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According to Ryan (2005), a contract is a formal and legally binding agreement made between two or more parties. It has specific terms between the persons involved where there is a promise to do something in return for a benefit known as consideration. A contract of law has the following elements offer, capacity, acceptance, intention, legality, and consideration. The paper will look into the elements of a legal contract and analyze a situation with the purpose to determine whether or not the parties had a legal agreement.
Offer is a basic element of a contract; it is a proposal by one party to enter into a contract with another. It may be written, implied on the conduct of the one offering, or by word of mouth. An offer must be clearly stated.
Acceptance occurs when the person required to answer the offer agrees to it. It may be in writing or by word of mouth. Only what was offered by the party initially can be accepted, on the same conditions; however, a counter offer can be brought up if there is suggestion of new terms which can either be rejected or accepted. An agreement comes into force when both parties accept the offer.
Capacity refers to the legal ability of a person to enter into a contract. Any person is at liberty to enter into a contract except minors, people of unsound mind, the corporations and persons who have been declared bankrupt by a court of law. The capacity of the above persons is restricted by the law of contract. In our case, Jim and Laura Buyer are of sound mind and can enter into any contract.
Consideration in a contract is the bargain element. One party offers a promise which is accepted by the other party as a price for the promise that is one party promises to do something for the other expecting something in return. The price must be of value although it does not necessarily have to be money but must be of some benefit to the other party. A contract must be supported by some valuable consideration for it to be binding.
Intention refers to the willingness to enter into legal relations. The parties involved in the agreement must intend to enter into legally binding contracts, they must be willing and able to enter into legal relations. The parties involved must understand that the agreement they are entering into is enforceable by law and must be stated clearly in the contract.
The contract must be legal. It must be enforceable and consistent with the public welfare and must be entered into for a purpose that is lawful.
In the case of Jim and Laura Buyer, there was no contract for the purchase of the automobile. They did not enter into a contract with the local car dealership to purchase the blue sedan.
There was no definite and clearly stated offer at hand to do anything, Jim and Laura did not receive any offer from Stan, the sales person, for the purchase of the car. No offer was put forward by the automobile company to enter into a contract either written or by word of mouth, therefore, there was no contract for the purchase of the car.
For a contract to be legally binding, it must be accepted. There is no offer at hand to be accepted either by word of mouth or by written means. Acceptance occurs when the person required to answer to the offer agrees to the offer in question, since Jim and Laura Buyer did not get any proposal of an offer in the first place there was no offer to be agreed upon and, therefore, there was no contract for the purchase of the car because an agreement comes into existence when both parties, that is, the buyer (Jim and Laura) and the seller (local car dealership represented by Stan) agree on the offer (Frey & Frey 2001).
A contract of law requires that the parties must be willing and able to enter into legally binding agreement. This is referred to as intention. Jim and Laura did not intend to enter into a contract with the automobile company because on the way home from the dealership, they changed their mind about buying the blue sedan simply because they were not ready for that cost. They opted to pay a deposit to hold the car for a day so that they could consider the purchase of the car (blue sedan) and were promised by Stan the salesman that the deposit was refundable however no documents were signed as proof that payment was made. Payment of the deposit was to hold the car for only a day and was not meant for the purchase of the car in question; therefore, there was no contract between the parties for the purchase of the car.
A contract of law must be supported by some valuable consideration for it to be legally binding. It is the bargain element, that is, a promise made by one party which is then accepted by the other party as a price. Jim and Laura Buyer did not give anything in return for the car. They did not promise to pay for the car. They were thinking of purchasing it but did not make it official. The payment they made was not for the blue sedan but for holding the car for a day. For the contract to be binding Jim and Laura Buyer would have promised to pay a specific amount of money in return for a promise from the local car dealer.
In conclusion, there was no contract for the purchase of the car by Jim and Laura Buyer because there was no offer made in the first place and, as a result, no acceptance of an offer. Furthermore, there was no intention of the parties to enter into a legally binding agreement. And lastly, there exists no consideration for the contract to exist.