Chapter 3: Contract formation and content Flashcards
principle of good faith
negotiations and contractual relations should be characterised by honesty and fairness, with the intention to carry out obligations and without seeking an unfair detrimental advantage
privity of a contract
only the parties that are involved in the contract are bound or entitled by its terms –> third parties have no rights or obligations
Elements of a contract
- presence of consideration
- agreement consisting of offer and acceptance
- intention to create a legally binding relationship
invitation to treat
invitation to negotiate: an invitation for others to make offers
invitation to tender
invites people to say how much they would like to charge to supply goods or services –> of someone responds by making a tender, this is an offer!
how can an offer be terminated?
- revoked: withdrawn by offerer
- lapsed: automatically terminates after reasonable time interval
- met with counter offer
unconditional assent
mirror image rule –> offer must be accepted without further changes
postal rule
acceptance via post becomes effective once the letter has been posted (common law), or when received (civil law)
battle of the forms
parties send their own standard form of the contract
last shot rule
the offer that has been last made counts
consideration
parties show that they have accepted a promise by performing an act or offering a promise in return –> if there is a will or a gift, we must include a deed or a nominal consideration
executory consideration
when sides exchange promises (Bilateral!)
executed consideration
an act that is done in return for a promise (unilateral)
parol evidence rule
if a contract is in a written form and can be treated as an entire contract, no external evidence will be considered in order to vary the terms of the contract
representation
a statement that was made only as an inducement to enter the contract –> does not need to be specified as a term in the contract
conditions
fundamental term –> innocent party has the right to to treat the contract as repudiated and claim damages
warranty
minor term of the contract –> in case of breach, the innocent party does not have the right to treat the contract as terminated, but they do have the right to claim damages
innominate term
intermediate term between warranty and condition –> parties cannot agree whether the term should be treated as a warranty or as a condition
express terms
terms that have been specifically agreed upon –> court does not have to accept these terms as warranties or conditions
implied terms
terms that are implied to the contract –> customs, statute or court
exclusion clause
to exclude all liability for one party for breach of contract, misrepresentation, of negligence, or to limit such liability.
how to validate an exclusion clause
- by way of notice: e.g. a sign
- as part of a signed document: do not set the sign (e.g.) after the contract has been signed!
- by previous course of dealing: when it has been done before and the agreement has been made over the phone
contra proferentem rule
exclusion clause must cover the exact circumstances in question. any ambiguity in the clause will be interpreted as a disadvantage of the party relying on the clause (guy that vomited in the bus)
main purpose rule
the exclusion cause will fail if it would defeat the main purpose of the contract
