9 - Contract Formation 2

Question 1

what is consideration

Answer 1

element of value in an agreement
must be supplied by both parties to form a binding contract

Question 2

what are the three forms of consideration

Answer 2

1. executory = promise to perform action
2. executed = act in return for a promise
3. past = consideration supplied after agreement formed

Question 3

what are the general rules of consideration

Answer 3

• performance is legal
• performance is possible
• must be sufficient and adequate

Question 4

how is sufficiency of consideration defined

Answer 4

1) performance of existing contractual obligations isn’t sufficient to support promise of additional reward

2) to support waiver of legal rights, where part payment is given in full settlement of a debt; part payment isn’t sufficient to write off unpaid debt

Question 5

what are some legal presumptions made

Answer 5

1. domestic and social arrangements; spouses living together = no intention presumed, spouses separating = intention presumed
2. commercial agreements

Question 6

what are intentions

Answer 6

in absence of written or verbal consent, courts have to make presumptions

Question 7

what is misrepresentation

Answer 7

false statement of fact before the contract inducing the other party to enter into it

statement intended to be acted on and must have actually deceived other party

Question 8

how does intention relate to misrepresentation

Answer 8

intention is missing from a contract if either of parties didn’t genuinely consent to the contract

eg, one party makes misrepresentation to the other

Question 9

when is silence misrepresentation

Answer 9

silence will not be a misrepresentation unless following circumstances occur:

• earlier statement no longer true
• application made for insurance
• contracts made between parties in a fiduciary relationship (someone who manages money for someone else)