A contract can be defined as a promise or an agreement which is legally biding or enforceable in a court of law. For a contract to come into existence there are various elements that have to be present. They include; 1. offer and acceptance 2. intention to create legal relations 3. consideration 4. capacity to contract 5. free consent 6. lawful object 7. possibility of performance Offer and acceptance An offer is defined as an expression of willingness to enter into a contract on definite terms, as soon as these terms are accepted. For any contract to come into existence an offer must be made.
Therefore an offer becomes the starting point of any valid contract. An acceptance is an assent to the offer and must correspond to the term of the offer. Intention to create legal relation There must be an intention between the parties that the agreement should be attached by legal consequences and create legal obligation. 2 Lawful consideration Consideration can be said to be the price paid by one party for the promise made by the other. An agreement is legally enforceable only when each of the parties to the contract gives something and gets something.
Capacity of the parties
The parties to an agreement must be competent to contract. In order to be competent to contract the parties must be of the age of majority, of sound mind and must not be disqualified from entering into a contract by a court of law. Lawful object The object to which the agreement has been entered into must not be fraudulent or illegal or opposed to public policy or must not imply injury to the person or property of another. The objective theory of contract states that where an objective third party (the jury) believes that the intention of the parties was to form a contract then a contract should be found.
This means that we prefer to interpret word and actions in such a way that a contract exist rather than interpreting that no contract exist. The application of this theory on this case can be perceived in two ways, one is what john Leonard did. He believed that the harrier jet was the consideration offered by Pepsi in exchange of 7 million Pepsi point and therefore he presumed that a contract exist. On the other hand Pepsi co believed that no contract exists since the advert did not amount to any offer.
The court upheld that there was no valid contract since the advert was not an offer on the part of Pepsi and therefore they had no any contractual obligation to fulfill the terms of the purported contract. 3 Advertisements are not considered as offers rather they are treated as invitation to make an offer. The customer is the one who makes the offer by picking goods from the shelf and the contract is complete when he pays for such goods e. g. in a case of pharmaceutical society of great Britain v boots (1953), fisher v bell 1969 all of which illustrate an invitation to treat (Knapp & crystal, 1997).
In a unilateral contract only one party to the contract make a promise and acceptance occurs only upon the satisfaction of condition. The case defers with a reward situation since in a reward situation there are intention to be legally bound and therefore the offeror is under legal obligation to fulfill his promise but in this case there were no such intention on part of Pepsi since they were not actually making an offer and therefore no legal obligation on their part to fulfill the term of the contract (white & summer, 1990).
References: Knapp, C. L. , & Crystal, N. M. (1997). Rules of contract law: Selections from the Uniform commercial code and the Restatement of contracts. Boston: Little, Brown. White, J. J. , & summers, R. S. (1990). Handbook of the law under the uniform Commercial code. Hornbook series. St. Paul, Minn: West Pub.