The Power Of The Legal Ink: When Do Agreements Become Contracts?

Late evening, Mercy asked if I could prepare a contractual agreement for her boss and the next question I asked was this, ‘does your boss have a lawyer?’ She responded with this story. She works with a Logistics company that hires out bikes to their riders based on the following terms;


a) the rider is to remit a stipulated amount to the company everyday.
b) where the delivery service comes from the company, the rider is entitled to 40% of the sum.
c) the rider is to be responsible for all repairs of the bike while in his custody.
d) And at the end of one year, ownership to the bike goes to the rider.


Before receiving the bike, the rider was asked to ascertain the state of the bike to be certain that it was in good condition as at when he took custody. All these terms of agreement were communicated to the rider and sealed based on his integrity. Nothing on paper on parchment.

Three weeks down the line, no daily returns has been made to the company and the rider now complains that the bike has developed a fault which he is not ready to repair. What then happens to all those supposed terms? This piqued the interest to examine if agreements and contacts are one and the same?


An agreement is said to be an understanding or arrangement between parties. For example, A and B agrees to share chores in the apartment they stay in. That is an understanding between the parties. This kind of arrangement is not normally written and there are no visible legal sanctions if a party defaults because the arrangement is based on a friendly understanding.

Therefore, it is not a matter enforceable in court as it lacks any legal force or backing.
A contract on the other hand is a well defined agreement which comprises of terms and conditions breach of which are enforceable in the court of law. From this definition, the force of law is a major distinguishing factor between an informal agreement and a contract that is formal.

It is worthy of note that not all contracts are required to be in writing and being unwritten does not invalidate them, but the fulcrum of this work is to appraise the importance of written contract over an oral one by exploring the basic elements of the law of contract.


Elements of the Law of Contract

The court will not enfoce all arrangements or promises as only the presence of certain features bring into effect the machinery of the law, and when these are not in existence, no contract is said to exist and parties cannot be bound by the prior agreements they have made. What then are they;

1. Offer
It is a voluntary expression of interest to contract on specific terms. The offeror has the intention that his expression becomes binding on the other party upon acceptance. How would one then one interpret whether this expression is an offer or not, it has been agreed that tlthe court would employ the use of the reasonable man test.

This means that how would any right thinking ordinary man give meaning to the action of the offeror. Having laid down the foundation for ascertaining this element of contract, it is notable that not all communications or expressions can be termed as an offer. Bindingness of an offer upon acceptance is thus a crucial attribute as it distinguishes an offer from a statement of intention which is still futuristic; a mere supply of information and nothing more and an invitation to treat.


An invitation to treat simply means ‘inviting offer’, traced from the Latin phrase ‘invitatio ad offerendum’. It is not an offer in itself but a call for an offer. This concept is well distingued from an offer in the famous case law of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. The Court of Appeal held that a newspaper advert stating a reward of £100 for whoever contracted influenza after using the Carbolic Smoke Ball properly. The advertisement further stated that a sum of £1,000 had been deposited in the bank to show the company’s sincerity and intent to give out the reward. Carlill, after having used the Smoke Ball properly still contracted influenza and claimed the reward sum which the defendant refused to pay on the ground that the advert was an invitation to treat and not an offer as the latter cannot be made to the whole world.

The court’s decision favoured the claimant as it was held that the advert equates to an offer of a one-sided contract as acceptance was made when the claimant fulfilled the conditions attached to ussimg the Smoke Ball. It was further held that an offer can be made to the whole world and that the company’s act of depositing £1,000 to the bank for the reward truly indicates an intent of bindingness upon acceptance.

2. Acceptance
Where the minds of both parties meet through an unequivocal and unqualified acceptance on the offerer’s part, a contact is said to have been formed. A variation of any form to the offer will not amount to acceptance but a counter-offer which now turns the table back to the offeror being in the position of the offeree and on and on until a certain agreement is reached.

3. Consideration
This is a very essential element of contract whose presence makes the contract binding as the promise of a gift without more is not an enforceable contract.
Curie v Misa (1874) LR 10 Ex 153 ‘a valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss of responsibility given, suffered or undertaken by the other’.


Consideration need not be money alone but can also be money’s worth. Sufficiency and not adequacy is what is considered by the court in assessing the value or worth exchanged between the contracting parties. Where adequacy seeks that an equal or proportionate value is exchanged, sufficiency’s only focus is that an economic value is traded irrespective of proportion.

4. Intention to Create Legal Obligations
This primarily distinguishes a contract for a mere friendly agreement as parties have agreed to have recourse to an external body for adjudication. Domestic or social agreements however lack this intention and the law would generally presume this. But this presumption can be rebutted from the circumstances surrounding such agreement.

5. Certainty of Terms
It is not the duty of the court to create terms of contract but to interpret the terms presented before it. Therefore, nothing must be left subject to agreement on a later date as the contract must be complete and certain. However, where a contracting party has relied on the somewhat uncertain agreement, to protect the interest of such party, the court would imply some terms.


From the foregoing, it is safe to draw out that all these elements are indicators as to whether an agreement qualifies as a contract with terms binding on the parties. Back to the story, do you think the Logistics Company has a legal ground to sue the defaulting rider for breach of contract? Let us have your comments in the box. Thank you for your time.

References
Elements of the law of contract. Catharine MacMillan. Richard Stone. University of London International Programmes Publications Office Stewart House 32 Russell Square London WC1B 5DN, United Kingdom.
All Answers ltd, ‘Carlill v Carbolic Smoke Ball Co – 1893’ (Lawteacher.net, August 2021) https://www.lawteacher.net/cases/carlill-v-carbolic-smoke-ball-co.php?vref=1

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