Contract Law
The Foundation of Commercial Transactions and Property Agreements
What is a Contract?
"An agreement giving rise to obligations which are enforceable by law."
— Treitel, The Law of Contract
A contract is a legally binding promise or set of promises. If a party breaks the promise, the law provides a remedy to the injured party.
Essential Elements of a Valid Contract
For a contract to be enforceable, it must contain all of the following elements:
Offer
A clear, definite promise by one party (the offeror) to be bound on specific terms.
Key principles:
- An offer must be communicated to the offeree
- It must be certain and definite in its terms
- It can be revoked before acceptance
- It is not an "invitation to treat" (e.g., goods on display, advertisements)
Acceptance
An unqualified agreement to the terms of the offer by the other party (the offeree).
Key principles:
- Acceptance must be communicated to the offeror
- It must mirror the offer exactly (mirror image rule)
- Silence generally does not constitute acceptance
- Postal rule: acceptance occurs when letter is posted (for postal communications)
Consideration
Something of value exchanged by the parties. It is the "price paid for the promise."
Types of consideration:
- Executed consideration: An act performed in exchange for a promise
- Executory consideration: A promise given in exchange for another promise
- Past consideration: Not valid consideration
Rules: Must be sufficient (have value) but need not be adequate (fair market value).
Intention to Create Legal Relations
The parties must have intended their agreement to be legally binding.
Presumptions:
- Business/Commercial agreements: Presumed intention to create legal relations
- Social/Domestic agreements: Presumed no intention (rebuttable)
Case: Balfour v Balfour [1919] - Husband's promise to pay wife maintenance while separated was not legally binding.
Capacity
The parties must have legal capacity to contract.
- Minors: Generally not bound, with exceptions for necessaries
- Mental incapacity: May be voidable if other party knew of incapacity
- Intoxication: May be voidable if other party took advantage
- Corporations: Bound by contracts within their powers
Formalities: When Must a Contract be in Writing?
The general rule is that contracts can be oral, but statute law creates critical exceptions for property professionals.
The Statute of Frauds (Ireland) 1695, Section 2
Requires the following contracts to be in writing and signed to be enforceable:
- A promise to answer for the debt or default of another (guarantee)
- Contracts made in consideration of marriage
- Contracts for the sale or other disposition of land or any interest in land
- Contracts not to be performed within one year from the date of making
Modern Position: Land and Conveyancing Law Reform Act 2009, Section 51
This modernised the law but maintains the core requirement for writing for land contracts.
Equitable Exceptions to the Writing Rule
If a contract that should be in writing isn't, the common law would say it's unenforceable. However, courts of Equity developed doctrines to prevent injustice where one party relied on an oral agreement to their detriment.
A. The Doctrine of Part Performance
If a party has acted on the basis of an oral contract in a way that clearly refers to the existence of the contract, a court may order performance even without writing.
Requirements: The acts must be "referable" to the contract claimed.
Case: Kingswood Estate v Anderson [1963] 2 QB 169
Facts: A landlord orally promised a tenant a new flat for life if she gave up her rent-controlled flat. She did so. The landlord later tried to evict her.
Finding: Giving up the legally protected flat was a clear act of part performance consistent with the alleged oral agreement. The court enforced the promise.
B. Proprietary Estoppel
Prevents a person (promisor) from going back on a promise when the other party (promisee) has relied on that promise to their detriment. It is a "shield, not a sword" but can effectively create property rights.
Three Key Elements:
- A promise or assurance
- Reasonable reliance on that promise
- Detriment suffered as a result of the reliance
Case: McCarron v McCarron (1997)
Facts: A son worked on the family farm for 16 years for little pay, based on a promise from his father that he would inherit the farm. The father died without a will.
Finding: The son's years of work constituted a "detriment." The court held it would be unconscionable for the estate to go back on the promise. The son successfully claimed a share in the farm.
Agency Law
Definition of Agency
A relationship where an Agent has legal authority to act on behalf of a Principal, creating a legal relationship with a Third Party.
Creation of Agency
Express Agreement
Written or oral agreement between principal and agent. Example: Letter of Engagement with an estate agent.
Implied Authority
Authority arising from the circumstances or custom of trade.
Apparent/Ostensible Authority
Created when a principal's conduct leads a third party to believe the agent has authority.
Case: Dunne v Mahon [2005] IESC 81Ratification
Principal accepts and confirms an act done by an agent without authority.
Agency by Necessity
Created in emergencies where the agent must act to protect the principal's interests.
By Operation of Law
Examples: partners in a partnership, company directors.
Duties of the Agent
Fiduciary Duties (Duties of Good Faith):
- No conflict of interest
- No secret profits (must account for all benefits)
- Disclose any personal interest in the transaction
- Cannot act for two principals with conflicting interests
Duty of Skill and Care:
- Must exercise reasonable skill and care
- Standard: that of a reasonably competent professional
Duty to Account:
- Must keep proper accounts and account to the principal
- Must not mix principal's money with own funds (client accounts)
Duties of the Principal
- To pay remuneration: As agreed in the contract
- To indemnify the agent: Reimburse expenses and liabilities incurred
- Not to hinder or prevent performance
Liability of Agent and Principal
Disclosed Principal: If the agent discloses they are acting for a principal, the principal is liable on the contract.
Undisclosed Principal: If the agent acts without disclosing the principal, the agent may be personally liable.
Acting without Authority: The agent may be liable for breach of warranty of authority (Case: Dunne v Mahon [2005]).
The Regulatory Framework: PSRA
Property Services (Regulation) Act 2011
The PSRA is the statutory body responsible for licensing and regulating property service providers in Ireland.
Who Needs a Licence?
- Auctioneers
- Estate Agents
- Letting Agents
- Property Management Agents
Consequences of Unlicensed Practice: It is a criminal offence.
Role of the PSRA
- Licensing and renewal of licences
- Setting minimum standards and codes of conduct
- Investigating complaints against licensed providers
- Administering the Compensation Fund for losses due to dishonesty
Connecting Contract Law to Property Practice
Letter of Engagement
Your Letter of Engagement is a contract formed by:
- Offer: Client's instruction
- Acceptance: Agent's agreement
- Consideration: Promise of service for promise of payment
- Intention: Presumed in business context
Sales Agreements
The contract for sale of land must be in writing (Land and Conveyancing Law Reform Act 2009, s.51).
Includes the Law Society Conditions of Sale 2019 Edition, which requires pre-contract investigation of title.
Client Disputes
Understanding part performance and estoppel is vital. A client might claim you made an oral promise about marketing spend or a guaranteed sale price.
While the written Letter of Engagement is key, equitable doctrines show courts will look at overall conduct.
Compliance Checklist
How Contract Law, Agency Law, and PSRA rules work together:
- Contract Law → Letter of Engagement
- Agency Law → Fiduciary duties to client
- PSRA Rules → Licence, AMV, complaints handling
Test Your Knowledge: Contract & Agency Law Quiz
1. The primary legislation establishing the PSRA is the...
2. In McCarron v McCarron, the court found the plaintiff's claim was based on...
3. An agency relationship created when a principal's conduct leads a third party to believe an agent has authority is known as...
4. Which of the following is a core fiduciary duty of an agent?
5. According to the Statute of Frauds (1695), which contract must be in writing?
6. The case of Dunne v Mahon is most concerned with an agent's...
7. Which Act, as amended, requires a contract for the sale of land to be in writing?