business law ip 3

A contract is an agreement between two or more person which is intended to create legally binding obligations . The word binding is used for there are some contracts which are valid but are not enforceable (Emanuel , 2004

For a contract to be enforceable , it must fulfill four elements of a valid contract which states that

In a contract , there must be an offer and acceptance . An offer may be made to a specific person or to any member of a group of persons or to the world at large , but it cannot form

the basis of a contract until it has been accepted by an ascertained person or group of persons . This means that if X makes an offer to Z , it is a specific offer and Z is the only person who can accept it . But in many cases , it is immaterial to whom the offer is made . Offers made by advertisement are the commonest form of offers made to the world at large , and can be accepted by anyone just by acting on them

Another element of a valid contract is that there must be an intention to create legal relations . Since a contract is a result of an agreement between the parties , then for contract to be enforceable , there must have been an intention to create legal relations . Whether or not the parties intended to create legal relations is a question of fact to be inferred from all the circumstances of a case (Emanuel , 2004

The other element of a valid contract is that there must be a consideration or the contract must be under deed . A consideration is some rights that accrue to one party though it need not be adequate as long as it has some economic value . Even an act or omission of small value can be consideration , but a mere sentimental motive for making the promise will not make it binding

For contract to be valid , it is presumed by law that the parties are competent to enter into a contract , but certain categories of persons due to age , status or mental instability have certain disabilities in this connection . Lack of contractual capacity in one or both the parties may render the contract void , voidable or unenforceable (Jertz and Miller , 2004

The objective theory of a contract is to create a legally binding obligation . For this case , Pepsi had an intention of making a legally binding obligation when they made the advertisement

The court ruled that there was no valid agreement in the advertisement that has been aired by Pepsi . The judge dismissed the case that since the deal was too good to be true because a jet costs approximately 23 million and there was no way Pepsi would have bought it for consumers of Pepsi drink if they attained 7 million Pepsi points . The consideration in question is not realistic hence no reasonable man would have taken the advertisement seriously

Advertisements are considered as offer since they invite the public at large...