Chapter 1. Introduction to the Formation of Contract

DEFINING A CONTRACT

The sphere of contract law, a distinct segment of civil law, focuses on the regulations governing individual interactions. This is in stark contrast to criminal law, which oversees societal conduct.

In contract law, remedies primarily aim for compensation, diverging from the punitive measures typical in criminal law. While English law does not provide a strict definition of a contract, it can be conceptualised as an agreement with legal enforceability, imposing obligations on the involved parties. Non-compliance with these obligations allows the aggrieved party to seek a remedy.

Fundamental to contract law is the concurrence of the parties' intentions to establish a legally binding relationship, underpinned by consideration – a mutual exchange of value to validate the agreement.

The simultaneous presence of mutual agreement, intent to create legal relations, and consideration is imperative for the constitution of a legitimate contract.

TYPES OF CONTRACTS

2.1 SIMPLE CONTRACTS

Simple contracts are characterised by their flexibility in formation, as they can be established in various formats: in writing, verbally, or implied by the actions and behaviour of the parties involved.

2.2 WRITTEN CONTRACT REQUIREMENTS

Specific types of contracts are mandated by law to be documented in writing. These encompass:

• Guarantee agreements, where an individual (the guarantor) commits to ensure that another party fulfils their obligations, such as the repayment of a debt;
• Contracts involving the sale, purchase, or alteration of rights in land or property;
• Agreements related to consumer credit facilities.

It is also noteworthy that contracts formed electronically, which are commonplace in consumer dealings, are treated on par with written contracts and are considered legally binding and properly executed.

2.3 CONTRACTS BY DEED

A deed is a special type of document, explicitly identified as a deed, and it needs to be formally executed in the presence of a witness and delivered to be effective.

'Delivery' in this case signifies the manifest intention of the parties to be legally bound by the terms of the deed, often evidenced by wording such as “Delivered as a deed on date.”

Certain agreements require formation via a deed to attain legal enforceability, including:

• Unilateral Promises. Unilateral promises, where no reciprocal benefit or promise is received, can still be legally binding when made through a deed. A common instance is a commitment to give a gift.
• Transfer of Property Rights. The legal process of transferring property rights, particularly in the context of land, necessitates execution by way of a deed.

2.4 EXTENDED CLAIM PERIOD FOR CONTRACTS BY DEED

A significant distinction between a simple contract and a contract by deed is the duration within which a breach of contract claim can be initiated.

For non-deed contracts, the limitation period for bringing a claim is six years from the date of the breach. In contrast, for contracts by deed, this period extends to 12 years following the breach.

This extended timeframe is a key reason why some parties opt for contracts by deed even when there are no other compelling reasons for this formality.