Contracts are agreements that the law enforces. The law provides remedies when an agreement is broken or acknowledges the performance of an agreement as a duty. Contracts come into play when a duty does, but may also arise by a promise or agreement with one of the parties. For a contract to be legally binding, an agreement has to be made and exchanged for satisfactory consideration. A good consideration is beneficial in that the concerned party receiving the consideration gets one that is reasonable and fair in the form of a contract. For instance, if the promise happens to be a gift, then it is not considered as one to be enforced by the law because the satisfaction that the guarantor gets from the act of giving is not regarded as adequate consideration.
However, some promises that are not considered as contracts can be enforced if one side relies to the loss and assurances of the other side. Contracts are especially governed by state statutes, private law and common law. Private law looks at the agreements made by the parties who are exchanging the promises. This law may override a number of the other laws that are made by the state. Statutory law requires some contracts to be put into writing, as well executed with specific formalities. Alternatively, the parties involved enter an agreement that is binding without signing any formal written document.
Essentials of a Contract
A complete contract should have a few essential things; one of them is that it should be lawful. It should also be of possible performance and within the capacity of the contract. A good contract should also have serious intentions and base on the union of minds of the parties involved and a consensus between them (Poole 2012). It should not be vague, and the intention of the participants should be communicated. This means that the contract does not necessarily have to be written unless there is a particular statutory requirement that it should be written. A verbal contract is equally as valid as a written one as long as the one alleging the contract has proof of agreement on particular terms. Writing, therefore, becomes important only for purposes of evidence, though it does not stand as a requirement. For there to be an agreement, there has to be an offer and an acceptance. This is only a general rule and does not necessarily follow that it must appear in each contract.
Offer and Acceptance
An offer is a statement made by a person referred to as the offerer, showing his/her willingness to contract which statement that is made in the awareness that it will be binding in the case that the other person called the offeree accepts (Poole 2012). There is a distinct margin between a firm offer and an invitation to treat or negotiate. A firm offer is unconditional and unqualified. It states all the terms and material facts forming the basis of the offer and becomes a contract once the other party accepts the offer as it stands. This means that a negotiation does not really make a very good offer.
Carlill v Carbolic Smoke Ball Company
The company inserted an advertisement in the newspaper offering to pay 100 pounds to anyone who contracts the increasing epidemic of influenza or any disease caused by taking cold after having used their smoke balls 3 times daily for two weeks. According to the printed directions supplied on each ball, the advertisement went on to say that 1000 pounds had been deposited in a certain bank showing its commitment to the matter. During the last epidemic of influenza, many thousands carbolic smoke balls were sold as preventives against the disease, but in no ascertained case were the disease contracted by those using the smoke balls. The plaintiff, alleged on the faith/strength of an advertisement, bought one of the balls at the chemist and used it as directed three times a day for 2 weeks, but she got the influenza and claimed the 100 pounds reward price. The court of first instance held thatshe was entitled to the 100 pounds, but the defendants appealed; however, their appeal was dismissed. In point of law, the advertisement in this case was an offer to pay 100 pounds to any member of the public who would have performed at those conditions set out in the newspaper. The performance of those conditions was held to constitute acceptance of the offer.
A contract is only deemed binding if it complies with the law. In the case where the contract does not comply with the law, then it is considered illegal and unenforceable. This could occur in two forms; statutory illegality and common law illegality. With statutory illegality, an agreement contravenes a piece of legislation either in the form of a statute, by the law, or statutory legislation. This automatically makes the contract null and void. For example, in Wilken v Kohler, it was important to note that where a contract contravenes a statutory enactment which does not expressly declare the contract void, the intention of the legislature must be asserted.
At times, looking consciously at the statutory prohibition, the two parties can make their contract in such a way that the contract evades the statutory provision, which makes that contract illegal.
Common Law Illegality
Common law illegality is applied to a contract that is dissimilar to public policy, common law or good morals. A Dutch scholar defines public policy as a stipulating performance, which does not pose immoral, or illegal issue, but which the court on the ground of experience does not enforce because performance will in the end affect the attention of the society. In general, a contract is said to be divergent to public policy if it affects the interests of the society and runs contrary to social economic expedience. This was seen in the case of Sasfin (Pty) Ltd v Beukes, where the court held that:
Agreements which are clearly detrimental to the wellbeing of the society, whether they are differing to law or run contrary to social or economic expedience will therefore on the grounds of public policy not be imposed. No court should for that reason reduce in size from the duty of declaring the contract contrary to public policy. If it is clearly detrimental to the interests of the community or is divergent to law or morality or runs counter social or economic expedience is plainly improper and unconscionable and unduly harsh and oppressive. It is important to note that the (iv) fourth criteria is not sharply defined, especially when it is remembered that public policy is a question of fact and not a question of law and it always changes with the general sense of the justice of the community or the ban mores manifested in public opinion.
This civil wrong can be redressed by awarding damages. These wrongs are recognized by the law as grounds for a lawsuit and often result in injuries or any form of harm involving the basis for a claim by the casualty. At times, it can be crimes punishable by the law and can even result in imprisonment. The main purpose of tort law is to provide relief for the damage caused and prevent others from committing the same crimes (Chen-Wishart, 2012). The casualty could sue for an injunction to stop the tortuous conduct or, in some cases, for money. The injured party may sue for recovery of damages in many forms like; reasonable medical expenses, pain and suffering and loss of earning capacity. These damages may include both future and present losses expected.
A number of torts exist; for instance, we have assault, negligence, product liability, trespass, battery, and intentional infliction of emotional distress. This means that these forms of crimes fall into different categories. Intentional torts are those wrong doings that a person knew or should have known before doing a certain action like hitting a person intentionally. The other form is negligent tort where a person’s actions are unreasonable and unsafe like failing to obey traffic rules and causing an accident. Strict liability torts are those that a person is not necessarily dependant on the degree at which they are careful, but the damage causes a repercussion on the defendant like liability for making and selling defective products.
It is also good to note that there are other forms of tort law, such as defamation, nuisance, invasion of privacy and a certain category of economic torts. Tort law is state law created through judges best known as common law and by statutory law or legislatures. A number of judges and states utilize the restatement of torts as an influential guide, which is a publication that is prepared by the American law institute with the aim of presenting an orderly statement of the universal law in the United States of America.
In the case of Cunningham v Wheeler (1994), Cunningham was injured when he was hit by a car, he was 46. He was employed by BC Rail, in hospital for 9 days, off work for 20 weeks (during which time he collected disability benefits worth $5327. 15). No deductions were made from his pay for the disability benefits. But, under collective bargaining package, if collateral benefits went down, there would be a corresponding rise in hourly wage. Historically, in courts, payments received for lost wages pursuant to a private policy of insurance should not be deducted from a lost wage claim of a plaintiff. Usually, the plaintiff is not entitled to any double recovery for loss due to injury (the tension between compensation and deterrence). Double recovery occurs usually from public benefits. It originates in Bradburn v Great Western Rail Co (1874), where plaintiff received both insurance money and damages from the railway company because there would be no justice in setting off an amount the plaintiff had entitled himself to prudently purchasing insurance. Causal reasoning: accident is not what causes the payment directly; an accident must occur, but it is his contract, which causes him to receive the money. Later cases determined also that the plaintiff paid for the insurance, and did not pay for it to benefit the defendant. The court refused to accept them as they were not deducted directly from pay. However, SCC (Cory J speaking, Sopinka, Iacobucci, Major JJ concurring) said the benefits clearly resulted in a reduction of hourly pay; therefore, they were paid for just as much as a private policy would be. Wealthy individuals are more likely to have private insurance, so to deduct public benefits from (usually) poorer people would be socially skewed in favor of the wealthy; collective agreements are often a means for poor people to gain security. Collective agreements should be counted as a private plan because of employee sacrifice.
Evidence that the workers contributed to the plan would be sufficient for exemption rule, which is evidence that would trade-off in the collective bargaining process and evidence of some money forgone by the workers in return for benefits. Evidence is said to be a direct payment of the worker being payments by the owner for the profit made on behalf of the worker, which shows those payments as part of the worker’s earnings.
This particular status ought not to be restricted only to unionized workers but to someone who can show proof of payment to disability schemes.
The first exception to the rule against double recovery is in the case of charitable gifts. The second exception is insurance, as in Bradburn v Great Western Rail co. Indemnity payment intended to compensate the insured in whole or part for pecuniary loss. In the case of non-indemnity, the payment of a previously determined amount upon proof of a specified event is given. For instance, McLachlin believes that Bradburn’s insurance is a non-indemnity contract. If insurance money is not paid to assure the plaintiff for a pecuniary loss, then the plaintiff has not been compensated for any loss. Therefore, no double recovery took place. McLachlin sees the disability benefits are clearly indemnifying; therefore, they should not be exempted from the double - recovery claim.
In addition, if earnings were not lost due to a disability plan, there would be a need to compensate him because he has no lost earnings. A plaintiff who is more or less vulnerable, as a consequence of defendant’s negligence, will not be reflected in the actual award of damages; the plaintiff is compensated to the fullest extent of the loss, no more/less. A key principle for McLachlin is, “the measure of tort damages is what the plaintiff has lost, not what the defendant should be compelled to pay as the price of his negligence”. However, if the plaintiff can show that if they win all the damages they would have to pay back the insurance company, then they do not have to take it into account.
Contract law as defined has many angles that show legality and illegality of a contract. The cases shown above are examples of tort laws and legal as well as illegal contracts. This way, having the proper knowledge of contract law helps one to know their rights and fight appropriately to protect them. The scenarios presented above give a vivid view of what contract law is all about and how the various situations are dealt with.