Chapter 2 - Contract formation Flashcards
What is a valid contract?
Legally binding agreement between 2 parties which agreement may be evidenced by writing, words or action.
What is meant by void and voidable?
Void - There is no contract and goods should be returned (even from a third party)
Voidable - The contract can be set aside by the “injured” party
What factors make a contract void/voidable?
Void - illegality
Voidable:
- Lack of capacity
- Absence of free will
- Misrepresentation
What contracts cannot be oral?
Transfer of land and credit agreements - must be in writing
Guarantees - evidenced in writing
Are email exchanges valid as a contract?
Yes
What is an offer?
A definite promise made by an offeror to be bound on specific terms.
Must not be vague
What is an invitation to treat?
A statement of willingness to enter into negotiations.
E.g. Advertisements
What are the ways an offer can be terminated?
rejection
counter-offer
revoke
lapse of time
failure of pre-condition
What is the definition of acceptance?
An unqualified agreement to all the terms of the offer.
Some act is required
How is acceptance communicated?
General rules is that acceptance is not effective until it is communicated to the offeror.
Any reasonable means of communication
What are the exceptions to the communication rule?
Communication has been waived - unilateral contracts (no need)
What are the conditions of the postal rule?
Use of post is reasonably within the contemplation of the parties.
The letter must be correctly addressed and the correct postage paid.
Applies only to acceptance, not revocation.
Acceptance by notice in writing overrides postal rule
Doesn’t apply to instantaneous communication
What are the court’s 2 rebuttable presumptions made to decide whether intention exists?
Social, domestic and family - no intention to create legal obligations
Commercial - intention to create a legally binding contract
What is executed consideration?
An act performed or executed in return for a promise
What is consideration?
Right, interest, profit or benefit accruing to one party or something borne by the other
Price for which the promise of another is bought
What is executory?
A promise given for a promise
What is past consideration?
Generally invalid
What are the exceptions to when consideration is not required?
When a contract is made by deed, contracts that are required to be made by deed:
Conveyancing - transfer of property
Leases over 3 years
Promises unsupported by consideration
Does consideration need to be adequate and sufficient?
Adequate - no
Sufficient - yes, must have some identifiable value
Is the performance of an existing statutory duty considered?
No
What is the rule for the wavering of an existing debt?
Must be supported by consideration
E.g. Foakes vs Beer
What are the exceptions to the rules in Foakes vs Beer?
Third party payment
Bargain by creditors that each will accept part payment acceptable despite no consideration
What are terms of an oral contract?
If wholly oral, must ascertain what was expressly agreed
Oral evidence won’t usually be admitted to add to, vary or contradict written terms
What are the terms of a written contract?
Must be substantially complete
