Chapter 6

Question 1

mutuality

Answer 1

both parties support their promise by consideration

Question 2

consideration

Answer 2

price paid for the other party’s promise or act

Question 3

rule of consideration

Answer 3

1. cannot be past

2. sufficient (performing existing legal duties does not count)

Question 4

economic duress

Answer 4

an attempt to obtain favourable contract terms by threatening financial loss to a contracting party

Question 5

part payment

Answer 5

a promise by a credit to accept less than the full sum owed does not discharge the debtor from the legal obligation to pay the balance

Question 6

composition

Answer 6

a legally binding agreement between creditors that they will each take only a proportion of what the debtor owes, in full settlement of the entire debt

Question 7

promissory estoppel

Answer 7

parties who gratuitously promise that they will not enforce existing contractual rights may lose their entitlement to do so if it would be unfair to allow them to go back on their promise

Question 8

intention to create legal relations

Answer 8

the parties intention that their agreement be binding in law

• family and friends are thought of as not usually making agreements that are legally enforceable
• parties to a business agreement intend to be legally bound

Question 9

privity of contract

Answer 9

generally the doctrine of privity of contract prevents anyone except a party who contributes to the bargain from enforcing it

Question 10

Exceptions to the rule of privity

Answer 10

agency, third-party insurance, assignment of contractual rights, trusts, collateral contracts

Question 11

minors

Answer 11

under 18s are to be protected but not prevented from entering contracts

Question 12

binding contracts for minors

Answer 12

contracts for necessaries