Law of Accounting Coursework question Essay Example | Topics and Well Written Essays - 4000 words

Law of Accounting Coursework question - Essay Example It is a well established principle that a contract can come into existence even if it is oral or has been concluded in an informal manner, however, it is important to note that there are certain conditions which must be satisfied for a legally binding contract to be existent. The starting point for the formation of a contract is that there must be an offer made and it should clearly not be an invitation to treat and subsequently there should be acceptance. The next aspect is that of the criterion of consideration, the intent to enter into legal relation the presence of certainty. For an effective evaluation of how a contract is to be concluded can be found in the case of Smith v Hughes1, whereby the subjective as well as the objective test was laid down so as to evaluate the existence of a valid and legally enforceable contract. The subjective test focuses on the intention of the parties who entered into the contract, while on the contrary the objective test looks into what had been said, done, not done by the parties and what the intention of saying or doing was. An important evaluation on the principles of offer and acceptance can be seen from the evaluation of Professor Atiyah, whereby it was reasoned that offer and acceptance is determined by of one of the methods which is ‘reason forwards’ and ‘reason backwards’. Reason forwards takes into account of offer and acceptance and their existence at first and then goes on to reason out and conclude on the dispute at hand and as for reason backwards the most reasonable solution is made out and it then turns around to ascertain from that offer and acceptance. The definition offer is unequivocal willingness by the offeror that is the person making offer to be bound by certain terms and conditions subject to acceptance of the offeree that is the peron to whom the offer is made. There has been a clear distinction which has been drawn by the courts on the area of invitation to treat and offer , however, there have been times when the differentiating was a mere thin line. Invitation to treat has been defined as an expression of willingness to induce another party to enter into negotiations and to make an offer, however, the boundary is, the fact that it is conditional and is therefore not an offer. The case of (Fisher v Bell)2 clearly defined the fact that invitation to treat is merely an expression of willingness of one party to enter into negotiations with another party thereby hoping that eventually offer and acceptance would take place and a valid and legally enforceable contract would come into existence. The thin line and the distinguishing features between an invitation to treat and offer can be seen from the cases of of Gibson v Manchester City Council3 and Storer v Manchester City Council4. The facts in Gibson were that the treasurer in his letter to Mr. Gibson stated that the council was willing to sell Mr. Gibson the house and needed him to make a formal applic ation. The courts looked into the circumstances of the case and in particular the price factor and held to be an invitation to treat. Contrary to Gibson, in Storer the courts held that a valid contract had been created because of the fact that the transaction had moved one step further and was prior to exchange of contracts. Even though it was a very thin line the courts distinguished between the