Analysis of Contract Law in Business

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Elements of a valid contract

A contract is defined as a legally enforceable agreement between two or more parties where one party agrees to undertake some actions while the other part guarantees a consideration as a result; a breach of the conditions leads to a legal case. Not all contracts are valid, however for a contract to be legal, four elements have to be fulfilled, they are:

  • Consent and undue influence: for a valid contract, there must be mutual consent of the parties to a contract; there should be no external influence that can influence the decision of one or both parties to enter in the contract.
  • Legal capacity, both the parties to a contract must have the legal capacity to contract. Legal capacity means that they must be of the age of majority and sound mind.
  • Consideration: For a contract to be valid there must be some consideration; a consideration is anything of value promised by a party in a contract
  • Legally enforceable or Lawful objective; the objects to a contract must be legally accepted in the country of the contract (Gillies, 2004).

Objective theory of contract

Objectivity theory was developed to give a special consideration to factors of a case; according to the theory in a contract implies that for an offer and acceptance to take place, the reasonableness of the offer and acceptance should be considered, thus other than the mutual consent of the parties involved. The offer and acceptance should be reasonable to a rational man, thus in case of a doubt in the case, then the most reasonable decision is made. If either party to a contract does not act rational, objective and reasonably, then a contract will not exist.

Pepsi for Harrier-Jet Prize Case

Case background

John D. R. Offered $700,000 for a jet that its market value was $23 million, although the contract has been seen to suggest the possibility of such a deal, he did not act rationally and reasonably; he is ignorant to the real situation and was biased when enforcing the contract.

Why did the court hold that there was not a valid agreement

The court looked into the facts of the case and considered whether there was an offer and an acceptance; the situation of the case was that there was an offer and an acceptance however it the situation lacked objectivity. John D. R. Leonard did not act logically and did not consider the real situation; he was driven by the need to have the contract enforced for his selfish interests. The concept of too good to be true appears since if John had considered it, then he would not have enforced the contract.

Advertisement and offers

There is a difference between offers and invitation to treat, invitation to treat cannot be enforced but they build a pathway to offers; advertisements and displays are mere invitation to treat not offers. Advertisement falls short of an offer since the offeree has not taken a step to express of willingness to contract on certain terms set in the advertisement (McKendrick, 2005).

How does Pepsi for Harrier-jet prize differ from a reward contract?

In reward contracts there is compensation offered by the offeror to the public or specific group of people (they are mostly people with a special attribute for example professionals) after the completion of a certain act. The conditions of the contract and terms to the contract are set by the offeror. The contract becomes enforceable or consummative after the fulfilment of the set conditions and terms.

Pepsi for Harrier-jet prize case differs with the requirements of reward contracts, like the prevailing conditions. Pepsi had the perceived promise in course of its duty and did set conditions as called for in a reward contracts, however the condition and rewards were made in such a way that rational people could realize the contract could not be enforced; this made the contract unenforceable, thus not a reward contract (McKendrick, 2005).


Gillies, P. (2004). Business law. Sydney: Federation Press.

McKendrick, E. (2005). Contract Law – Text, Cases and Materials. Oxford: New Delhi: Oxford University Press.

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Premium Papers. 2022. "Analysis of Contract Law in Business." March 26, 2022.

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