CHAPTER 7. AN INTRODUCTION TO THE LEGAL RELATIONSHIP
Contract: an agreement made between two or more persons that is enforceable at law
- Comes into existence when parties fulfill all elements of a contract that makes it enforceable.
- Different from tort law: if parties comply with the principles laid down for the creation of an
enforceable contract, they are free to create specific rights and duties of their own that the
courts will enforce.
I. HISTORICAL DEVELOPMENT OF THE LAW OF CONTRACT
- Decline of the feudal system and Rise of the merchant class
- Ecclesiastic courts on the basis of breach of solemn promise
II. THE ELEMENTS OF A VALID CONTRACT
1. An intention to create a legal relationship(presumed)
5. Capacity to contract
6. Legality (contract can be made and will be sustained in law-dictated by statutes, public policies)
Other not so important requirement: some must be in writing, in an electronic substitute or take a
Free from vitiating elements such as mistake, misrepresentation or undue influence.
The intention to create a legal relationship: two or more parties agreeing to a consensus on
the terms and conditions that will for their agreement with each other.
- Notion of consensus ad idem or agreement as to the subject or object of the contract.
- Intention must be bound by promise made ( with the intention of legally fulfilling it)
- Generally presumed to exist at law in any commercial transaction because such would be
difficult to prove. Exceptions- promises made by family members and promises advertised on
written or verbal media, as they are made with no fulfilling them.
- If a clear intention to be bound by them is expressed, then the court will treat the promise as one
made with an intention to create a legal relationship.
So, advertisement is an invitation to do business (invitation to ask you to offer purchases),
2 e.g., goods displayed on shelves- invitation to the public to examine the goods and if so
desired by the patrons, offer of purchase be made.
Offer and acceptance:
a. The nature of an offer: Only a promise made with the intention of creating a legal
relationship may be enforced. Plus: condition is attached to it, requiring one party to perform an act in return for
something in exchange.
b. Communication of an offer: An offer must be communicated by the offeror to the offeree
before the offer is capable of being accepted.
- The basis here is that no person can agree to an offer of which he or she is unaware.
- If however, the acceptance takes place before the offer is made, the offeror is not bound by the
- Offer is usually directed to a specific person, that only the person to whom an offer is made may
accept the offer.( offer to public at large is not an offer)
c. Acceptance: A statement or act given in response to and in accordance with an offer.
General rules are:
- Acceptance of the offer must be communicated to the offeror in the manner requested or
implied by the offeror in the offer.
- An act itself may deem it accepted and a notification of acceptance need not be sent to the
- Offer that invites acceptance by post, rules established is that the acceptance of the offer takes
place when the letter of acceptance, properly addressed and the postage paid, is placed in the
post-box or post office.
- The courts have also held that when an offer does not specifically state that the mail should be
used for acceptance, but when it is the usual or contemplated mode of acceptance, then the
posting of the letter of acceptance will constitute acceptance of the offer.
d. Electronic offer and acceptance: An electronic document is deemed to be sent when it
enters an information system outside the sender’s control or, if the sender and the
addressee use the same information system, when it becomes capable of being retrieved