I have recently employed the services of a painter and decorator with the view to decorating a number of rooms in my house.
The first room was completed whilst I was away on holiday and included a wallpapered feature wall. After a fabulous holiday but long journey home, I was spurred on by the thought of seeing the newly decorated room but unfortunately all was not as expected. The wallpaper was upside down.
When something like that happens your thoughts immediately turn to questions such as; how did it happen, how can it can be sorted, who is responsible and who will bear the extra costs involved? This is when having some knowledge and understanding about contract law is really useful.
Firstly, we need to be clear about the agreement that is in place and whether it constitutes a valid contract, in other words, is it legally enforceable by the courts.
In order for a contract to be valid it has to meet five requirements:
- Intention to create legal relations
This is reached by the offerer making and communicating an offer, (a definite and unequivocal statement of willingness to be bound by specific terms without further negotiation) to the offeree and the offeree receiving and accepting the offer.
Offer + Acceptance = Agreement
However, in order for both elements to be binding they must be communicated between the parties. Communication can be ‘express’ in other words, verbal or written, or it can be ‘implied’ which means inferred through the conduct of the parties.
Offer – in my case, the decorator (offerer) rang me (offeree) and made an express offer to decorate rooms within the house for a specified fee. On the phone he told me that the fee included wallpapering but that the wallpaper needed to be supplied by me, so specific terms were stated. I told him I would consider the offer and ring him back. Therefore, we were at the stage where the offer had been made and communicated but an agreement was not reached as the acceptance element was not in place.
Termination – at this point the decorator could of ‘revoked’ the offer, as long as he communicated that to me, because I hadn’t accepted the offer or made any payments. As it was I ‘rejected’ the offer and made a ‘counter offer’ as I decided one of the rooms included in the original offer did not actually need decorating after all. *
Counter offers – a counter offer is an offer made in response to a previous offer if the original one is unacceptable or needs changing. It is effectively the technical term for bargaining. Unlimited counter offers can be made until one is accepted. The important issue to note about counter offers is that each one overrides the previous offer, which can then no longer be accepted as it doesn’t exist or have any legal standing.
Acceptance – when I rang the decorator with the counter offer, he told me the amended price which in effect became a new offer, which I then verbally accepted.
Only at this point had the requirement of agreement been met.
Before we move onto the next legal requirement we need to deal with the issue of how an ‘invitation to treat’ is different to an ‘offer’. Part of the agreement was that I would supply the wallpaper and I had found the perfect product online (a cow parsley print in grey tones, in case you are wondering). Advertised prices are generally accepted as invitations to treat instead of offers. This means that the seller is not making an offer for the buyer to accept but is instead inviting the buyer to make an offer (of the advertised amount) that they will accept, usually at the point of processing the payment.
This is the second requirement and means that both parties have agreed to provide something of value to the other. In order for consideration to exist, one of the following criteria needs to be satisfied:
- Sufficient – must have some value, usually monetary, but it doesn’t have to be the true value.
- Legal – the exchange cannot be illegal.
- Executed – consideration is carried out at the time the contract is made.
- Executory – promises are made to fulfil consideration in the future.
- Timely – consideration must not be past, it can be exchanged when the contract is made (executed) or at a later date (executory).
In my case consideration satisfies more than one of the above as it is sufficient, I gain a decorated room and the decorator gains the fee, it is legal and will be paid for once the job is complete so the payment is executory.
Intention to create legal relations
Now there is acceptance and consideration a simple contract exists. This is often enough for a successful transaction to take place, however, it does not automatically become a contract that is legally enforceable. If something goes wrong and one of the parties wishes the courts to enforce the terms of the agreement then they must show that there had been an intention by both parties to create legal relations. As employing a decorator is a commercial transaction, it would generally be assumed that relations were intended.
Capacity and legality
These are the final two requirements and basically mean that a contract cannot be legally enforced if it is illegal or made with someone who does not have sufficient abilities to do so. There are three groups of people considered to have limited capacities to enter contracts so would not be bound by an agreement:
- Under 18’s
- Those of unsound mind
- Anyone under the influence of alcohol or drugs
So, having looked at each of the five requirements, I think we can ascertain that my contract with the decorator is valid, as capacity and legality are both fulfilled as well. If I was trying to form a contract for something illegal then the contract would be void. If one of my children had been trying to form the contract then it would have been voidable because as minors they cannot be bound by contracts. In part two, we will look at how the issue of the upside wallpaper was resolved.
* The offer could have also been terminated through it ‘lapsing’ if either of us had died or a specified/reasonable period of time has passed before it was accepted.
Gill Myers is a self-employed accounts consultant. She has taught AAT qualifications since 2005 and written numerous articles and e-learning resources.