Law of Contract - CA Sri Lanka

Law of Contract By Nihal Matara Arachchige (LL.M, Attorney-at-Law) The need for a law of contract Our society would not survive if agreements and promises could be broken without any fear of legal sanction. The law of contract is a part of law of

obligation. Unlike tort ,the obligation in contract arise out of agreement. Basic doctrine in contract law The principal source of obligations under the law of contract must be the contract itself. The freedom of contract. Sanctity of a contract.

How to arise a Contract A contract means an agreement which is enforceable by law. An agreement consist of reciprocal promises between the two parties. In a contract each party is bound by the promise made by him, A contract could arise in following way; 1.By agreement and contract,

2.By standard form contract, 3.By promissory Estoppel Types of contracts Contracts of records, Contracts under seal, Simple contracts. Agreement &Contract

An agreement enforceable by law is a contract All agreements are not enforceable by law and therefore all agreements are not contracts (Agreement to go to see a movie, agreement to play a cricket match, agreement to go for a dinner.etc may not contracts) But reverse is not the same all the contracts are agreements.

agreement In an agreement there is a promise from both parties A promise is a result of offer(proposal) and acceptance. This promise is known as agreement. If this agreement satisfy all the basic element of a contract are contracts.

The intention to create legal relations A critical factor in the formation of a contract is the legal intention of the parties.the parties must have intended agreement to be binding in law Domestic agreement &Commercial agreement

Balfour v Balfour Meritt v Meritt Edwards v Skyways Ltd OKeefe v Ryanair Holdings PLC Basic elements of a valid contract

Offer, Acceptance Intention to create legal relationship Consideration

Capacity to contract Free consent Legality OFFER An offer is an expression of willingness to contract on certain terms made with the intension that the offer shall become binding as soon as it is accepted by the person to

whom it is addressed. The person who makes the offer is called the offerer and the person to whom it is made is called the offeree. Requirement of a valid offer An offer must be definite An offer must be Serious An offer must be Communicated to the

offeree An offer must be Distinguished from an invitation to treat Offer &invitation to treat distinguished An invitation to treat is a preliminary steps of an invites to get offers. An offer has to be distinguished from an invitation to treat.

sometimes person may not offer to sell his goods, but make some statement or give some information with a view to inviting others to make offers on that basis. (Sending catalogue of books) (Inviting persons to an auction) cases Harris v Nickerson

Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd. Carlill v Carbolic Smoke Ball Co. Fisher v Bell Cross offers &Counter offers Wrench v Hyde Tinn v hoffman

Termination of an offer By notice(an offer may be revoked any time before acceptance but not afterwards) By lapse of time By death or insanity By counter offer By rejection by offeree. Acceptance

When one person to whom the offer is made signifies his assent thereto, the offer is said to be accepted. An offer when accepted becomes an agreement. Who can accept? An offer can be accepted only by the person or persons for whom the offer is intended. an offer made to a particular person can only be accepted by him because

he is the only person intended to accept. But ,an offer made to the word at large can be accepted by any person whatsoever To constitute a valid acceptance the assent must be communicated to the offeror.(Boulton v Jones) Essentials for a valid acceptance Acceptance must be Absolute and Unqualified

Hyde v Wrench Acceptance must be Communicated to the offeror Acceptance must be In the prescribed manner An acceptance must be by the offeree. Powell v lee Acceptance must be Express or implied Consideration The consideration is the price of the promise

Quid-pro-quo=something in return. this something may be some benefit, right, interest or profit or it may also be some forbearance, detriment, loss or responsibility upon the other party. Currie v Misa Consideration is what the promisor demands as the price for his promise.

Capacity to contract One of the essentials of a valid contract is that the parties to the contract should be competent to make the contract. every person is competent to contract who is of the age of majority according to the law to which he is subject ,and who is of sound mind ,and is not disqualified from contracting by any law to which he is subject

The position of a minor Minors agreement is void ab initio, and he is incapable of making a contract to pay for any services rendered or goods supplied to him. Leslie v Sheill However, for the necessaries supplied to a minor reimbursement is permitted . A minor may bind by beneficial contract.

Nash v Inman Costa v A.G/Doyle v White City Stadium Position of

Insane persons, Drunkards Foreigners', Companies, Partnership, Embassodors,

Consensus ad- idem ,Free consent One of the essentials of a valid contract is that the parties should enter into the contract with their free consent.consent is said to be free when it is not caused by , Mistake, Misrepresentation, Duress, Undue influence.

Legality Every agreement of which the object or consideration is not lawful is void. eg Forbidden by law Fraudulent purpose Agreement injurious to the person or property of another. Immoral

Opposed to public policy, Agreement tending to injure the public service The terms of a contract Express terms Implied terms Exemption Clauses Termination and discharge of a

contract Performance Agreement Operation of law

Breach Contractual remedies

Damages Specific performance Rescission Injunction Restitutio in integrum Law of Delict/Tort

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