Define Free Contract: Everything You Need to Know
Define free contract means a legally enforceable agreement or exchange of promises between parties.3 min read updated on February 01, 2023
Define free contract means a legally enforceable agreement or exchange of promises between parties.
What are the Requirements of a Contract?
A contract has some critical requirements under the law. They include:
- Offer and acceptance
- An intention to form a legal relationship
- Consideration, i.e., an exchange of value
Bilateral Offers vs. Unilateral Offers
An offer refers to an obligation to uphold certain provisions of a contract, and must approach the other party in a manner that is direct, clear, and purposeful. A bilateral offer occurs when a person (offeror) makes an offer to a single person (offeree) while a unilateral offer takes place when a person makes an offer to a group of people. The majority of offers are bilateral; however, unilateral offers also take place. In unilateral offers, there are no guarantees as the offeror is not aware of the offeree's identity since the offers are made through advertisements.
Is an Offer the Same as an Invitation to Treat?
An offer and an invitation to treat are not the same. An offer is a proposal requesting for an individual to act. However, an invitation to treat involves asking the person a question. An offer lasts until somebody accepts it, or it expires, is rejected, or revoked. However, a revocation will be issued if the offeror does not want the offer to exist any longer. The offeree must be notified of the revocation of the offer, although the offeror is not required to send the notice.
Acceptance is defined as a final assent to an offer's terms and conditions. An acceptance must be recorded either orally or in writing, and all parties must be notified for the execution of the contract. The contract requires that both parties must agree to be legally bound by the terms, considerations, and intentions of the agreement and hold their end of the relationship.
An agreement can be legally binding on both parties even when it was made without any intentions. Both parties are to be notified of acceptance in clear terms, and the silence of one of the parties does not constitute acceptance.
Intention to Create Legal Relationship
Both parties must have an intention to be legally bound by the agreement. The implication is that parties to an agreement must do so out of their own volition. However, it can be difficult to determine the true intentions of the parties to an agreement. For this reason, courts use an objective test to determine the motive of the parties and base their decision on the conduct of both parties.
The law categorizes agreements into two groups including:
- Social agreement, and
- Commercial agreement
Many people presume that social and domestic agreements do not require providing intentions. However, they soon find out such agreements are a basis for legal relations. The commercial contracts require parties to present their intentions for creating an agreement. The intention, in this case, is hard to displace.
Consideration refers to an exchange of value between both parties. Cash is the most common form of consideration, especially in contracts that involve the exchange of goods and services between parties.
Consideration is of two types including:
- Executor consideration, and
- Executed consideration
For consideration to occur, there must be an exchange of value that must be sufficient, but it may not be equal.
The Breach of Contract
Breach of contract can either be actual or anticipatory. The actual breach of contract occurs when a contracting party does not uphold its obligations to the contract or fails to bargain when the contract is due. On the other hand, an anticipatory breach occurs when a contracting party notifies the other party of its intention not to bargain.
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