1. Contract Formation

Question 1

Define contract

Answer 1

A legally binding agreement- enforceable in law

Question 2

Simple contracts require no formality such as the need to be _____ or _______ ______

Answer 2

Written, formally completed

Question 3

What are the four essential features of a contract?

Answer 3

1. Offer
2. Acceptance
3. Consideration
4. Intention

Question 4

What four vitiating factors can affect the validity of a contract?

Answer 4

1. Lack of capacity
2. Absence of free will
3. Illegality
4. Misrepresentation

Question 5

What is the difference between a void and voidable contract?

Answer 5

Void: contract is not a contract at all (illegal)
Voidable: a contract which one party may set aside

Question 6

Define offer

Answer 6

A definite promise to be bound on specific terms, and it must be capable of acceptance

Question 7

Define Invitation to Treat (ITT)

Give an example

Answer 7

An invitation by one party to the other to enter negotiations that might lead to an offer

Examples: goods displayed in shop window, advertisements, share prospectus

Question 8

An offer must be more than a supply of _____ on request

Answer 8

Information

Question 9

What five ways can lead to a termination of an offer?

Answer 9

1. Rejection
2. Counter-offer
3. Lapse of time
4. Revocation
5. Failure of a precondition

Question 10

Define acceptance

Answer 10

The unqualified agreement to all of the terms of the offer

Question 11

Acceptance will only be effective where the _____ is aware of the offer

Answer 11

Offeree

Question 12

What two rules must acceptance follow?

Answer 12

1. Acceptance must be either expressly worded or inferred from conduct
2. Acceptance may not be via silence

Question 13

In which two circumstances may the need to communicate acceptance be waived?

Answer 13

1. Where unilateral acceptance is possible

2. Where postal rules apply

Question 14

Define consideration

Answer 14

The element of value in an agreement

Question 15

What three types of consideration are there?

Answer 15

1. Executory (valid) (promise for a promise)
2. Executed (valid) (act already performed for a promise)
3. Past (generally invalid) (consideration given before agreement)

Question 16

Consideration need not be ____ but must be _____

Answer 16

Adequate, sufficient

Question 17

In the absence of written or verbal consent, which two presumptions will the courts make?

Answer 17

1. Domestic family and social arrangements (e.g. are the spouses living together?)
2. Commercial agreements

Question 18

Define the doctrine of privity

Answer 18

Only a party who is a party to a contract may enforce or sue on that contract

Question 19

What three exceptions are there to the doctrine of privity?

Answer 19

1. Where an agency relationship exists
2. Common law and statutory exceptions
3. The Contracts Act 1999 whereby the third party has rights provided that a) they are expressly identified in the contract by name, class or description and b) the contract confers a benefit on them

Question 20

Define express term

Answer 20

One that has been explicitly agreed by the parties, either orally or in writing, during the formation of a contract

Question 21

What three factors must be taken into account when considering express terms?

Answer 21

1. Terms must be substantially complete
2. Statements of fact made before the contract which induces the other party to enter into the contract may become a term
3. Oral evidence will not usually be admitted to add to, Cary or contradict written terms

Question 22

In what three ways may implied terms be incorporated into contract?

Answer 22

1. By reference to custom, unless inconsistent with express terms
2. By statute
3. If it is implicit in the nature of the contract