Introduction to Business Law: Evaluation of Validity of contracts in the case of Duncan v Jarred and Susan

Background

Agreements and contracts are fundamentally different. While agreements may not be enforceable by law, contracts are enforceable upon the satisfaction of the elements of a valid contract as defined by common law and various written laws (Binder, 2011). Jarred and Susan are both offered incentives to perform various tasks where Jarred is required to ensure the cleanness of his employer’s shop while Susan was supposed to help eradicate the incidences of illegal parking behind the shop. The two would get £30 and £20 a week respectively. The shop owner, Duncan later failed to pay the sums agreed upon. When determining the appropriate advice to the aggrieved, it is imperative that the elements of a valid contract be evaluated at length with the aim of determining whether the contract between Duncan and the two aggrieved persons could constitute a valid contract enforceable by law.

Explanations on the elements of a valid contract in view of the case

Offer and Acceptance (Contract formation)

An offer is made by an offeror to an offeree. It is a tentative promise made to an offeree subject to a condition or containing a request to the offeree. According to Mckendrick (2005), an offer must be communicated to the offeree before acceptance can happen and is specific to the offeree. This implies that if a person accepts an offer made to a different person, there can be no valid contract. The offer must be distinguished from an invitation to treat which entails making an invitation by another party to make an offer as is common with advertisements. An offer must be accepted within the time frame specified by the offeror. Any failure to accept an offer within the time specified leads to a lapse of the offer, meaning that subsequent acceptance cannot be construed to lead to the formation of a valid contract (Koffman, Lawrence, Macdonald, Elizabeth, 2007). The offer can be revoked by the offeror at any time provided that the offer is yet to be accepted by the offeree. The right to revoke an offer is valid even before the lapse of the period the offer is supposed to be kept open. This is as illustrated in the case of Payne v Cave as shown below:

Payne v Cave (1789)

Fact: The defendant made the highest bid for the plaintiff's goods at an auction sale, but he withdrew his bid before the fall of the auctioneer's hammer. Held: It was held that the defendant was not bound to purchase the goods. His bid amounted to an offer which he was entitled to withdraw at any time before the auctioneer signified acceptance by knocking down the hammer (Cases on Formation of a Contract, 2011)

 In this case, the offer was made by Duncan to Jarred and Susan. The offer was to pay the specified sums of money to the offerees upon delivery of the specified benefits.

Acceptance of the contract produces the obligation to the contract on the part of the offeror. Acceptance is only valid where it is presented in the manner specified by the offeror. This acceptance may either be verbal, written or in any other form specified by the offeror. Acceptance is unconditional as it signifies the acceptance of the terms set out by the offeror. Any demands for new conditions constitute a counter-offer and can therefore not be considered as an acceptance. In this case, both Susan and Jarred accepted the offer constituting a contract that could be enforceable if the contract would be found valid. The validity of a contract entails the existence of all elements of a valid contract as specified by law.

Consideration

A consideration is a valuable thing that is offered to an offerer by the offeree in exchange of the offer specified in the contract. The adequacy of the consideration is often not questioned provided the two parties enter into the contract with full knowledge of the offer and consideration involved. The offer is £30 for Jarred and £20 for Susan. The consideration in the case of Jarred was the perfect cleanness of the shop while in Susan’s case; it was the emptiness of the parking lot behind the shop which Susan was supposed to enforce by ticketing drivers who parked at the specified spot on behalf of Duncan. However, consideration is valid only where there is no pre-existing obligation to perform the tasks outlined in the contract. The legality and morality of the consideration is also crucial in ensuring the validity of a contract. In this instance, the consideration is invalid in both cases (Chen-Wishart, 2007). Jarred is already employed as cleaner. One of his duties is to ensure that the shop is spotlessly clean at all times. Entering into a contract requiring him to clean the shop constitutes forming a consideration involving a pre-existing obligation. In the case of Susan, she as a traffic officer is a public servant who is mandated to among other things, prevent illegal parking. This means that Susan was already obligated to ensure the area behind the shop remains empty prior to the contract. This contract therefore delves into an area where obligation pre-existed. Moreover, there were moral implications of the consideration. Offering incentives to public servants to perform their duties is considered immoral on the part of both the offeror and the public servant (Chen-Wishart, 2007). The consideration also involved ticketing drivers on behalf of Duncan hence implying that she would be performing private duties while working as a public servant. This certainly constituted an illegality. Where a consideration is opposed to public policy, it is considered invalid.

Intention to create legal relations

The intention to create legal relations is an important component of any valid contract. This requirement draws a clear line between domestic agreements and commercial agreements where the latter are mainly considered to be intended to create legal relations. The intention to create legal relations can be evaluated by the original intentions of the parties involved (Stone, 2009). Where the parties intended to be bound by the terms of the contract, it constitutes the intention to create a legal relation. It has not been explicitly stated whether Jarred is fully employed by his father or has been offering services as a result of some domestic arrangement with the father. However, it is clear that a father son relationship existed between Duncan and Jarred where Jarred worked at the shop with the obligation to ensure the cleanness of the shop. It would appear that the contract could be lean more towards being a domestic agreement. Moreover, given that the incentive to ensure the shop is spotless covered an already existing obligation, it would seem that there was no intention to create a legal relation ab initio. However, where the offeree can prove that they heavily relied on the promise in the execution of a task, the courts may after due considerations opt to waive the requirement for the intention to create legal relations. In the case of Susan, the existence of legal relations was already made impossible by the fact that the consideration was against morality and public policy. A legal relation cannot be created through a contract agreement where the consideration constitutes an illegality.

Legal capacity and free consent

A contract is valid when it is formed between parties that are legally mandated to enter into binding agreements. This includes persons that have already attained majority age and persons of sound mind. The contract must also be consented to freely. This implies the absence of coercion, misrepresentation, fraud, mistake, and undue influence. In both Susan’s and Jarred’s case, the contract can be said to have been consented to freely by the parties involved.

Certainty

 The certainty of a contract refers to the level of clarity of the terms and conditions of the contract. The importance of certainty was further enhanced by the Case of Schweppe v Harper where the court ruled that uncertainty could render a contract unenforceable (LLB recent developments, 2009). In the case of Jarred v Duncan, it was impossible to define the relationship between the tow. It was not clear whether Jarred was fully employed at the shop or was simply offering voluntary service. This would have made it impossible a court of law to make a determination on whether or not the contract was enforceable.

Conclusion

Whether or not Susan and Jarred can seek redress for the enforcement of their contract with Duncan is highly dependent on the contract validity. Several elements of a valid contract have been satisfied. Such elements include the existence of an offer and its acceptance as well as their free consent. However, for a contract to be valid, all elements have to be satisfied. In this case, the element of consideration lacks the requisite legality. So is the absence of the intention to create a legal relationship. In view of the fact that the contracts were not valid, it must be concluded that Susan and Jarred have no legal recourse and should therefore forfeit the incentives promised.

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References

Binder, P.Z., 2011. Binder on Contracts. (Online) Available at: http://www2.gsu.edu/~rmipzb/contracts.htm (Accessed 12 April 2011)

Cases on Formation of a Contract, 2011. Cases on Formation of a Contract. (Online) Available at: http://a-level-law.com/contract/agreement/cases.htm (Accessed 13 April 2011)

Chen-Wishart, M 2007, Contract Law, Oxford: Oxford University Press

Koffman, Lawrence, Macdonald, Elizabeth, 2007. The law of contract. Oxford: Oxford University Press

LLB Recent Developments, 2009. Recent Developments 2009: 2650040 Elements of the law of contract. (Online) Available at: http://www.londoninternational.ac.uk/current_students/programme_resources/laws/llb_diplaw/recent_dev/elements_law.pdf (Accessed 12 April 2011)

McKendrick, E., 2005. Contract Law - Text, Cases and Materials. Oxford: Oxford University Press

Stone, R 2009, The Modern Law of Contract, New York: Routledge- Cavendish