Business Law LO2
28/11/2013
Contents
Elements of a Contract
There are different elements of a contract that you must take into account when entering one. The following will give an understanding of these and explain their importance.
Capacity
There are four essential elements that affect contract law. The first of these is capacity. This element states that parties in agreement with a contract must have the legal capacity to enter into that contract. There are factors that affect the capacity of a party that either does not give them capacity or limits it. These factors are:
Under 16 – Anyone under 16 does not have the capacity to enter a contract. This is governed by the “Age of Legal Capacity (Scotland) Act 1991.”
Insanity – The insane may not realise what they are entering into, thus, they do not have the capacity to enter into a contract. This makes any existing contracts void, but does not include the purchase of necessities at reasonable prices.
Incorporated Organisation – These organisations use advertising and therefore do not have the capacity to enter a contract or have limitations by terms and conditions agreed on when the business was established. The powers they still hold are called contractual powers that if broken can make a contract void.
Consensus in Idem
Parties have to agree to the same thing and there must be an offer and acceptance that matches the contract subject. A consensus ad idem must be in place before a contract can be formed. This means that there is a meeting of the minds where two sides of a contract must agree on fundamental terms of the contract.
Intention to be Legally Bound
In order to enter a legally binding agreement, parties have to appear to have intended to enter it. The parties must be aware that this will be enforced by courts if they do not do what they agreed to in the agreement. Legally binding contracts are different from other sorts of agreements as the terms agreed on are enforced by law. An example
Contents
Elements of a Contract
There are different elements of a contract that you must take into account when entering one. The following will give an understanding of these and explain their importance.
Capacity
There are four essential elements that affect contract law. The first of these is capacity. This element states that parties in agreement with a contract must have the legal capacity to enter into that contract. There are factors that affect the capacity of a party that either does not give them capacity or limits it. These factors are:
Under 16 – Anyone under 16 does not have the capacity to enter a contract. This is governed by the “Age of Legal Capacity (Scotland) Act 1991.”
Insanity – The insane may not realise what they are entering into, thus, they do not have the capacity to enter into a contract. This makes any existing contracts void, but does not include the purchase of necessities at reasonable prices.
Incorporated Organisation – These organisations use advertising and therefore do not have the capacity to enter a contract or have limitations by terms and conditions agreed on when the business was established. The powers they still hold are called contractual powers that if broken can make a contract void.
Consensus in Idem
Parties have to agree to the same thing and there must be an offer and acceptance that matches the contract subject. A consensus ad idem must be in place before a contract can be formed. This means that there is a meeting of the minds where two sides of a contract must agree on fundamental terms of the contract.
Intention to be Legally Bound
In order to enter a legally binding agreement, parties have to appear to have intended to enter it. The parties must be aware that this will be enforced by courts if they do not do what they agreed to in the agreement. Legally binding contracts are different from other sorts of agreements as the terms agreed on are enforced by law. An example