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Contract Law: Essentials of a ContractDefinition of a Contract:A contract is an agreement which (1) binds the parties and (2) is enforceable in lawIf any one of the above-mentioned elements is missing, there will not be a valid contract.An offer may be made to:1.A single person2.A group of persons3.To the whole worldInvitation to Treat (ITT)An offer to negotiate or an offer to receive offers. Unlike an offer, it is not an indication by theperson making it that he is willing to be bound should the other party be interested in proceeding further.Common instances of invitations to treat:1.Display of goodsa.If display of goods is considered an offer, a seller may not be able to state that he has reserved the goods for someone else or already sold to someoneelse. Further, when a customer tries it on or brings it to the cashier, it might amount to acceptance and he may not be able to change his mind afterwards2.Advertisementsa.As it is unreasonable to expect the advertiser to always have sufficient stocksof the items he advertises unless stated sob.Practical effect of the rule is that if the goods stated are not available, the advertiser will not be liable for breach of contract c.Exception: advertisements may amount to offers especially true of unilateralcontracts – one party makes a promise, the other party does not promise anything. In such situations, advertisements would usually be considered as offers and once the act has been completed, there would be contracti.Prudent for the company to state that the offer lasts for only as long as the stocks of free gifts last3.Company Prospectusa.ITT: company not promising that all applications will be approved or grantedOFFERThree Elements of a Contract1.Offer and Acceptance2.Intention to create legal relations3.Consideration (sufferance)
b.Offer: when potential investors apply for sharesc.Acceptance: when company allots the shares to the investors4.Auctionsa.ITT: auctions that call for bidsb.Offer: when the bidder places the bidc.Acceptance: when auctioneer selects the highest bid and knocks with his hammer 5.Tendersa.ITT: call for tenderb.Offer: when tender is placedc.Acceptance: tender that the company accepts6.Quotationsa.Offer or ITT depends on factors eg what the quotation actually states and whether essential matters have been addressed