1): Existence/ Formation of a Contract Flashcards
What are the 5 requirements to make a valid contract?
Offer + Acceptance: agreement between the parties
Consideration: there must be act or promise given in exchange for the promise
An intention to create legal relations: intention to be legally bound by the agreement
certainty: as to the terms of the agreement
capacity: capacity to contract
What is meant by an offer?
promise to be bound if the offeree agrees to the terms
offer can be addressed to the general public and is accepted when acted upon by a member of the general public.
What is not an offer?
an invitation to treat: invitation to negotiate or make offers
- display of goods in a shop is an invitation to treat
- Adverts are invitations to treat
However: adverts for rewards are offers that are accepted when the condition is met. - auctions are invitations to bid (make offers) + acceptance of the last bid is acceptance of the offer
What happens if a display of goods in a shop has an incorrect price tag?
shop is not obliged to sell at mistaken price
customer makes an offer to buy when they present goods at the till
Can an offer be accepted AFTER it has been terminated?
No.
Termination may happen by:
Rejection: outright rejection of offer/counteroffer being made
Withdrawal: offer may be revoked any time before acceptance and must be communicated through reliable source to the offeree
Lapse of time: offer lapses after specified time/ reasonable period (if not specified)
What is meant by acceptance?
final and unqualified agreement to all terms of offer
adding/ amending the offer counts as a counter offer and is not acceptance
acceptance must be unconditional + communicated (words/conduct) to the offeree
silence is NOT acceptance UNLESS accompanied by conduct indicating acceptance
What is the postal rule?
acceptance by post takes effect when it is posted unless it is clear that acceptance will only take effect when it is communicated
Which agreements are not legally binding?
letters of intent
agreements to agree
agreements ‘subject to contract’
What is consideration?
each party gives something in return for what they have gained
either a benefit to the person making the promise or detriment to person to whom promise is made (or both)
What are the 6 established principles regarding consideration?
it need not benefit the promisor
it must not be past- unless it was done at promisor’s request, there was mutual understanding the promise would be compensated + had the promise been made in advance it would have been legally enforceable
it must be sufficient: but need not be adequate
it must be of economic value: emotional/sentimental exchanges do not qualify
It can be a promise not to sue
it can occasionally exist through performance of an existing duty: performance of existing public duty is not consideration but exceeding a public duty is. Exceeding a contractual duty to another party is consideration.
Can a contract be binding without consideration?
waiver: one party promises not to enforce their rights under contract even without consideration
promissory estoppel: contracting party promises not to enforce a contractual right, they will not later be able to enforce that right if to do so would be inequitable + the promise has been relied upon by the other party
OR
agreement by deed: contract formally executed as a deed doesn’t require consideration
What are the legal presumptions regarding the requirement of intention to create legal relations?
social + domestic agreements are not intended to be legally binding (can be rebutted)
commercial agreements are intended to be legally binding (clear words required to rebut this)
What will the court consider when attempting to establish certainty of an agreement?
any provision for clarification
terms to be implied by statute
the parties previous course of dealing
reasonableness
custom
the officious bystander test: court may ask if a person observing the contract would have believed that particular term was a part of the contract
whether a term is sufficiently unimportant to be removed
Do minors have capacity to enter into contracts?
if under age of 18, not usually bound by contracts they make
Exceptions where contract is for:
necessaries such as goods + services
OR the minor’s benefit such as training + experience
What happens if a person with mental incapacity makes a contract?
contract is voidable if:
the person did not have mental capacity at the time they entered into the agreement
AND
the other party knew/should have known that this was the case
What happens if an intoxicated person enters into a contract?
contract will be invalid if:
at the time they were incapable of understanding the nature of the transaction
AND
the other party knew this was the case
Can corporations enter into contracts?
Yes:
registered companies
statutory corporations
limited liability partnerships
What is the common law doctrine of privity of contract?
a person who is not party to a contract (3rd party) cannot enforce the provisions of the contract
OR
rely on its provisions even if they were made to benefit the 3rd party
3rd parties can neither sue nor be sued under a contract (subject to exceptions: rights of 3rd parties)
What does the Contracts (Rights of Third Parties) Act 1999 state?
a party who is not party to a contract can sue on it if:
the contract expressly provides that they may do so
OR
the contract purports to confer a benefit on them, unless the parties do not intend it to be enforceable
Explain agency in contract law?
authorised agent may bind a principal to a contract with a 3rd party
agent must have actual authority (express/implied)
Can an agent still bind a principal if they do not have actual authority?
Yes. If they have apparent authority
will bind principal if:
the principal represented that the agent had authority (by words/conduct)
the 3rd party relied on that representation
AND
the 3rd party entered into the contract
