8 - Contract Formation 1

Question 1

what is law

Answer 1

system of rules that a country/community recognise as regulating actions of members and may lead to penalties

Question 2

what is a contract

Answer 2

legally binds parties, law will recognise and enforce

Question 3

what does it mean to be subject to contract

Answer 3

• parties in agreement but not legally bound
• parties negotiating, either party may leave without penalty

Question 4

what are standard form contracts

Answer 4

• used when no negotiation between parties
• party presenting contract has more power
• eg, mobile phone, utility companies

Question 5

what is an agreement

Answer 5

made by offer and acceptance

Question 6

what is consideration

Answer 6

both parties bring something of value to the contract

Question 7

what is intention

Answer 7

parties have intention to create legal relations between themselves

Question 8

what are vitiating factors

Answer 8

those that can render a contract void:
- form = particular form sometimes needed
- terms = properly incorporated into contract
- consent = affects validity of contract
- legality = won’t be enforced if seen as illegal
- capacity = contracts only within boundaries of authority

Question 9

how may a contract be formed - types of contracts

Answer 9

• written
• oral
• inferred

Question 10

how may a contract be invalid

Answer 10

VOID = there is no contract
VOIDABLE = innocent party withdraws from contract
UNENFORCEABLE = valid contract but one party can’t be enforced

Question 11

types of contracts that need to be in writing to be legally enforceable

Answer 11

• transfer of shares
• sale of land
• bills of exchange/cheques
• consumer credit contracts
• assignment of debts

Question 12

what are speciality contracts

Answer 12

• leases of 3+ years
• transfer of a legal estate in land, including a mortgage
• promise not supported by consideration
• must be by DEED
• covenants are also speciality contracts

Question 13

what is an offer

Answer 13

an offer to be bound on specific terms, it must be certain

Question 14

who are the people engaged with an offer

Answer 14

offerer = person making the offer
offeree = person in receipt of offer

Question 15

what is an Invitation to Treat

Answer 15

something acting as an inducement to encourage someone else to make an offer; not capable of acceptance itself

Question 16

which actions terminate an offer

Answer 16

• express rejection
• counter offer
• lapse of time; express = time stated in offer, implied = reasonable time if unstated
• revocation = cancellation that is communicated, received, reliable
• failure of a condition
• death of offeree

Question 17

what is acceptance

Answer 17

unconditional assent to all terms of the offer

an offer is accepted when all parties ‘in agreement’

Question 18

what is the rule around communication

Answer 18

• acceptance must be communicated
• a person can only accept an offer if they know about it

Question 19

what are exceptions to the communication rule

Answer 19

1. where unilateral acceptance is possible (one side only)
2. when postal rules apply, acceptance completed as soon as letter is posted subject to restrictions
3. telegrams subject to comms rule

Question 20

what does it mean for a contract to be exercised in deed

Answer 20

• in writing and signed
• delivery must take place; consists of conduct that deed will be executed and bound by

Question 21

examples of invitations to treat

Answer 21

• goods displayed in a shop window
• goods on shop shelf
• public advertisements
• a share prospectus (shows details of stocks of a company)
• invitation to submit a tender

Question 22

what terms is revocation subject to

Answer 22

• communicated before acceptance
• actually received by offeree
• may be via third party
• promise to keep offer open only effective when promise has been bought by offeree