• A contract is a legally binding agreement or set of promises between two or more parties that the law will enforce.
  • There are four main elements in a contract: offer, acceptance, intention to create binding relations and consideration.
  • You have rights if the other party to the contract does not keep its promise.

Elements of a Contract

Offer and Acceptance

Before parties are regarded as having entered into a binding legal contract, there must be an agreement. An offer must have been communicated by the offeror (the party making the offer) and the offeree (the party accepting the offer) must have accepted the terms of that offer in circumstances where the parties intended to create legal relations. Offers are often confused with intentions to negotiate. An offer needs clear and precise terms and intention.

Intention to Create Binding Relations

The parties to a contract must manifest an intention to create legal intentions. A court will only enforce a contract if the terms of the agreement are created with sufficient certainty and that the parties have agreed on all the terms necessary to carry out the contract (completeness).


In addition to offer, acceptance and the requisite intent to create legal relations, a valid contract requires the presence of “consideration”. Consideration is the act of forbearance of the one party for the promise thereof is the price for which the promise is bought and the promise thus given for value is enforceable.

  1. Consideration must move from the promisee
  2. Consideration must be something of value
  3. Consideration must be sufficient in the eyes of the law

Key Issues

  • Acceptance must be communicated to be effective. It can be accepted through conduct.
  • Only persons who are parties to a contract may enforce benefits or be subject to burdens arising under it.
  • A contract that is not complying with the requirement that it be in writing is not necessarily void and unenforceable.

Key Considerations for Contracts

Contract in Writing

A contract does not need to be in writing to be enforceable. Two main types of contracts are required to be evidenced by writing; firstly a contract for the sale or disposition of an interest in land; and secondly contracts of guarantee.

Termination of Offer

An offeror can formally withdraw the offer. The general principle is that the offer can be revoked any time before acceptance. If consideration is paid for an option, the offer cannot be revoked. An offer can also be terminated by changes of circumstances, lapse of time, failure of an essential condition of a death of ones of the parties.

Regarding termination generally, there are four methods of termination:

  • performed termination (contract is finished);
  • agreed termination;
  • legal discharge (illegality, frustration); and
  • breach discharge.

Vitiating Factors

These are the elements of a contract that vitiate it (the terms are vital to its formation and existence). Vitiating factors include those that occur before formalizing a contract. It is these factors that can provide a remedy to the innocent party.


Unless a contract has a fixed order, then each party agrees to do everything necessary to allow the other party to gain the full benefit of the contract. Despite this order, it depends on the nature of the relationship and the actions.

The Standard of Performance depends on four factors:

  1. order of performance;
  2. time of performance;
  3. entire performance; and
  4. strict and exact performance.


Misrepresentation is a false statement that induces one party to enter a contract with another. To obtain relief, the representee must show they were misled by and relied on the misrepresentation of fact.

Frequently Asked Questions about Legal Contracts

Q: What is a mere puff?
A: A mere puff is an exaggerated statement where no reasonable person would take it seriously. It is not an offer nor a representation.

Q: What is the postal acceptance rule?
A: This is an exception to the general rule where acceptance is expected to be sent by post. In such cases, acceptance is effective as soon as it is posted.

Q: What is estoppel?
A: The principles of estoppel operate where non-contractual promises and representations have been relied on, and it would be unjust or unconscionable to depart from the assumption.

Q: What is the parol evidence rule?
A: The rule provides that where a contract is reduced into writing and appears in the writing to be entire, it is presumed that the writing contains all the terms of it

Q: What is repudiation?
A: Repudiation occurs when one party is unwilling or unable to perform.

Q: What is undue influence?
A: In situations with no threat, but a more subtle form of influence, the contract may be voided on the basis of undue influence. This is a result of an abuse of a position of power.

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