Legal Contract Law
The most common definition of a contract stipulates that it is a legal binding form of an agreement; in other words a contract is an agreement that is enforceable by law (John A. Willes, 2009). On the other hand, under the sherman act an agreement defined as a fundamental ingredient or component of a contract (Turner, 1962). Thus, from these definitions, similarity between a contract and an agreement can be concluded. However, there are few elements separate between them, and identify the term contract as inclusive and legally binding form of agreement (Humphries, 2004). In order to form a contract an agreement must be reached between the involved parties. Thus, an agreement is the most essential component of a formal contract; consequently in that sense, any contract is basically an agreement between specific involved parties (Turner, 1962). On the contrary, individuals may reach agreements between them every day, but not in all circumstances these agreement can be considered as legal contracts enforced by law. To be regarded as a contract, an agreement must fulfil the requirements and conditions necessary to form a legal contract (John A. Willes, 2009).
In order to critically analyse the statement “all Contracts are agreement but not all agreements are contracts,” it must be discussed in the light of the main elements of a valid contract. The essential elements of a valid contract respectively are: offer, acceptance, consideration, intention to contract, capacity to contract, consent to contract, legality of form and legality of purpose (John A. Willes, 2009). An offer is a proposal presented by one party to buy or sell goods or provide a service. In more general terms it is a proposal to do or to give something. To be regarded as an agreement, an offer must be accepted by the second party; consequently the second element of a valid contract is acceptance. Acceptance is agreement of the second party or the offeree to the specific terms of the offer (John A. Willes, 2009). Once the offer is accepted it can be considered as an agreement; however to be considered as a contract, it must fulfil the remaining conditions of a legally binding contract which will be discussed respectively.
While offer and acceptance might be inferred from the conduct or the words of the involved parties, the conduct or words must conform to particular rules that have been formed before acceptance could be considered as legally valid (John A. Willes, 2009). These rules have been formed by the courts over time, and they are the remaining elements of a valid contract which must be fulfilled for an agreement to be considered as a contract. These are: consideration, intention to contract, capacity to contract, consent to contract, legality of form and legality of purpose (John A. Willes, 2009).
Consideration means that the goods or services exchanged between the involved parties must be real, adequate and legal (John A. Willes, 2009). Intention to contract refers to involved parties’ willingness to be a part of a legal contract. Therefore, involved parties must know that they are about to form legal relations which cannot be broken or violated (John A. Willes, 2012). Capacity to contract condition states the cases and conditions required for a specific person to be entitled to enter a legal contract. These conditions include but aren’t limited to sanity and maturity (John A. Willes, 2009). A person who is under the age of eighteen is not allowed to be involved into a legal relation (John A. Willes, 2009). For, example, an agreement can be reached between two parties which both or one of them is a minor, but in this case a legal contract doesn’t exist. In this circumstance, the statement under discussion is explicitly applicable. Consent to contract means that a person cannot be enforced to enter a contract, and it should be subject the free will of involved parties. For instance, if a marriage contract is created by forcing or threatening the groom to marry the pregnant pride, it is not considered as a valid contract (Humphries, 2004).
The last two elements are legality of form and legality of purpose; Legality of form means that a valid contract must be formed in accordance with specific legal roles. For instance, Rules specify that a valid house buying contract must be written and cannot be oral. Legality of purpose means that the contact would only be considered as valid and legally binding if it only was made for legal transactions specified by law (John A. Willes, 2012). To illustrate, an agreement could be reached between two parties for the exchange of illegal product; however, a legal contract cannot be established because legality of purpose rule was not fulfilled. Under the previous circumstances, the statement “all Contracts are agreement but not all agreements are contracts,” is valid.
Bibliography
Humphries, A. (2004) Essential Features of a Valid Contract.
John A. Willes, J. H. (2012) Contemporary Canadian Business Law-10th Edition. Mcgrow-Hill.
John A. Willes, J. H. (2009) Fundamentals of Canadian Business Law-2nd Edition. Mcgrow-Hill.
Turner, D. F. (1962) Definition of Agreement under the Sherman Act: Conscious Parallelism and Refusals to Deal.