Chapter 3: Law of contract

Question 1

What is a contract under seal?

Answer 1

A contract under seal (also known as a special contract or a contract by deed) is a formal contract which is signed, has the (wax) seal of the signer attached and is witnessed.

Question 2

What is a unilateral contract?

Answer 2

A unilateral contract is primarily a one-sided, legally binding agreement where one party agrees to pay for a specified act. Such contracts only require a pre-arranged commitment from the offeror.

Question 3

What is a bilateral contract?

Answer 3

A bilateral contract is legally binding between two or more parties, where the offer by the promisor is accepted by the promisee.

Question 4

What is a void contract?

Answer 4

A void contract is a formal agreement that is unenforceable (often, but not always, from the moment it is created). For example, an agreement between a drug dealer and a buyer is void because the terms of the contract are illegal. As such, neither party can go to court to enforce the contract.

Question 5

What is a voidable contract?

Answer 5

A voidable contract is a formal agreement between two parties that, though valid when made, is liable to be subsequently set aside on a number of different grounds.

Question 6

What are the five essentials for the formation of a valid contract under English law?

Answer 6

1. there must be an agreement, which in English law is generally shown by offer and acceptance;
2. there must be the intention to create legal relations;
3. there must be consideration (in the case of simple contracts) e.g. a promise to pay the agreed premium;
4. the agreement must be in the form required by law (if any);
5. the parties must have capacity to contract.

Question 7

What contracts must be in writing?

Answer 7

Contracts in this group include:

• bills of exchange;
• cheques and promissory notes;
• the transfer of shares in a registered company;
• some consumer credit (‘hire-purchase’) transactions; and
• contracts of marine insurance.

Since 1989, all contracts for the sale or other disposition of land must also be in writing and signed by the parties.

Question 8

What contracts must be evidenced in writing?

Answer 8

In this case, there must be a ‘note or memorandum’ of the contract in writing although, unlike contracts which must be in writing, the document(s) may come into existence after the time
when the contract was made. These requirements apply to contracts of guarantee (contracts in which one party agrees to answer for the debt, default or miscarriage of another).

Question 9

What contracts must have one party supply certain written particulars to the other?

Answer 9

A requirement of this sort applies in many cases: an employer may, for instance, have to set out the main terms of their employees’ contracts in writing; and a landlord may have to give their tenant a rent-book containing certain particulars.

Question 10

Under the general law of contract, what is a warranty?

Answer 10

Under the general law of contract, a warranty is a term which affects only a minor aspect of the agreement. If it is broken, the injured party has a right to claim damages but not, in general, to terminate the contract.

Question 11

What is a condition?

Answer 11

A condition is a term which relates to an important aspect
of the agreement: it ‘goes to the root’ and if it is broken the victim has a right not only to claim damages but also to terminate the agreement.