Chapter 2 - Formation of Contract

Question 1

What are the two types of contract?

Answer 1

Special contracts and simple contracts

Question 2

What are special contracts and an example ?

Answer 2

Special Contracts need to be in writing as required by law. It has to be signed, sealed and delivered in a required format. These contracts are also known as deeds.

E.g. Deed for the transfer of land.

Question 3

What are simple contracts?

Answer 3

Simple contracts may be oral, in writing or a mixture of both.

Question 4

What is a contract

Answer 4

Contract is an agreement giving rise to obligations which are enforced or recognised at law.

Question 5

Are agreements and contracts the same?

Answer 5

No. All contracts are agreements at the simplest form. However, not all agreements are contracts.

While all contracts are agreements, not all agreements are contracts.

Question 6

What are the four basic elements that constitute a contract?

Answer 6

Offer, acceptance, consideration and intention to create legal relations.

Question 7

What is an offer?

Answer 7

An offer is made when one party (“offeror”) makes it clear by his words or actions that he intends to be bound to the other party (“offeree”) to whom the offer is made, as soon as the other party accepts it.

When the other party accepts the offer without any modification, there will be a binding agreement between the parties.

The offer has to be communicated clearly without ambiguity or uncertainty.

Question 8

What is a counter 0ffer?

Answer 8

A counter offer is where an offeree responds to an offer by making an offer on different terms. This indicates a rejection of the original offer. The original offeror (the person who first offered you an agreement) may then elect to accept or reject your counter-offer.

Question 9

Can an offer be made to the world at large? If so, what is it called.

Answer 9

Yes, it is also known as Unilateral Contract.

Question 10

What is a Unilateral Contract?

Answer 10

Unilateral contract is an offer made to the world at large and anyone can step forward to accept that offer.

Question 11

An example of Unilateral Contract Case and explain more about it.

Answer 11

Carlill v Carbolic Smoke Ball Co (1893).

Idea behind it that - the Advertisement showed an intention to be bound to anyone who came forward, accept it and performing it according to the instructions.

Question 12

What is another scenario of Unilateral Contract?

Answer 12

Reward Cases.

Same idea as the above case.

Question 13

What is an invitation to treat?

Answer 13

An invitation to treat is an invitation to initiate negotiations, it is an invitation to make an offer.

Question 14

In what situation would an offer to the public at large be a binding offer and in what situation would an offer to the public be an invitation to treat?

Answer 14

An offer to the public at large is made when one party (offeror) makes it clear, by his words or actions, that he/she intends to be bound to the other party (offeree). If an offer is made to the world at large, it can be accepted by anyone. In this situation, terms and conditions are stated clearly and no further negotiations are required.

An invitation to treat is an invitation to initiate negotiations. It is ambiguous with no intention to be bound to anyone, it is merely an advertising puff. In this situation, an invitation to treat is subjected to conditions, whereby the terms and conditions are very vague.

Question 15

When is an advertisement an offer?

Answer 15

An advertisement can be an offer if the terms of offer are clear and specific, it does not require further negotiations.

Question 16

What are the 4 scenario of invitation to treat and list the case study (explain) ?

Answer 16

Advertisements (Partridge v Crittenden) 1968, display of goods (Pharmaceutical Society v Boots) 1953 and Request for information. (Harvey v Facey) 1893 and Auctions and Tenders.

Question 17

Why is request for information not a offer?

Answer 17

A mere supply of information in response to a question is not usually an offer. The courts look at actual words used to determine if there is intention to be bound by the offer.

Question 18

Explain more about auctions as an invitation to treat.

Answer 18

The request for bids by the auctioneer is an invitation to treat. The bids are offers and the acceptance is deemed to be completed by the fall of the hammer.

If hammer does not fall, there is no acceptance and therefore no agreement.

Question 19

Explain more about tenders as an invitation to treat.

Answer 19

A request to submit tenders are invitations to treat. A submitted tender is an offer and a contract is formed once the tender is accepted.

Question 20

What is acceptance?

Answer 20

is the unconditional consent by the offeree to all the terms of the offer.

Question 21

What are the conditions of acceptance?

Answer 21

Once there is a valid offer, an agreement can only be formed if there has been acceptance of that offer.

1. Acceptance can be made orally, in writing or by conduct.
2. The offeree must accept all the terms of the offer without any amendments or modifications. Acceptance must be final
3. The general rule is that acceptance must be communicated to the offeror. If a specific method has been prescribed, then that method has to be adhered to. (E.g. request for writing)

Question 22

What are the two exceptions to the general rule?

Answer 22

Silence and Postal Acceptance rule

Question 23

Why is silence an exception to the general rule?

Answer 23

It is a situation where the parties have agreed that the offeree’s silence is to be construed as acceptance.

Silence typically does not amount to acceptance. It has to be agreed by both parties that silence is to be adopted as acceptance before it is effective.

Question 24

What is postal acceptance rule?

Answer 24

The postal acceptance rule states that the letter of acceptance must be posted, addressed and stamped properly. Acceptance is deemed to be complete when the letter is posted, even if it arrives late or never arrives.

Question 25

Why did postal acceptance rule exist?

Answer 25

Because of the time a letter spends in the postal system, there must be inevitably be a period of uncertainty for one party or the other, and since the offeror can always protect himself by specifying a different mode of acceptance, the rule of default is one that protects the acceptor (offeree).

Question 26

What are the exceptions to the postal rule? (Hint- 4)

Answer 26

1. Instantaneous communication (telephone conversations, email, fax, voicemails). The acceptance is upon receipt as a general rule.
2. Electronic Transactions (SG favored the receipt rule rather than the postal rule).

The Electronic Transaction Act states that an offer of goods on the internet is considered an invitation to treat unless it is made clear by the offeror that he intends to be bound it.

3. Exclusion of the postal rule (terms of the offer expressly or impliedly state the use of the postal rule is to be excluded)
4. Unreasonable to use the post.

Question 27

Can an offer be terminated before acceptance takes place?

Answer 27

Yes

Question 28

What happens when an offer has been successfully terminated?

Answer 28

Any acceptance made after the termination is ineffective.

Question 29

What are the 4 ways can offer can be terminated?

Answer 29

Revocation, Rejection, Lapse of Time, Death of offeror or offeree.

Question 30

What is Revocation and the conditions for it ?

Answer 30

Revocation is also known as withdrawal. Revocation is usually the first way of ending an offer. When the offeror withdraws his offer, it is known as revoking it.

Conditions:
Revocation has to be communicated to the offeree before acceptance is made by the offeree. In order for revocation to be effective, the offeree must have receive notice of it.

However, the communication of revocation need not be directly from the offeror himself. It can be from a reliable third party. E.g. an authorised agent of the offeror.

Question 31

What is Rejection?

Answer 31

An offer can be terminated by an outright rejection of the offer or by modifying the conditions of the offer resulting in a counter-offer.

Question 32

What is lapse of time ?

Answer 32

The offeror may state in his offer that the offer is to be opened for a reasonable period of time. It is understood from the terms of the offer that acceptance is to be made before the reasonable period of time lapse. What is reasonable depends on the subject matter, trade or industrial practices.

Question 33

What is the death of offeror or offeree means?

Answer 33

An offer can be terminated upon death of either offeror or offeree, before acceptance.
Death after acceptance does not affect the contract, unless the personal services of the deceased are crucial to the contract.
(E.g. on Pg 10 of chpt 2)

Question 34

What is “offer subject to conditions?”

Answer 34

When conditions are attached to an offer and those conditions are not met, the offer is automatically terminated.