In today's business world contracts play an essential role - therefore it is of great importance to know what a contract is, how it is formed and what elements it must contain.

"A contract is a legally binding agreement"(Thomas, 2001 p. 32), usually a commercial agreement based on the law of contract. There are several possibilities of entering into a contract. A small proportion of contracts must be formal written documents (e.g. contracts for the purchase of land), but the vast majority can be made in any of the following ways:

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* In Writing: Although any contract may be in writing, only a small number must be in writing.

* Orally: Many contracts are made orally.

* By conduct: A contract may be entered by the following of a course of action, it is not necessary to speak to form a contract.

* It is also possible to form a contract by combining any of the above mentioned three points.

In order to distinguish between an ordinary agreement and a contract, one must consider whether the agreement contains the three essential elements of a contract, which will then render the agreement legally binding.

1. There has to be an agreement between the parties. It must consist of an offer, which is made by the offeror, and an acceptance, made by the offeree. "An offer is a proposal suggested on certain terms by the offeror together with a promise to be bound by the proposal if the offeree accepts the stated terms"(Keenan/Riches, 2002 p. 203). Once a valid offer has been established, it must be accepted while it is still in force to for an agreement. Besides, this acceptance "must be absolute and unqualified"(Keenan/Riches, 2002 p. 208). At this stage a definite agreement must have been reached. Moreover "the acceptance must be communicated to the other party"(Thomas, 2001 p. 36) - this may be done by speech, writing or conduct. In Payne v Cave (1789) the defendant withdrew his offer at an auction before the hammer fell. The court decided that his offer could be withdrawn any time before the auctioneer signified acceptance by knocking down the hammer.

2. Apart from the agreement every contract must include a second element, called "consideration". Both the offeror as well as the offeree "must promise to give of do something for the other"(Keenan/Riches, 2002 p.211). One can distinguish between thee types of consideration:

* An executory consideration is the promise to perform an action which will be carried out in the future, e.g. "cash on delivery" terms.

* Executed consideration is a present consideration, "one party promises to do something in return for the act of another"(Keenan/Riches, 2002 p. 211).

* Past consideration is not regarded as a consideration. In the case Re McArdle (1951) three brothers and sisters signed a contract to reimburse one of the brother's wife after she had made some improvements to the property, which belonged to all three of them. The court considered this as past consideration.

3. Both parties must show the intention to create legal relationships. The court saw not the intention to create legal relations when in Balfour v Balfour (1919,CA) a husband who was working abroad promised to pay maintenance to his wife in England.

A contract may also be rendered defective or unenforceable, even if the three elements agreement, intention to be legally bound and consideration are present, by one of the following factors:

1. Capacity - Everyone has the right to make a contract, excluding minors, mental patients and drunks.

2. Mistake - If there is no operative mistake, than "the general rule of common law is that a mistake does not affect the validity of a contract."(Keenan/Riches, 2002 p. 225). However, operative mistakes will make the contract void.

3. Misrepresentation - There must be no misrepresentation. Often the actual conclusion of the contract is preceded by a series of negotiations between the parties. If a statement of fact, made by one party which induced the other party to enter the contract is false, it is a misrepresentation.

4. Illegality - "A contract which is illegal is normally unenforceable"(Dobson, 1997 p. 125). The agreement of the contract must not be contrary to public policy. In Everet v Williams (1725) two highwaymen agreed to share the booty before robbing a stagecoach. However, the court refused one's claim for his share of the proceeds.

5. Duress or undue influence - The essence of a contract is that all parties enter into it freely and voluntarily. Neither side shall enter into the contract either by physical or economical force.

Question two

To determine, whether Tim is entitled to compensation, one must consider whether the exclusion clause is valid under the common law rules, the statutory rules and the Unfair Terms in Consumer Contracts Regulations. Because these laws do not always apply to both, personal injury and damage of property, I will firstly examine the case of his broken leg and afterwards the damage of his trousers.

Exclusion clauses are common features of business contracts. "They are express terms which seek to exclude or limit the liability that might belong to one party in the event of a breach of contract"(Keenan/Riches, 2002 p. 270).

The Unfair Contract Terms Act (1997) states that a clause is rendered totally ineffective if it excludes the liability for death or personal injury caused by negligence (see Thomas, 2001 p. 53). Therefore, if Tim's injury was caused by negligence he is entitled to claim compensation. To ascertain his right for compensation under The Unfair Contract Terms Act (1997), it is evident to find out, if Tim's injury has been caused by negligence.

When leaving a lecture one usually does not expect the floor to be wet inside a building, therefore it would have been the university's obligation to warn the students. It is not clear whether this happened or not, if for example there was a sign warning everybody of the wet floor, then the university has not acted negligently and there is no likelihood of him getting compensation. Knowing about the wet floor he than should have walked more carefully. Because the text does not tell who caused the wet floor, it is also possible that Tim caused the wet floor himself or saw someone causing it, for example by dropping a bottle of water. In this case he knew about the wet floor too - and should have been more carefully. Also in this instance one could not blame the University of being negligent. For the case that Tim did not know about the wet floor and that there was no warning of it, the university is negligent under the statutory protection and Tim is most likely entitled to compensation.

Under the common law an exclusion clause may be incorporated into a contract by signature or by notice. When the exclusion clause is brought to attention of the other party by notice, it must happen before or at the time of the contract. However, the university has not the right to exclude the liability for any injury arising to students caused by negligence while attending the university (as discussed above). Therefore the following argumentation concerns only the replacement of Tim's trousers.

In Tim's case it is not totally clear whether he had seen the exclusion clause before signing the contract - and therefore knew about it at the time entering the contract, or if he did not know anything about the exclusion clause. It may be possible that Tim saw this exclusion clause before, for example on the brochure for the course. Than the exclusion clause would be part of the contract and he would not be entitled to any compensation. Another possibility is that he attended other courses in the same room before, or that there was another sign at the occasion where he entered into the contract, which he ignored. In this instance he would have been negligent himself, compensation under these circumstances seems doubtful. If the notice was only displayed to him after entering into a legal contract, than the exclusion clause is totally ineffective both, for personal injury and the damage caused to his trousers. Not knowing some very important details and facts, it is difficult to give Tim a reasonable advice whether claiming compensation is likely to be successful.

Question 3

The Employment Rights Act (1996) provides employees the right not to be unfairly dismissed by their employer. An employee who is dismissed may challenge the dismissal before an industrial tribunal on the grounds it was unfair (see Dobson, 1997 p. 266).

If an employee has reached the normal retirement age (usually 65) s/he will not be able to claim unfair dismissal (see Thomas, 2001 p. 74). Though the text does not provide information about Sally's age, I will assume in the following argumentation that she is under this age. If this is not the case, she will not be able to claim unfair dismissal.

A very clear provision in the company's disciplinary and grievance procedures was provided to every employee - also to Sally - that anyone who would access pornographic sites on any of the company's computers should be dismissed without notice. Not complying with this rule may be seen as a gross misconduct and gross misconducts may under normal circumstances be a reason for immediate dismissal.

Is it still gross misconduct, if Sally was not the one accessing the pornographic sites but someone whom she let use her computer, even though she was unaware of it? Usually it is not possible to access a computer without a certain password or identification. Providing someone else with one's access to the computer may be a risk, because one is still responsible for what that person does on the computer. Not supervising the actions of that person can be seen as very negligent, because one has to take all conceivable consequences.

Another question has to be asked: was Sally authorized to let anybody else make use of her computer in the company but herself? This question may not be clearly answered, because the company's rules concerning this subject are not supplied. However, if only she was entitled to use her computer, which I would assume to be more likely, then the fact of letting her cousin using it can be seen as another misconduct. This would then even underline the fact of gross misconduct.

A different aspect that has to be looked at is if the employer has acted reasonably. The random test revealed without doubt that Sally's computer had been used to access pornographic sites. Furthermore, she admitted this fact even though denying of being responsible for it. The only point on which one can doubt the employer's reasonableness in the case is that it is not clear, whether she had a fair hearing, where she could have explained the case from her point of view, or not. The wording of the question leaves grounds for the assumption that the decision to dismiss Sally was already made before this hearing.

Considering all the facts I can say that there is no likelihood of Sally succeeding in a claim for unfair dismissal. Therefore I would not advice her to bring the case to court.