3. Intention to Create Legal Relations; Capacity Flashcards

1
Q

For a contract to be binding, what do both parties need to intend?

A

To be legally bound by it

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2
Q

How must intention to be legally bound be communicated?

A

Mutually, either expressly or impliedly

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3
Q

What is the presumption regarding intention to be legally bound in domestic situations (married couple, family member)?

A

That the parties do not intend to be legally bound

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4
Q

What is required to rebut the presumption against intention to be legally bound in domestic situations?

A

Objective evidence to the contrary

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5
Q

Even where objective evidence to the contrary is used to rebut presumption against intention to be legally bound in domestic situations, what will prevent it from being rebutted?

A

If either party has actual knowledge that the other does not intend to be legally bound

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6
Q

What is the presumption regarding intention to be legally bound in social situations?

A

Same as domestic

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7
Q

What is a situation in which the courts have found the presumption against intention to be legally bound in social situations to be rebutted?

A

Where friends or family members join together to enter a race or competition

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8
Q

What trap on the exam concerning a social situation should we look out for? Iclr

A

Social parties, e.g. friends or family, acting within a commercial context

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9
Q

What is the presumption regarding intention to be legally bound in commercial situations?

A

Strong presumption that the parties intend to be legally bound

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10
Q

What is required to rebut the presumption against intention to be legally bound in commercial situations?

A

Clear and unambiguous evidence to the contrary

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11
Q

If a commercial party does not intend to be legally bound, what should they do to rebut the presumption?

A

State that their agreement is “subject to contract” or “binding in honour only”

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12
Q

What is the implication in a commercial situation where an agreement is subject to contract?

A

That a legally binding agreement will follow

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13
Q

What is the effect of a contract entered into by a minor?

A

Voidable by the minor, with some exceptions

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14
Q

When is a minor bound by a contract?

A

When they ratify the contract, or to pay a reasonable price for necessities

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15
Q

How does a minor ratify a contract?

A

By adopting it after they turn 18

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16
Q

What are three exceptions to the general rule that a contract cannot be binding on a minor?

A
  1. Contracts for necessaries
  2. Employment contracts that benefit them
  3. Contracts for the acquisition of a permanent interest in property
17
Q

What contracts for necessaries are binding on a minor?

A

Any contract for necessary goods or services at a reasonable price

18
Q

In the context of a contract for necessaries with a minor, what is deemed “necessary”?

A

This is subjective, based on the minor in question

19
Q

When is a contract for the acquisition of a permanent interest in property not binding on a minor?

A

When the minor expressly repudiates the contract

20
Q

Why is a contract for the acquisition of a permanent interest in property binding on a minor, unless expressly repudiated?

A

Because under the contract, an ownership interest passes to the minor

21
Q

Under the Minors’ Contracts Act 1987, what will the court do in a situation where under a contract, the other party has transferred property to the minor under a voidable contract?

A

Require the minor the send the property back, if it is just and equitable to do so

22
Q

What is the effect of a contract entered into by an individual lacking mental capacity?

A

Voidable, if the other party knew that they lacked capacity

23
Q

What are four factors to consider when judging if a person lacks capacity?

A
  1. Unable to understand information relevant to the decision
  2. Unable to retain such information
  3. Unable to weigh up such information
  4. Unable to communicate their decision
24
Q

If a person lacking mental capacity enters into a contract, can they ratify the contract?

A

When they recover

25
Q

Does the necessaries exception apply to mental incapacity?

A

Yes

26
Q

Is intoxication considered a mental incapacity?

A

Yes

27
Q

What does the Companies Act 2006 say about corporate capacity?

A

The validity of an act done by a company cannot be called into question by reason of anything in the company’s constitution