Intention

An agreement will only become a legally binding contract if the parties intend this to be so. This will be strongly presumed in this case of business agreements but presumed otherwise if the agreement is of a friendly, social or domestic nature. (BPP, page 102) The importance is that it protects the weaker party and prevents sales introducing unfair terms.

e.g. The husband had left house which was owned by him and his wife. And they agreed if she pays the entire mortgage she will own this house by herself only. The wife made the husband to sign up to prove their agreement. The wife paid off the mortgage but the husband refused to transfer the house to her. Then she went to the court and she won this case because there was a written evidence of their agreement.

Capacity

Capacity refers to the fact that the law regards some groups as being unable to enter into contractual arrangements, because they might not be in a position to fully understand the agreement they have entered into. (BPP, page 106)

There are 3 categories that lack capacity to make a contract:

· Minors

· Insane

· Intoxicated

The importance is that capacity protects minors from being taken advantage of. The legal capacity of minors is determined by the Minors` Contracts Act (1987). In most states both parties must be at least 18-year-old to make a legal agreement, but some states set the minimum age at 21. The adult party is bound by the bargain, the minor is not. If one of the parties is under the age 18, this party has a right to declare the contract void. Disaffirmance is a cancellation of a contract made during ones minority. A minor is responsible for his torts to a very tender age, but his parents are not responsible for the torts of a minor.

Discussion about the impact of different types of contract