What makes a Valid Contract?
Posted on 19th December 2018
Your local Solicitors in Lancaster, MG Legal, advise that when two parties enter into a contract, whether orally or in writing, there are certain criteria that must be met to ensure that the contract is valid, and therefore legally enforceable. The conditions are as follows:-
1 There must be an offer made;
2 The offer must be accepted;
3 There must be sufficient consideration passing between the parties;
4 Both parties must have mental capacity;
5 There must be an intention to create legal relations.
Now, whilst a few of the points may seem obvious, Solicitors in Lancaster explain that it can be easy to fail to meet all the conditions.
So, to ensure that your contract is valid, it is always advisable to seek advice from an expert. If you are entering into a contract or have any queries about what you’re entering into give one of MG Legal’s team of Solicitors in Lancaster a call on 01524 581 306, drop into our offices in Garstang or Longridge, or contact your nearest solicitors, MG Legal via email at enquiries@mglegal.co.uk, to ensure that you do not get caught out by an invalid contract!
In the meantime, however, to help you on the way, Solicitors in Lancaster, MG Legal, briefly explain what the five points above mean.
1 An offer must be made from one party to another. Although this can seem pretty self-explanatory, an offer could be as follows:
Mr Smith offers to purchase a piece of furniture from Mr Jones’ shop. The price stated is £295, and Mr Smith is happy to pay this price, so offers Mr Jones the full amount.
2 The offer must be accepted. So:
Mr Jones informs Mr Smith that he accepts the price of £295.
3 There must be sufficient consideration. It is important to note that the Courts will not concern themselves with whether consideration is deemed to be adequate (i.e. enough), just that it is sufficient.
So, regardless of whether Mr Jones accepts £1 or £295, as long as there is consideration passing between them the this is valid. In this case, Mr Jones is receiving the sum of £295, and Mr Smith is receiving a piece of furniture, therefore consideration is sufficient.
4 Both parties must have mental capacity. Now, whilst this is not always straight forward to determine, in most cases a person would be deemed to lack mental capacity if they cannot do one of four things:
a) Understand information given to them about a decision
b) Retain the information long enough to be able to form a decision on their own
c) Be able to consider the available information to form the decision
d) Communicate their decision
Some common examples of situations where a person can (but not necessarily does) lack capacity include a person suffering from dementia, a person with learning disabilities, and a person under the age of 16. Whilst in cases such as purchasing something from a shop, a child would not necessarily be refused, in some situations a person has to be over the age of 18 to enter into the contract (for example, buying a piece of land).
In this case, we can presume that both Mr Jones and Mr Smith have capacity.
5 Lastly, there must be intention to create legal relations.
Unless implicitly stated, in commercial transactions, such as purchasing something from a shop or a business contract, it is implied that the intention to create a legally binding agreement is present. However, in domestic situations, such as between parties to a marriage, it is presumed that there is no intention to create a legally binding agreement.
Obviously, some situations can differ from this, or can be governed by additional laws, but for advice on whether a contract you are entering into is going to be legally binding, contact Solicitors in Lancaster on 01524 581 306.
As Mr Jones and Mr Smith are entering into the contract in a commercial environment, it will usually be legally binding, and thus there is an intention to create legal relations.
Whilst the above rough guide does not cover every situation, hopefully it will help to explain the conditions of a contract. It should be said, however, that it is always best to consult your nearest solicitors in Lancaster, Garstang, or Longridge, before signing any contract, or agreeing to any contractual terms orally, and it is always advisable to ensure that you are protected when entering into a contract.
So, if you need legal advice about a Contract, Property sale or purchase, or Grant of Probate application, or you want to make a Will, contact your Solicitors in Lancaster MG Legal, on 01524 581 306 or email enquiries@mglegal.co.uk to see how we can help you.
And remember what Samuel Goldwyn once said..
‘An oral contract isn’t worth the paper it’s written on’
MG Legal - Your Local Solicitors
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