Headlines
  • Economies of Scale vs. Economies of Scope

Accounting for Intangible Assets

08 Mar 2012 / 0 Comments

Steve Collings looks at the fundamental principles in accounting for goodwill and intangible assets and also looks at some fundamental differences between current UK GAAP, IFRS and the proposed IFRS for SMEs.As accountants we are all aware that an intangible asset does not have any physical form

Read More...

Internal Rate Of Return: An Inside Look

Gordon Growth Model

Calculating Covariance For Stocks

Financial Accounting
Economics

Economies of Scale vs. Economies of Scope

Generally speaking, economies of scale is about the benefits gained by the production of large volume of a p...

Currency Appreciation and Depreciation

Current and Financial Account Surpluses and Deficits Current account deficits (or surpluses) and financi...

Communication Skills

A Sample Cover Letter For A Job Application

Most jobs ask for a cover letter along with your resume. A cover letter can make or break your case with th...

Communication

  VERBAL COMMUNICATIONThe term “Verbal” implies ‘use of words’ which makes language. Verbal communicati...

Information Technology

    Lesson 4: Creating Charts

    In Microsoft Excel, you can represent numbers in a chart. On the Insert tab, you can choose from a variety o...

Laws

INDEMNITY and GURANTEE

Normal 0 false false false MicrosoftInternetExplorer4 ...

Contract of Agency

KINDS OF COMPANIES

Contract: express and implied terms

Contract: the elements of a contract

Management and Marketing

Interest rate risk management

The management of risk is a key area within a number of ACCA papers, and exam questions related to this area ...

Regional and Sustainable Development Department

RSCG is the Capacity Development and Governance Division of the, Regional and Sustainable Development Departm...

Comparison of financial and management accounting

There are two broad types of accounting information: • Financial Accounts: geared toward external users of...

Financial Management

The Capital Asset Pricing Model

...

Mathimetics

Linear Equation with Video Examples

An equation is a mathematical statement that has an expression on the left side of the equals sign (=) wi...

Straight-Line Equations

Solving Literal Equations

Systems of Simultaneous Equations

SolvingSystemsAlgebriacally

Cost Accounting

Product vs Period Costs

Product Costs: Include all costs that are required to make a product Product costs are: Direct Material...

Manufacturing Overhead

Zero-Base Budgeting

cash budget

Master Budget

Statistics
Audit and Assurance
Economics
Published On:Thursday, 8 December 2011
Posted by Muhammad Atif Saeed

Contract: the elements of a contract


The first step in a contract question is always to make sure that a contract actually exists. There are certain elements that must be present for a legally binding contract to be in place.
The first two are the most obvious:
  • An offer: an expression of willingness to contract on a specific set of terms, made by the offeror with the intention that, if the offer is accepted, he or she will be bound by a contract.
  • Acceptance: an expression of absolute and unconditional agreement to all the terms set out in the offer. It can be oral or in writing. The acceptance must exactly mirror the original offer made.
  • A counter-offer is not the same as an acceptance. A counter-offer extinguishes the original offer: you can’t make a counter-offer and then decide to accept the original offer! But…
  • A request for information is not a counter-offer. If you ask the offeror for information or clarification about the offer, that doesn’t extinguish the offer; you’re still free to accept it if you want.
It is very important to distinguish an offer from an invitation to treat – that is, an invitation for other people to submit offers. Some everyday situations which we might think are offers are in fact invitations to treat:
    • Goods displayed in a shop window or on a shelf.
      • When a book is placed in a shop window priced at £7.99, the bookshop owner has made an invitation to treat.
      • When I pick up that book and take it to the till, I make the offer to buy the book for £7.99.
      • When the person at the till takes my money, the shop accepts my offer, and a contract comes into being.
    • Adverts basically work in the same way as the scenario above. Advertising something is like putting it in a shop window.
    • Auctions:
  • The original advertising of the auction is just an invitation to treat.
  • When I make a bid, I am making an offer.
  • When the hammer falls, the winning ‘offer’ has been accepted. The seller now has a legally binding contract with the winning bidder (so long as there is no reserve price that hasn’t been reached)
N.B: an offer can be revoked at any time before it is accepted, so long as you inform the person you made the offer to that the offer no longer stands.
  • Consideration: each party to the contract must receive something of value.
This is best illustrated by an example: suppose I promise to give you my watch, but you don’t give me anything in return. If I break my promise and keep my watch, you can’t then go to court and make me give it to you. The contract isn’t legally binding: you didn’t give me any consideration for my promise.
So put simply, consideration is the price paid for the other’s promise.
There are four legal maxims that apply to consideration:
    • Consideration must move from the promisor;
    • Consideration need not move to the promisee;
    • Past consideration is not good consideration;
    • The consideration given must be sufficient, but it need not be adequate.
The detail isn’t necessary here, but there is a separate note on them if you’re interested.
  • Intention to create legal relations: if my brother offers me a lift to London, and I say I’ll contribute to the cost of the petrol and then don’t, there isn’t necessarily a binding contract that he can sue me under. If the arrangement is an informal, social one, then my offer to pay for petrol probably wasn’t made with the intention of being legally bound (see the definition of ‘offer’ above).
In general, arrangements of a social nature are presumed not to be legally binding, whilst commercial arrangements are presumed to be intended as binding contracts. Of course, these presumptions can always be rebutted in court by producing evidence to the contrary.
 
For Reference: Author: Deborah Smithies, August 2007  http://blogs-images.forbes.com/benkerschberg/files/2011/04/contract.jpeg

About the Author

Posted by Muhammad Atif Saeed on 22:42. Filed under . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

By Muhammad Atif Saeed on 22:42. Filed under . Follow any responses to the RSS 2.0. Leave a response

0 comments for "Contract: the elements of a contract"

   

Leave a reply

Visit Counters

free counters
Free counters

About Me

My photo
I am doing ACMA from Institute of Cost and Management Accountants Pakistan (Islamabad). Computer and Accounting are my favorite subjects contact Information: +923347787272 atifsaeedicmap@gmail.com atifsaeed_icmap@hotmail.com
  1. Accounting for Intangible Assets
  2. Fair Value Measurement of Financial Liabilities
  3. The Concept of Going Concern
  4. The Capital Asset Pricing Model
  5. Bond Valuation
  6. Asset Management Market Efficiency Asset Management Market Efficiency
x

Welcome to eStudy.Pk....Get Our Latest Posts Via Email - It's Free

Enter your email address:

Delivered by FeedBurner