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Essential Elements of a Legal Contract

Question:

Discuss about the Mediation Arbitration and Negotiation System.

A legal contract binds two or more parties to an agreement that is enforceable by law. Contract can be formed between parties who fulfill the essential elements of a contract which include an offer, acceptance, intention, consideration, and capacity. A legal contract does not necessarily have to be constructed on paper; it can be written or oral. The benefit of written contract is that it is easier to prove its validity in the court and the hard copy serves as a written record of term and condition of the contract.

The terms of contract are legally binding upon the parties of the contract, and failure to fulfill such conditions constitutes a breach of contract. A party can file a lawsuit for non-fulfillment of contract’s conditions, and the court can provide remedies by enforcing performance or ordering defaulting party to pay for damages. Other than a lawsuit, there are alternative dispute resolution methods that can be applied by the parties to resolve their dispute like meditation, arbitration, negotiation, and others.

The key issue is that whether a legal contract has been formed between Alan and Bernard management, Damian and Charleen, and if a contract is established then who the contracting parties were.

According to McKendrick (2014), a contract can be defined as an agreement that gives rise to obligations that are recognized and enforced by the law. A valid contract requires fulfillment of essential elements. Following are the essential elements of a contract:

  • Offer: Professor Treitel defines offer as an expression of willingness to contract based on specified conditions that are made with an intention to enforce the acceptance of another party legally (Treitel, 2003). An offer can be written, oral or through conduct of parties. The person offering the contract is called offeror and person to whom the offer is made called offeree.
  • Acceptance: As per Professor Atiyah, acceptance occurs when an offeree gives his/her approval to the terms of the contract by providing consideration or some other valuable thing to confirm the contract (Smith & Atiyah, 2006).
  • Consideration: Consideration in a contract is defined as the value that is offered and accepted by the parties to the contract.
  • Intention: It is necessary that parties to a contract have the intention to bind such contract legally, and the consent must be free from any external force (Chen-Wishart, 2012).
  • Capacity: The parties entering into a contract must have the capacity to enter into a legal contract that means the parties should not be minor, insolvent and mentally insane (Koffman & Macdonald, 2010).

In this case, Alan posted on Facebook his intentions to sell his book along with handwritten notes. Bernard responded to such post, but he did not accept the offer, instead, he provided a counteroffer to buy the book for $150. Alan rejected the offer of Bernard and told him that he will only sell his book at $200 and that he already has an offer. Bernard then decided to accept the original offer of Alan and send him money through the post. The principle of law provides that once a counteroffer is made, the first offer ceases to exit. The court provide in Hyde v Wrench [1840] 49 ER 132 case, if a party rejects an offer for contract and provide a counter offer than the original offer ceases to exist. After the rejection of counteroffer, the party did not have the option to accept the original offer (Rahnavard, 2013). Bernard did not have right to accept the original offer of Alan, and his decision to send him money through post cannot be constituted as acceptance of the original offer. Therefore, Bernard and Alan did not enter into a valid contract.

Case scenario analysis

In case of Charleen, she saw her brother’s Facebook post and told him that she is willing to buy the book. Charleen was taking her GCE “O” level, and she was still a minor. As per Nash v Inman [1908] 2 KB 1 case, a minor is not able to enter into a legal contract by himself (Andrews, 2016). Therefore, the contract between Charleen and Alan is not valid.

Damian was not the Facebook friend of Alan; instead, he comes to know about Alan’s offer through Bernard. He accepted the term of Alan’s contract and sent him a message to show his desire. Damian asked Alan whether he can pay on 4th November and Alan give his acceptance; it created a valid offer between Alan and Damien.

To conclude, the contract between Bernard and Alan is not valid because Bernard provided a counteroffer that terminated his right to accept the original offer of Alan. Charleen is a minor therefore she cannot enter into a legal contract management. In Damien and Alan, there is a clear contractual relationship because Damien fulfills the requirement of a valid contract.

Bernard saw the Facebook post of Alan and decided to buy his book along with handwritten notes. Bernard asked Alan to sell his book for $150 instead of $200. Alan rejected his offer by telling him that he will only sell at $200 price, and he already has an offer. After that, Bernard decided to buy the book for $200, and he sends the money to Alan through the post; Alan received the money on 5th November. In this case, a valid contract did not establish between Bernard and Alan. The counteroffer made by Bernard terminated the original offer of Alan, and Bernard losses his right to accept the original offer. In Hyde v Wrench case, wrench offer to sell its land for $1000 and Hyde provided a counteroffer of $950.

Wrench rejected Hyde's offer, and then Hyde decided to buy his land for $1000. Wrench rejected to sale his land so Hyde files a lawsuit for breach of contract against Wrench. The court held that Hyde did not have right to accept the original offer because he provided a counter offer which terminates an original offer. Similar principle was laid down by the court in Dickinson V Dodds [1876] 2 Ch D 463 case. The court held that if a party failed to accept the offer in time hence no legal contract has established between them (Beale, Bishop & Furmston, 2007). On this ground, it can be said that Bernard did not enter into a valid contract with Alan, so he did not have right to file a suit for breach of contract for not providing his book along with handwritten notes (Anson, Beatson, Burrows & Cartwright, 2010).

Dispute Resolution Methods

To conclude, the counteroffer provided by Bernard terminated the original offer of Alan; Bernard did not have right to accept the original offer of Alan. Therefore, Bernard cannot file a suit against Alan for breach of contract because they did not enter into a valid contract.


The contract between Charleen and Alan did not construct because Charleen is a minor and a minor cannot enter into a legal contract (Nash v Inman, 1908). In De Francesco v Barnum [1890] 45 Ch D 430 case, the court held that a minor cannot into a legal contract that is not beneficial for him (Gooley, Radan & Vickovich, 2007). There is lack of evidence that buying Alan’s book will be beneficial for Charleen during his studies or in the future, therefore, the contract is invalid. In the Felthouse v Bindley [1862] 142 ER 1037 case, the court provided that acceptance cannot be considered valid on the ground that offers were not rejected (Gordon, 2014). The smile passed by Alan is not a valid acceptance because silence cannot be constituted as valid acceptance (Felthouse v Bindley, 1862). Therefore, Charleen did not have any legal rights, and she can only ask for her money back.

Damien did not see the Facebook post of Alan; instead, he comes to know about the offer through Bernard. He decides to buy the book along with handwritten notes and show his desire to Alan thought an SMS. Damian paid $200 to Alan on 4th November in Kaplan Higher Education. On 7th November, Alan gives his original copy of the book to Bernard and buys another copy for Damien; he gives it to him along with his handwritten notes. Damien and Alan entered into a contract for Alan’s book and handwritten notes, therefore the terms of contract have been breached by Alan. Damien has right to file a legal suit against Alan for not giving original copy of the book. Like Redgrave v Hurd [1881] 20 Ch D 1 case, there have been false statements made by Alan, and he misleads Damien into buying his book (Waddams, 2013). Damian can file a suit against him for misleading him into a legal contract through false statement and get his money back.

To conclude, Alan has breach the terms of contract by not fulfilling his duties and misleading Damien into the contract, therefore, Damien can sue Alan and get his money back.

Dispute resolution defines different methods of solution of a dispute between parties through various methods such as mediation, negotiation, arbitration, collaborative law, and litigation (Sourdin, 2008). In case a breach of contract occurs, parties have right to use the traditional method of filing the suit, or they can resolve their disputes between themselves through alternative dispute resolution methods. The courts also encourage ADR methods because it saves precious time and solve disputes more easily instead of the complicated litigation process. In this case, various methods of ADR can be select by the parties.

Meditation is a method of ADR in which mediator is appointed by parties as a neutral third party that facilities and guides the parties of contract to accept a mutually acceptable agreement. The mediator did not focus on breach of contract or which party is guilty of breaching the contract, instead, he helps parties find a common solution that is beneficial for all (Goldberg, Sander, Rogers & Cole, 2014). Arbitration is another method of ADR in which both parties agreed to present their dispute to a neutral third party called arbitrator. The arbitrator hears the entire dispute and gives his decision based on natural justice principles. The decision of arbitrator is binding upon the parties of contract (Goltsman, Horner, Pavlov & Squintani, 2009).


The main advantage of mediation and arbitration is that it saves time and money of parties; the court proceedings require a lot of time and money that can be saved by parties by selecting an alternative dispute resolution method. The arbitrator and mediator establish a close connection with parties and listen to their side of the story that allowed for a fair solution. Selecting these processes also maintains the confidentiality of parties, and they can avoid open courts and transcripts that are public record (Moffitt & Bordone, 2012).

The disadvantages of these methods are that in some disputes, the large corporations and wealthy individuals influence the proceeding in their favor that negatively affect the fairness of case. The parties find it difficult to appeal against arbitrator’s decision which makes it difficult for parties because arbitrator acts as judge and jury and parties’ leave their faith in his/her hands. The cost of arbitration is lower than compared to court proceeding but in few cases the situation is opposite, and ADR method costs more than court proceedings.


In Singapore, mediation facility is provided by State courts and Family justice courts. The arbitration is conducted in Singapore International Arbitration Centre (SIAC, 2016).

The Primary Dispute Resolution Centre will soon be converted into State Courts Centre for Dispute Resolution. Family disputes are conducted in Child Focused Resolution Centre and Family Resolution Chambers.

Private meditation conducted in Singapore International Centre and Singapore Meditation Centre (Singaporelaw, 2017).

References

Andrews, N. (2016). Sources and General Principles of English Contract Law. In Arbitration and Contract Law (pp. 165-175). Springer, Cham.

Anson, W. R., Beatson, J., Burrows, A. S., & Cartwright, J. (2010). Anson's law of contract. Oxford University Press.

Beale, H. G., Bishop, W. D., & Furmston, M. P. (2007). Contract. Oxford University Press.

Chen-Wishart, M. (2012). Contract law. Oxford University Press.

Goldberg, S. B., Sander, F. E., Rogers, N. H., & Cole, S. R. (2014). Dispute resolution: Negotiation, mediation and other processes. Wolters Kluwer Law & Business.

Goltsman, M., Hörner, J., Pavlov, G., & Squintani, F. (2009). Mediation, arbitration and negotiation. Journal of Economic Theory, 144(4), 1397-1420.

Gooley, J. V., Radan, P., & Vickovich, I. (2007). Principles of Australian Contract Law: Cases and Materials. LexisNexis Butterworths.

Gordon, B. (2014). Acceptance by conduct in ecommerce transactions in Australia. Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia, 28(2), 3.

Koffman, L., & Macdonald, E. (2010). The law of contract. Oxford University Press.

McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).

Moffitt, M. L., & Bordone, R. C. (Eds.). (2012). The handbook of dispute resolution. John Wiley & Sons.

Rahnavard, D. (2013). Course Notes: Contract Law. Routledge.

SIAC. (2016). Arbitration in Singapore. [Online] SIAC. Available at: https://www.siac.org.sg/2014-11-03-13-33-43/why-siac/arbitration-in-singapore [Accessed at 26/11/2017]

Singaporelaw. (2017). Introduction to Meditation. [Online] Singaporelaw. Available at: https://www.singaporelaw.sg/sglaw/laws-of-singapore/overview/chapter-3 [Accessed at 26/11/2017]

Smith, S. A., & Atiyah, P. S. (2006). Atiyah's Introduction to the Law of Contract. OUP Oxford.

Sourdin, T. (2008). Alternative dispute resolution (pp. 1-490). Thomson Lawbook Company.

Treitel, G. H. (2003). The law of contract. Sweet & maxwell.

Waddams, S. (2013). Mistake in Assumptions. Osgoode Hall LJ, 51, 749.

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