The law of contracts holds that a contract is a legally binding agreement. The agreement entails rights and responsibilities which are legally enforceable, and for it to exist, certain elements must be present. Sometimes, there are disagreements between parties on whether a contract was formed or not as was the case between Stan, a car salesman, and Jim and Laura. To establish whether Jim and Laura purchased the car, it is essential to analyze the main elements of a contract and vitiating factors to one.
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There are five main elements of a legal contract: offer, acceptance, consideration, capacity, and legality. An offer is a proposal made by one party to another. It is a declaration of a desire to enter into a contract (Poole, 2016). An offer may be oral, written, or implied from conduct. The party that makes the offer is known as the offeror, while the other party is called the offeree. In the case involving the car purchase, Stan is the offeror, and the offer is for Jim and Laura to purchase the blue 4-door sedan.
The second element of a contract is accepted, which refers to the offeree assenting to the offer made by the offeror. Acceptance gives rise to an agreement between the two parties. Similar to an offer, acceptance could be oral, written, or implied from the actions of the offeree. In this scenario, the deposit could be taken as a sign of acceptance. As stated, acceptance can be inferred from the actions of the offeree, and when Jim and Laura left a $100 deposit, Stan could have taken this as an acceptance of his offer.
Third, consideration refers to a promise, good, or service given by one party and accepted by another in exchange for the offer. In most cases, it is the offeree who gives the consideration (Poole, 2016). Consideration is often in monetary terms, but could also take the form of an act such as a service given in exchange for another. Essentially, consideration is value for value trade between the contracting parties. It is
The fourth element of a legal contract is capacity, which means that only people who have legal competence may enter into a contract. This means that they are capable of fulfilling their contractual obligations. Examples of people who cannot contract include minors, people of unsound mind, persons under the influence of alcohol or drugs, and persons declared bankrupt. Since Stan is a car dealer, we can assume he can contract. Similarly, we can also assume Jim and Laura have legal competence since they hold jobs.
The final element of a contract is legality, and it means that the subject matter of the contract must be within the confines of the law. This implies that people cannot enter into a contract that involves illegal trades. The sale and purchase of a car are legal dealings, and this situation contains the element of legality. Aside from the five main elements, there is a sixth minor element known as intention. The intention is also referred to as a meeting of the minds, and its means that both parties must have the aim of entering into a contract (Taylor & Taylor, 2019). They must be fully aware of their rights and responsibilities under the contract.
Jim and Laura did not enter into a contract for the purchase of the car. The meeting between the couple and Stan did not meet all the elements of a contract. First, from the given information, the price of the car is not clear. It is not known how much the couple would pay in exchange for the car. The couple paid a deposit of $100 for the car dealer to hold the car until the next day. However, the actual price of the car is not provided. This means that the contract lacked the element of consideration. Lack of consideration makes a contract void because a legal contract must involve the exchange of items of value.
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Aside from consideration, the given case also lacks intention. The contracting parties must have a genuine interest in establishing a binding legal relationship about the same subject matter (Poole, 2016). While Stan had the intention of creating a legal obligation, Jim and Laura did not. They did not understand what the $100 deposit signified or implied. Since the meeting between the couple and the car dealer does not have all the elements of a legal contract, the contract is void.
The element of intention can be impaired by mistake, misrepresentation, duress, or undue influence. In this case, the intention was vitiated by mistake, thereby rendering the contract void or voidable. In contract law, a mistake refers to an incorrect belief or a misrepresentation of a fact (Taylor & Taylor, 2019). In this case, there exists a mutual mistake. This type of mistake happens when there is a misunderstanding between the party’s intentions. When Jim and Laura paid $100, they thought that the money was meant for Stan to hold the car until the following day. On the other hand, Stan viewed the deposit as a down payment for the car. Hence, there was a mistake as to what the $100 represented. This mistake resulted in the intention being negated thereby voiding the contract.
Aside from arguing that the contract was not formed due to some elements missing, Jim and Laura can also argue that the contract needed to be in writing. Although contracts can be formed through word of mouth or even implied through the actions of the involved parties, some contracts must be in writing. Jim and Laura can argue that a car sale agreement is an example of a contract that should be written. This is because it involves substantial amounts of money and the exchange of a significant asset. In some states, the sale of a well worth $500 and above must be in writing for the contract to be recognized. Therefore, Jim and Laura can argue that an oral contract did not suffice for the given situation. In addition, Stan did not give them a receipt for the $100 deposit, and no documents were signed. The couple may argue that the contract does not exist because it was not in writing.
In summary, a contract does not exist in the given case. There are five main elements to a contract and one minor one. The given scenario does not satisfy all the given requirements for a contract to be legally binding. From the given information, there was no consideration or amount of money agreed upon as payment for the car. In addition, the element of intention was not met due to a mutual mistake. It appears that the parties were not in agreement over the details of the car sale. Finally, Jim and Laura can void the contract by arguing that the purchase of significant assets requires a written contract. In conclusion, since the couple did not enter into a contract, they are not obliged to make further payments for the car since they did not buy it.
Poole, J. (2016). Textbook on contract law. (Ed.). Oxford University Press.
Taylor, R., & Taylor, D. (2019). Contract Law Directions. Directions.