of the offer and acceptance to ascertain exactly what the contract entails. This is an area where significant litigation results because at the time of the initial contract there were two different worldviews of what they were contracting. So, at what exact point are the parties bound to an agreement? And which agreement are they bound to by the contract?
For example, your negotiations may be a mixture of synchronous and asynchronous communication and involve various methods of delivery such as fact to face meetings, telephone, direct mail or email – so what rule applies? And, when did that rule apply? At what point is the email you sent considered to have been received? Under what conditions should you rely on the mailing of a letter? And what distinguishes an offer from an invitation to treat – because the law differentiates between somebody making making an offer to which they intend to be bound and that of the person simply inviting you to partake.
Therefore, the definition of an agreement consists of an offer and acceptance as distinguished from an invititation to treat… Partridge v Crittendon (1968); Grainger v Gough (1896); Pharmaceutical Society v Boots (1952); Thornton v Shoe Lane Parking (1971); Spencer v Harding (1870); Rooke v Dawson (1895); Harvey v Facey (1893); Payne v Cave (1780); Butler Machine Tool Co Ltd v Ex-Cell-O Corporation England Ltd (1977).
In the next installment of Contracts 101 the offer will be further explored, including the difference between an offer and an invitation to treat. Understanding when you are making an offer, and therefore commiting to a contract, and when others are making an offer to you is important. However, I reiterate that the aim of this series is to broaden your perspective of the contract. There is no replacement for hiring legal counsel if you need professional advice on this subject.
Note: Resources used for this series are identified in the first installment – Contracts 101 – Part 1: Outline.
Installments in Contracts 101
- Contracts 101 – Part 1: Outline
- Contracts 101 – Part 2: Which Contract?
- Contracts 101 – Part 3: The Six Elements
- Contracts 101 – Part 4: The Agreement
- Contracts 101 – Part 5: The Offer
- Contracts 101 – Part 6: The Acceptance
- Contracts 101 – Part 7: Battle of the Forms
- Contracts 101 – Part 8: Consideration
- Contracts 101 – Part 9: Capacity
- Contracts 101 – Part 10: Legality of Object
- Contracts 101 – Part 11: Possibility of Performance
- Contracts 101 – Part 12: Genuine Consent
- Contracts 101 – Part 13: Promissory Estoppel
- Contracts 101 – Part 14: Ending the Contract
- Contracts 101 – Conclusion: Protect your Business
