Agreement Flashcards
Elements to form a valid agreement
- offer
- acceptance
- intention to create legal relations
- consideration
= BINDING AGREEMENT
GR for advertisements
Statements inviting further negotiations/invitations to treat. NOT a valid offer.
Exception: when advertisements amount to unilateral offers.
GR display of goods for sale
(price-market goods or shop window or website)
INVITATION TO TREAT
GR auction sales
Auctioneers request for bids are invitations to treat
What constitutes acceptance in auction sales
By the fall of the auctioneer’s hammer.
The bidder can revoke their offer at any time before the hammer falls.
Auctions ‘without reserve’
Auctioneer promises to sell to the highest bidder no matter the bid’s value.
It amounts to a unilateral offer.
If the auctioneer does not sell, then the unilateral contract is breached.
When is an invitation to tender is regarded as a binding contract? (= cumulative conditions)
Blackpool conditions
1- solicited from SPECIFIED PARTIES
2- ABSOLUTE DEADLINE FOR SUBMISSIONS
3- ABSOLUTE AND NON-NEGOTIABLE CONDITIONS FOR SUBMISSION
What are the occasions for terminating an offer?
1- counter offer
2- passage of time (lapse) (specified or ‘reasonable time’)
3- by the death of one of the parties (lapse)
4- revocation of an offer (ONLY if prior to acceptance)
When is the revocation of the offer effective?
Revocation of an offer is effective only upon actual notice of it reaching the offeree.
ie. Revocation takes effect from the moment it ACTUALLY REACHES the offeree.
When does revocation by post/email of the offer become effective?
When the letter/email is received.
GR for indirect communication of revocation
Provided the offeror has shown, by words or conduct, a CLEAR INTENTION to revoke their offer and NOTICE has reached the offeree, the revocation is effective.
Means of communication are irrelevant, so the revocation will be effective even if communicated by a third party.
Revocation of unilateral offers remains possible UNTIL […]
the completion of the required act.
When is revocation of unilateral impossible albeit the required act is not completed?
offeree has PARTLY performed the
obligation and is WILLING and ABLE to complete.
Revocation of unilateral offers to the ‘whole world’ (or a substantial nb of people) will be effective if […]
the offeror takes
REASONABLE steps to bring the revocation to the attention of all those who may have read the offer.
What happens if a counteroffer is accepted?
COUNTER OFFER’S terms and not the terms of the original offer become the terms of the contract.
Elements of a valid acceptance
(a) Acceptance must be in response to the offer.
(b) Acceptance must be unqualified. (‘mirror image’)
(c) It may be necessary to follow a prescribed mode of acceptance.
(d) Acceptance must be communicated.
When does the prescribed mode of acceptance become mandatory?
ONLY if the offeror makes it very clear and mandatory, and it must be to the exclusion of other modes
Definition of unqualified acceptance
Mirror Image Rule.
Acceptance must be unqualified and correspond exactly with the terms of the offer.
When does acceptance become effective?
Effective from when it is communicated to the offeror.
Does silence constitute acceptance?
NO
Postal rule
(note: only effective for ‘acceptance’)
Acceptance sent by post is deemed to be effective from the date that the post is properly posted/sent.
When does the postal rule NOT apply?
1- it is not contemplated/reasonable in the circumstances that the post would be used; or
2- does not apply to letter revoking offers; or
(ie. revocation becomes effective when received)
3- if it’s incorrectly addressed; or
4- if disapplied by an offeror; or
5- if instantaneous methods are employed (email, fax)
Rule concerning terms of the offer to be binding if it accepted
A binding contract requires all material terms to be certain and complete.
Sufficiently certain terms agreed on all material terms.
–> test is objective
Can a third party communicate acceptance?
If TP informs the acceptance and with the authority.
In this scenario, is the contract formed/ If so, when?
Day 1 - A makes offer to B
Day 2 morning - A posts letter revoking the offer
Day 2 afternoon - B posts a letter accepting the offer
Day 3 - B received revocation
Day 4 - A received acceptance
Contract is formed on day 2 in the afternoon when B posted letter of acceptance.
The postal rule only applies to letters of acceptance.
The postal rule applies even where (…)
the acceptance is delayed or lost in the post.
Where an acceptance is made by an instantaneous mode of communication, the general rule is (…)
that the acceptance takes place at the moment the acceptance is received by the offeror.
Is communication necessary to accept an unilateral offer?
No - completion of act suffice.
To determine whether the parties have reached an agreement on all material terms what test does the court apply?
Objective test
- asking whether, in all the circumstances of the case, the parties have
agreed all the terms they considered to be a precondition to creating legal relations.
When does the court consider terms too uncertain to be enforced?
Terms
- too vague
- uncertain
- variety of different terms
- too ambiguous
- agreement incomplete or uncertain from the terms
Can be enforced if the words could be given a reasonable meaning.
What is ‘consideration’?
- money/price paid
- something in return suffice
What is executory consideration?
Where contracting parties make promises to each other to perform something in the future after the contract has been formed.
4 Rules governing consideration
1- must not be past
2- must move from the promisee
3- need not be adequate
4- must be sufficient
Explain
1- must not be past
2- must move from the promisee
3- need not be adequate
4- must be sufficient
1- no consideration on some past event/performance
Exception: prior act/service provided by the promise at the promisor’s request and it was known from the outset/the beginning that the payment would be made for that act/service
2-party who hasn’t provided consideration may not bring an action to enforce a contract
3- the court will not assess the adequacy of the consideration, it will not interfere with the bargain freely reached by the contracting parties.
4- must have some value ‘in the eyes of the law’ - does not matter how small the value is as long as it is worth something.
If a thing of value can be identified, then there will be sufficiency of consideration and the court will not enquire as to its adequacy.
Conditions for exception to the rule that consideration must NOT be past
1- The act must have been done at the promisor’s request.
2- The parties must have understood that the act was to be rewarded either by a payment or
the conferment of some other benefit. (express or implied)
3- The payment, or conferment of other benefits, must have been legally enforceable had it been promised in advance.
Can existing obligations be considered as good consideration?
GR: No
Exceptions:
1- executory consideration
2- if the party agrees to exceed their existing obligation (ie. went beyond existing obligations)
Rule for ‘promises to pay more for existing obligations’
Will constitute good consideration if there is a practical benefit/obviation of a disbenefit.
Conditions:
1- A and B contracted for A to do some act in return for payment by B
2- before A completely performed, B has reason to doubt whether A will be able to do so
3- B promises A additional payment for A to complete on time
4- B receives a practical benefit or obviates a disbenefit
5- provided that B’s promise not given in due to economic duress or fraud on part of A
Promise will be legally binding.
B must exceed their existing obligations.
A must not demand extra money from B under undue pressure.
Consideration in the form of ‘practical benefit’.
Part payment of a debt
Good consideration if that party accepts a lesser sum and release the remainder of their liability.
Performance of an existing obligation in part will constitute good consideration if there is a practical benefit in excess of receiving prompt payment of a part of the arrears.
The EXCEPTION to the rule in Foakes v Beer (Part payment of a debt is not good consideration) is only applicable if
If, at the creditor’s request, some
new element is introduced, then this will amount to good consideration, and the court will not enquire as to the value of the new element.
Examples might be payment at a different place, or at a different time or by providing a different thing in place of money
Obligations under a public duty cannot amount to good consideration. The only exception is (…)
If the officer went beyond his public duty.
It was held that the duty of a police
officer is the prevention of crime and they are not under a duty to provide information to a private individual. In doing so he went beyond his public duty and thus provided consideration for the offer of reward.
The duty owed to third parties is a good consideration IF
Promisee obtains a direct obligation which he can enforce.
If there is a failure to meet its obligations, this party would face action from both parties.
Promissory Estoppel conditions
1- shield, not sword
2- clear and unequivocal promise that strict legal rights will not be (fully) enforced
3- a change of position in reliance on the promise
(reliance need not be detrimental, a mere change of position suffice)
4- inequitable to resile from the promise
(detriment would incur in case of resignation from the promise)
5- rights are suspended
(promisor can resume their full rights back after giving a reasonable notice OR once the estoppel expires)
Promissory estoppel requires a clear and unequivocal promise to be made. What does it mean?
A clear and unequivocal promise or representation that strict legal rights will not be fully enforced.
The promise must be intended to affect legal relations and not simply amount to a gratuitous privilege given to the promise.
A promise can be express or implied (for example by conduct).
Inequitable to allow the promisor to go back on their promise means (…)
Promissory estoppel, as an equitable doctrine, is based on principles of fairness and is discretionary. The courts, in exercising their discretion, undertake a balancing exercise to determine whether it would be inequitable to allow the promisor to go back on their promise.
Test for intention to create legal relations
OBJECTIVE =: would reasonable people regard the agreement, in those circumstances, as intended to be binding?
presumption applying to intention to create legal relations (ICLR)
- in commercial agreement: ICLR presumed
- in social/domestic agreements: presumed that there is no ICLR
–> can be rebutted spouses in the process of separating
–> rebutted if estranged relations in the family
Negotiation of a contract create strong rebuttal for presumptions.
Contracts entered with minors can be enforced only under 2 exceptions
1- necessaries
–> if contract is for the benefit of the child, the minor will pay a reasonable price. Must be suitable to the condition in life of the minor and to their actual requirements at time of sale or delivery.
2- for education, employment or an apprenticeship contracts
–> minor is also bound by a contract of employment, apprenticeship or education but only if it is for their benefit.
Mental incapacity renders the contract ‘void’ if
1- unable to make a decision for himself relating to the matter
2- at the time contract is made
And the contracting counter party knew/ought to know this!
impairment of mental capacity requires inability to communicate a decision due to being incapable of:
1- understand the relevant info
2- retain relevant info
3- use relevant info
Therefore, unable to communicate a valid decision.
In cases of other cases of incapacity (drug, drunkenness etc.)
Contract is VOIDABLE if the person purporting incapacity can establish that:
1- they did not understand what they were doing; and
2- that the other party knew that to be the case
Exception to the effect of entering into a contract with a person lacking capacity
NECESSARIES
A person without capacity still remains liable to pay a reasonable price for
‘necessaries
