Introduction
A contract is an agreement between two or more parties and it can be oral, implied or written except where certain specific forms of contracts are required to be in writing. In order to be a valid contract, there must be the essential elements such as offer, acceptance, consideration present in it. These elements are outlined below.
Agreement
The Uniform Commercial Code defines an agreement as the “bargain” between the parties. This is borne out of mutual consent signified by outward actions, oral or written words of the parties to the agreement.
There must be meeting of minds for an agreement to be reached after which neither party can withdraw without the consent of the other party. Formation of contract is characterized by mutual assent (offer and acceptance) ,support of consideration and legality of the subject matter .
Mutual Assent
Offer : An offer is a proposal of one party directed against another (offeree) for acceptance. It can be by acts, words spoken or written directly conveyed to the offeree directly by face to face contact or through any medium such as messenger, mail, wire, email, fax etc capable of being received by the offeree.
The offer must signify intention to make a contract , definite without being vague so that court can determine the actual intent of the parties in case of dispute and be communicated to the offeree. Advertisements, catalogues, brochures and announcements are not offers and are considered as an invitations to offer as they are not definite and not communicated to specific parties.
But a unilateral offer through such advertisements etc are considered as an offer since they are definite and addressed to specific persons “saying whoever comes first or finds”. Unless there is a specific time limit for the offer to be accepted, it will lapse by passage of reasonable time. An offer can be withdrawn before it is accepted but it depends on what constitutes acceptance and when an acceptance is made subject to postal rule .
Acceptance : The offeree must signify his acceptance in the manner stipulated by the offeror within the time specified by him if any. If the acceptance is qualified, then it is his counter offer and the offeror is not bound to accept the counter offer.
Thus, the acceptance must be communicated in the same manner mentioned by the offeror but the U.C.C. permits any medium of acceptance so long as it meets the requirements of the offer and reaches the offeror in time.
However, silence does not constitute acceptance even if the offeror states in his offer that in case of no reply, it will be taken as accepted. The mutual assent can be lacking due to mistake, misrepresentation, duress and/or undue influence .
Consideration
It represents lawful alteration of responsibilities as a result of exchange of consideration of the other person. It is the “quid pro quo” as a thing in return for what the person has offered. It can be an action, forbearance, or promise.
However, adequacy of consideration is not essential to form a valid contract provided the consent is not vitiated by the above said fraudulent actions. It also depends on the capacity of parties and not being contrary to public policy. Moreover, past consideration is no consideration. However, promissory estoppel gives rise to consideration .
Legality of the subject matter
A contract should not be against public policy or in violation of common law or statutory law .
Conclusion
Thus if, If there is no meeting minds between the parties to a contract due to fraud, undue influence, coercion or undue influence, there can be no valid contract. Material mistake, and unconscionably also vitiate an otherwise valid contract.
References
Emerson, R. W. (2009). Business Law. New York: Barron’s Educational Series.
Miller, R. L., & Jentz, G. A. (2010). Business Law Today. Mason, OH: Cengage Learning.