Ch.7 An Introduction to Contracts

Question 1

Contract

Answer 1

agreement made between two or more persons that is enforceable at law

Comes into existence when parties have established elements that make contract enforceable

Question 2

Freedom of contract

Answer 2

General ability of parties to create their own “law”, which they are obliged to follow

Create specific rights and duties that courts will enforce

Question 3

6 basic elements of a valid contract

Answer 3

1. An intention to create a legal relationship
2. Offer
3. Acceptance
4. Consideration
5. Capacity to contract
6. Legality

Question 4

Contracts must be free of vitiating elements

Answer 4

Mistake
Misrepresentation
Undue influence
Duress

Question 5

Requirements must be met for contract to be enforceable by the Courts

Answer 5

Certain types of contracts must be in writing, or take special form

Question 6

Premise of Contract:

Answer 6

End result is meeting of the parties’ minds (consensual agreement)

Essential element is a promise
- Intention on the part of the promiser is to be bound by the promise made i.e. create a legal relationship

Intention is a presumption at law

Question 7

Presumptions in contract law

Answer 7

Strangers intend to be bound by their promises

Family members and close friends do not intend to be bound in contracts

Both are presumptions that can be rebutted

Question 8

Invitation to do Business

Answer 8

Advertisements are not offers
Invite offers that seller may accept or reject

Answer 9

In text

Key to the decision was the deposit of money in order to pay the reward

Prior to this decision advertisers could make any claim and stand behind it as ‘puffery’

Now, most promises in ads follow this precedent although advertisers still have great scope in claims like ‘works great’ or ‘best product’

Question 10

Nature of an offer

Answer 10

Only a promise made with intention of creating a legal relationship may be enforced

A promise is tentative, until the other party accepts proposal i.e. to comply with the condition(s)

Question 11

Acceptance

Answer 11

• a statement or act given in response to and in accordance with an offer

Question 12

RULES OF ACCEPTANCE

Answer 12

RULE: Acceptance of the offer must be communicated to the offeror in the manner requested or implied by the offeror in the offer

RULE (for an offer accepted by the post): the acceptance of the offer takes place when the letter of acceptance, properly addressed and the postage is paid, is placed in the postbox

Question 13

Nature of Acceptance

Answer 13

Must be clear and unconditional
Counteroffer is a new offer and a rejection of original offer
Silence cannot be considered acceptance unless there is a pre-existing agreement
Legislation (Common Law) protects consumers:
- Public not obliged to pay for unsolicited goods
- Not liable for goods lost or damaged while in their possession

Question 14

Unilateral agreements

Answer 14

offers that require oferees to complete their part of the contract as a mode of acceptance

• An offer made to the world at large
• Completing or performing the act is acceptance
• Offeror cannot revoke offer so long as offeree is in the course of performing their part

Question 15

Location of the Transaction

Answer 15

Place of offer/acceptance determines location of contract and jurisdiction that governs it

Data messages are deemed dispatched from the originator’s place of business

Deemed received at the addressee’s place of business
Location of contract determines:
- Jurisdiction whose laws apply to contract
- Applicable sales or income taxes

Question 16

Effect and Timing of the Click

Answer 16

Electronic business contracts must include valid offer and acceptance
- Radio button and click box
- Click wrap agreement

Question 17

Click wrap agreement

Answer 17

internet click box of “I agree” which constitutes valid acceptance of enumerated contractual responsibilities

Question 18

Lapse

Answer 18

termination of an unaccepted offer by the passage of time, a counteroffer, or the death of a party

• Until offer accepted, no legal rights or obligations
• If offer rejected outright, it lapses and cannot be received except by offeror
• Offers may also lapse by passage of time
  Stated in the offer expires
  If not stated, after a reasonable period of time

Question 19

Revocation

Answer 19

termination of an offer by noticed communicated to the offeree before acceptance

Offeror may revoke the offer at any time prior to the acceptance
Revocation must be communicated to the offeree
Can be communicated in any form as long as it is communicated and received

Question 20

Option

Answer 20

a separate promise to keep an offer open for a period of time

Requires consideration or signed under seal

Question 21

Indirect revocation:

Answer 21

Revocation can be communicated through someone else (indirect)

Must prove offeree had notice of revocation indirectly from a reliable source