Chapter 2 - Contract Formation

Question 1

What’s a simple contract?

Answer 1

Not in writing

Question 2

What types of contracts need to be in writing to be valid and enforceable (4 Points)

Answer 2

> Bill of exchange
Regulated Consumer Credit Agreements
Transfer of land (Deed - speciality contracts)
Guarantees

Question 3

What are the four essential elements of a contract?

Answer 3

An offer
Acceptance
Consideration
Intention to be legally bound

Question 4

What’s an invitation to treat in regards to make offers?

Answer 4

Someone else to make an offer to you

Question 5

How can an offer be terminated?

Answer 5

> Rejection
Revocation
Lapse of time
Failure of a pre-condition

Question 6

What is Recocation, when can it be done and when can it not be done? (5 points)

Answer 6

When the offeror withdraws their offer
Can be done at any time before acceptance
Communicated to the offeree by the offeror or a reliable third party

If the offeree pays the offeror to keep the offer open as this creates a collateral contract.
In a unilateral contract

Question 7

What is a lapse of time in relation to accepting an offer?

Answer 7

Offer doesn’t exist if it passes a specified time limit or if the offeror dies

Question 8

What is a unilateral contract?

Answer 8

Made one to the whole world so it’s virtually impossible to notify everyone who saw the offer of the revocation.

Question 9

What are the three conditions for an acceptance of an offer?

Answer 9

1. Oral or written or by conduct
2. Must be communicated during business hours if it’s fax or email
3. For postals the moment it’s posted you accept the offer, unless stated that a letter of acceptance must be received to be binded.

Question 10

What is consideration in contract law?

Answer 10

Essentially, exchanging something of value with each other

Question 11

Why is consideration required in simple contracts but not speciality contracts?

Answer 11

Simple contracts require consideration to be legally binding so something of value exchanged between the involved parties.

Whereas speciality contracts are written agreements that are signed, witnessed and delivered and therefore do not require consideration to be legally binding.

Question 12

What is a deed?

Answer 12

Speciality contract - Formal promise between the parties that must be in writing and signed.

Certain contracts must be in the form of a deed including conveyances and leases for three years or more

Question 13

What are examples of valid consideration?

Answer 13

Executed and executory considerations are capable of being valid considerations

Question 14

What is an executed consideration?

Answer 14

Act in exchange for a promise, e.g., paying for goods at the time the goods are deliveredW

Question 15

What are executory considerations?

Answer 15

Promise given in exchange for a promise e.g., a promise to pay for goods that are to be delivered at at a later date

Question 16

What is sufficient consideration?

Answer 16

Consideration capable of given a value

In contract law, sufficient consideration is when a party provides something of value to another party in exchange for a promise. The consideration must be sufficient, but not necessarily adequate. This means that the courts are looking for some value in the exchange, even if it’s not the full market value.

Question 17

What is inadequate consideration?

Answer 17

Unequal in value. Parties have freedom to contract under any terms and court cannot try to make it fair as long as you can identify value

Question 18

What is invalid consideration?

Answer 18

Involves something that’s already been done at the time of the promise made. E.g., RE Macardle carried out some works and a promise was made to pay them after but because it was after there’s no consideration.

Question 19

What does subject to contract mean

Answer 19

Strong presumption that there is no intention to create an immediately binding contract.

Question 20

What does privity of contract mean?

Answer 20

Only a person who is party to a contract has enforceable rights to it

Question 21

There are three exceptions for privity of contract which are what?

Answer 21

1. Contracts (Rights of Third Parties Act 1999)
   > A person not involved with the contract can enforce it as long as the contract was for their benefit
2. Trust
   > Allows a beneficiary to enforce a trust, as a third party to enable their rights in court.
3. Agency
   > Agent can enter into a contract with a third party on behalf of his or her principal

Question 22

What is a term?

Answer 22

Part of the contract

Question 23

What is a representation?

Answer 23

Something said by the offeror to induce the offeree to enter into the contract. And then later becomes a term

Question 24

What are express terms?

Answer 24

Elements of a contract that have specifically agreed

Question 25

What are implied terms?

Answer 25

Terms that are still part of the contract but aren't expressly included

Question 26

In what situations can terms be implied?

Answer 26

1. Implied due to type of contract 2. Implied by court to give business efficacy - If both parties failed to cover a matter the court can imply parties presumed intentions 3. Implied to comply with custom and usage - If they are felt to be usual in that type of agreement 4. Implies by Acts of Parliament - Statutory protection

Question 27

What's the Consumer Rights Act 2015 and the Partnership Act 1890

Answer 27

Consumer Rights Act - Goods must be of satisfactory quality and fit for purpose Partnership Act - In absence of an express provision to the contrary profits will be shared equally between partners

Question 28

What's the factual matrix

Answer 28

The background knowledge which would reasonably have been available to the parties in the situation in which they found themselves at the time of the contract/document