Elements required for the formation of a valid contract

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Elements required for the formation of a valid contract

What are the basic requirements for making a valid contract? A valid contract normally contains the following five basic elements. In other words, if you have signed a contract for business-related activities, then you will be able to sue the other party if that party does not fulfil the contractual provisions, and vice versa.

This presumption can only be rejected if the parties expressly state that they do not intend to make a legally binding contract. Sometimes you may see the words "subject to contract" printed on a document.

These words have the legal meaning that the document is not a contract, and that all of the contents will be bound by a subsequent contract if the parties sign that contract.

In case of dispute, the burden of proof that the intention was to create a binding contract rests on the person who wishes to rely on the contract.

You may also come across the words "without prejudice". These two words are used to indicate that nothing that is written in the relevant document is legally binding. If no time limit is specified, an offer is valid for a reasonable length of time before the offeror the person who makes the offer can revoke or cancel it.

To avoid potential disputes, however, the offeror should specify the deadline for the acceptance of an offer.


It is also important to note that the offeror cannot take silence as a form of acceptance. This means the offeror cannot say "If I do not hear from you within 10 days, then I will assume that you have accepted my offer and will pay for the product".

An offer must be distinguished from an "invitation to treat", which merely invites other people to make offers but is not in itself an offer.

Examples of invitations to treat include: Acceptance is normally made orally or in writing, but if the contract allows that the acceptance and performance of contractual duties are to be carried out simultaneously, then acceptance can also be made by conduct. For example, when a supplier receives your cheque, that supplier may immediately deliver the goods to you without saying or writing anything.

It is recommended that both of the contracting parties clearly specify and agree to the method of acceptance. If the method of acceptance is not specified by the offeror, then the following rules may apply.

Elements required for the formation of a valid contract

Postal Rule — If it is reasonable to use the post for the offer and acceptance process, then the contract is formed at the time of posting the letter of acceptance, even if the letter is lost in the post. Receipt Rule — When an acceptance is sent by fax, it is deemed to be valid when the message is received, even if the offeror does not in fact read the fax immediately.

United States contract law - Wikipedia

This rule also applies to e-mail messages see section 17 and section 19 of the Electronic Transactions Ordinance. Another important point to note is that a conditional or partial acceptance is only a "counter-offer" and does not constitute a valid contract. In other words, if the person to whom the offer is addressed only accepts some of the terms or proposes some new terms, then that person is not accepting the offer but is making a new offer to the other party.

In the business world, there may be a series of counter-offers before a final acceptance comes out. Money, goods and services are the most common examples of consideration.

You should note that consideration need not be adequate, which means that if the seller or service provider is contracted to sell a product or service at a price that is below the market price, then that seller or provider cannot subsequently go to court to claim the shortfall.

A promise of a gift is not enforceable in law because of the lack of mutual exchange of consideration the recipient does not have to pay anything in return. An exception to this rule is when a contract is executed in a specific form called a "deed"in which case the recipient may not be required to give consideration to the other party.

Elements required for the formation of a valid contract

Any contracts that are made by persons who are lacking in legal capacity are voidable: A minor who fails to pay for "necessaries" can be sued by the seller.LACHES DOCTRINE IS EQUITABLE IN NATURE, WHILE SOL - BY CONTRAST - IS STATUTORY Laches is an equitable remedy that prevents a plaintiff from asserting a claim due to a lapse of time.

This essay has been submitted by a law student. This is not an example of the work written by our professional essay writers. Malaysian contract law.


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1. What are the basic requirements for making a valid contract? A valid contract normally contains the following five basic elements. (i) Intention to create legal relations.

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