Contract Formation
Introduction
A contract is an agreement between two or more parties with a lawful object intended to create a legal obligations between the parties. We enter into contracts almost every day. When we board and take a seat in a bus we are already in an implied contract with the bus company. The law of contract is very different from other laws in that it lays down the rights and the duties which are protected and enforceable under the contract law. It’s subject to a number of limiting principles to which the parties to the contract may create and enjoy the rights and the duties themselves. The major components or elements of a contract are offer, acceptance, capacity to contract and consideration.
A contract can be void, voidable, or unenforceable. A void contract is not a contract at all. While voidable contracts can be avoided at the behest of any of the parties to the contract. Unenforceable contracts are not enforceable in a court of law in an action for remedies.
A contract can come to an end by performance, agreement, frustration, frustrating events, limitations, law reforms and breach. The following are the types and classification of contracts; a) Contracts as per to enforceability, valid and voidable contracts, void contracts, illegal agreements, unenforceable agreements. b) Contracts as per to mode of formation, Expressed contracts, implied contracts, quasi contracts. c) Contracts regarding performance. Executed contracts, Executory contracts, unilateral and bilateral contracts.
There are several factors that can vitiate a contract. These are factors that affect the validity and effectiveness of a contract. These are Duress, undue influence, misrepresentation and lack of capacity. Misrepresentation means a statement of fact that’s not true and was part of the contract between the parties of the contract and which could have induced the parties. Under certain conditions, statements that are false made by the seller of goods and services regarding the product quality being sold may eventually constitute misrepresentation. Where a case of misrepresentation has been proved a remedy of rescission may be allowed and later may be damages depending on the nature and type of misrepresentation.
In contract law, misrepresentation are of two types that’s, the fraud in the factum and the fraud in inducement. The fraud in the factum deals in the other party’s knowledge of contract i.e. if he really knew he was entering a contract in question. If he had no idea about the contract at the time of signing the document, then the contract is void abnitio i.e. right from the beginning. Fraud in inducement on the other hand concentrates on the material fact that the misrepresentation attempted to get the other party to enter and be part of the contract. This misrepresentation of facts made the other party to sign into the contract, without which he would not have entered into the contract. This makes the contract void.
The remedies of misrepresentation in the law of contract are connected to orders for specific performance, when contracts prohibits certain actions or activity then an action of injunction may be instituted.
Undue influence involves a person taking advantage of his position or authority of power over another person where his rights to make free decisions is not possible. Duress, also known as coercion is a situation where a person acts or doesn’t act as a result of threats, violence or pressure against him. It’s a threat of violence or even death to induce another person to act forcefully and who under normal circumstances would have acted differently. Duress in common law is used as a defense to avoid a contract. For a contract to be rescinded in common law then the following must be proved.
- The threat must be of a serious nature that can lead to even death or serious body harm.
- The harm of the threat must be greater than the harm of the crime.
- The threat must be real, immediate and not avoidable.
- The defendant must have found himself in that situation without any input from his own side.
Equitable remedies are the judicial remedies which were developed by the laws of equity during the time of King Henry VII to provide flexible judgments and which were responsive to the needs of the people at the time.
Equitable remedies were established by the Chancery court in England. These were,
- Injunction- This was to estopp a party from continuing with the business or agreement after the disagreement.
- Specific performance. These were the doctrines adopted in common law that compels the wrong doer to compensate and also to carry out his remaining part of the agreement.
- Account profits and restitution. These compel compensation to the aggrieved party.
- Rescission. This action overturns the agreement and each party is entitled to their contribution in the agreement.
- Declaratory of relief
- Rectification
- Equitable estoppels
- Subrogation
- Constructive trusts, equitable lien and compensation.
In election of remedies, under the law of civil procedure, the winning team in the law suit is allowed to choose and decide the nature of remedy that will be convenient and applicable to him. For instance, if a court rules that the plaintiff whose paintings were stolen should be given back an equivalent amount of money or the drawing, he may elect to take the money and forgo the drawing as long as he does not take both of the options.
While terminating the contract, the remedy should be elected and if its inadequate then the aggrieved party should be seek alternative remedy.
References.
Wilmot et al, (2009) Contract Law. Oxford. Oxford University Press,
Simpson, B. (1975) A History of the Common Law of Contract: The Rise of the Action of
Assumpsit, Oxford. Oxford University Press.
Ewan M. (2005) Contract Law – Text, Cases and Materials. Cambridge. Oxford
University Press.
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