Agreement Flashcards
What three elements must be present for there to be a binding contract?
- offer and acceptance
- intention to create legal relations
- consideration
What is required for valid offer and acceptance?
There must be a clear and certain offer by one party displaying intention to be bound and the other party needs to communicate an unequivocal acceptance
Does the court take an objective or subjective approach in determining whether a contract has been formed or not?
Objective
What question does the court ask when determining whether an agreement exists between the parties?
‘What a reasonable person would say the intention of the parties was, having regard to all the circumstances?”
What is required for certainty of offer?
There must be a clear and certain offer
What are the two kinds of contract?
Unilateral and bilateral
What is a bilateral contract?
Each party assumes an obligation to the other party by making a promise to do something, such as to sell an item to the other party in exchange for payment
What is a unilateral contract?
One party makes an offer or proposal in terms which call for an act to be performed by one or more other parties. It does not involve mutual promises - only the party making the offer assumes an obligation. Only actual performance of the required act will constitute acceptance.
Can an invitation to treat be accepted to form a binding contract?
No - an invitation to treat is not a form of valid acceptance
Is an advertisement to be treated as a valid offer or an invitation to treat?
General rule is that advertisements are statements inviting further or invitations to treat.
Exception - can be treated as valid offer if they amount to a unilateral offer
What are the requirements for a unilateral offer?
- prescribed act and
- clear intention to be bound
Is a display of goods for sale to be treated as a valid offer or an invitation to treat?
General rules is that they are not an offer for sale but invitation to treat
Is an invitations to tender to be treated as a valid offer or an invitation to treat?
General rule - invitation to treat
Exceptions:
- where invitation to tender expressly contains an undertaking to accept the highest or the lowest bid
Is an auction sale to be treated as a valid offer or an invitation to treat?
General rule - invitation to treat
Bidder may revoke offer anytime before the hammer falls
What is the exception to the rule that an auction sale is to be as an invitation to treat?
An auction without reserve price is to be taken as a unilateral contract so valid offer.
- promise to sell to the highest bidder
What happens to an offer when it is rejected?
It is terminated and cannot be accepted
When does a rejection take effect?
On actual communication to the offeror
What is the effect of a counter-offer?
Original offer is deemed to be rejected and cannot be subsequently accepted.
What happens if a counter-offer is accepted?
Its terms and not the terms of the original offer are accepted.
What is the difference between a counter-offer and a request for information?
A counter-offer rejects the original offer which cannot be subsequently accepted
With a request for information, the original offer still stands
How may an offer lapse?
- by passage of time
- by the death of one of the parties
What passage of time is required for an offer to lapse?
Either passage specified in contract
If not specified in contract, then if acceptance is not made within a reasonable time (which will depend on circumstances of case)
What effect does death of the offeror have on an offer?
If offeree knows of death - offer will lapse
If offeree does not know - offer will probably not lapse
What effect does the death of the offeree have on an offer?
Offer will lapse - cannot be accepted by their personal representatives
When can an offeror revoke their offer?
Any time before acceptance but not after acceptance
When is revocation effective?
On actual notice (communication) reaching the offeror.
Must be clear intention to revoke offer
Is there a prescribed means of communication for revoking an offer?
No
Can be done by third party with authority
What is the exception to the rule that an offer can be revoked any time before acceptance (involves unilateral offers)?
Offeror may unable to revoke offeror where offeree has partly completed performance
How do you revoke a unilateral offer made to the whole world?
Revocation would likely be effective if offeror brings revocation to attention of all those who have read the offer
What is meant by acceptance must be in response to the offer?
Only the person to whom the offer is made can accept the offer
If offer is made to the whole world then everyone with notice of the offer can make a valid acceptance
What is meant by acceptance must be unqualified?
Acceptance must respond exactly with the terms of the offer. If there is qualification, than likely counter-offer and not an acceptance
Is there a prescribed mode of acceptance?
Not as a general rule.
Parties can make a prescribed mode - must make it clear that they will not be bound otherwise.
If prescribed mode is not made mandatory, then any other reasonable form of acceptance is okay.
What is meant by acceptance must be communicated?
Acceptance must be communicated to the offeror and is only effective from that moment.
Silence is not enough
What if a third party communicates acceptance?
Yes possible for valid acceptance if third party has authority
What is the postal rule in relation to acceptance?
Acceptance takes effect from moment letter is properly posted, even if it is never received by offeror
When does the postal rule not apply?
Where it has been disapplied by the offeror - offeror can require actual communication
The acceptance has been incorrectly addressed
What is the situation when communication is made my instantaneous means eg a phone call or email?
General rule - acceptance takes place at moment it is received by the offeror
If message received outside of office hours, then will be received at start of next business day
What is the situation with communication and unilateral contracts?
Communication is waived
Performance is sufficient to accept the offer
Why must all material terms be certain and complete for there to be a binding contract?
Because they must be capable of being enforced by the court.
Court cannot enforce an agreement that is too vague or ambiguous.
How do you know the parties have reached agreement on all material terms?
Ask ‘whether in all circumstances of the case, the parties have agreed all the terms they considered to be a precondition to creating legal relations’
