Formation Issues

Parties

Contracts may be entered by and between natural persons or so-called legal persons, usually companies. They may be entered between businesses and consumers (“B2C”). The business may be a person, as partnership or company. The consumer must usually be a natural person.

Contracts may be entered be entered between businesses/traders (“B2B). Contracts entered by and between private persons / non- business corporate entities.

The benefits of a contract are usually limited to those who are party to the contract. Generally speaking, a third party, who was not a party to the contract can neither sue or be sued under it. The sole remedy is against the other party. This position has been modified by case law in Ireland to some extent. It has been changed by statute in the UK jurisdictions.


B2B and B2C

In the case of business to business contracts, there is very little legislation which affects the terms and conditions of a contract that may be negotiated. The parties may come up with their own terms and conditions. Contract law must determine whether there has been an agreement and if so, what terms and conditions apply.

Contract law applies generally irrespective of the relative bargaining strength of the parties. It may be that if one economically powerful party can dictate their terms and conditions. Contract law will generally uphold them. A contract between businesses, the law largely assumes that each is in a position to uphold its own interests.

In the case of business to consumer contracts, modern consumer protection laws protect persons who contract with businesses, where they deal as consumers. Broadly, this refers to acting in a private capacity. In the sale of goods and supply of services, key consumer protections are implied, which cannot be changed by the terms of the contact / agreement.


Mutual Agreement

Each party to a contract must consent to the terms of the agreement. Generally, one party will request the other, by conduct or words, to do or omit to do something in return for something else. There will be an element of bargain/exchange.

The courts will wish to see that the parties have agreed to the same proposition or terms of the agreement. The courts do not look at the subjective viewpoint of the parties. Instead, they look at how the parties’ words and conduct would appear to a reasonable bystander.

A person may not subjectively wish to enter a contract. If, however, he acts in relation to the other party in such a way that appears to agree to a contract, he cannot claim a secret subjective intention, contrary to the objective appearance.Contract law endeavours to promote certainty in dealings.

There are limited exceptions to this principle, which apply where the person concerned is acting on the basis of a fundamental mistake, duress, coercion or misrepresentation. See the separate chapters in relation to these matters


Exchange and Bargain

The element of bargain and exchange is essential. The may be an actual exchange of one thing for another. Alternatively, there may be an exchange of promises to do or forbear from doing something in the future.

An offer is a clear and unambiguous statement of the terms upon which the offeror is willing to contract, should it be accepted. If a person, irrespective of his real intention, acts in such a way that it appears that he is entering a contract with another, then he will be bound by such contract, irrespective of his private subjective intentions and reservations /intentions.

The mutual promises must be requested, expressly or impliedly by the other party. If two parties simultaneously and coincidentally agree to do something for the other, but not at the other’s request, there is no contract. There must be a requested exchange; “if you do this, I will do that”.


Sufficient Certainty

A contract may exist notwithstanding that an express agreement has not been reached on every detailed point, provided that the principal material terms have been agreed. Other terms may be implied by law, for example in consumer and employment contracts. The courts may imply in terms and conditions which are necessary. Past dealings and trade practice may illuminate the position.

The courts look at the time and surrounding pre-contract circumstances in order to determine the terms and conditions of the contract. They do not generally take account of what took place afterwards. If, however, the parties have performed the contract in a particular way, the later conduct may clarify otherwise unclear terms and conditions.

The terms must be sufficiently certain in order to constitute a contract. An agreement to do something, if one party chooses to do it, is an illusory promise. It is not a real commitment and will not usually suffice to constitute a contract promise.

An agreement to agree is usually too vague to be a contract. However, a contract to pay a reasonable price, which can be objectively determined, (e.g. by an independent expert or arbitrator) can be binding.


Writing not usually Required

There is no general requirement that a contract must be in writing. Some types of contract must be in writing. In some cases, written proof of the contract terms is usually required in order to enforce the contract.

Even where writing is not required, the existence of a written document or record is of great practical assistance in proving the terms of the contract. The old adage that a verbal contract is “not worth the paper it is written on” carrier a significant element of truth.

Contracts can come into existence by conduct as well as by written and spoken words. For example, approaching a shop counter with goods, tendering the purchase price is sufficient to form a contract for their sale and purchase. There are numerous similar everyday examples, such as getting on a bus, hailing a taxi etc.


Battle of Forms

Difficulties of interpretation may arise as to when and if a contract has arisen where parties exchange their own standard forms. There will be commonly a contract where the parties act on the basis of the last document sent without objection

However, once performance commences, it is difficult to deny the existence of a contract. Where parties start performing, the court is likely to find that there is a contract

Provided that it can be ascertained that the parties have reached agreement on all material points, the courts will endeavour to find a contract. This may be the case even though there are differences between the forms and the conditions of each.

Some cases have taken the view that the concepts of offer, rejection, and acceptance may be too rigid in modern commercial practice. However, although it may be difficult to apply the principles of offer, acceptance and counter offer in some complex cases, the principles remain the basis of the determination of whether there is a contract.


References and Sources

Irish Textbooks and Casebooks

Clark, R. Contract Law in Ireland 8th Ed. (2016) Ch.1

Friel, R. The Law of Contract 2nd Ed, (2000)

McDermott, P.  Contract Law (2001) 2nd Ed (2017) Ch.1

Enright, M. Principles of Irish Contract Law (2007)

Clark and Clarke Contract Cases and Materials 4th Ed (2008)

English Textbooks and Casebooks

Poole, J. Casebook on contract law. (2014) 12th edition

Stone and Devenney, The Modern Law of Contract 10th Ed (2015)

McKendrick, Contract Law 10th Ed (2013)

Chen-Wishart, Contract Law 5th Ed (2015)

Anson, Reynell, Beatson, J., Burrows, Cartwright, Anson’s law of contract. 29th Ed (2010)

Atiyah and Smith, Atiyah’s introduction to the law of contract. 6th Ed.

Chen-Wishart, M. (2015) Contract law. 5th Ed.

Cheshire, Fifoot and Furmstons, Furmstons and Fifoot Cheshire, Fifoot and Furmston’s law of contract. OUP.

Duxbury, Robert (2011) Contract law. 2nd Ed.

Halson, Roger (2012) Contract law. 2nd Ed.

Koffman & Macdonald’s Law of Contract. 8th Ed. (2014)

O’Sullivan, Hilliard, The law of contract. 6th Ed. (2014)

Peel, and Treitel, The law of contract. 13th Ed. (2011).

Poole, J.Casebook on contract law. 12th Ed. (2014).

Poole, J.  Textbook on contract law. 12th Ed. (2014)

Richards, P Law of contract. 10th Ed. (2011)

Stone, R.  The Modern law of Contract. 10th Ed. (2013)

Treitel, G. H.  An outline of the law of contract. 6th Ed (2014).

Turner, C Unlocking contract law. 4th Ed. (2014).

Upex, R. V., Bennett, G Chuah, J, Davies, F. R. Davies on contract. 10th Ed. (2008).

UK Casebooks

Stone,Devenney, Text, Cases and Materials on Contract Law 3rd Ed (2014)

McKendrick, Contract Law Text, Cases and Materials 6th Ed (2014)

Stone, R, Devenney, J Cunnington, R Text, cases and materials on contract law. 3rd Ed (2014)

Burrows, A. S.  A Casebook on Contract. 4th Ed.

Beale, H. G., Bishop, W. D. and Furmston, M. P. Contract: cases and materials. 5th ed. (2008)

Blackstone’s Statutes on Contract, Tort & Restitution 2017 (Blackstone’s Statute Series)

UK Practitioners Texts

Chitty on Contracts 32nd Edition, 2 Volumes & Supplement (2016)

The above are not necessarily the latest edition.