Firstly, both parties must have the intention to create legal relationship voluntarily in order to have a valid contract. It can be divided into domestic agreements and commercial agreements. There is a rebuttal presumption that domestic agreements are not legally binding as the court does not want to intrude private lives of families unnecessarily. In commercial agreements, there is a very strong rebuttable presumption that both parties have the intention to create a contract that is legally binding. If any party does not fulfill the requirements stated in the agreement, the other party is able to sue that party. Nevertheless, the judges will determine cases by asking questions in regard to “whether the person understand he or she has the obligation bound by law under the agreement” and “whether the contract is certain and precise”. This is illustrated in the case of Esso Petroleum v. Commissioner for Customs & Excise [1976] 1 All ER 117; 1 WLR. 1, House of Lords.

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Offer

Before an agreement can be formed, an offer must be initiated to kick-start the entire process. An offer indicates the willingness of the offerer to enter into a contract based on the offered terms. According to Section 9 of the Contracts Act 1950, an offer can be made expressly, which is in oral or written form; or impliedly, which is by conduct. There are two elements of offer, the certainty of offer and the communication of offer. The certainty of offer refers to the requirement of a proposal to be a definite promise to be bound provided certain specified terms are accepted. On the other hand, under Section 4(1) of the Contracts Act 1950, it is said that the completion of the communication of an offer occurs only after it comes to the knowledge of the offeree. An example regarding the issue of an offer can be found in the case of Harvey v. Facey [1893] UKPC 1, [1893] AC 552.

Acceptance
With the willingness of one party to make an offer, the other party must then make the decision of whether to accept the

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offer and converting it into a promise. This act is called an acceptance. The acceptance of that proposal must be absolute and unqualified by virtue of Section 7(a) of the Contracts Act 1950. Furthermore, the method of acceptance must be definite and in the same manner of the offer or in an agreed upon manner, or in the manner prescribed by the offerer, in accordance to Section 7(b) of the Contracts Act 1950. Other than that, a valid contract must also be done with the consent of both parties, also referred to as a ‘meeting of the minds’. Lastly, under Section 6(b) of the Contracts Act 1950, the acceptance must be made within a reasonable time period, depending on circumstances. An example regarding the issue of acceptance can be found in the case of Ignatius v. Bell [1913] 2 FMSLR 115.

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