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Contract law in ten minutes

The goal of this article is an ambitious one: to set out the basic principles of English contract law in a way that can be read and understood by a reasonably intelligent non-lawyer in one ten-minute reading.

Contract law is the foundation of English civil law. 'Civil' in this context means that it regulates the obligations between individuals, rather than between individuals and the state; these latter obligations are rather the province of criminal and consitutional law. Contract law is one of the first things taught to undergraduate law students, and usually takes up a significant part of a year's study — and even that is normally regarded as providing only an overview of the subject.

Naturally, a subject this vast cannot be dealt with in ten minutes. Nevertheless, I feel that the basic, foundational principles can be explained easily and fairly quickly. Given the nature of the brief, I won't be citing any case law or entering into detailed legal argument.

So here we go...

1. A contract is a specific kind of legal agreement between persons

A contract is an agreement between two or more persons to fulfil certain obligations. The agreement has a particular legal form, which is the subject of the next couple of sections. The obligations may be to supply things, carry out tasks, pay money, or almost anything else. I'm using the term 'person' here rather than 'people' or 'individuals', because contracts can be formed between companies or other corporate bodies, as well as between private individuals. When a limited company enters into a contract, it does so as if it were a private individual, and the contract is with the company, not with its directors, even if it is the directors who end up signing the cheques.

A contract is not by any means the only kind of legal agreement that binds people to obligations. There is another body of law relating to agreements called convenants, that runs alongside contract law, and overlaps with it in complicated ways. For the most part, the law of covenants comes into play in transactions involving land. A will is also a kind of agreement to create obligations, albeit a one-sided one. A will creates obligations, not on the testator (the person making the will), but on the executors (the people who give effect to the testator's instructions). What distinguishes these particular agreements is not the nature of the obligations they create, but the legal forms that are used to create them.

In what follows I will assume that the contract is between only two persons whom I shall call Arnold and Betty. If an enforceable contract is created between Arnold and Betty, then either has a right to go to court to ask for it to be enforced; that is, if Arnold defaults on his obligations, Betty can ask the court to compel Arnold to fulfil his part of the deal, or to pay compensation if he does not. And, of course, Arnold can approach the court for the same sanction against Betty, if she is in default.

For the sake of completeness I should point out that there is a technical difference between a valid contract and an enforceable contract, which we'll touch on later.

There is no formal, statutory definition of a contract, or of what distinguishes a contract from any other formal legal agreement. The basic principles of contracts are set out in case law, which has been developed and refined over hundreds of years.

Over the years, the courts have decided that an agreement needs to have certain elements in place to be considered a contract. These elements are the subject of the next section, and they are so well-established that they are unlikely to change any time soon. However, even if all these elements are in place, courts have often ruled contracts invalid because they were made under duress, or on the basis of incorrect information, even if provided in good faith.

Moreover, the courts have established the principle that some people lack the legal capacity to make contracts at all: as a minimum one has to have sufficient intellectual competence to be deemed capable of understanding the obligations of a contract. For most purposes, children (under 18) are not deemed competent to create contracts. The same applies to adults with certain intellectual or psychological disorders, but experience has shown that courts are very reluctant to set aside a contract between adults on such a basis. Some agreement are prevented from being upheld as contracts on the basis of the nature of their obligations. For example, there are restrictions on the enforcement of betting contracts.

On the other hand, in the interests of justice a court might enforce an agreement that is not a valid contract, without disturbing the principles that underly contract law. If, for example, Arnold believed that he was acting under a contract with Betty, and paid money to Betty as a result, but the agreement later turned out to lack some element of contract formation, Arnold may still be able to get his money back from Betty under the law of restitution. This is a very murky area of law indeed.

Similarly, there may be remedies available under the laws of tort (essentially, wrongdoing), where an agreement does not amount to a full contract. It can be argued that the modern law of negligence flowed from one judge's willingness to compensate a victim of illness caused by poor food hygiene, who did not have an enforceable contract with the vendor of a bottle of ginger beer.

In summary, the law of contract has reasonably well-established principles, but courts are often able to do the right thing despite those principles, by appealing to other areas of law. Over the last forty years or so, there has been a marked intrusion of statute law into the principles of contract, which complicates the situation still further.

2. A contract always requires certain elements

To have a valid, enforceable, contract, the following five elements must always be in place. If any is absent, there is no contract. As I mentioned before, that doesn't necessarily mean that the agreement will not be upheld by a court, but the grounds on which the court will do so are much less well-defined.
  • Element 1. One party must offer something to the other party. It doesn't matter much what the 'something' is, so long as the terms of the offer are clear. For example, if Arnold says to Betty "You can have my bicycle for £50'', that is an offer. If I take a newspaper to the checkout in a newsagent's shop, I am making an offer to purchase it for the cover price. However, if I advertise my car for sale in a local newspaper, that is not an offer. Nor is it an offer if I display goods in a shop window for sale. This may seem strange, as these things seem like offers. The reason they are not offers is that the contract, if there is one, comes into existence the moment the offer is accepted, and becomes binding from that moment onwards. If an advertisement to sell a car is an offer, then everyone who telephones to say he or she wants to buy it potentially has a contract with me; and I will be in breach of all but one of these contracts, as I only have one car to sell. So the courts do not treat advertisements, or displays of goods, as offers. Similarly, it is probably not an offer in the strict sense if Arnold says to Betty "Would you be interested in buying my bicycle for £50 or thereabouts?'' The terms are simply not sufficiently certain.
  • Element 2. The other party must formally accept the offer. The acceptance must be unequivocal, and not in the form of a negotiation. If Betty responds to Arnold's offer to sell at £50 by saying "Will you take £40?'' that is an entirely new offer, which Arnold can accept or reject as he sees fit. There is a huge body of case law concerning how, when, and why offer and acceptance take place.
  • Element 3. There must be a consensus, a 'meeting of minds'. This means that that Arnold and Betty must each understand what the other is bringing to the deal. When people try to wriggle out of their contractual obligations, it is this requirement that is most frequently cited as the reason why they should be allowed to. More on this point later.
  • Element 4. There must be consideration. What this means, in short, is that Arnold and Betty must both bring something to the deal. If Arnold offers to give Betty his bicycle, free of charge, then that is not a contract. Betty cannot go to court to enforce the contract — it simply doesn't exist. Consideration can be a tricky matter, and we'll come back to it in the next section.
  • Element 5. Arnold and Betty must intend to create a contract. Certain agreements are assumed not to be intended to create contracts. The most obvious example is family arrangements: agreements between husband and wife, or between parent and child, are assumed not to be contracts. Of course, this is only a presumption, and it can be rebutted if suitable evidence is brought forward.
If any of these elements is missing, there is no contract. None. Nothing. Nada. The jargon term for an agreement which looks a bit like a contract but does not amount to a contract at all is a void contract. It can be confusing, but it is often important to understand the difference between a void contract and a 'voidable' contract, which retains some legal effect. We'll come back to this later.

3. In English law, any valid contract requires consideration

Traditionally, is a very strong principle of English law that for a contract to be valid, there must be valid consideration. That is, the person who accepts an offer made to him or her must offer something of value in return. An agreement to make an outright gift is never a valid, binding contract. It might be a valid term in a will, or in a covenant if certain formalities are met, but it is not a contract. Consideration is a peculiarly English concept, and only features in the legal systems of jurisdictions that have some connection with English law — the USA, for example. It is an alien concept in most European states. Recently, a number of significant court cases have somewhat reduced the scope of the doctrine of consideration, because in some cases it leads to manifest unfairness.

In English contract law, it does not matter whether the value of the consideration accurately matches the value of the thing being offered. The contract will only fail if nothing of any value at all is offered. For example confectionery wrappers have been held to be valid consideration, even though their monetary value is negligible.

This all seems simple enough, but the Devil, as always, is in the details. The problem turns on what 'value' means. The situation is clear enough when the consideration is money or a tangible object, however meagre its value. Problems arise when the consideration is an action. The performance of a professional service is usually taken as valid consideration, as it has a measurable monetary value. An agreement to enter into contract 2 is usually seen as valid consideration for a contract 1. A textbook example of a problem area is an agreement to remit a debt. If Arnold owes Betty £1000, but cannot pay, Betty — needing the money — might say, "Well, if you can pay £800, I'll let you off the rest''. If Arnold then pays up the £800, is the original debt discharged? The answer would appear to be 'no'. Betty could still, at some later date, pursue Arnold for the outstanding £200. How can this be? Betty made an offer to remit the debt — reluctantly, of course, but of her own free will — and that offer was accepted. Why do Arnold and Betty not have a valid agreement to call the debt cancelled? The answer seems to be that Arnold's consideration — the payment of £800 — has no legal value. It clearly has monetary value, but it is not good consideration. The reasoning is that the £800 was due to Betty anyway, so Betty did not give Arnold anything of additional value.

There are a number of other grey areas in the adequacy of consideration, but so long as both parties offer money, or something to which a monetary value, however small, can be attached, there's usually no problem.

I'll point out that in some areas of English law, a promise to marry somebody is considered to be good consideration, despite its having no obvious monetary value. However, the class of contracts that are amenable to marriage consideration is a rapidly-diminishing one, and I only mention it for historical interest.

4. Contracts need not always be made in writing

Most contracts involving significant amounts of money or time are made in writing, for reasons which should be obvious. However, there are very few circumstances in which English law requires that a contract be in writing. Of these circumstances, the only one that most people will ever encounter is a contract involving an interest in land. An interest in land may include freehold ownership of the land itself, of course, but it also includes mortgages, long leases, and technical matters such as contracts to grant easements (e.g., rights of access).

Even for interests in land, it remains uncertain whether the contract must actually be made, from the outset, in writing. The exact wording of the relevant statute is "manifested and proved by some writing''. That this wording was never intended to mean that the contract must be made from the outset in writing is clear, because later in the same section of the statute it uses the term "made in writing'' of some other transaction. Quite what "manifested and proved'' was intended to mean is not entirely clear, and that confusion has lined the pockets of lawyers for nearly a hundred years.

In short, apart from certain land transactions — which must be backed up by written evidence of the agreement — and a few other obscure transactions (a contract to create a trust, for example) an oral contract is binding under English law. Does this mean that you can enforce a promise that was made to you in the pub last night? In principle, yes, if the elements of a valid contract are in place. In practice, no — you probably won't be able to gather sufficient evidence to support your case.

An interesting situation is one in which a contract is made in writing, but in court the parties refer to verbal agreements that they made during the negotiation stage. The fact that there is a written contract means that neither party can deny that some agreement was made; but it can be awkward to determine its exact scope. Consequently, it is conventional to include a term in a complex contract to the effect that the written document constitutes the whole of the agreement.

5. A contract may contain multiple terms, which may not have equal weight

A contract may, and very often does, set out multiple obligations binding on the parties. Any contractual statement is referred to as a 'term' of the contract. It is very likely that the parties do not intend all these terms to be equally binding or, at least, have equivalent consequences if breached.

Lawyers divide contractual terms into 'warranties' and 'conditions'. There might be a third type, the 'inominate term' ('term without a name'), but we won't worry about that here. The distinction between a warranty and a condition becomes a vital one if the contract is not fulfilled properly. If a contractual term is considered to be a warranty, then the contract as a whole will survive that term's obligation being broken. The person who breaks the obligation may be ordered by the court to pay compensation for his breach, but the contract as a whole continues to bind the parties. On the other hand, if a term is considered to be a condition, then a breach of that condition is a breach of the whole contract, which then ceases to be binding on either party.

Here is an example. Betty agrees to buy Arnold's car for £1000. Arnold agrees that he will clean the car before delivering it to Betty. There are three obligations here — Arnold has an obligation to hand over the car, and an obligation to clean it. Betty has an obligation to pay money to Arnold. The obligation to pay, and the obligation to hand over the car, are probably conditions. If either is not fulfilled, the contract is dead in the water. However, the agreement by Arnold that he will clean the car is probably a warranty, not a condition. What this means is that if Betty does not pay the money, not only does Arnold not have to hand over the car, but he doesn't have to clean it either. The contract ceases to bind anyone to anything. On the other hand, if Betty hands over the money, and then finds that Arnold has not cleaned the car, she probably cannot treat the whole contract as broken and force Arnold to repay the money. What Betty can do is to pay to have the car cleaned herself, then ask the court to force Arnold to reimburse her the cost. But Betty can't get back the money she paid for the car, because A's breach is not of a condition, merely of a warranty.

Because of the crucial distinction between a warranty and a condition, it would be nice if there were a magic formula for deciding whether a particular obligation were a warranty or a condition. But, on the whole, there isn't. The courts have developed rules-of-thumb over the years, of which two are particularly important.

First, an obligation that 'goes to the heart of the contract' is probably a condition. If the obligation is central to the whole purpose of the contract, then breach of that obligation will bring the contractual obligations to an end.

The second important rule of thumb is that the courts will give due weight to the intention of the parties. This is why you will often see wording like this in commercial contracts: "It shall be a condition of this contract that...''. The wording expressly sets out that the obligation in question is a condition. However, the courts have refused in the past to honour such an agreement where it is plainly unreasonable.

6. Once made, the contract must (usually) be performed

Failure to perform one's contractual obligations is known as breach of contract. It is very common for a person who is alleged to be in breach to claim that the contract has become much harder to perform, or more expensive, than when the contract was agreed. Traditionally, such arguments have made little headway in the courts, which have held parties to their agreements to the extent of bankruptcy. More recently, this stance has softened a little, but the general principle remains: don't enter into a contract unless you're sure you can perform your part of it.

A contract that is impossible (merely than difficult or expensive) to perform, for reasons outside the parties' control, is said to be frustrated. In such cases the courts often will release parties from their obligations. Very often one party will already have expended time and money, before the contract is set aside. In such cases the courts have the discretion to order reasonable compensation to be paid. It is recognized, however, that there is generally a loser when a contract is frutrated.

Because of the danger of frustration, many commercial contracts contain terms setting out in advance what the parties' liabilities will be in such an event.

7. Even an invalid contract might have legal consequences

The general principle in English law is that a contract is considered to be good right up until the moment it isn't. Even if a contract is determined by the courts to be invalid or unenforceable, that doesn't necessarily mean that it is as if it never existed. Earlier I mentioned the concept of the 'void contract' — a contract with no legal effect whatever. In practice, when contracts are set aside by the courts, they are more often deemed to be 'voidable', rather than 'void'. This distinction is subtle, but potentially very significant, especially for lawyers, who often live well on fighting one another over the difference.

A voidable contract is one that starts off valid, but can be set aside later by the parties. For example, if Arnold persuades Betty to buy his bicycle on the basis that it has a carbon-fibre frame, but it later turns out that the frame is made of cast iron drainpipes, then there is, initially, a valid contract. That remains true even if Arnold knew perfectly well he was selling something other than the thing he purported to offer. Why? Because all the basic elements of contract formation were in place: offer, acceptance, consideration, consensus, and intention. Of course, Arnold has committed a fraud on Betty, and when Betty discovers this she can have the contract set aside. Until she does, however, Arnold and Betty have a contract. In short, this contract is voidable, not void.

This may sound like academic nit-picking, but it's not. This point — the difference between a void contract and a voidable contract — is a frequent area of litigation. You see, if Betty buys goods under a voidable contract — perhaps because of fraud, or because the seller carelessly misrepresented the quality of the goods — then she becomes the legal owner of those goods. She becomes the owner of the bicycle, not when she pays Arnold, but at the moment the contract is formed. If Betty later sells the bicycle to Charles, then Charles becomes the legal owner of the bicycle from that moment. Betty can sell what she legally owns, even if she came to ownership of it by means of a contract which isn't binding on her.

Now, consider the case where Arnold and Betty have a void (nonexistent) contract. Perhaps Arnold offered to sell the bicycle, but the price was never clear. Because there is now no contract, Betty never becomes the owner of the bicycle, even if she pays for it. This is so important, it's worth saying again: the title to (ownership of) goods is not exchanged under a void contract. If Betty later sells the bicycle to Charles, Charles never becomes the legal owner. Betty simply doesn't have anything to sell even if, at the time, she believes she does.

So, while it might not matter much to Arnold or Betty whether their contract is deemed to be voidable or void, to Charles it makes all the difference in the world. If the contract is voidable, Charles gets to keep the bicycle he has purchased from Betty, but if it is void he can lose it completely, most likely along with his money.

As you can imagine, a huge amount of lawyers' time has been spent over the years in efforts to prove that a contract is void, not voidable, or vice versa. Courts are reluctant to hold a contract as void if the basic elements are in place, because doing this disturbs the rights of innocent third parties. However, a contract will usually be ruled void if it pursues an illegal objective (a contract to assassinate someone, for example, is invariably void), or was made by a person of unsound mind, or was made a result of a mistake by both parties. For example, if I offer to sell you my green car, meaning the green Robin Reliant, and you offer to buy my green car, meaning the green Rolls Royce, most likely we don't have any kind of contract. The kind of mistake can be interpreted as an absence of 'meeting of minds', so it's a moot point whether we have a contract that is void for mistake, or void for lack of consensus — practically it doesn't make much difference.

8. The victim of a breach of contract is entitled to certain remedies

If Arnold is in breach of his contractual obligations to Betty, she may ask the court for certain remedies. Recission is the setting aside of the contract, as if it never existed. Money and goods transferred must be returned. Damages is financial compensation for losses incurred. Specific performance is an order to fulfil the contract, or else face being held in contempt of court (a Bad Thing).

More than one of these remedies can be sought, and awarded, for the same breach. Where damages are awarded, the general principle is that the party in breach must pay compensation not only for direct losses, but for all reasonably forseeable losses. Moreover, the party in breach will normally have to pay the other side's legal expenses; these days such expenses often amount to more than the amount at issue.

The victim of a breach of contract is expected to take reasonable steps to control his losses, rather than simply letting everything go pear-shaped and expecting the party in breach to make good all the damage. If Arnold buys a regulator for his nuclear reactor from Betty and, on delivery, it turns out to be the wrong type, he can't let the reactor explode and then expect Betty to make good the damage. The law expects Arnold to do the right thing as well; in this case that might mean buying a replacement from another supplier and asking Betty to return his money (and reasonable costs, perhaps).

It is increasingly common for contracts to contain agreements about the scale of damages that will be paid for breaches by either party. In principle, this simplifies matters for the courts which, as we have seen, generally try to uphold the parties' agreements. However, there is a tendency for such clauses to become punitive. If a contract for the rental of a piece of equipment contains a term that the hirer must compensate the owner a million pounds for every day that the item is late being returned, such a term is likely to be deemed a penalty clause and struck out. However, depending on the nature of the equipment, a term enforcing compensation of, say, £100 per day might be considered liquidated damages — a genuine reflection of the loss that the owner might suffer — and be held enforceable.

9. Remedies for breaches of contract do not (usually) depend on motive

For the most part, the court is not concerned about how blameworthy either party is, when deciding how to award remedies. Blame, guilt, and motive are really concepts applicable to criminal, rather than civil, law. In contract cases, what matters is simply responsibility — who is responsible for the breach of contract?

The example of innocent misrepresentation — which is interesting in its own right — might help to clarify this concept.

If Arnold induces Betty to enter into a contract with him by means of false information — turning back the mileometer on a car he is selling, for example — then Arnold has perpetrated a fraudulent misrepresentation. If he claims in good faith a certain mileage, because of incorrect information given to him by the previous owner, then he has committed an innocent misrepresentation. It might be felt that a fraudulent misrepresentation is a worse failing — more blameworthy — than an innocent one, and until relatively recently the English legal system took the view that it was. If Betty is the victim of a fraud, then not only is she entitled to set aside the contract (and reclaim any money paid), but she is entitled to be compensated for any losses following directly from the contract, even if they were not reasonably foreseeable by Arnold. In some cases, these consequential losses can be very significant — many times more than the value of the contract.

However, since the Misrepresentation Act (1967) came into force, the victim of an innocent misrepresentation is entitled to the same remedies as the victim of a fraudulent misrepresentation. The only defence that Arnold has in this case is that he had good reason to believe that he had been given correct information about the mileage, and that he did believe it was correct it right up until the contract was formed. If he could have checked the details, but did not, such a defence is unlikely to be accepted by the court.

On the face of it this does seem a little harsh — people make mistakes, after all. However, civil law — as opposed to criminal law — is not really concerned with motive, but with responsibility. In the mileometer example, Arnold is not (perhaps) ethically reprehensible for not checking the mileage on the car he is selling, but he is certainly accountable for it. As an aside, I will point out that if he did deliberately misrepresent the car's mileage then he might be guilty of a criminal offence as well; but that is completely separate from his obligations under contract law.

The practical implication is this: you need to be very sure indeed of the accuracy of all the information you use to negotiate a contract.

10. Some contracts have implied (unstated) terms

Courts will very often rule extra terms into a contract, beyond what the parties expressly agreed to. A common-sense reason for this is that some things are held to be so obvious that they never get written down. For example, if Arnold is selling goods to Betty, it would be unreasonable for him to claim later than he never promised Betty that the goods were actually his to sell. It is an implied term of all contracts for the sale of goods that the seller actually owns the goods being sold. Similarly, it is an implied term of such contracts that if a buyer is shown a sample of the goods, the sample is representative of the rest. These implied terms, along with many others, are now set out in the Sale of Goods Act (1979).

Some implied terms are matters of public policy. For example, it is a term of all contracts of employment that that the employer and employee will act with 'mutual trust and respect'. Many actions for wrongful dismissal cite a breach of this implied term, which in most cases neither the employer nor the employee expressly agrees to.

Many contracts are formed with only implied terms. If I buy goods in person from a shop, for example, then most likely there will be no specific agreement. In such a case, the contract will be governed only by the implied terms relating to sale of goods. Similarly, if I enter into casual employment for a short period of time, I may never have a contract of employment. Again, the employee and employer are bound by general contractual terms established in employment law.

Many implied terms can be overridden by an express provision of the contract. For example, if goods are purchased by mail-order (or email-order, these days) it is implied that the risk of loss of those goods is borne by the purchaser. It is very common for contracts to reverse this implication, because the purchaser usually has no business arrangement with the postal service. However, not all implied terms can be overridden by the parties. It remains uncertain, for example, to what extent an employee can be bound by a contract that compels him to work dangerously long hours, even if he signs a contract that expressly stipulate that he must.

In summary, when you enter into a contract, you may be bound by terms that apply not just to the specific contract, but to all contracts of that type.

11. Many types of contract, are regulated by special provisions relating to that type

English courts are, on the whole, keen to enforce all particulars of a contract made by consenting parties of sound mind. No contractual term is ever glibly set aside. However, it is recognized that we can't enforce every kind of agreement between every kind of person in every kind of circumstance.

One common ground for ruling out contractual terms is on the basis of unfairness. Contracts are often formed between people of highly unequal bargaining power — consumers and big businesses, for example, or employers and employees. In such case the 'weaker' partner might well be compelled to agree to unreasonable terms, having little alternative. There is now strong legislation to regulate and strike out unfair terms, especially when used by businesses against consumers. The law relating to consumer contracts is an unwieldy and expanding body of material in its own right.

Related to unfairness is the idea of exclusion clauses. A contract will often try to exclude liability of one party for adverse effects following from the performance of the contract. It is no longer permissible, for example, for a contract to attempt to exclude liability for death or personal injury. Some lesser consequences can be excluded but, again, there are relatively strict tests of fairness. In general, the courts have fewer powers, and less willingness, to intervene in contracts between businesses, than in those between individuals and corporations.

Many classes of contract have specific restrictions, and often these types of contract relate to matters that are of profound importance to most people: employment, property, and financial services (especially credit). These three areas in particular are associated with such a volume of statutory regulation that it would be dangerous to assume that a grasp of conventional contract law would be sufficient to interpret the parties' obligations.

For example, recent changes to property law have enhanced the consideration requirements for land transactions. It is no longer possible to offer one pound as consideration for the purchase of a house, although it would have been possible (in principle) until recently, and even one pound would be valid consideration for almost any other type of contract.

12. Contracts can (sometimes) create rights, but not obligations, for third parties

This is a relatively recent development in English law. Formerly, contracts were held to create no legal rights for anybody but the offerer and offeree. For example, if Arnold buys a toaster from Betty, and gives it as a present to Charles, considerations of natural justice would suggest that Charles is entitled to some response from Betty if the toaster turns out to be unsatisfactory. If the toaster actually explodes and singes his eyebrows, Charles may have remedies against Betty under the law of negligence; but if his loss is purely financial, this is considered to be a matter for contract law. Unfortunately, Charles doesn't have a contract with anybody.

This scenario is often referred to as the 'wedding present problem' in law textbooks, for reasons that should be obvious. Arnold still has legal remedies against Betty as the original purchaser but, in practice, it can be difficult for Charles to persuade Arnold to enforce his rights.

Recent changes in the law mean that now third parties like Charles can take action, in limited circumstances, under contracts to which they are not parties. For this to be permissible, it has to be very clear in the contract that the contract is intended to benefit a third party. In practice this means that the 'wedding present problem' remains a problem, as most contracts made in shops are not negotiable like this.

Although a contract may create rights for third parties, it cannot create obligations binding on anybody but the original parties.

Concluding remarks

There is, of course, much more to be said about this vast and fascinating subject. In fact, contract law is becoming increasingly extensive and complex, as modern technological developments stretch the applicability of existing law. For example, it is a matter of contention to what extent the existing law on contracts formed at auction applies to on-line auctions such as eBay. It remains somewhat uncertain whether purchasers can be held to general terms of sale that are visible only suppliers' web sites. However, we can expect all changes to the law of contract to be incremental, and broadly within the scope of the basic principles outlined above.
Copyright © 1994-2013 Kevin Boone. Updated Jul 12 2012