CH2 Contract Formation

Question 1

What are the requirements for a contract?

Answer 1

Offer + Acceptance (= Agreement) > Consideration > Intention > Capacity and Form

Question 2

What is a void contract?

Answer 2

Not a contract at all.
Goods should be returned (even from a third party).
Not legally binding

Question 3

What is a voidable contract?

Answer 3

Valid contract
Can be set aside by “injured” party
E.g. lied to, coerced

Question 4

What types of agreement must be either in writing (i.e. signed) or evidenced in writing (i.e. there is a written record)?

Answer 4

In writing: transfer of land; consumer credit agreements
Evidenced in writing: guarantees

Question 5

What is the definition of an offer?

Answer 5

A definite promise made by an offeror to be bound by specific terms

Question 6

What is an invitation to treat and what is it NOT?

Answer 6

Statement of willingness to enter negotiations
NOT an offer
CANNOT be accepted

Question 7

Give some examples of invitations to treat

Answer 7

Advertisements
Goods displayed in window/on shelves
Circulation of price list
Auction

Question 8

Is silence enough to constitute acceptance?

Answer 8

No

Question 9

What is a unilateral contract?

Answer 9

A contract where the offeror has implied or expressly waived the need for communication. E.g. reward for finding someone’s lost dog.

Question 10

When is acceptance deemed valid according to the postal rule?

Answer 10

When the letter of acceptance is posted, regardless of whether it is received.

Question 11

What are the conditions for the postal rule to apply?

Answer 11

1. Must be dealing in post
2. Correct address/postage applied
3. Applies to acceptance, NOT revocation
4. Acceptance ‘by notice in writing’ overrides it as notice must actually be received by the offeror (i.e. it is written into the contract that acceptance has to be received).
5. Does not apply to instantaneous communication e.g. email

Question 12

What are the rules around Revocation?

Answer 12

Received and delivered by a
Reliable person

Question 13

Is it presumed that there is intention to create legal obligations in social circumstances (family and friends)?

Answer 13

No

Question 14

Is it presumed that there is intention to create legal obligations in commercial circumstances?

Answer 14

Yes

Question 15

If a commercial agreement has been made using the term ‘ex gratia’, is that sufficient to rebut the presumption that a legally binding contract has been created?

Answer 15

No

Question 16

When does executed consideration, executory and past consideration happen? Is each valid?

Answer 16

Executed consideration: at time of agreement: valid
Executory consideration: in the future: valid
Past consideration: in the past: not valid

Question 17

What is the difference between past consideration and implied promise to pay?

Answer 17

In implied promise to pay, the promise is made before the consideration is provided and both parties expect that there will be payment

Question 18

What is the exception to the rules relating to consideration?

Answer 18

When a contract is made by deed

Question 19

Which contracts are required to be made by deed?

Answer 19

1. Conveyancing: transfer of property
2. Leases >3 years
3. Promises unsupported by consideration (e.g. promise to donate to charity over several years)

Question 20

Does consideration need to be adequate (i.e. equal in value to the consideration received in return?

Answer 20

No

Question 21

Does consideration need to be sufficient (i.e. have some identifiable value)?

Answer 21

Yes

Question 22

If you are performing an existing statutory duty, can this be classed as consideration?

Answer 22

No, it is insufficient

Question 23

Is the performance of an existing contractual duty owed to the promisor counted as consideration?

Unless what….?

Answer 23

No (insufficient), UNLESS promisee goes over and above the scope of the contract
or the other party gains some extra practical benefit

Question 24

Is the performance of a contractual duty owed to a third party classed as consideration?

Answer 24

Yes

Question 25

Is part payment of a debt sufficient consideration?

What is needed in order to waive the rest of the payment?

Answer 25

No. If one party accepts part payment, the waiver for the rest of the payment should be supported by consideration

Question 26

Part payment of a debt is usually insufficient. What are the exceptions?

Answer 26

1. Alternative consideration given
2. Bargain between creditors
3. Third party settles the debt
4. Early payment

Question 27

What are the exceptions to the privity rule?

Answer 27

1. Road Traffic Act
2. Agency arrangements
3. Executors of a will
4. The Contracts (Rights of Third Parties) 1999 (IF the individual is EXPRESSLY identified OR the term confers a benefit on them