Contract

A Contract is a transaction with legal effect binding two or more parties to take a certain action.

Essential Elements
A contract in Scottish law has 3 essential elements; firstly there must be agreement about the "thing" involved (consensus in idem), at least two contracting parties, and the creation of legal obligations

Consensus in idem
Whilst this may seem obvious, there has to be agreement on the item involved in order for any contract to be valid. In Raffles v Wichelhaus (1864), a contract to transport a package was booked for travel on a ship called "Peerless" was found to not to have consensus in idem as both parties didn't have common consensus over the ship in question - there were two different ships by the same name traveling in different months.

Mathisen Gee (Ayrshire) Ltd v Quigley is perhaps the most notable case to explore this area. Quigley desired the silt in his pond to be removed; Mathisen Gee offered a contract for plant to do the work, whereas Quigley believed this to be a contract for plant and labour.

At least 2 Contracting parties
Except in a few cases, there is no upper limit to the number of parties to a contract (Parternship agreements being a notable example).

Creation of Legal obligations
Rather than illustrate when legal obligations are created, it is perhaps better to highlight when they are not.


 * "Social Contracts" such an agreement to buy the other a meal do not create legal obligations.
 * "Moral" contracts, like those made between a social worker and client do not create legal obligations.
 * Sporting wagers are "Sponisones ludicrae", or an obligations in jest. Whilst this may seem to apply to just joking wages (I'll pay you a million if X wins), it was held to apply to a casino patron who was overpaid in chips (County Properties and Developments Ltd v Harper (1989).
 * Illegal contracts, or contracts against public policy are not enforceable and do not create legal obligations.
 * Gentlemen's agreements are not enforceable. In Ritchie v Cowan & Kinghorn (1901), Cowan and Kinghorn accepted a reduced payment for a debt with a note that it was "In full" but a subsequent note that the remainder would be paid "whenever able"; the second part of this was held not to be enforceable.

Formation
A contract is formed when the essential elements are agreed. There may be some elements which are still in dispute, but there should be consensus on the essential elements.

The "reasonable man" test is used to determine if the contract has been formed.

Whilst the most well known way for this to be the case is to sign a document it is by no means the only way. Formation can occur when a ticket is taken from an automated machine, like in Thorton v Shoe Lane parking.

Formation occurs when an offer is accepted. An offer may be countered with another offer, which may then be accepted, countered, or rejected.