4.1. The Elements of a Contract

4.1. The Elements of a Contract: Formation and Defenses

PART A: CONCEPT & TERMINOLOGY

1. The Basic Equation

For a contract to be legally binding (enforceable) in the Anglo-American system, four essential elements must be present:

Offer + Acceptance + Consideration + Intention = Contract

• Offer: A proposal by one party (the offeror) to another (the offeree) manifesting an intention to enter into a valid contract.
  Note: Distinguish an offer from an "Invitation to Treat" (e.g., goods in a shop window). An invitation to treat is merely an invitation for others to make an offer.
• Acceptance: The unequivocal agreement to the terms of the offer. It must mirror the offer exactly (the "Mirror Image Rule").
• Consideration: This is the most distinct feature of Common Law. It means "something of value" given in exchange for a promise. It is often defined as a "benefit conferred" to the promisor or a "detriment incurred" by the promisee. A promise to give a free gift is generally not enforceable because there is no consideration.
• Intention to Create Legal Relations: The parties must intend to be legally bound.
  • Commercial Agreements: It is presumed there is an intention to be bound.
  • Social/Domestic Agreements: It is presumed there is no intention to be bound.

2. Defenses to Formation (Why a contract might fail)

Even if the elements above are present, a contract may be void (gecersiz) or voidable (iptal edilebilir) if certain defenses apply:

• Capacity: The legal ability to enter into a contract. Minors (under 18), intoxicated persons, and mentally incompetent persons lack capacity.
• Legality: The subject matter must be legal. A contract to commit a crime or one that violates public policy is void.

PART B: INTERACTIVE EXERCISES

Exercise 1: Matching (Key Terminology)

Match the legal term with the correct definition using the dropdowns.

1. Offeror Select Definition... A. The price or value given in exchange for a promise. B. A proposal manifesting an intention to enter into a contract. C. The person who makes an offer. D. The legal ability to enter into a binding agreement. E. An indication of willingness to negotiate.

2. Consideration Select Definition... A. The price or value given in exchange for a promise. B. A proposal manifesting an intention to enter into a contract. C. The person who makes an offer. D. The legal ability to enter into a binding agreement. E. An indication of willingness to negotiate.

3. Capacity Select Definition... A. The price or value given in exchange for a promise. B. A proposal manifesting an intention to enter into a contract. C. The person who makes an offer. D. The legal ability to enter into a binding agreement. E. An indication of willingness to negotiate.

4. Invitation to Treat Select Definition... A. The price or value given in exchange for a promise. B. A proposal manifesting an intention to enter into a contract. C. The person who makes an offer. D. The legal ability to enter into a binding agreement. E. An indication of willingness to negotiate.

5. Offer Select Definition... A. The price or value given in exchange for a promise. B. A proposal manifesting an intention to enter into a contract. C. The person who makes an offer. D. The legal ability to enter into a binding agreement. E. An indication of willingness to negotiate.

Exercise 2: The "Is it a Contract?" Checklist

Read the scenarios. Is there a valid contract? Click YES or NO.

1. Scenario: John promises to give his old car to his brother as a birthday gift. His brother accepts happily.

Hint: Is there consideration?

2. Scenario: A shop displays a coat in the window with a price tag of $50. You walk in and say "I accept your offer."

Hint: Is a window display an offer or invitation to treat?

3. Scenario: ABC Corp. orders 100 widgets from XYZ Ltd. for $1,000. XYZ Ltd. accepts. Both are companies.

Hint: In commercial deals, intention is presumed.

Exercise 3: Multiple Choice (Defenses)

1. A 15-year-old student signs a contract to buy a luxury sports car for $5,000 a month.

a) Lack of Consideration b) Lack of Capacity (Minority) c) Illegality

2. Two parties sign a contract to import banned substances (drugs) into the country.

a) Lack of Intention b) Mistake c) Illegality

3. A person signs a contract while heavily intoxicated and does not understand what they are signing.

a) Lack of Capacity (Intoxication) b) Lack of Consideration c) Invitation to Treat

Exercise 4: Text Analysis (Gap Fill)

Complete the summary using these words: void, consideration, offer, acceptance, voidable

"To form a contract, the process begins with an (1) . If the other party agrees to the terms exactly, this is called (2) . However, the law also requires (3) , which means something of value must be exchanged. If one party is a minor, the contract is usually (4) (meaning the minor can cancel it). If the contract involves a crime, it is (5) from the beginning."

Exercise 5: Legal Logic (Odd One Out)

Click the concept that does NOT belong in the group.

1. Group 1:

Offer

Acceptance

Consideration

Tort

2. Group 2:

Minor

Intoxicated Person

Lawyer

Mentally Incompetent

ANSWER KEY

• Ex 1: 1-C (Offeror), 2-A (Consideration), 3-D (Capacity), 4-E (Invitation), 5-B (Offer).
• Ex 2: 1. NO (Gift/No consideration), 2. NO (Inv. to treat), 3. YES (Commercial).
• Ex 3: 1-b, 2-c, 3-a.
• Ex 4: 1. offer, 2. acceptance, 3. consideration, 4. voidable, 5. void.
• Ex 5:
  1. Tort (Others are elements of Contract).
  2. Lawyer (Others lack capacity).