Chapter 2

Question 1

.Types of Contract

Answer 1

Specialty contract - “signed, sealed, delivered” in a very specific format. Aka “deed”
Simple contract - not required to be prepared in the format of a deed. may be oral, written, partly oral and partly written, or even implied from conduct.

Question 2

Contract vs Agreement

Answer 2

Not all agreements are legally binding. Every contract is necessarily an agreement, but not every agreement is a contact. A valid contract is an agreement which the law will recognize and enforce.

Question 3

Features of a contract

Answer 3

Offer+Acceptance(agreement), Intention to create legal relations, Consideration

Question 4

Agreement

Answer 4

Agreement arises when an offer made by one party is wholly accepted by another without any modifications.

Question 5

Agreement - Offer

Answer 5

An indication of willingness by the offeror to enter into a legally binding contract. Terms must be either expressly or impliedly indicate that it is to become binding of the offeror as soon as it has been accepted by the offeree.

Question 6

Agreement - Invitation to Treat

Answer 6

a) Display of goods for sale in a shop (shopkeeper may have limited stocks/reserved item for another customer) b) Advertising collaterals (the word “offer” expected to lead to further bargaining) c) Auctions d) Notices inviting tenders (notices that invite suppliers to tender for project by stating prices - if states in the notice that he definitely binds himself to accept lowest price, notice can be regarded as offer)
e) Mere statements as to price - a response to information may not be an offer if the parties are merely stating the minimum price they are wiling to sell

Question 7

Agreement - Offer - Rules

Answer 7

a) An offer must be clear and certain in its terms
b) An offer must be communicated to an offeree before it can be accepted. The offeree must know of its existence c) An offer may be made to one specific person or a specific group of persons.

Question 8

Agreement - Rejection to offer

Answer 8

i) Offeree notifies the offeror that he does not wish to accept the offer ii) Offeree attempts a counter offer

Question 9

Agreement - Revocation

Answer 9

The offeror may sometimes revoke his offer. Effective revocation needs to take place before the acceptance and the offeree must know of the revocation, either directly or through third party

Question 10

Agreement - Lapse

Answer 10

There must be at least a reasonable time limit for validity of offer.

Question 11

Agreement - Death of Offeror

Answer 11

If the offeree is not notified of the offeror’s death before accepting the offer, the legal effect depends on whether the contract involves the provision of the offeror’s personal services.

Question 12

Agreement - Offer is subject to condition

Answer 12

If the condition is not satisfied, the offer cannot be accepted

Question 13

Agreement - Acceptance Rules - a)

Answer 13

acceptance must be unqualified. al terms of the offeror must be accepted without any change. any variation of the offeror’s terms by the offeree will be treated as a “counter-offer”

Question 14

Agreement - Acceptance Rules - b)

Answer 14

the acceptance must be made orally, in writing or by any other positive act (clicking the icon). silence and inaction do not indicateacceptance.

Question 15

Agreement - Acceptance Rules - c)

Answer 15

if method of acceptance is specified, the method must be adopted to accept the offer

Question 16

Agreement - Acceptance Rules - d)

Answer 16

the acceptance must be communicate to the offeror either by the offeree or an authorised person. an agreement is formed at the time and place where acceptance is received. however, there are a few exceptions.

Question 17

Agreement - Acceptance Rules - 1st exception to d)

Answer 17

where the offeror expects acceptance by conduct only (in a reward situation where acceptance is by performing a specified act). communication of acceptance is insufficient in such a case.

Question 18

Agreement - Acceptance Rules - 2nd exception to d)

Answer 18

postal rule - when the offeree makes his acceptance by post, the law treats the offer to be accepted as soon as the offeree mails his letter, duly and correctly address and the correct postage paid for. applies despite mail delays, unless the offeree knows of the disruption (unreasonable). one practical way to protect the offeror from the unawareness of a binding agreement is to specify in his offer that acceptance is effective only when it is received by him or before a certain date.

Question 19

Intention to Create Legal Relations - domestic and social agreements

Answer 19

a domestic or social agreement has no intent to create legal relations.

Question 20

Intention to Create Legal Relations - business agreeements

Answer 20

legal presumption is that parties do intend to create legal relations with each other. exceptions include use of words such as “subject to contract” or “in honour only” or “gentlemen’s agreement” so it is not enforceable.

Question 21

Consideration

Answer 21

A consideration is “something of value” in exchange for what the other side is to provide. A contract must be supported by a “consideration”. Not required in a specialty contract.

Question 22

Purpose of consideration

Answer 22

The purpose of giving consideration is to bind the promisor to the promise. If he breaks the promise, the promisee who has been given the consideration would be able to ask the court to enforce it.

Question 23

Consideration may be defined as

Answer 23

the price, given by the promisee in exchange for promisor’s promise

Question 24

The Price

Answer 24

the price connotes some value and consideration must have some value in the eyes of the law. Positive consideration involves giving the promise of benefit by the promisee. Negative consideration is given when the promisee accepts a disadvantage.

Question 25

Consideration - Rules

Answer 25

a) Consideration must be clear and capable of monetary value. b) Consideration must have value, but it need not be adequate. c) Consideration must be fresh and not merely part of an existing duty

Question 26

Payment of a lesser sum

Answer 26

Creditor can still sue debtor to recover balance of payments as it is an existing duty to respect the debt.

Question 27

Payment of a lesser sum - exceptions to general rule

Answer 27

a) if a creditor requests a “different performance” of the existing duty that would be good (earlier payment, at a different place, with a different method, with an additional token)
b) if the existing contractual debt was “paid in part by a third party in a condition the debtor is released from that debt” c) if the debtor can establish promissory estoppel that prevents a person from going back on his word when it woud be unfair to do so

Question 28

Right of third parties act

Answer 28

Allows third party to sue under a contract when a) contract states expressly that a third party has the right to enforce the contract, b) the contract purports that the benefit is to be given to a third party - needs to identify third party by name and description

Question 29

Executory consideration

Answer 29

Consideration that has yet to be performed.

Question 30

Executed consideration

Answer 30

Consideration that has already been performed

Question 31

“In exchange for the promisor’s promise”

Answer 31

Consideration is given in exchange for a promise. Past consideration is valueless consideration.