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 but doesn’t need to be 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)

Question 10

what ways can consideration be shown

Answer 10

• money
• goods
• services
• or promise of any of these

MUST move from the promisee

Question 11

is past consideration valid

Answer 11

may be deemed valid where it can be proved there was an earlier implied promise to pay

Question 12

in what instance may part payment be allowed

Answer 12

additional consideration could be supplied:
- pay debt early
- provide payment in kind (use of goods/services instead of cash)
- pay at a different location
- payment is made by a third party

Question 13

what can the injured party receive if they are subject to misrepresentation

Answer 13

1. declare contract void and seek rescission (be restored to precontractual position)
   OR
2. affirm contract and claim damages for any losses