Four elements of a valid contract
A contract is a legally enforceable agreement where one party agrees to undertake some actions to the other party for a consideration; for a contract to be valid, there are four elements it has to have they are;
- Legal capacity, a contracting party must have the legal capacity to contract; this means that he must of the age of majority and of sound mind.
- There must be mutual consent of the parties to a contract; there should be not external influence that can influence the decision of one or both parties to enter in the contract.
- Lawful objective; a contract cannot be enforceable if its nature and elements contract laws governing it, it must thus be in accordance to be laws of a country.
- For a contract to be valid there must be some consideration; a consideration is anything of value promised by a party in a contract (Gillies,2004).
Objective theory of contract
The theory of objectivity in a contract implies that for an offer and acceptance to take place, the reasonableness of the offer and acceptance should be considered, thus other than the mutual consent of the parties involved, the offer and acceptance should be reasonable to a rational man. If either party to a contract does not act rational, objective and reasonably, then a contract will not exist.
How the theory apply in Pepsi for Harrier-jet prize
In the case, John D. R. Leonard did not act rationally and reasonably to think that he can enforce a contract that offered Harrier jet for $700,000; the jet cost about $23 million. He is thought to have ignored objectivity when enforcing the contract.
Why the court held that there was not a valid agreement
The court looked into the facts of the case and considered whether there was an offer and an acceptance. Although John D. R. Leonard accepted the offer, he did not act logically and did not consider the external environment. If he had considered the normal cost of the jet and assuming that he is rational, he would have termed the offer as too good to be true.
Advertisement and offers
Advertisements are not offers, but are mere invitation to treat. Advertisement falls short of an offer since the offeree has not taken a step to express of willingness to contract on certain terms set in the advertisement. It thus remains as an invitation to bargain (McKendrick, 2005). .
How does Pepsi for Harrier-jet prize differ from a reward contract
In the case of reward contracts, some compensation is offered by the offeror to the public or specific class of people after the completion of a certain act.
The contract is like any other contract but with a condition set by the offeror; it only becomes consummated contract after the fulfilment of the set conditions and terms. It must be supported by a something of value that is a consideration after performance of a certain act.
It differs with Pepsi for Harrier-jet prize, in the nature of the prevailing conditions of the two cases. Pepsi had the perceived promise in course of its duty but made in such a way that every rational person could realize the contract could not be enforced. In the case of reward contracts, it is expressing lays clear teams of a case. The expressing nature makes it enforceable (McKendrick, 2005).
References
Gillies, P. (2004). Business law. Sydney: Federation Press.
McKendrick, E.(2005). Contract Law – Text, Cases and Materials. Oxford: New Delhi: Oxford University Press.