4. Contract law

Question 1

What do you need to form a legally binding contract?

Answer 1

• Agreement
• Consideration
• Intention
• Capacity

Question 2

What is an offer?

Answer 2

A promise to be bound on specific terms, and it must be capable of acceptance. It cannot be vague, imprecise or open to interpretation

Question 3

What is an invitation to treat?

Answer 3

Not an offer. Merely acts as an inducement to encourage another person to make an offer and is, therefore, not capable of acceptance itself. (i.e. goods on a shop shelf)

Question 4

How is agreement formed?

Answer 4

Once a valid offer has been accepted. This acceptance must be made whilst an offer is open and may only be made by an authorised person.

Question 5

What would result in the termination of an offer? (7)

Answer 5

• Express rejection
• Counter offer
• Lapse of time either express or implied
• Revocation of the offer - must be communicated at any time before acceptance
• Death
• Conditional acceptance
• Failure of condition

Question 6

What are the requirements for consideration? (6)

Answer 6

• Must be from both parties
• Performance must be possible
• Performance must be legal
• Must not be past
• Performance of existing contractual or legal obligations is not sufficient
• Need not be adequate but must be sufficient

Question 7

What capacity must one have to enter into a contract?

Answer 7

In order for an individual to enter into a contract, they must be over the age of 18 and are of sound mind and not suffering from a factor ruling out capacity (e.g. drunkenness)

Question 8

As much as he deserved [latin]

Answer 8

quantum meruit

Question 9

What are the exceptions to complete performance of contract?

Answer 9

There are some exceptions to the rule that performance of a contract must be entirely and exactly complete:

• where there is acceptance of partial performance of the contract; or
• where one party prevents the other from performance of their duties.

Question 10

What is a breach of contract?

Answer 10

Where one party fails to comply fully with the terms of contract, they are deemed to be in breach of contract. Any breach of contract gives the innocent party the right to claim damages under common law.

Question 11

What are the 2 types of contract breach?

Answer 11

• Straight forward breach - where a party fails to comply with the terms set out in the contract; and
• Anticipatory breach - where a one party gives notice of their intention to not comply with the terms of the contract, the innocent party has the right to sue immediately on notice of breach.

Question 12

What are damages under common law?

Answer 12

Monetary award to be paid to a person as compensation for loss or injury.

Question 13

What 2 conditions must be met for the court to award an equitable remedy?

Answer 13

• The claimant must be truly the innocent part, ‘he who comes to equity must do so with clean hands’; and
• The court must be convinced that damages alone would not be an adequate remedy.

Question 14

What 4 equitable remedies may be awarded?

Answer 14

• Injunction - judicial order that restrains a person from doing something or orders someone to do something.
• Mareva Injunction - asset freezing order, thereby preventing the defendant transferring or disposing of assets.
• Rescission - order to return both parties to their pre-contractual position.
• Specific performance - directs a party to complete their contractual obligations.

Question 15

When is specific performance not awarded?

Answer 15

• Where court cannot supervise enforcement
• Where a contract is for a personal service
• When a contract involves minors