Requirements of a legally binding contract

Contract law requires certain requirements of a legally binding contract to be met in order
for the agreement to be enforceable. Regardless of the type of contract, if any of these
five elements is not met, the contract may not be enforceable.

I) Mutual assent

Mutual assent is considered the meeting of the minds between two or more parties that
forms the foundation of a contract by manifest with write or conduct. At the time of
mutual assent, it can be said that a legally binding contract exists. The usual method of
showing mutual assent is by offer and acceptance

An offer must be made in a contract. No contract is formed until the offeree accepts the
offer. When you make an offer, never assume that the offeree will accept the offer.
Contractual liability is based on consent.

Such an offer may be to exchange goods or services for something of value, or an offer to
act or refrain from acting in a certain manner. For example, a construction contractor
offers to build a house in exchange for a specified amount of money. An offer may be
made in person, or in writing.

Acceptance is the agreement of the other party to the offer presented. In most contracts,
the method of signaling acceptance is left open. While in many contracts, both parties add
their signatures to demonstrate their agreement to the terms, others assume an acceptance
of the offer to be made when one or both parties perform their duties under the contract.

When two parties enter into an agreement, a couple of things happen. One party,
the offeror, offers something of value in exchange for a promise. The offeree accepts or
declines the offer. If the offer is accepted by the offeree, and all things are legal, there is a
mutual agreement. This agreement is called mutual assent, meaning two parties agreed
upon something and are prepared to enter into a contract.

In other words, both parties agree to the same thing. There is also a mutual understanding
of what each party promises and that the promise can be carried out as agreed. The court
will look at two things, offer and acceptance, when making a decision on whether both
parties actually reached mutual assent. And this must be done objectively. The objective
theory of contract states that an agreement between two parties exists if a reasonable
person could judge the acts and behaviors of the parties enough to objectively construe
agreement.

Example case : Harvey v Facey [1893] UKPC 1

This case decided by the United Kingdom Judicial Committee of the Privy Council which
in 1893 held final legal jurisdiction over most of the British Caribbean.[1] Its importance
in case law is that it defined the difference between an offer and supply of information.
The Privy Council held that indication of lowest acceptable price does not constitute an
offer to sell. Rather, it is considered an offer to treat .

The case involved negotiations over a property in Jamaica. The defendant, Mr LM Facey,
had been carrying on negotiations with the Mayor and Council of Kingston to sell a piece
of property to Kingston City. On 7 October 1891, Facey was traveling on a train between
Kingston and Porus and the appellant, Harvey, who wanted the property to be sold to him
rather than to the City, sent Facey a telegram. It said, "Will you sell us Bumper Hall Pen?
Telegraph lowest cash price-answer paid". Facey replied on the same day: "Lowest price
for Bumper Hall Pen £900." Harvey then replied in the following words. "We agree to
buy Bumper Hall Pen for the sum of nine hundred pounds asked by you. Please send us
your title deed in order that we may get early possession."

Facey, however refused to sell at that price, at which Harvey sued. Harvey succeeded his
action at trial, but Facey appealed to the Court of Appeal, which reversed the trial court
decision. The appellants obtained leave from the Supreme Court of Judicature of Jamaica
to appeal to the Queen in Council (i.e. the Privy Council). The Privy Council reversed the
Supreme Court's opinion, reinstating the trial court's decision and stating the reason for
its action.

The Privy Council advised that no contract existed between the two parties. The first
telegram was simply a request for information, so at no stage did the defendant make a
definite offer that could be accepted. Lord Morris LC gave the following judgment.
II) Consideration

A valid legal contract also must have consideration, Each party to a contract must
intentionally exchange legal benefit or beget detriment as an inducement to the other
party make a return exchange. "return exchange and legal benefit" are called
"considerations" and not necessarily money. Consideration is giving something of value
in return for something else. For example, if you are buying a car, you give the seller a
certain amount of money and the seller gives you the car. When you enter into an
employment contract, you agree to give service for a specific amount of salary. In this
section, the factors associated with consideration should also be included. For example,
you should include information about payment terms, time considerations and other
expectations.

Example case : Chapple v Nestle (1959)

Nestle were running a special offer whereby members of the public could obtain a music
record by sending off three wrappers from Nestle's chocolate bars plus some money. The
copyright to the records was owned by Chapple, who claimed that there had been
breaches of their copyright. The case turned round whether the three wrappers were part
of the consideration. It was held that they were, even though they were then thrown away
when received.

III) Capacity

Before a valid legal contract is created, both parties must be able to prove that they have
the capacity required. This means that the individuals have to be of legal age, depending
on state law and they must be of sound mind. This means that if they are mentally
handicapped or are under the influence of drugs or alcohol, they cannot enter into a
binding contract. The parties must also enter into the agreement under their own free will
and cannot be coerced into signing.

Example case : Blomley vs Ryan (1956) 99 CLR 362

This case involved the sale of a farm by Ryan to Blomley. At the time the contract was
entered, Ryan was suffering from prolonged and excessive alcoholism. Blomley knew
this but went ahead with the contract. Ryan tried to call off the sale but Blomley took him
to court, seeking specific performance (an order from the court to carry out the contract).

In this case, it was found that Blomley was aware of Ryan’s persistence problem with
alcoholism, and the court noted that Ryan was ‘seriously affected by drink’ when the
contract was entered. It was subsequently found that Ryan therefore lacked the capacity
to enter a legally binding contract in this case, especially seeing as Blomley was aware of
Ryan’s impairment and sought to benefit from it.

IV) Intention to create legal relations

The parties entering into the contract must have the intention that their contract be legally
enforceable. This is when two or more people are in agreement. The basic legal question
is whether or not they regard themselves as being bound by that agreement. If the
agreement is one based upon a social or domestic agreement the intention to create legal
relations is missing.

Example case: Balfour vs. Balfour (1919).

In this case the defendant was a civil servant stationed in Ceylon. He and his wife were in
England on leave. It became clear that she could not return with him abroad because of
her health. She alleged that he had promised to pay her 30 pounds a month as
maintenance during the time that they were forced to live apart. She sued for breach of
this agreement.

The court held that she could not recover and she would not receive compensation as a
consequence of her husband’s broken promise because the parties did not intend that the
agreement should have legal consequences. It held that such agreements are not contracts,
but rather a domestic agreement that has no legal force in a court of law.

V) Legality of object

The agreement also has to have legal terms. If you enter into an agreement to perform an
illegal act, this would not constitute a legal contract. The purpose of a contract must not
be criminal, tortious, or otherwise against public policy . For example, if you enter into
an agreement to launder money for an illegal operation, that contract would not be
enforceable by the law because you are involved in an illegal activity.
Example case: Ruling Court Case. Bukly Vs. Humason, Volume 50 Minnesota Reports,
Page 195

Humason was the owner of property in the city of Chicago. He went to Buckly, who was
in the real estate business in Chicago, and requested him to find a purchaser for his
Chicago property. Humason promised to pay him a certain per cent commission if a sale
of the property was made. Buckly, in the course of a few weeks, sold the property and
demanded his commission. This, Humason refused to pay. Suit was then brought by
Buckly upon the agreement to pay him compensation for his services.

Humason defended on the ground that the contract was illegal by virtue of a statute in the
State of Illinois, in pursuance of which the City of Chicago had passed the following
ordinance: "It shall be unlawful for any person to exercise within the City of Chicago the
business of real estate broker without a license."Buckly had no license, and, therefore, the
contract was illegal.
2)Outline the structure and hierarchy of the courts in Malaysia , U.K. and the U.S.

MALAYSIA

In Malaysian legal system hierarchy there are two major types of trials which are criminal
trials and civil trials. Then, the Malaysian Courts system consists of the superior courts
and the subordinate courts.The superior courts are the federal court, court of appeal and
high courts whereas the subordinate courts are made up of the sessions court and the
magistrate court.

The Federal Court.This is the highest court in Malaysia and hears appeals of civil
decisions of the court of appeal where the federal court gives the permission. This court
also heard and disposed off by three judges or such greater uneven number of judges as
the Chief Justice may in any particular case determine.

The Court of Appeal.This is that court which hears all civil appeals against the verdict of
the high court. The number of judges was increased to fifteen by order of the Yang di-
Pertuan Agong .

The High Courts.In Malaysia there are two High Courts having coordinate jurisdiction
and status,that is the High Court in Malaya and the High Court in Sabah and
Sarawak.The High Court in Malaya consists of a Chief Judge and forty-seven judges
whilst High Court in Sabah and Sarawak consists of a Chief Judge and ten judges.

Subordinate courts consist of the Sessions Court and the Magistrates court.A Sessions
Court has the jurisdiction to hear both criminal and civil cases.Then,a Sessions Court
judge is appointed by the Yang di-Pertuan Agong on the recommendation of the
respective Chief Judges.Magistrate court in Malaysia are divided into First Class and
Second Class Magistrates.In the courts of criminal matters, the first class magistrates
courts have power to try all crime where the maximum imprisonment term does not
exceed 10 years.
U.K. / England

The court system in England can be considered as consisting of 5 levels.It is supreme

court,court of appeal,high court,county courts and magistrates courts.

The Supreme Court replaced the Court of Appeal in the United Kingdom, Wales and
Northern Ireland as the House of Lords.According to the situation, five to nine judges can
hear the case,called judges.

The Court of Appeal is made up of two divisions, the civil division and the criminal
division. Next, the Civil Division of the Court of Appeal hears appeals concerning civil
law and family justice from the High Court, from Tribunals,in rare cases,and certain
cases from the County Courts.The Criminal Division of the Court of Appeal hears
appeals from the Crown Court.

The High Court consists of three division, the Chancery Division, the Family Division,
and the Queen's Bench Division.The Chancery Division is commercial law.The
Companies Court deals with cases business disputes, commercial fraud, land, bankruptcy,
disqualification of directors,and intellectual property and patents. Next,the Family
Division is Family Office handles all matters of marriage, including matters relating to
adoption, child custody, separation and uncontested probate issues. The Queen's Bench
Division is made up of five separate courts covering a range of issues ranging from
transportation to technical and architectural disputes. The case may be appealed from the
High Court to the Civil Service of the Court of Appeal.

County courts handle most civil cases. The county court deals with civil cases involving
illegal, housing, debt and law enforcement issues. Each case is heard by a judge, and no
jury may appeal to the High Court.

The Magistrates’ Courts deal with summary criminal cases and committals to the Crown
Court, with simple civil cases including family proceedings courts and youth courts, and
with licensing of betting, gaming and liquor. Cases are generally heard without a jury,
and either by a district judge or a panel of three trained magistrates.
U.S.

The legal system in the United States is composed of two levels.It is Federal Courts and
State Courts.

In the federal court system consists of the Supreme Court of the United States, the U.S.
Court of Appeals, the U.S. District Court, and the U.S. Bankruptcy Court.

The Supreme Court is the highest court in the United States. It to appeal over all the
federal and state court cases which involves matters of federal law along with original
authority over small cases. In the federal court,94 district level trial courts and 13 courts
of appeals sit below the Supreme Court.

The U.S.Court of Appeals are the intermediary appellate court of the federal court system.
Appeals courts consist of three judges and do not use a jury.The court of appeals makes
decisions on appeals which are from the district courts in its circuit of federal judiciary
and in some cases from the other selected federal courts.

The U.S.District Courts are the common trail courts of the federal court system. Next, he
U.S.District courts resolve disputes by determining the facts and applying legal principles
to decide who is right.Trial courts include the district judge who tries the case and a jury
that decides the case. It deals with both the criminal and civil cases.

The U.S.Bankruptcy Court. This courts are formed under the Article 1 of the constitution
of the United States.Through the bankruptcy process, individuals or businesses that can
no longer pay their creditors may either seek a court-supervised liquidation of their assets,
or they may reorganize their financial affairs and work out a plan to pay their debts.

In United States legal system hierarchy, there are wide variety of forms in State Courts as
described by every state’s legislature.It include in State Supreme Court and State Court of
Appeal.

The State Supreme Court is a trial level court of general authority in the court system of
the state.Then,the State Court of Appeals is the uppermost court in a particular state in
the U.S.Include of seven judges, one of the chief judges and six deputy judges are
appointed by the Governor.
References
I) Requirements for a legally binding contract
1. *https://legaldictionary.net/contract-law/
2. *e-laweresourcea.co.uk
3. *corporate.findlaw.com/business-operations/contracts-law.html
4. * http://chestofbooks.com/business/law/Case-Method/IV-The-Object-Of-The-
Contract-Must-Be-Legal-1-Contracts-May-Be-Made-Illegal-B.html

II)Structures and hierarchy of courts in Malaysia ,UK and US

1. *https://www.hierarchystructure.com/malaysia-courts-hierarchy/
2. *http://new.justcite.com/kb/editorial-policies/terms/uk-court-structure/
3. *http://www.taylors-law.co.uk/blog/3481748/The-UK-civil-court-
system/1248665
4. *http://www.hierarchystructure.com/malaysia-legal-system-hierarchy/
5. *http://www.uscourts.gov/about-federal-court-role-and-structure
6. *http://www.hierarchystructure.com/united-state-legal-system-hierarchy/