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Law Certificate > Chapter 2 - Contract formation > Flashcards

Chapter 2 - Contract formation Flashcards

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1
Q

Three essential elements of contract

A

agreement, intention to create legal relations, consideration

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2
Q

Void / Voidable - lack of capacity

A

Individual must be of sound mind and aged 18 or over
If not followed - voidable at option of person without capacity

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3
Q

Void/Voidable = absence of free will

A

a party should not be made to enter into a contract other than by their own free will (not duress, undue influence)
Voidable

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4
Q

void/voidable = illegality

A

contract should not be illegal or offend public policy
Void

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5
Q

Void/Voidable
Mistake

A

If one or both parties allies they were mistaken, may affect validity, but complex

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6
Q

Void/Voidable
Misrepresentation

A

If A makes pre-contractual statement of fact that is intended to and does cause B to enter into a contract that terns out to be untrue,e the other party may choose to avoid the contract
Voidable

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7
Q

Void contract definition

A

A void contract is not a contract at all. Parties not bound by it and if they transfer property under it can generally recover goods even from third party

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8
Q

Voidable contract definition

A

Contract which one party may set aside property transferred before avoidance is usually irrecoverable from a third party

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9
Q

When will a contract be unenforceable

A

where it is not in the correct form

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10
Q

When is oral contract not sufficient

A

Agreement for transfer of land and consumer credit agreements - must be in writing

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11
Q

Guarantee - does this need to be in writing

A

No - but terms must be evidenced in writing before any action is bought

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12
Q

Golden Ocean Group Ltd v Salgaocar Mining Industries PVT 2011

A

Decision - Court of Appeal recognised contracts often negotiated informally by email and held single document was not necessary, not material that no documents were traditionally signed, and typed name in email clearly signified agreement and constituted validsignature

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13
Q

Offer

A

defined promise to be bound on specific terms and is made by offeror

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14
Q

Is a vague statement an offer

A

No - unless can be rendered certain by reference to previous dealings or cusom

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15
Q

Is a statement which sets out possible terms of a contract an offer

A

No - unless offer is clearly indicated

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16
Q

In the course of negotiations when a vendor states price they will sell at is this an offer

A

Yes

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17
Q

Is advertising an auction will take place an offer?

A

No - statement of intention

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18
Q

What is an invitation to treat

A

where party is initiating negotiations, it cannot be accepted to form binding contract

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19
Q

An advertisement is

A

an invitation to treat

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20
Q

Goods displayed for sale in shop window/self service shelves is

A

an invitation to treat (if accepted by removing, couldn’t put back and would be breach)

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21
Q

Circulation of a price list is

A

an invitation to treat

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22
Q

Who does an offer have to be made to

A

class of persons or to the world at large

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23
Q

arils v Carbolic Smoke Ball Co 1893

A

Advertisement for 100 reward to anyone contracting influenzaa
valid offer capable of acceptance as not vague, and offer can be made to the workd at large

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24
Q

Termination of offer
Rejection

A

rejection by offeree terminates the offer

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25
Q

Termination of offer
counter offer

A

offeree proposes new/amended terms, terminating the original offer. this is then open to be accepted or rejected

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26
Q

Hyde v Wrench 1840

A

Counter offer - accept original offer - original offer terminated by counter offer

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27
Q

Stevenson v McLean 1880

A

Offer to sell iron Stevenson enquired whether agree to delivery spread over 2m, no reply, Stevenson accepted original, McLean had sold to third party
Held there was a contract Stevenson had enquired variation of terms, not rejected/counter offer

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28
Q

Termination of offer
Lapse of time

A

Offer may be expressed to last for a specified time, if there is no express time limit set, expires after reasonable time

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29
Q

Ransgate Victoria Hotel Co v Montefiore 1866

A

Montefiore applied for shares and paid deposit in June, in November acceptance and requested payment, Montefiore contended offer expired
Offer was for reasonable time only, five months more than that offer had therefore lapsed

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30
Q

Termination of offer
Revocation of offer

A

Offeror may revoke anytime before acceptance either expressly or implication

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31
Q

When does revocation initially take effect

A

When it is communicated to or received by the offeree (postal rule only acceptance, not revocation of offer)

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32
Q

Termination of offer
Failure of pre-condition

A

Offer may be conditional (dependent on some event occurring or change in circumstance) if that event doesn’t occur, offer can’t be accepted

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33
Q

Acceptance must be

A

unqualified agreement to all the terms of the offer. Acceptance may be made by express words to that effect by the offeree or their authorised agent or can be inferred from conduct

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34
Q

Brogden v Met Railway 1877

A

C supplied coal to D for years, D’s agent sent draft agreement for consideration and applied terms of draft to dealings, didn’t sign, C denied agreement
Held the conduct was only explicable on assumption they both agreed to terms

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35
Q

Felthouse v Bindley 1862

A

C wrote to nephew offering to buy horse, adding if I hear no more, I consider the horse mine, nephew intended to accept, did not reply
held C had no title to horse as silence is not acceptance

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36
Q

Acceptance made by post, communication is effective

A

the moment the acceptance is posted, even if delayed or lost all together

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37
Q

Postal rule - subject to:

A

Delay not attributable to offerees negligence (address incorrect);
Use of post must have been within contemplation of parties

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38
Q

Does postal rule apply when offeror requires acceptance ‘by notice in writing’

A

No - means notice actually received by offeror

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39
Q

Does the offeree have to be aware of the offer for acceptance to be effective

A

Yes

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40
Q

Clarke v Dunraven 1897

A

Both entered regatta, and undertook to obey club rules including obligation to pay for all damages caused by fouling. Dunraven’s yacht fouled Clarkes which sank and they sued for damages. Dun argued liability under merchant shipping act
Held contract created when entered yachts and accepted rules

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41
Q

Is intention to create legal relation required for contract

A

Yes

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42
Q

What is presumption for social, domestic and family relations

A

Presumed not intended to be legally binding unless clear evidence to the contrary

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43
Q

What is presumption about commercial relationship

A

Presumed there is an intention to enter into legal relations unless expressly disclaimed/circumstances give clear contrary indication

44
Q

Use of words subject to contract gives strong presumption of

A

no immediately binding contract being intended

45
Q

RTS Flexible Systems ltd v Molkerei Alois Muller GmHB 2010

A

Letter of intent set out draft contract did not become effective until signed/executed by both. not signed but proceeded with project
Supreme Court held unrealistic to conclude major works carried out in absence of contract, evidence of agreement and intent, made clear not always the case.

46
Q

True/False
In circumstances where works commence before contract is finalised, the contract exists between parties contained the same terms as those negotiated in the contract

A

True

47
Q

Consideration (Currie and Misa 1875)

A

A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accusing to one party or some forbearance, detriment loss or responsibility given suffered or undertaken by the other

48
Q

Consideration (Dunlop v Selfridge 1915)

A

Act or forbearance of one party or promise thereof is the price for which the promise of the other is bought and the promise thus given for value is enforceable

49
Q

Three types of consideration

A

Executed (valid)
Executory (valid)
Past (usually invalid)

50
Q

Executed consideration

A

Performed or executed act in return for a promise (payment for goods when delivered)

51
Q

Executory consideration

A

Promise given for a promise - promise to pay for goods which are to be delivered and paid for at later date

52
Q

Past consideration

A

something that has already been done when the promise is made - work carried out then promise to pay made
generally invalid

53
Q

Re McArdle 1951

A

Facts - under will testators children entitled to house after mothers death. During lifetime, one lived with mother and wife made improvements, children agreed in writing to repay wife but refused to do so
work had been completed before promise was made - improvements were past consideration and promise not binding

54
Q

Where is consideration not required

A

where contract is in the form of a deed

55
Q

A deed is

A

a formal promise between parties which must be in writing and signed

56
Q

Does the following require a deed
Conveyances

A

Yes
Where property is transferred between parties

57
Q

Does the following require a deed
Leases lasting over three years

A

Yes

58
Q

Does the following require a deed
Promises unsupported by consideration

A

yes
promise to pay regular amount to other party with nothing expected in return

59
Q

Does consideration need to be adequate

A

No - no remedy for poor bargin

60
Q

does consideration need to be sufficient

A

Yes - must have some identifiable value to be capable of being regarded as valid consideration

61
Q

Thomas v Thomas 1842

A

Widow use of house after death, executors (defendants) allowed for rent £1pa, later said not supported by consideration
Held compliance with wishes is not valid consideration, but nominal rent sufficient (though hardly adequate)

62
Q

Is performing existing statutory duty consideration

A

no not unless can be shown extra service offered

63
Q

Is performance of existing contractors duty owed to promisor consideration

A

No unless shown that doing something over and above

64
Q

Williams v Roffey Bros & Nicholls 1990

A

D subcontracted work to Williams for 20k, Williams found self in financial difficulties and was promised extra 10.3k to finish quickly, later refused to pay
Held that promise was not duress or fraud, got added benefit not finding someone else and avoid penalty for late performance

65
Q

Is performance of existing contractual duty owed to third party consideration

A

Yes

66
Q

Is forbearance or waver of existing rights consideration

A

Yes if it has some value/amounts to giving up something of value

67
Q

Foakes v Beer 1884

A

B obtained judgement against F, judgement debts bear interest. By written agreement, B agreed to pay in instalments, no mention of interest. F paid in full, B claimed interest, claiming agreement not supported by consideration
B entitled to debt with interest - no consideration to waive part of the rights

68
Q

Is waiver binding for alternative consideration

A

Yes - goods instead of cash/payment in advance of due

69
Q

Is waiver binding for bargain between creditors

A

Yes

70
Q

Is waiver binding for third party part payment

A

Yes

71
Q

T/F
Terms must be substantially complete or be capable of being clarified

A

True

72
Q

T/F
Statement of fact made before the contract that induces a party to enter into the contract may become a term of the contract

A

True

73
Q

T/F if the person making statement (which induces party to enter) more likely to be treated as a term of the contract

A

Tue

74
Q

Implied Terms
By reference to custom

A

but not if that would produce an inconsistency with express terms

75
Q

Implied Terms
By statute

A

e.g. supply of goods and services act 1982 implies terms that work and materials should be of satisfactory quality

76
Q

Implied Terms
By the courts

A

Necessary to give business efficacy and implicit in the nature of the contract itself

77
Q

Necessary to give business efficacy

A

Terms may be implied if the court concludes the parties must have intend those terms to apply to the contract to give it business efficacy (the moorcock)

78
Q

The Moorcock 1889

A

Owners of wharf agreed ship should be moored to deliver cargo, well known at low water the ship would ground. Ship settled on ridge beneath mud and suffered damage
Held implied term ground was safe at low tide

79
Q

Implicit in nature of contract itself

A

court may imply a term not based on presumed intention, but as it is considered to be implicitly required by the nature of the contract

80
Q

Liverpool City Council v Irwin 1977

A

Tenant with no formal agreement withheld rent, alleging owner breached implied terms as lifts didn’t work and stairs unlit
Held as tenants could only occupy building with access to stairs and/or lifts, the agreement between the parties required the owners to maintain common parts

81
Q

GHSP v A B Electronics Ltd 2010

A

C purchased pedal sensors from D which were defective and caused substantial loss. Both parties argued their standard terms applied, D’s excluded liability for consequential loss or damage and limited liability to repair
Held the contract was not governed by either as neither had accepted the others terms, instead governed by sale of goods act

82
Q

When may non-party to a contract claim under it

A

Where agent enters into contract with third party on behalf of contract, the contract is between principal and third party - agent cannot enforce
When covered by Contract rights of third parties act 1999

83
Q

Contracts (rights of third parties act 1999) provides third party may enforce term of contract if

A

Contract expressly provides that they may or the term confers a benefit on them, unless it appears that the contracting parties did not intend them to have the right to enforce it

84
Q

T/F
under Contracts rights of third parties act 1999 third party must be expressly identified in the contract by name class or description

A

True

85
Q

What is the following situation
Advertisement

A

Invitation to Treat

86
Q

What is the following situation
Exhibition of goods for sale

A

invitation to treat

87
Q

What is the following situation
circulation of price list

A

invitation to treat

88
Q

Postal rule states

A

where the use of post is within the contemplation of both parties, the acceptance is complete and effective as soon as the letter is posted, even though it may be delayed or lost in the psot

89
Q

Executed consideration

A

Act in return for a promise

90
Q

Executory consideration

A

promise given for a promise

91
Q

Consideration need not be X but must be Y

A

Adequate
sufficient

92
Q

Name of EU law adopted by UK dealing with situations where parties that are based in European countries have not agreed which countries law applies

A

Rome II

93
Q

Must an agreement for transfer of land be evidenced in writing / in writing

A

Yes - must be inn writing and transfer itself must be by deed

94
Q

T/F
Guarantee can be oral if it is evidenced in writing

A

True - must be signed or acknowledged in some way

95
Q

What happens when a pre-condition is satisfied

A

The offer becomes unconditional

96
Q

T/F
Acceptance must always be communicated to the offeror in order for it to be effective

A

False

97
Q

T/F
When no mode of communication of acceptance is prescribed, the offeree should use the same mode as that used for the offer

A

False - can use any reasonable method

98
Q

T/F
when acceptance is to be made by notice in writing, this means notice is required to be received by the offeror and the postal rule does not apply

A

True

99
Q

T/F
A term implied by custom and practice and be overridden by a written term

A

Yes

100
Q

T/F
there is an irrefutable presumption parties to a commercial agreement intend it to be legally binding

A

False - it is rebuttable

101
Q

Does revocation of offer need to be in writing

A

No - may be express or implied

102
Q

T/F
A statute cannot override terms of a contract that have been expressly agreed between the parties

A

False - legislation often implies terms to protect the weaker party

103
Q

T/F
A court may imply terms into a contract to make it fairer to both parties

A

False - Courts will not imply terms into a contract just to make it fairer

104
Q

Supply of goods and services act 1982 implies work and materials must be

A

of satisfactory quality

105
Q

T/F
Statements made by one party before a contract is formed that induce the other party to enter the contract will become terms of the contract

A

false - only statements capable of being construed as terms will become a term of the contract, others will be considered representations

106
Q

T/F
In the event of a contractual dispute, oral evidence cannot be submitted that contradict or vary the written terms

A

False - oral evidence may be submitted where it can be shown that the document containing the written terms was not intended to include all the agreed terms

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