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The Law of Contract - Formation of Contract

The Law of Contract - Formation of Contract

A contract is  a legally binding agreement made between two parties, usually to exchange goods, services or money. It can be made orally or in writing or even by actions alone. For a valid contract to come into existence, there must be:

  • a clear offer made by one party to the other; and

  • a clear acceptance of the offer by the person to whom the offer was made; and

  • an exchange of consideration (this can be an actual exchange of goods, services or money or a promise to do so in the future); and

  • an intention by both parties to enter into a legal contract (see also intention to create legal relations ); and

  • an understanding by both parties of what they are agreeing to (see also capacity).

Unless all five are present, a legally enforceable contract will not be created.

This unit examines the basic principles of tortious liability and the court system that is used to process claims in the negligence of tort.


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