Geoffrey Caesar, Solicitor

A contract and an agreement are not the same in English law, although the term ‘agreement’ is often used to describe a contract.

An agreement is a broader term for any mutual understanding or arrangement between two or more parties. A contract is a specific agreement that meets certain criteria and is legally enforceable.

To form a contract, there must be an offer, an acceptance, a consideration and an intention to create legal relations. These are the essential elements of a valid contract, and they must be present for the contract to be enforceable.

An offer is a clear and definite statement of the terms on which one party is willing to enter into a contract with another party. An offer can be made orally, in writing, or by conduct. An offer can be made to a specific person, a group of people, or the whole world. An offer can be revoked or withdrawn before it is accepted unless it is supported by a consideration.

For example, Alice offers to sell her car to Bob for £10,000. This is an offer made to a specific person. Alice can change her mind and revoke her offer before Bob accepts it unless she has received some consideration from Bob to keep the offer open.

An acceptance is an unqualified and unconditional agreement to all the terms of the offer. An acceptance can also be made orally, in writing, or by conduct. An acceptance must be communicated to the offeror unless the offeror has waived the need for communication. An acceptance must be made within a reasonable time or within the time specified by the offeror. An acceptance cannot introduce new terms or conditions to the offer. Otherwise, it will be considered a counter-offer, which rejects the original offer and creates a new one.

For example, Bob agrees to buy Alice’s car for £10,000. This is an acceptance made orally. Bob must communicate his acceptance to Alice unless Alice has indicated she does not need to hear from him. Bob must accept Alice’s offer within a reasonable time or within the time that Alice has set. Bob cannot say that he will buy Alice’s car for £10,000 if she also gives him her bike, as this counter-offer rejects Alice’s original offer.

A consideration is something of value that each party gives or promises to give to the other party in exchange for entering into the contract. A consideration can be money, goods, services, or anything else that has some value in the eyes of the law. A consideration must be sufficient, meaning that it must have some economic value, but it does not have to be adequate, meaning that it does not have to match the value of what is received in return. A consideration must not be illegal, immoral, or impossible to perform.

For example, Alice’s car is worth £15,000, but she agrees to sell it to Bob for £10,000. This is a sufficient consideration from Bob’s side, as he is giving money with some value in exchange for the car. However, it is not an adequate consideration from Alice’s side, as she is receiving less than the market value of her car. Nevertheless, this does not affect the contract’s validity as long as both parties are happy with the deal. However, if Bob promises to give Alice a stolen painting in exchange for her car, this would not be a valid consideration, as it is illegal.

An intention to create legal relations is a mutual understanding that the parties intend to be legally bound by their agreement. This intention can be expressed explicitly or implied from the circumstances of the case. Generally, commercial agreements are presumed to have this intention, while social or domestic agreements are presumed not to have this intention unless there is evidence to the contrary.

For example, Alice and Bob sign a written contract stating they intend to create legal relations by their agreement. This is an explicit expression of their intention. Alternatively, Alice and Bob shake hands after agreeing on the terms of their deal. This may imply that they intend to create legal relations by their conduct. However, if Alice and Bob are friends who agree to go on holiday together and split the costs equally, this may not imply that they intend to create legal relations through their social agreement.

These are the basic principles of contract law in England and Wales. However, there are many other rules and exceptions that may apply depending on the type and nature of the contract. Therefore, you should contact me for legal advice before entering any contract.