BUSINESS AGREEMENT

Business Agreement

Business Agreement

1. Introduction

When someone makes you an offer, it is a proposal made on certain terms by the offeror together with a promise to be bound by that proposal if the offeree accepts the stated terms. The offer can be a bilateral one which means it is between two people (face to face) for example when a head teacher of a school wrights to a student offering them a place at their school this offer can only be accepted by that specific pupil. If an offer is made to a group it can be accepted by any member of that group. An offer can also be made unilaterally, which means it is an offer to the whole world for example the U.S. government has offered a reward for the whereabouts of Osama Binladen. The offer can be accepted by anyone who knows about it, and finds Binladen.

An example of a case concerning a true offer is that of Carlill v Carbolic Ball Co (1893). The company was so sure of its smoke balls that they placed advertisements in newspapers stating that it would pay anyone who caught flu £100 after using its smoke balls as directed. Mrs Carlill bought one of the smoke balls, used it as directed but still caught flu. She claimed the £100 reward but was refused, so she sued the company in contract. The court held that in this kind of contract, which is known as a unilateral contract, acceptance consists of performing the requested act and notification of acceptance is not necessary. The court concluded that Mrs Carlill was entitled to recover the £100 reward.

2. Applying the rule

"An act of forbearance of the one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable" (Pollock; adopted by Lord Dunedin in Dunlop Pneumatic Tyre Co v Selfridge [1915]).

The element of exchange is known as consideration and is an essential element of every valid simple contract. A promise of a gift will not be binding unless made in the form of a deed. Consideration can take two forms: executed or executory.

1.Executed consideration is where one party promises to do something in return for the act of another, e.g. reward cases.

Promise - £50 reward offered for the return of lost car keys, ring Dave (00022299876).

Act - someone sees the advert in a local paper. He has found the keys, returns them to Dave and claims the reward.

'Cash with order' terms are an example of executed consideration.

2.Consideration is called executory when the parties exchange promises to perform acts in the future, e.g. cash on delivery terms.

Promise - Dave promises to pay £8300 when the new roof is delivered.

Act - Davis building contractors promise to have the new roof delivered and set up within 8 weeks.

Once the promises have been exchanged the agreement is binding. If one party announces that he will not be going ahead with the deal, the other can ...