ACCA F4 - Corp and Business Law (ENG)

40 3: Formation of contract I  Part B The law of obligations

(c) Content. In general the parties may enter into a contract on whatever terms they choose.

Some terms which the parties do not express may be implied, and some terms which the

parties do express are overridden by statutory rules.

(d) Genuine consent. A mistake or misrepresentation made by one party may affect the validity

of a contract. Parties may be induced to enter into a contract by undue influence or duress.

(e) Legality. The courts will not enforce a contract which is deemed to be illegal or contrary to

public policy.

A contract which does not satisfy the relevant tests may be either void, voidable or unenforceable.

A void contract is not a contract at all. The parties are not bound by it and if they transfer property under it

they can sometimes recover their goods even from a third party.

A voidable contract is a contract which one party may set aside. Property transferred before avoidance is

usually irrecoverable from a third party.

An unenforceable contract is a valid contract and property transferred under it cannot be recovered even

from the other party to the contract. But if either party refuses to perform or to complete their part of the

performance of the contract, the other party cannot compel them to do so. A contract is usually

unenforceable when the required evidence of its terms, for example, written evidence of a contract relating

to land, is not available.

4 Form of a contract

As a general rule, a contract may be made in any form.

Contracts do not usually have to be in writing except in the following circumstances.

 Some contracts must be by deed.

 Some contracts must be in writing.

 Some contracts must be evidenced in writing.

4.1 Contracts by deed

A contract by deed must be in writing and it must be signed. Delivery must take place. Delivery is conduct

indicating that the person executing the deed intends to be bound by it.

These contracts must be by deed.

 Leases for three years or more

 A conveyance or transfer of a legal estate in land (including a mortgage)

 A promise not supported by consideration (such as a covenant for example a promise to pay a

regular sum to a charity)

A contract by deed is sometimes referred to as a specialty contract. Any other type of contract may be

referred to as a simple contract.

4.2 Contracts which must be in writing

The following contracts must be in writing and signed by at least one of the parties.

 A transfer of shares in a limited company

 The sale or disposition of an interest in land

 Bills of exchange and cheques

 Consumer credit contracts

Key terms

Key terms

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