1. Contracts Flashcards

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1
Q

What are the three forms of contract

A

Simple contracts
Written contracts
Speciality contracts

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2
Q

What contracts must be in writing to be valid and enforceable?

A

Bills of exchange
Consumer Credit Agreements
Transfers of land (evidenced by Deed, aka speciality contracts)
Guarentees

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3
Q

If a minor enters a contract, is it voidable at the option of the minor?

A

Yes

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4
Q

Give 2 examples of someone without the capacity to enter a contract.

A

Minors
Parties of unsound mind
Companies before incorporation

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5
Q

What is a contract

A

A legally binding agreement formed by the mutual consent of the contracting parties

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6
Q

What is a simple contract

A

A contract that means they do not have to be in any particular form

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7
Q

What is a speciality contract

A

Contracts used for agreements such as transfers of land and long leases

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8
Q

What makes a speciality contract binding

A

It must be signed, sealed and delivered i.e. intended to take effect

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9
Q

What is the limitation period (time limit from the breach to bring an action) for most contracts and what’s the limitation period for speciality contracts (if different)

A

6 years, 12 years

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10
Q

What are 3 elements that would make a contract invalid

A

Void, voidable, unenforceable

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11
Q

What essential elements make a contract valid

A

An offer
Acceptance
Consideration
Intention to be legally bound

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12
Q

What is an offer

A

An offer is a definite promise to be bound on the specific terms made by the offerer to the offeree.
The offer can be made in any form but must be communicated to the offeree who can can anyone including the whole world.

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13
Q

What is not an offer

A

An invitation to treat (invitation to someone else to make you an offer)
A supply of information or statement of intention
Vague statements (not sufficiently specific)

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14
Q

How can an offer be terminated

A

Rejection/counter offer
Revocation (withdrawal of offer)
Lapse of time
Failure of pre-condition

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15
Q

3 terms of revocation

A

Can be made at any time up to the point of acceptance
Can be made even if the offerer has agreed to keep the offer open
Must be communicated to the offeree by the offerer or reliable 3rd party

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16
Q

What are the 2 exceptions to revocation rules

A

If the offeree pays the offerer to keep the offer open this creates a collateral contract and therefore revocation of the original contract would be in breach of that collateral contract. The offeree could claim damages for the loss of opportunity to accept the original offer.
In a unilateral contract - an offer made to the whole world. In addition if the offeree has begun performance of the unilateral contract then revocation is not effective as by beginning performance of the act, they are in the process of accepting the offer.

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17
Q

How does Lapse of time effect an offer

A

If not accepted within specified time of if no time specified then after a reasonable time, the offer will cease to exist.
An offer will lapse upon death unless offeree accepts in ignorance of death.

18
Q

What is failure of precondition

A

Unless the condition or change of circumstance is met, the offer cannot be accepted.

19
Q

What is acceptance

A

Unconditional agreement to all terms of the offer

20
Q

What format must acceptance be in

A

Can be written, verbal or shown by conduct. The offerer can specify a method of acceptance, in which case it will only be binding if made in that format.

21
Q

What must the acceptance be in order to be binding?

A

Communicated unless this requirement is waived.
If acceptance is sent by email etc it becomes ‘communicated’ during business hours.

22
Q

If the offerer says ‘if i don’t hear from you I will assume you have accepted’. Can this be deemed communicated?

A

No, however the offerer can make a way that the offeree doesn’t have to communicate their acceptance.

23
Q

What is the postal rule?

A

When an acceptance is posted, it is deemed communicated when the letter is posted providing it’s stamped, addressed, posted and if post is deemed a reasonable method of communication.
If it acceptance is specified as ‘notice by writing’ the postal rule does not apply here.

24
Q

Does the postal rule apply to revocation

A

No, the postal rule only applies to acceptance. Revocation must be received before being deemed withdrawn.

25
Q

What is consideration

A

The give and take in a contract. There must be both in order to make the contract valid.

26
Q

What is the rule of consideration

A

Consideration must be sufficient (capable of being given value) but need not to be adequate (each parties consideration does not need to be be equal).

27
Q

What are the two types of adequate consideration

A

Executed consideration - provided at the time of the agreement
Executory consideration - promise to do something in the future

28
Q

What does forbearance/waiver of rights mean

A

One party can forfeit their rights to something which could be good consideration if it is capable of being assigned a value

29
Q

What is considered invalid consideration

A

Past consideration - something already done at the time of the agreement.
Performance of an existing statutory duty as this is something you are already legally bound to do. (Unless exceeded as this creates a new contract)
Performance of an existing contractual duty - already bound to perform this duty (Unless exceeded as this creates a new contract or is for a new third party).
Performance of an illegal act.

30
Q

Is past consideration ever considered to be valid consideration

A

Generally no, however if an act was done in response to a specific request and payment might be expected in such a situation, then there is an implied promise to pay and this constitutes good consideration

31
Q

What is the part payment problem?

A

Payment of a lesser sum in satisfaction of a greater sum cannot be any satisfaction for the whole sum. An extension of the rule that performing an existing contractual promise cannot be consideration for a further contract with the promiser.

32
Q

What are the exceptions to the part payment problem?

A

Alternative consideration can be accepted.
Bargain between creditors - group of creditors can jointly agree to part payment in lieu of full debt as all creditors bound to specified terms.
Payment by third party.

33
Q

What is the intention to create legal relations

A

For a contract to be created, both parties must intend to enter a legal relationship.

34
Q

If it’s not obvious of the intentions to enter a legal relationship, what are the two rebuttable presumptions that can be applied?

A

Domestic agreements - presumed there is no intention to be legally bound in a social or domestic arrangement. However can be rebutted or overturned by showing clear evidence to suggest otherwise. Also rebutted if agreement between spouses where parties were not living together happily.
Commercial agreements - it is presumed there is intention in a commercial agreement. Possible to rebut this if contrary intention is clearly expressed in the agreement itself but courts reluctant to do so.

35
Q

What does it mean when ‘subject to contract’ is included in the agreement

A

There is a strong presumption that there is no intention to be immediately legally bound.

36
Q

What is Privity of contract

A

Only a person who is a party to a contract has enforceable rights or obligations under it. Parties who have not contributed consideration to a contract cannot sue for breach as they are not privy to the contract.

37
Q

What are the exceptions to privity of contract

A

The Contracts (Rights of Third Parties) Act 1999 - beneficiaries explicitly named in the contract can enforce it provided the contract expressly allows them to.
Trust law allows beneficiaries to enforce a trust as a third party.
Agency law allows an agent to enter into a contract with a third party on behalf of his/her principal.

38
Q

What forms the contract once it’s been determined there is one?

A

Terms - expressed (must be clear to be enforced) or implied (not specifically agreed by the parties but part of the contract none the less)
Representation - something a party says to get the other to enter into the contract with them (could become a term but doesn’t have to be). Can sue for misrepresentation otherwise.

39
Q

How may implied terms arise in a contract

A

Due to the type of the contract.
To give business efficacy (term is needed in order for the contract to work practically).
Custom and usage - usual things for that type of contract.
Acts of parliament - e.g. Consumer Rights Act allows businesses to sue for breach of contract where goods supplied are not fit for purpose.

40
Q

What is Battle of the Forms

A

Where contracting parties each have their own standard terms, the parties should determine which terms apply. If not done the court will decide which takes precedence.

41
Q

What happens if an implied term contradicts a written express term?

A

The express term will prevail.

42
Q

Where a contract is in writing, will the courts allow parties to rely on terms agreed but not embodied in the contract?

A

Yes providing it can be shown that the document was not intended to comprise of all the agreed terms otherwise general rules apply that oral evidence cannot be relied on.