The party’s intent in contract law is an important ingredient to the formation process for the legal relationship to be created. The formation of a contract falls under the objective or the subjective elements all of which are affected by the deciding factor. The dominance of the offer of each party in the contract is what determines the nature of the contract that will be formed. The contracting parties can either express “intention to be bound” or the “intention to create legal relations”. The intention is determined on the grounds of what a reasonable person would have said or done. The connection between two, therefore, does not rely on the actual actions or words of the parties but rather the judgment of an import of what a reasonable person would do (O’Byrne, 2015). The objective and subjective elements of the formation of the contract is the basis for the intention to contract that is formed between the parties. The relationship between legal and commercial standings of a contract is the major component when it comes to making a distinction between the two ways of formation of a contract.
When in a commercial environment, for instance, the contracting parties will come up with a common understanding of what their transaction is all about. As such, the entire process is largely subjective drawing from their actual goals, motives, and actual intent. In the legal view, however, an objective view is adopted in which contract formation is by the expressed intentions by both parties. The intention to contract whether “intention to be bound” or “intention to create legal relationships” forms what is then regarded as the objective approach from either of the parties. For example, if a party comes up with a letter that can be viewed in the eyes of a reasonable person as an intention to contract, then by law such a party will be obligated to contract even though the party did not intend to contract. In this regard, even though the party saw himself or herself as simply putting forward a proposal for discussion, the contract would be considered valid because of the reasonable reference from the other party.
The actual intent of a potential contracting party is invalidated when it comes to the consideration of whether a contract has happened or not. The outward appearance in actions and speech directly makes a contract valid or invalid. The connection between the two focusses mainly on the representation that is given by the parties which form the larger conviction of the presence of a contract or the lack of it. The actual intention of the party does not count when it comes to the contracting status. What a man said or did is the ultimate determinant for a contract that was to be entered into or rejected. The rest of the acts considered within or outside of the agreed framework will not be considered as instruments of the contract since they do not add to the contractual capacity of either party that is primary to the contract.
The objective nature of looking at the contract law is having a view that looks at the process in the formation of the contract. Different from a commercial point of view in which the contracting parties reach a common ground of understanding of the instruments of a contract, the legal contract does not have to have the two parties reaching a common understanding of the transaction. Instead, the two contracting parties can simply have a common standing on the two primary steps of offer and acceptance (Marson and Ferries, 2018). These two forms a significant portion of a contract in such that if a party acts or says something in the proposition of a contract reasonably, then it can out rightly be considered as a valid contract and the involved parties are legally bound and obligated to do as the contract dictates.
Just as English law, both instruments of a contract are tied to the offer and acceptance. Upon the satisfaction of the two then there is an equal balance of the determination of the seriousness of the terms that are in the contract. There are different ways in which contracts can be formed. One such way is through bargaining. For this method of contracting, a party will decide for instance to offer a product or a service at a fee. The service rendered will be charged at a certain price. The seller and the buyer discuss the price and additionally agree on the mode of payment, the place, and the time of purchase. These details, therefore, add up to the ultimate decision that is made by either of the sides whether to enter into the contract or not (Lewinsohn, 2019). These types of contract transactions are straightforward and occur several times a day.
The other way in which a legal contract is signed is through the offers and the invitation to a treat. This critically analyses the three major characteristics of an offer for it to qualify to be considered in a contract. The offer therefore must refer to the terms upon which the person offering is willing to contract with other people. Secondly, the terms must be sufficiently certain and the person offering must give sufficient reason or intention to be bound without having reservations as soon as the terms are accepted by the person that bidding or buying.
Breaches of contract ma tale different forms including defective performance, delayed performance, and complete non-performance where the consequences entirely depend on the term that has been broken. Before suing for breach of contract, claims have to be set out in the particular of claims where the facts on how the breach occurred on the balance of probabilities are conducted to obtain a remedy. Breaches can be distinguished when they are either repudiatory and those that are not. When a party shows that it is no longer in a position to substantially perform its obligations under a given contract or it is unwilling to do so, they go into repudiatory breach. The other case happens of breach happens when the given party has no right to terminate a contract. In a law case on the repudiatory breach, as published by Legal Alert, the breach was meant to end the contract automatically without opting to continue with it.
The case involved seller shipping containers from a shipper to transport cargo to a buyer. It involved liquated damages clause where the shipper was to make daily charges for any day empty containers were not returned after delivery (Singh, 2016). The clause provided that payment of a fixed sum in case a breach happened that would cater to protracted and expensive disputes over the compensation amount payable. The buyer, however, failed to collect the cargo even after the seller had passed the ownership making the seller unable to unpack and return the containers to the shipper. The seller, therefore made it open-ended as the liability to pay for the shipper was on him as he could not force the buyer to collect the cargo leading to a charge of the repudiatory breach as he could not return the containers. The High Court argued their ruling on the basis that the shipper had no legitimate interest in affirming the contract pushing them to treat the breach as an ending contract. An appeal on the case was made that agreed with the high court that the contract had been repudiated and had ended with different reasoning of the delay that frustrated the commercial purpose of the contract.
One of the factors that distinguished this case of the breach as a repudiatory breach its seriousness to the parties involved (Arvind, 2019). The breach is bound to affect the shipper adversely, materially, and substantially as the more, the seller failed to pay for the return of the container, the more he failed to meet the compliance with the terms of the contract binding them. It is a serious repudiatory breach where the seller has failed to fulfill his obligation as required by the contract rendering the serious and a hindrance for the continuance of the contract and, therefore, calling for immediate termination. Another factor distinguishing the case law as a repudiatory breach is the seriousness of the term that was breached. According to the contract between the seller and the shipper, payment of the containers were to be made daily. These were express terms that were set by the two parties to agree on the payment. No court was involved in the contract to make the seriousness of the term implied. The express terms of the contract were set to ensure that the payments were adhered to in time. Violation of the seriousness of the express terms of the contract rendered the breach a repudiatory breach. The breach gave rise to liability to the shipper who wasn’t receiving any payments which would have led to misrepresentation since the aggrieved party relied on the statement of the contract.
The terms of any contract play an important role in avoiding breaches. They layout the prices to be paid as well as the subject matter of a contract. Between the shipper and the seller, the terms were clear on the prices and how they were to be paid. The parties involved including the buyer had the option of using their terms as conditions, warranties, or innominate terms. The parties might not have found it straightforward to state which of the terms to use as no one anticipates termination of a contract through the repudiatory breach (Gayan, 2019). However, for condition terms, the aggrieved party which is the shipper, at the time of breach of the contract, is given the right to terminate the contract, affirm it or in this case, claim for the damages caused for no using the containers for days due to failure of the seller to make payments. If the terms chosen were warranty, the shipper would not have the choice of terminating the contract but instead gets the right to claim for the damages caused. Between the two types of terms, the condition is the fundamental term to be used contracts as it goes to the heart of the contract. daily payments in the contract were to be held as a condition. For a warranty, it gives assurance to the aggrieved on the factual matter. In between condition and warranty terms, the parties could use innominate terms where for the repudiated breach, there would be a remedy depending on its effect at the time it happened. Substantial effects on the shipper give him the right to end the contract and claim charges. Otherwise, it is only the charges that would be claimed. Since the termination of the contract ended up in court, the contract was based on condition terms which considered the most important part of the terms of the contract and the decision supported by both the High Court and the Court of Appeal.
Marson, J., & Ferris, K. (2018). Business law. Law Trove. https://doi.org/10.1093/he/9780198766285.001.0001
O’Byrne, S. (2015). CASES AND NOTES SUMMARY FOR CONTRACT LAW. S3-us-west-2.amazonaws.com. Retrieved 18 August 2020, from https://s3-us-west-2.amazonaws.com/cans/Contracts+CAN+-+O’Byrne.pdf.
Lewinsohn, J. (2019). Paid on Both Sides: Quid Pro Quo Exchange and the Doctrine of Consideration. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3471850
Arvind, T. (2019). Contract law (2nd ed.). TT Arvind, Contract Law (2019, OUP, 2nd edn.), 449.
Gayan, R. (2019). Terminating Contracts under English Law. Retrieved 18 August 2020, from https://www.ashurst.com/en/news-and-insights/legal-updates/terminating-contracts-under-english-law/
Singh, G. (2016). Case law: Repudiatory breach of contract may mean contract ends automatically, with no option to continue it. Retrieved 18 August 2020, from https://www.icaew.com/archive/library/subject-gateways/law/legal-alert/2016-09/case-law-repudiatory-breach-of-contract-may-mean-contract-ends-automatically