American Intercontinental University
In the following paper will discuss the four essential elements of a valid contract. Also included is the objective theory of a contract and how it applies to the scenario that was given. Furthermore, an explanation will be given why the court in the scenario held that there was not a valid agreement. In further discussion explains if advertisements are considered offers. Last but not least, an explanation will be given on how the scenario case differs from a reward situation in which a unilateral contract is formed upon completion of the requested act.
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The next element of a contract is the acceptance. In this part of the contract both parties agree upon all terms of the contract and their intentions are made clear to each other (Financial Web, n.d). The acceptance part of the contract is the agreement that can be between two companies, a person and a company or even between two people (Maughan, 2011). M R Curd Limited (2004) stated “the acceptance must be of what the offer stated, if not this is considered as an encounter offer.”
The third element is the intention of legal consequences. The purpose of this element is to inform the other party entering in the agreement that the contract must intend to create legal relations and must understand that the agreement can be enforced by law (Small Business, 2010). Goodchild, Herring and Milosevic (n.d.) stated “a contract cannot be enforce unless the actions agreed upon are legal in the jurisdiction where the contract is made.” Also in this section is where the competent parties section which ensures that the parties entering the agreement are legally eligible to enter into the contractual agreement (Financial Web, n.d.). Financial Web (n.d.) states “This can consist of knowing if the parties are the legal age to agree to the conditions of the contract, or meeting the requirements in its jurisdiction for mental competence.”
The fourth element is the consideration (Financial Web, n.d.). In the consideration each party agrees to give something to the other party (Goodchild, Herring and Milosevic, n.d.). The consideration can be in the form of money for payment; refraining from doing something right; or anything of value (Small Business, 2010). However, the consideration of the contract cannot be something that was promised in the past (Ollek, n.d.). It must be a new promise or a new exchange for the offer to be made valid (Ollek, n.d.).
Now that we know the four elements of a valid contract lets discuss what the objective theory of a contract is. According to US Legal (2011) the objective theory of a contract is a principle states that the existence of a contract is determined by the legal significance of the external acts of a party to a purported agreement, and not by the actual intent of the parties. This basically says that the principle of the theory means the legal significance is based on what the...