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CIMA - BA4 > 5. The Law of Contract > Flashcards

5. The Law of Contract Flashcards

1
Q

What are the 4 elements required to form a contract?

A
  1. Agreement
  2. Consideration
  3. Intention to be legally binding
  4. Legal capacity
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2
Q

What is a gratuitous promise and how is it executed?

A

Where only one party offers consideration, executed by a deed

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3
Q

What are the 2 elements necessary for an agreement?

A

Offer and acceptance

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4
Q

An offer must be… but may be…

A

Must be certain and not vague, but may be conditional or time limited

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5
Q

What are the 6 ways in which an offer can be terminated?

A
  1. Rejection
  2. Conditional acceptance
  3. Lapse of time
  4. Death of offeror or offeree
  5. Failure to comply with terms
  6. Counter offer
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6
Q

When is revocation effective?

A

If it is communcated by offeror or reliable third party before acceptance

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7
Q

What are the most common examples of invitation to treat?

A

Goods on supermarket shelves and adverts on TV/newspapers

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8
Q

What are the 3 rules for valid acceptance of an offer?

A
  1. Made by authorised person only
  2. Made before revocation or expiration
  3. Must be communicated by positive words or actions (e.g. by conduct (consuming a meal) but not inferred by silence)
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9
Q

What is the postal rule?

A

Contracts are deemed accepted from the moment of posting by the offeree

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10
Q

When is acceptance deemed to be from when communicated by instantaneous methods?

A

When the acceptance is received

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11
Q

In what type of contract is communication of acceptance waved?

A

Unilateral contracts

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12
Q

What are the 3 types of consideration, and are they valid?

A
  1. Present, executed (valid)
  2. Future, executory (valid)
  3. Past (not valid)
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13
Q

Where might there be an implied promise to pay?

A

A hairdressers, taxi or restaurant

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14
Q

What must consideration be in order to be valid?

A

Sufficient (has some, but not necessarily fair, value), but not adequate

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15
Q

Is performance of existing contractual obligations sufficient consideration?

A

No

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16
Q

What is the rule in Pinnel’s case?

A

Part payment of a debt is insufficient consideration and the creditor will always be able to sue for the balance outstanding

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17
Q

What are the 5 exceptions to the rule in Pinnel’s case? (If accepted by the creditor)

A
  1. Alternative consideration
  2. Early payment
  3. Payment by a third party
  4. Payment at an alternative location
  5. The equitable doctrine of promissory estoppel
18
Q

What is promissory estoppel?

A

If a creditor makes a gratuitous promise to his debtor that he will not insist on full payment of a debit, AND the promise is made with the intention that the debtor will rely on it, AND the debtor does so, then the creditor is prevented from denying the genuineness of the promise

19
Q

Are social and domestic arrangements presumed to be legally binding?

A

No, unless the parties specify either expressly or by implication that they intend the agreement to be legally binding

20
Q

Are commercial arrangements presumed to be legally binding?

A

Yes, unless there is clear evidence to the contrary

21
Q

What are the 2 exceptions to commercial agreements being legally binding?

A
  1. Comfort letters

2. Transactions binding ‘in honour only’

22
Q

What are the 2 elements of privity of contract?

A
  1. Only a promisee can enforce the promise

2. Consideration must move from the promisee

23
Q

What is a breach of contract?

A

A contract is not honoured by one or more of the parties to it, entitling the other party to sue for damages

24
Q

What is a term?

A

A statement forming part of a contract (if broken, can bring action for breach of contract)

25
Q

What is a representation?

A

A statement made by one parties designed to induce the other party to enter into the contract (if untrue, can bring action for misrepresentation)

26
Q

What two things will a court look at to determine if a statement is a representation or a term?

A

When the statement was made an the importance of the statement

27
Q

What is a condition?

A

A major term of the contract which goes to the heart of the contract

28
Q

What does breach of a condition allow?

A

The injured party to repudiate (reject) the contract, or continue with it and claim damages from the breach

29
Q

What is a warranty?

A

A less vital, although still important, term of the contract

30
Q

What does breach of a warranty allow?

A

The injured party to sue for damages (but cannot reject the contract entirely)

31
Q

What are innominate terms?

A

Terms classified as warranties or conditions in a contract can be classified as innominate if the consequences of the breach of the term were more or less serious than originally envisaged

32
Q

Terms can be implied into a contract by…

A
  1. Statute
  2. Custom
  3. The courts (to avoid gross unfairness but not to make the contract ‘fairer’)
33
Q

What is an exclusion clause?

A

A contract term that attempts to exclude or limit liability for breach of contract or negligence

34
Q

What are the three levels of protection within exclusion clauses?

A
  1. Common law (all contracts)
  2. Unfair Contract Terms Act (between businesses)
  3. Consumer Rights Act 2019 (consumer and business)
35
Q

What is a misrepresentation?

A

A false statement of fact, made with the intention of inducing another party to make a contract

36
Q

What does misrepresentation lead to?

A

The contract becomes voidable, and the injured party can take steps to rescind the contract (go back to pre contractual position)

37
Q

What are the 2 types of misrepresentation?

A

Fraudulent and Negligent

38
Q

What is the remedy for fraudulent misrepresentation?

A

Rescission and/or damages for deceit

39
Q

What is the remedy for negligent misrepresentation?

A

Rescission and/or damages for negligence

40
Q

Silence does not generally constitute misrepresentation unless… (4)

A
  1. Contract of good faith
  2. Half-truth
  3. Fiduciary relationship
  4. Previously true statement becomes untrue

CIMA - BA4 (7 decks)

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