Although England and Wales, Scotland and Northern Ireland constitute three separate jurisdictions within the UK, contract law in these three realms varies only slightly. They all trace back to a common root in Roman law which had three elements necessary to make a contract legally enforceable. These were Mutual Agreement, Legality and Competence. To this list, English Contract Law adds “Consideration.” The close relationship between the legal systems in all English speaking countries throughout the world means that these elements are required in other nations, including Canada, the United States and India.
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“Competence” is simply the requirement that all parties to a contract are mentally competent and legally entitled to sign a contract. In the UK that means that anyone under the age of 18 cannot sign a legally enforceable contract and their parent or guardian should sign it on their behalf. Also, a contract cannot be enforced if one of the parties can prove they were mentally impaired, drunk, drugged, or rendered incompetent in some other way.
Mutual Agreement is sometimes expressed as “Offer and Acceptance.” This is a complicated requirement because of the many different forms of agreements covered by contract law and because there is no statutory path laid down to present an offer or express acceptance.
The agreement must concern an act, service or good that is legal, in order for the contract to be enforceable in court. Hence any agreement concerning illegal drugs cannot be considered a legally enforceable contract. This element is sometimes expressed as “legal purpose,” which leads to confusion. Another requirement to form a valid contract is that the expression and circumstances of the agreement should either specifically state that the contract is enforceable under the law, or that it does not impact on a realm which is generally accepted under the law to not be subject to contracts, such as domestic arrangements. Although, both “legality” and “legal purpose” are necessary for a contract, sources vary on which one of these is one of the four basic elements.
Under English law, a contract is not legally enforceable without the element of “Consideration.” That means there must be something in the contract to the benefit of all of the parties to the agreement. For example, a money lender should expect interest or some form of compensation for the use of the money. If there is no element of consideration, no one will ever suffer a loss by the contract being broken, and so there is no point for the contract to fall under the competence of the law. If a benefit only accrues to one party in the agreement, it is unlikely that the others would have signed it freely and so all parties must draw a benefit for the contract to be valid. In theory, the element of Consideration is not included as an essential element of a contract in Scotland. However, in practice, lack of consideration would make it difficult to enforce the contract in court. Such contracts would be exposed as exploitative or raise questions about the competence of the party that signed a contract that brought them no benefits.
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