(a) List and explain four elements of a valid contract (b) Explain four duties of an agent to the principal.

Answer Details

(a) Four elements of a valid contract

1. Offer and acceptance (agreement): There must be a definite offer by one party and an unqualified acceptance of that offer by the other party on the same terms.
2. Consideration: Something of value (money, goods, services or a promise) must pass between the parties; each party must give and receive something. A promise without consideration is generally not enforceable.
3. Capacity to contract: The parties must be legally competent, that is, of the age of majority, of sound mind, and not disqualified by law (infants, lunatics and drunken persons generally lack full capacity).
4. Intention to create legal relations: The parties must intend the agreement to be legally binding, so that either can enforce it in a court of law. (Social and domestic arrangements usually lack this intention.)

(Other valid elements: free/genuine consent, free from mistake, misrepresentation, fraud, duress or undue influence; legality of object, the purpose must be lawful.)

(b) Four duties of an agent to the principal

1. Duty to obey instructions: The agent must carry out the lawful instructions of the principal and act strictly within the authority given.
2. Duty of care and skill: The agent must perform his work with reasonable care, diligence and the skill expected in that line of business.
3. Duty to render account: The agent must keep proper records and give the principal a true account of all money and property received and spent on the principal's behalf.
4. Duty of good faith / not to make secret profit: The agent must act honestly, avoid conflict of interest, and must not take bribes or make secret profits; any such profit belongs to the principal.

(Other points: duty not to delegate his authority; duty to disclose all relevant information to the principal.)