What is a Contract?

Is this the ultimate act of trolling? This is alleged to be a real invite to a kid’s birthday party.  While the invite is a total dick move, it’s also a really good way to explain what a contract is, because everything is a learning opportunity!

Let’s break it down and see, but first- here’s the invite:

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To have a contract in place there are five criteria you need to meet.  Don’t get stuck into thinking that if you feel that you tick all five categories you have a contract automatically, it’s a lot more complex. Each category has reams and reams of complex rules and case law because it’s not always clear cut.

Capacity

To enter ino a contract you need to have the capacity to do so, that is that you are not in a vulnerable position that can be exploited. For example, a young child, a very sick person or a person with a disability.

How convenient, Aunty Jill on her deathbed sold you her house for $5.00! Ain’t that lovely?

Certain persons are deemed to be too vulnerable to be able to have contracts enforced against them.  They can still enter into contracts, but if they fail to perform the conditions required and they don’t have capacity under the law then they are not liable for breaching the contract.

It appears here that the people hosting the party and the invitees (or at least the people who are buying the presents) both have capacity. If this is a contract it’s not between the one year old and other children it’s between their parents and they would have capacity as full grown adults that can read and comprehend the invite. Tick.

Formalities

Contracts do not need to be in writing, they can be oral, they can even just be based on what you do. When you buy something from a shop you are entering into a contract for the sale of goods or provision of services. You could go to 7-11 and buy a chocolate bar and say absolutely nothing to the attendant, by your conduct alone you enter into a contract. They offer you chocolate, you offer them money. Deal.

An oral contract is fine too, the problem is that if there is a problem with a contract and you want to take the other person to court because they haven’t done what you agreed to do then you have a problem. If you haven’t written your contract down you are left in the difficult position of having to prove what the terms of the contract were. It’s possible to do by other means, it’s just not easy.

There are some contracts that MUST be in writing like contracts for the sale and disposal of land and guarantees.

This invite is written down and it appears to be really clear as to what the person wants and what they expect to receive in return for admission to the party. Tick.

Agreement

One party has to offer something and the other person has to accept. Seems straight forward enough but there is so much case law that explains what an offer and acceptance is, and when someone has taken to accepted an offer.

Simple if you’re buying some chocolate at 7-11, you take to the counter (offer) they take your money (acceptance) and you receive chocolate (goods or service). Not so if you are buying a lot of building materials for a construction project.

Imagine, if you were buying a whole lot of bricks and the person selling them to you sells them to you 75% off if you agree by a certain date, you think wonderful, I will write the brick seller a letter to agree via the post before the due date, but your letter unfortunately arrives after the date, or the other person didn’t read it in time. You think you’ve accepted, but the other person has no idea you accepted, are they obliged to give you the bricks at a discount? (Legally, no- but they could extend the offer to you again in good faith to keep your business).

The rules with offer and acceptance are very, very complex. For our purposes then the inviter is offering access to the party provided that they receive (x) gift. They don’t specify if failure to fulfil the conditions in the letter will mean they will not be admitted, let’s assume though that it is strongly implied because they’re awful trolls. Qualified tick.

Consideration

Consideration is a fancy legal word for “price”. Consideration is the price that the person selling or promising something expects in exchange for their product, service or promise. Just like offer and acceptance there is very complicated case law as to what consideration is and is not, and just how much consideration is enough consideration.

For example, I could rent you my flat for $1.00 a year, and that’s fine. That’s the price I expect and that’s the price you give me. Consideration doesn’t have to be money, it could be a peppercorn. I could rent you my flat for a peppercorn a year and that’s fine as long as all the other requirements for contract are met.

Let’s assume that the inviter will not allow anyone without the right gift, or the right goods to access the party. Somehow the inviter will be at the door blocking access to anyone who doesn’t fulfil their criteria. Provided that this is clear enough, and you knowing this and still choose to go to the party then you are potentially saying to the other person, I accept the price for entry and I will comply by paying the price you have set.

Oh, oh, we are starting to unravel. The inviter uses words like “suggest” and “if you choose to”, which implies that there is an element of choice to the type of gift you can bring, they might be angry with you, and you probably won’t get another invite to the second birthday party, but you’re not going to be thrown out of the party.

BUT remember, that this is not the actual invite, there is a formal invite that will follow. If the formal invite has the same conditions as the pre-invite letter and if the invite actually specifies that if you don’t bring the gift they want you will not be admitted, and you choose to go to the party on their own terms, under their “price”; you could with your conduct be giving them consideration. Qualified tick.

Intention to Create Legal Relations

The intention to create legal relations is another area in contract law with a lot written about it. Basically, both parties need to have the intention to enter into a relationship that is governed by the law of contract and that applies penalties for non performance.

Let’s recap:

If you’re at 7-11, if they have a stand of chocolate bars on display that is their “offer“, you take it off the shelf, that is your “acceptance“. You are deemed to have capacity to enter into a contract because you know that you have to pay for the bar, and the shop is a business, it sells things every day and it knows how to so you both have the “capacity“. The contract does not need to be in writing, it just needs to be clear enough, the chocolate bars have the price listed on or near them and there is enough information for you and the shop to contract that you don’t need any “formalities“. When you hand your money over to the attendant, she is accepting your offer to contract and you have provided your “consideration“. You have agreed the price they are asking is the one you will pay.

Because you are buying a good or service you are protected by the Australian Consumer Law, and they, by running a shop are bound to follow the law and if they don’t they can be punished, and if you stole the bar you have not fulfilled your end of the contract and you too can be punished. You both implicitly agree to enter into the “creation of legal relationships.”  at 7-11, you have all the requirements met so yes, there is a contract.

This is where this letter unravels completely. The party that is claiming that you have agreed to create a legal relationship with them bears the burden of proving that a legal relationship is what you intended to create. This is determined on a case by case basis, there is no blanket rule for it. No one (or at least no sane person, without control issues) goes to a child’s birthday party expecting to enter into a contract for the provision of goods or services. People go to parties because it’s a fun, nice thing to do.

I don’t think a court could ever or would ever, based on the letter above, find that because you agreed to go to a party you were also agreeing to enter into a contractual relationship.

No tick.

The above invitation is not a contract because it does not meet all the requirements that must be met for a contract to stand. We have no deal ladies and gentlemen.

It is a bit of a “dick” move but it’s not a contract.

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