Chapter 3: Intention, Consideration, Formalities, Capacity and Illegality - incomplete Flashcards
An agreement will not give rise to legally enforceable rights and obligations unless…
There is an intention to create legal relations.
That is, there must be an intention that the agreement is to be enforceable in the courts, if necessary, in the event of a dispute.
What is now an essential element of an enforceable contract?
Consideration.
Intention to creat a legal relationship: social and domestic agreements.
In normal circumstances, there is a presumption that domestic agreements are not intended to give rise to legally enforceable obligations.
Marriage and Defacto relationships.
However, when. An agreement between a husbands and wife falls outside normal domestic agreements and concerns some commercial matter, such as their relationship under partnership, then it will be enforceable.
Similarly, agreements as to the disposition of property where the marital relationship has broken down will be enforceable. Eg. Merritt V Merritt
Other family agreements.
Other kinds of family arrangement are not generally regarded as intended to give rise to enforceable rights and obligations, however the circumstances may indicate that the parties intended to be legally bound.
Commercial agreements.
Where an agreement is reached in the course of business dealings, the courts will enforce the agreement unless it is apparent that the parties did not intend that their agreement should be legally binding.
What happens if an agreement includes an express stipulation that it is not intended to give rise to legally enforceable obligations?
The court will give effect to such provision. Accordingly, such provision will not be enforceable by law.
What is consideration?
It is the requirement which means that a promise can only be legally enforced by the promises if the promisee can show that they have given or promised to give something in return for the promise.
Accordingly, a gratuitous promise, for example a promise to make a gift, is not enforceable because nothing of value has been given in truth for it (although such a promise would be enforceable if made under a seal)
What are the rules of consideration?
. Consideration must be sufficient, need not be adequate
. Consideration must be executed but cannot be part consideration
. Performing an existing obligation (at law or under contract) is not good consideration
. Consideration must move from the promisee
. Consideration must not be uncertain or illusory
What are the essential rules regarding consideration?
- Consideration is essential to every simple contract.
- So long as consideration exists, the court is not concerned as to its adequacy, provided that it is of some value.
- The consideration must not be illegal or unlawful and must not involve a breach of the law or public policy.
- The nature of consideration must be definite. If consideration is vague, it will not be sufficient.
- It should be executed or executory consideration and not last consideration.
- The consideration must be capable of performance. If the pro,idea of one of the parties to the contract was an absolute physical impossibility, there would not be real consideration.
- It must move from the promisee, that is to say, the party who wishes to enforce a contract must be able to show that they have furnished the consideration.
- There is no consideration if all that the promisee does or promises to do amounts to no more than that which they are already obliged to do or refrain from doing by law or under an existing contract with the promisee.
- Consideration may consist of a promise to refrain from taking legal action, provided that the person threatening such action has a Nina fide belief in the claim and their prospects of success.
- Consideration may also consist of the bona fide compromise off a dispute arising from a claim honestly believed to be well founded.
What is the doctrine of promissory or equitable estoppel?
This provides some relief from the rule that a promise is not enforceable unless some consideration is given for it by the promisee (in limited circumstances).
What is a promisee?
The person to whom the promise it made.
What is the primary application of the doctrine of promissory or equitable estoppel?
Where one party to a contract promises, or by words or conduct leads the other party to believe,mth at the promisee will not enforce their strict legal rights under the contract, and the other party acts on what representation and alters its position accordingly.
What must occur for the promisee to successfully reply on promissory or equitable estoppel?
The promisee must be able to show that they have suffered some material detriment, that is, that they have alter their position in reliance on the statement or representation, and in consequence it would be unjust to permit the promisor to resist from the statement or representation.
Formality.
Different rules regarding whether a contract is enforceable.
On page 45-46
Capacity: Why can’t all people enter into a valid contract?
Certain classes of people are not capable, in law, either wholly or partly, of entering into contractual obligations.
The capacity of minors, mentally incapacitated and intoxicated persons and corporations to enter into valid contracts are discussed.
