The basic elements of a contract include an agreement: (i) consisting of an offer and acceptance, (ii) made voluntarily, (iii) entered into by persons with capacity to contract, (iv) supported by a valid consideration and (v) covering an object that is legal. (Chapter 8) Therefore an agreement is an essential element of a contract.
Before a contract can be entered into there must be a ‘consensus ad idem’ meaning a meeting of the minds of the parties involved.The agreement consist of two elements; one an offer from one party to perform something and the acceptance of the offer by the other party. There must also be an intention to enter into an agreement. There should not be any compulsion on both the sides either to make an offer or to accept it. The agreement should evolve voluntarily with the free mind of the parties. The law requires that there should be a sufficient consideration for entering into the contract.
However the consideration should be made presently as past consideration is not considered for making a contract legally binding. Above all the contract cannot cover an object that is illegal. Stages of Negotiation and Areas of Concern Negotiation represents a process of two individuals or groups reaching an agreement jointly evolved about different needs or objectives. According to Oliver (1996) negotiation is a process in which “negotiators jointly searching a multidimensional space and then agreeing to a single point in the space.Stages in a negotiation process can be enumerated as (i) orientation where introduction of the parties are made and the negotiators get to know each other, (ii) probing or fact finding – in this stage each of the parties identifies the issues of concern and the strengths and weaknesses of each party, (iii) formulation of strategies – based on the fact finding the strategy for future course of action is decided in this stage, (iv) bargaining and decision making – implies the actual essence of the meeting where bargaining is carried out and concessions are made to arrive at a final meeting of the minds, (v) agreement – at this stage the plans for recording the agreement is discussed and finalized.
(A cuff, 1997)Having agreed on the mutual terms and conditions a verbal or written agreement will be entered in this stage. The main area of concern is the agreement stage where both the parties should have an identical understanding of the terms of agreement as this will form the basis for the contract. The other area of concern is the capacity of both the parties to enter into a contract which needs to be verified before the contract is entered into.Contract Containing Provisions for Performing Illegal Activities A contract may become illegal because the contract covers an illegal object or purpose. Thus a contract for the smuggling of contraband in contravention of the Customs and Excise Act is illegal because the purposes are illegal. Such contracts are not legally enforceable.
Contracts may become illegal because the parties share a common interest to commit a crime, prohibited act or other wrongdoing such as tort or breach of trust. However a contract does not become unenforceable merely because one of the parties commits an illegality while performing his part of the contract. A contract may also become illegal if the consideration is illegal and in this case also the contract will become unenforceable.It should be noted that in case of a contract which is statutorily prohibited the intention of the parties does not matter and the contract will be unenforceable even if the parties did not intend to act against the provisions of the concerned law.
Although in older versions of explanations on illegal contracts, an illegal contract is said to be void ab initio meaning that the contract containing an illegal objective will not considered as a contract at all as it is void from the beginning. But the best view is that such a contract for an illegal objective is only unenforceable as it can support an action for inducement for breach of contract and it can also support a defense against a holder in due course. (Law Reform Committee, 2002)When one of the Provisions of the Contract is Unenforceable When any one or more out of the several provisions contained in the contract shall for any reason held to be invalid, illegal, or unenforceable in any respect the parties may exclude that provision(s) by specific agreement to this effect. Such invalidity, illegality or unenforceability shall not affect the other provisions of the contract and the contract can still be performed with respect to other provisions which are legal and binding on both the parties. The parties may agree to the effect that the contract shall be construed as if such invalid, illegal or unenforceable provision has never been contained in the particular contract. This clause will be referred to as ‘severability’ clause.
