2. Formation of Contract Flashcards
What are the 3 basic features/requirements of a contract?
- Agreement = Offer + Acceptance
- Intention to create legal relations
- Consideration
What are the 2 types of contracts?
- Specialty Contract (Deed)
- contracts which the law require to be “signed, sealed, and delivered” in a specific format
- does not require consideration - Simple Contract
- may be oral or written/partially oral and written
Is a contract the same as an agreement?
No.
- Not all agreements are legally binding
- Agreement = Offer + Acceptance
- Contract = Agreement + ITCLR + Consideration
What is the difference between an Offer an Invitation to Treat?
In an offer, the offeror indicates his willingness to enter into a legally binding contract and be bound by those terms once accepted by the offeree.
In an invitation to treat, he is merely holding himself out as ready to receive offers which he may or may not reject. No indication of willingness to be bound by a legally binding contract.
Examples:
- Display of goods for sale in a store
- Advertisements
- Auctions
- Notices inviting tenders
- Mere statements as to price
What are the 3 rules of an offer?
- Must be clear and certain
- Must be communicated from the offeror to the offeree
- May be made to a specific person, a group persons or the whole world.
What are the 6 ways one can terminate an offer?
By acceptance (once accepted, the offer is no longer available for acceptance)
- By outright rejection
- By counter-offer (the original offer no longer exists)
- By revocation (must take place before acceptance, and clearly communicated to offeree either directly or by third party)
- By lapse (expiration of the offer)
- By death of the offeror (depends on whether it involves the provision of offeror’s personal services)
- Offer subject to condition (non fulfullment of conditions)
What are the 4 rules of acceptance?
- Must be final and unqualified (no variable/changes)
- Must be a positive act (oral/writing, since and inaction is not sufficient)
- Method of acceptance must follow offeror’s instruction
- Must be communicated to the offeror (directly or by offeree’s agent)
What is the postal acceptance rule?
- Offer is deemed as accepted once posted, duly and correctly addressed and the correct postage paid
- Not applicable to instantaneous modes of communication
- Applies to acceptances ONLY
Definition of Intention to Create Legal Relations
(2 Points)
- Readiness of each party to accept legal consequences if he does not perform his contract.
- This relationship creates rights and duties between them. It entitles them to take legal action against one another if one of them breaches his duties or violates the rights of the other.
What is consideration?
- The price “something of value”
- Given by the promisee in exchange for the promisor’s promise
What are the 3 rules of consideration?
- Must be clear and capable of monetary value
- Must have value but need not be adequate (the law is not concerned is the consideration matches the value of the promise, as the value of the promise is up to the parties to decide)
- Must be “fresh” and not something the promisor is already entitled to.
Is payment of lesser sum a good consideration?
No, payment of a lesser sum is not a good consideration since the debtor is merely carrying out his existing duty in respect to the debt, and there is no fresh consideration.
Is payment of a lesser sum a good consideration if the creditor requests and different performance in the payment of the debt?
Yes. In this case, if the creditor requests a different performance such as payment:
- earlier than the date agreed upon
- at a different place
- with additional token
- by different method,
this is then a fresh consideration given in exchange to the discount given to the debtor.
What is Promissory Estoppel?
(4 Rules)
Promissory Estoppel prevents a person from going back on his word when it would be unfair to do so. The party who wants to use this clause must show that:
- There has been a clear promise made
- It is unfair for the promisor to go back on his word
- The promisee relied on the promise in some way to his detriment
- Can only be used as a shield (defence) and not a sword (claim)
Can a party sue a manufacturer for goods that were gifted to them?
No. Only a party that has given consideration (e.g. person who bought the gift) may enforce a contract.
