Construction projects are relatively massive and consist of multiple direct and indirect parties. A contract ensures that the contractors are bound to the accepted work.

As a stakeholder in construction, you should have a clear idea about the components of a valid contract to hold any party in breach of its conditions. Some factors differ based on the legal system that operates within the country (ex: – English law, Roman-Dutch law) and the context of these components to change with these systems.

But following are the essential components of a contract that are required. (Note that case laws will be listed at the bottom)

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According to English law, an offer is an expression of willingness to contract on terms made with legal intention.

Terminology

Offeror -The party which made the offer called

Offeree -The party which accepted the offer called

Offeror declares offer to;

• A specific person
• Any member of a group of persons
• The public at large (general public)

For a valid offer

• Offer must be definite (Gunther vs Lynn)
• Offer must be serious
• Offer must be communicated to the offeree ( in unilateral contracts offer of rewards for service must be properly communicated to other parties Rex vs Clark)
• Offer must be distinguished from an invitation to treat (Pharmaceutical Society of Great Britain vs Boots Cash Chemists Ltd, Fisher vs Bell)
• Invitation to treat is not an offer; it is a preliminary step for an offer. It invites to get information from third
• parties regarding the transaction.

E.g.: prospectus issued by PLC, paper advertisements, catalogs, inviting persons to an auction, tender notices, price lists, / price tags.

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Acceptance is the unconditional acceptance of the offer. An agreement consists of an offer and an acceptance. An offer may only be accepted by the people for whom it is meant. Any person, anywhere in the world, can accept an offer made to the whole world.

For validity, the consent of the offeree should be communicated to the offeror.

A valid acceptance must be

• Acceptance must be expressed (in writing, verbally, or impliedly)
• Must be unconditional (Hyde vs Wrench)
• Should be communicated to the offeror
• It should be in the prescribed manner (If the offeror has defined a method)
• Acceptance must be made by the offeree or his authorized agent (ex: – managers, or authorized dealers)

Contract law is based on case law rather than legislation, so this affects the laws around acceptance as well.

1)Instantaneous acceptance is essential (acceptance expressly has to reach the offeror)

Entries Ltd vs Miles Far East Corporation

2)Express postal rule – Adams vs Lindsel

3)Silence is not a valid acceptance – Felthouse vs Brindley

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The price of the promise is called consideration, and it refers to how each party benefits from participating in the contract. Each party must receive a benefit, forbearance, detriment, loss, or duty in order for the contract to be legitimate.

This is represented in law as Quid-pro-quo (something in return)

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The parties that engage in the contract must be legally competent in doing so. The contractual capacity is the term for this.

The state’s law stipulated specific requirements, such as legal age to engage in a contract with a third party.

The following legal persons or individuals cannot have contracts with 3rd parties.

• Foreigners – if the country recognize as an enemy country
• Individual partners in a partnership
• Ambassadors (Diplomats)
• Drunken persons
• Insane persons
• Minors

There are few exceptions for minors as if they receive basic needs such as food, education, and accommodation in exchange for financial benefits.

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One of the essentials of a valid contract is that the parties should enter into the contract with their free consent.

Consent is confirmed when the acceptance is not done due to a,

• Mistake – If one or both parties mistakenly enter into a contract regarding a condition of the contract
• Misrepresentation – criminal and innocent are two types of misrepresentations
• Duress – threatened physical violence or imprisonment
• Undue influence – when a person in power influences their subordinate to enter into a contract.

Ex: –

Stronger party	Weaker party
Teacher	Student
Lawyer	Client
Doctor	Patient

A rebuttable presumption is stronger party commits undue influence against weaker parties, which can leader to null and void the contract.

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A contract is an agreement, but not every agreement is a contract. There are certain contracts that are not meant to be legally binding. Domestic and social agreements, for example, are not legally binding unless they include proof of offer and acceptance.

Case laws such as Balfour Vs Balfour and Merit Vs Merit illustrates that domestic contracts are not enforceable by law unless it was intended to be enforceable in the first place.

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Case laws

Factor	Case	Description	Verdict
Offer	Carlill Vs. Carbolic Smoke Ball Company	Plaintiff= Carlill, the lady used carbolic smoke ballDefendant= Carbolic Smoke Ball co.Company advertised they offer 100pounds to any person who gets influenza after using a carbolic smoke ball three times a day for two weeks. Plaintiff used the carbolic smoke ball as advertised and got attacked by influenza during treatments. She sued for 100pounds.	The advertisement was an offer to the whole world and analogically it was possible to make this kind of offer. Mrs. Carlill used the smoke ball to prevent influenza not to recover 100pounds. However, she had seen the offer and her motive was immaterial. (Unilateral Contracts) The company gave 100 pounds. Offer of the offeror may be made to the following categories of persons;to a specific personto any member out of a group of personsto the public at large
Offer	Gunther Vs Lynn	Plaintiff= Gunthing, BuyerDefendant= Lynn, Horse sellerBuyer (Gunther) of a horse .promised seller he would pay 5$ more for the horse or buy another horse from the seller if the horse was “lucky”. The horse wasn’t in the condition buyer believed and dispute aroused.	The condition to pay an extra 5$ for the horse if it was lucky was deemed to be vague to create a binding contract between parties. Promises with uncertain and hard to define terms are not offers. *Offer must be definite
Offer	Rex Vs Clarks	Plaintiff= Clarks, civilianDefendant= Rex, US Criminal Investigation DepartmentUS criminal investigation department displayed different advertisements to get any information of a murder case. Clarks gave the information, however; he hadn’t seen the advertisement.	Plaintiff cannot claim for the reward as he didn’t know about the offer. Especially for unilateral contracts (contracts that only one party promises to perform an act if the other party performs a stipulated act, but the other party is under no obligation to perform), an offer of a reward for services must be properly communicated to other parties.
Invitation to treat	Harris Vs Nickerson	Plaintiff= Harris, a commission broker/buyerDefendant= Nickerson, an auctioneerThe defendant advertised on London papers that an auction of certain brewing materials, plant & office furniture would take place at a stated time and place. The plaintiff traveled to the auction only to find that items that he was interested in had been withdrawn when he arrived. He claimed compensation to recover his expenses and time he wasted in attending the auction on this breach of contract, arguing that the advertisement constituted an offer, and his traveling to the auction was an acceptance by conduct.	The advertisement was not an offer, merely a declaration of intention and price. It was not an offer to contract with anyone who might act upon it by attending the auction. *Just an invitation to treat/offer.
Invitation to treat	Fisher Vs Bell	Plaintiff= Fisher, policemanDefendant= Bell, a sellerDefendant displayed a flicker knife with the price tag. Plaintiff argued it’s prohibited under the Restriction of Offensive Weapons Act 1959	Where goods are displayed in a shop together with a price label, such display is treated as an invitation to treat by the seller, and not an offer
Invitation to treat	Pharmaceutical Society of GB Vs Boots Cash Chemists	Plaintiff= Pharmaceutical Society of GBDefendant= Boots Cash ChemistsDefendant went to the self-service shop in which non-prescription drugs and medicines, many of which were listed in the Poisons List provided in the Pharmacy and Poisons Act 1933, were sold. These items were displayed on open shelves from which they could be selected by the customer, placed in a shopping basket, and taken to the till where they would be paid for. The till was operated by a registered pharmacist. However, the claimant brought proceedings against the defendant for breach of section 18(1) of the Pharmacy and Poisons Act 1933, which requires the supervision of a registered pharmacist for the sale of any item in the Poisons List	The defendant was not in breach of the Act, as the contract was completed on payment under the supervision of the pharmacist. The display of the goods on the shelves was not an offer that was accepted when the customer selected the item; rather, the proper construction was that the customer made an offer to the cashier upon arriving at the till which was accepted when payment was taken. These drugs shown cased on the shelves are for an invitation to treat. Paid under qualified pharmacist so there is no breach of any Act. This analysis was supported by the fact that the customer would have been free to return any of the items to the shelves before payment had been made.
Counter-offer	Hyde Vs Wrench	Plaintiff= Hyde, farm buyerDefendant= Wrench, farm sellerWrench offered to sell his farm to Hyde for 1200 pounds, Hyde declined Wrench offered it again for £1000 as his final offer, Hyde offered back for £950 but Wrench refused. Then Hyde agreed to buy the farm for £1000 without any additional agreement but Wrench again refused, Hyde sued for breach of contract.	There exists no valid binding contract between the parties for the purchase of this property. defendant offered to sell it for £1000, and if that had been at once unconditionally accepted there has been a perfect binding contract. Instead, the plaintiff made an offer of his own, to purchase the property for £950, and he thereby rejected the offer previously made by the defendant The offeror can add any condition to his offer, but the offeree cannot. If he adds any condition, it should be treated as a cross offer or counter offer.
Acceptance	Boulton Vs Jones	Plaintiff= BoultonDefendant= JonesBoulton had taken over the business of Brocklehurst, with whom Jones had previous dealings. Jones sent an order for goods to Brocklehurst, which Boulton supplied without informing Jones that the business had changed hands. When Jones found out that the goods had not come from Brocklehurst refused to pay for them and was sued by Boulton for the price.	Jones is not liable to pay for the good. It is a rule of law that “if a person intends to contract with A, then B cannot give himself any right under it” *To constitute a valid acceptance the assent must be communicated to the offeror by the offeree.
Acceptance	Powell Vs Lee	Plaintiff= Powell, job seekerDefendant= LeePowell applied for a job as headmaster and the school managers decided to appoint him. One of them, acting without authority, told Powell he had been accepted. Later the managers decided to appoint someone else. Then Powell brought an action alleging that by breach of a contract to employ him he had suffered damages in loss of salary	communication of intention to contract on the party. *Acceptance of an offer must be communicated to the offeror by the offeree himself or authorized agent.
Acceptance	Adam Vs Lindsel	Plaintiff= Adams, buyerDefendant= Lindsell, sellerThe defendant wrote to the claimant offering to sell them some wool and asking for a reply ‘in the course of post’. The letter was delayed in the post. On receiving the letter, the claimant posted a letter of acceptance the same day. However, due to the delay, the defendant had assumed the claimant was not interested in the wool and sold it to a third party. The claimant sued for breach of contract.	*Express Postal Rule There was a valid contract that came into existence the the moment the letter of acceptance was placed in the post box.
Acceptance	Entries Ltd. Vs Miles Far East Corporation	Plaintiff= Entores Ltd., London companyDefendant= Miles corp., cathode manufacturerThey were a company that was based in London. They had sent an offer to purchase 100 tons of copper cathodes to the defendants, Miles Far East Corp. Their company was based in Amsterdam and this offer was communicated by Telex, a form of instantaneous communication. The Dutch company sent an acceptance of this offer by Telex to the complainants. When the contract was not fulfilled, the complainants tried to sue the defendants for damages.	*Instantaneous Acceptance It was stated that the postal rule did not apply for instantaneous communications. Since Telex was a form of instant messaging, the normal postal rule of acceptance would not apply and instead, acceptance would be when the message by Telex was received. This general principle on acceptance was held to apply to all forms of instantaneous communication methods
Acceptance	Felthouse Vs Brindley	Plaintiff= Felthouse, potential horse buyerDefendant= Brindley, plaintiff’s nephewFelthouse had a conversation with his nephew about buying his horse. After their discussion, the Felthouse replied by letter stating that if he didn’t hear any more from his nephew concerning the horse, he would consider acceptance of the order done and he would own the horse. His nephew did not reply to this letter and the defendant, Mr. Bindley, ran the auctions but the nephew advised him not to sell the horse. However, by accident, he ended up selling the horse to someone else.	*Silence is not a valid acceptance There was no contract for the horse between the complainant and his nephew. There had not been an acceptance of the offer; silence did not amount to acceptance and an obligation cannot be imposed by another
Consideration [Justa Causa]	Carlill Vs. Carbolic Smoke Ball Company	Plaintiff= Carlill, the lady used carbolic smoke ballDefendant= Carbolic Smoke Ball co., manufacturerCompany advertised they offer 100pounds to any person who gets influenza after using a carbolic smoke ball three times a day for two weeks. Plaintiff used the carbolic smoke ball as advertised and got attacked by influenza during treatments. She sued for 100pounds.	The advertisement was an offer to the whole world and analogically it was possible to make this kind of offer. Mrs. Carlill used a smoke ball to prevent influenza not to recover 100pounds. However, she had seen the offer and her motive was immaterial. The company gave 100poinds. Offer of the offeror may be made to the following categories of persons;to a specific personto any member out of the group of personsto the public at large*Considered as a Unilateral Contract
Consideration [Justa Causa]	Currie Vs Misa	Plaintiff= Currie, a businessmanDefendant= Misa, a brokerLizardi & Co. sold many bills of exchange to Mr. Misa, drawn from a banking firm owned by Mr. Currie, and were to be paid on the next day. However, Lizardi was in substantial debt to Mr. Currie’s bank and was being pressed for payment. A few days later, upon paying in the cheque, Mr. Misa learned of Lizardi’s stopped payments and outstanding debts, instructing his bankers not to honor the cheque. The question arose as to whether the cheque was payable, particularly as to whether the sale of an existing debt formed sufficient consideration for negotiable security, to render the creditor to whom it was paid, Mr. Currie, a holder for the value of the cheque	*Consideration of a particular contract may include Benefit, Rights, Interests, Profits, Advantages, Loses, Responsibilities, Detriment, Forbearance Thus, there can be no legal contract unless there is a consideration in the form of a benefit gained, or detriment suffered arrangement by the parties
Contractual Capacity	AG Vs Costa	Plaintiff= Attorney GeneralDefendant= CostaThe first defendant, who was a minor, entered into a bond with her father as surety agreeing to pay His Majesty a sum of Rs. 300. The condition of the bond was that if the first defendant would complete the prescribed course for the students of the Misanis Training College and immediately thereafter be a teacher in some registered school, for five years, then the obligation shall be null and void. The first defendant presented herself for some examination, and, on failing, abandoned her training. The Crown sued on the bond. The Commissioner of Requests held that the bond was not in the form. Prescribed in the Education Code, the action was not maintainable.	As the bond was for the benefit of the minor, the contract was binding on the minor; and that as the father joined in the bond, the contract was binding on her. The fact that the bond was not in the form prescribed in the Code did not affect the validity of the bond. The amount stipulated even under the English law was like liquidated damages. *Minors can enter into binding contracts for the fulfillment of necessary needs
Contractual Capacity	Nash Vs Inman	Plaintiff= Nash, a tailorDefendant= Inman, a minorNash was a tailor working in Saville Row. Inman was a minor studying at Cambridge University. Nash sold some cloth on credit to Inman for what was approximately £145. Nash sued to recover the money, and Inman pleaded infancy	Inman was a minor and that he already had enough clothing at the time of sale. For this reason, the trial judge found that there was no evidence that the clothing could be considered to be in the class of necessaries and directed the jury to enter judgment in favor of Inman
Reality of Consent [Consensus ad idem]	Raffle Vs Wichelhaus	Plaintiff= Raffles, a sellerDefendant= Wichelhaus, buyerRaffles offered to sell an amount of Surat cotton to the defendant, Mr. Wichelhaus. This Surat cotton would be brought to Liverpool by a ship from Bombay, India. This ship was called the Peerless, but two ships had this name. The complainant and the defendant were both thinking about a different Peerless ship when they agreed to make the sale. One of the ships was due to leave Bombay in October, which was what the defendant had thought for his Surat cotton delivery, but the complainant was referring to the ship that was to leave in December. When the Surat cotton arrived in Liverpool, Mr. Wichelhaus refused to pay, as, in his mind, it was months late.	The contract between the complainant and defendant was not enforceable. When the contract was being discussed, there was ambiguity in the Peerless and what ship was being referred to? as well as no agreement on the terms of the sale. There had been no consensus ad idem or meeting of the minds between the parties to form a binding contract. Mutual mistakes as to the identity of the subject matter of the contract make it void *Lack reality of free consent/ free consent due to a mistake*
Reality of Consent [Consensus ad idem]	Foster Vs Mackinnon	Plaintiff= FosterDefendant= MackinnonDefendant an elderly person signed a bill of exchange on being told that it was a guarantee similar to the one which he had previously signed.(if a blind man, or a man who cannot read, or who, for some reason (not implying negligence) forbears to read, has a written contract falsely read over to him, the reader misreading it to such a degree that the written contract is of a nature altogether different from the contract pretended to be read from the paper which the blind or illiterate man afterward signs)	The mind of the signer did not accompany the signature; in other words, he never intended to sign and therefore, in contemplation of law, never did sign the contract to which his name is appended. *Lack of reality of consent due to false interpretation
Reality of Consent [Consensus ad idem]	Scott Vs Coulson	Plaintiff= ScottDefendant= CoulsonAt the time of entering a contract for life insurance, both parties believed the person whose life was to be insured was living. When in fact he was dead.	The contract was void for mistake as it was a common mistake as to the existence of the subject matter of the contract
Reality of Consent [Consensus ad idem]	Cundy Vs Lindsay	Plaintiff= Lindsay and co.Defendant= Cundy, an innocent third partyLindsay & Co were manufacturers of linen handkerchiefs, amongst other things. They received correspondence from a man named Blenkarn. He had rented a room at 37 Wood Street, Cheapside, but purported to be ‘Blenkiron & Co’, Lindsay & Co knew of a reputable business of this name which resided at 123 Wood Street. Believing the correspondence to be from this company, Lindsay & Co delivered to Blenkarn a large order of handkerchiefs. Blenkarn then sold the goods – 250 dozen linen handkerchiefs – to an innocent third party, Cundy. When Blenkarn failed to pay, Lindsay & Co sued Cundy for the goods.	Lindsay & Co had meant to deal only with Blenkiron & Co. There could therefore have been no agreement or contract between them and the rogue. Accordingly, the title did not pass to the rogue, and could not have passed to Cundy. They were forced to therefore return the goods. *Mistakes as to the identity of a party to the contract can render a contract void
Intention to create legal relationships	Balfour Vs Balfour	Plaintiff= Balfour’s wifeDefendant= Balfour, a civil servant stationed in CeylonThe couple went back to London in 1915, the husband returned alone to Ceylon in 1916 as the wife’s doctors advised not to go abroad again. Husband suggested they should remain separated and agreed to offer wife 30pounds per month as maintenance. The wife sued on the husband’s failure to perform his agreement.	There was no enforceable contract because parties didn’t intend to create legal relations. Hence, no contract between plaintiff and defendant
Intention to create legal relationships	Merit Vs Merit	Plaintiff= Merit, wifeDefendant= Merit, her husbandHusband left wife agreed to pay 40pounds per month as maintenance, the wife can pay the mortgage with that money. After finishing paying the mortgage, he would transfer house ownership from joint names to his wife’s name. Husband wrote those agreements on paper and signed but refused to transfer house later on.	Husband and wife were no longer living together when an agreement was made, hence a less domestic agreement. They must have intended the agreement to be legally binding. That intention was proved by the writing and signing on the paper. Husband had to transfer the house to wife.