Chapter 5: Legal Relations

Question 1

Presumptions to be legally binding

Social , domestic and family agreements ….

Commercial agreements ….

Answer 1

Social , domestic and family agreements are presumed to not be legally binding

Commercial agreements are presumed to be legally binding

Both unless stated otherwise …

Question 2

Domestic arrangements to be legally binding if …

Answer 2

if there is a mutuality of intention

The courts will look at the intentions of the parties when the arrangement was made

Question 3

Commercial agreements intend to be legally binding unless there is clear evidence otherwise.

Any ambiguity will lead to the agreement to remain binding.

What are comfort letters and are legal binding?

Answer 3

Comfort letters are only moral obligation

Holding companies sometimes give letters of comfort to creditors of subsidiary companies.

Question 4

Commercial agreements

Transactions binding in honour only

Answer 4

This constitutes an express denial of an intention to create legal relations.

Not binding

Question 5

Privacy of a contract

Answer 5

As a general rule, only a party to the contract has enforceable rights or obligations under it (those who have given consideration).

Third parties have no right of action except exceptional circumstances.

Question 6

Privacy of a contract

Only a promisee can enforce the promise
Consideration must move from the promisee

Answer 6

Only a promisee can enforce the promise - A promises B, in return for consideration from B, to do something for the benefit of C. C acquires no rights, as C is not the promisee.

Consideration must move from the promisee - A promises B and C, in return from consideration from B, to do something for C. C acquires no right, C has not provided consideration

Question 7

Exceptions where the third party can sue

Answer 7

Persons claiming under third party insurance - car insurance for example

A principal, where agents make the contract.

An executor of a deceased persons can enforce a contract on behalf of the deceased as he assumes all the rights and obligations of the deceased.

Question 8

Under the contracts (Rights of third Parties) Act 1999, third parties will accrue if:

Answer 8

• third party must be identified in the contract, but does not exist at the time the contract is made
  -A contract expressively provides for the third party to enforce the contract
  -A collateral contract between one of the parties and a third party relating to the same subject matter has been entered.