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A contract is a agreement of rights and obligation prepared between 2 or more parties that are accepted and enforceable by law. There are 4 vital action needed for the formation of the contract that includes offer, acceptance, intention to create legal relation and consideration.
An offer is a promise between the parties that is willing to accept the terms and condition that is stated in the contract. An agreement is made when the offeree accepts the offer from the offeror. An offer can be done by conduct, in writing or orally. A contract has to be formed to be legally bound to their obligation. Any party whom breach the contract is liable to be sued. An offer can be made to a specific individual, a group of people or to the world.
Acceptance of an offer is the expression of approval to the terms and conditions of the contract from the offeror. The acceptance must be an unconditional and unqualified assent of the offer, otherwise it amounts to a counter-offer. Acceptance of the offer can be made by conduct, in writing or orally. According to general rule, acceptance is communicated when the offeror actually receives the contract.
Intention to create legal relations means that parties of the agreement must intend their agreement to be legally binding. If one of the party breach the contract, the party is liable to be sued in the court. It is important for the parties to obey to the terms in the contract and act as an insurance for both the offeror and offeree.
Consideration is something given, promised or done by a party in exchange for a promise by the other party. Each party should provide something of value to convince the other party to enter the agreement. Promise of one party does not need to be equal in value to the other party’s promise. To enable a recipient of the promise to oblige the promise, he must show that he has given consideration. If such intention is not found, the agreement is not bind.
The advertisement posted on the online site, Cancellable by henry is merely considered as an invitation to treat. Henry is not the manufacturer of the phone. If the advertisement is created by the manufacturer, it may be considered as on offer. The offer is made by the buyer online. The agreement is formed when henry accepts the offer from the customer. This is proven by the case partridge v Crittenden (1968) whereby an online advertisement is merely an invitation to treat, not an offer. Contract will be established if henry accepted the offer. A contract made electronically is legally valid and enforceable.
The advertisement states that “smartphone will be sold to the first buyer who offer me $388” is a statement of price not an offer. It is an invitation to treat, supported by the case study Harvey v. Facey (1893) that it is just to convey information about the price of the phone, not an offer because there is no contract. Henry can choose whether he want to sell and who to sell the phone because he is not legally bound to sell to any particular party.
It is reasonable for henry to sell the phone to whoever that offers the highest price for the phone. Henry does not need to sell the phone to Jason even though he wants to buy it at $368 because he has not accepted the offer. Therefore, henry is not bound to sell the phone to Jason. This is supported by the case study Spencer v. Harding (1870) whereby a contract will made known when the offer is accepted by the offeree.
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