Chapter 7 The Law of Contract: Common Law

Question 1

Provide a simple definition of a contract.

Answer 1

is a deliberate engagement between competent parties upon a legal consideration to do or abstain from doing some act.

Question 2

What FIVE (5) elements are essential to a legally binding contract?

Answer 2

1. Offer and acceptance (agreement)
2. Capacity of parties to contract
3. Consideration
4. Genuine intention
5. Legality of object

Question 3

How must you make an offer when you want to enter into a contract?

Answer 3

1. Offer must be definite

2. Offer must be accepted

Question 4

How must an acceptance of an offer be made?

Answer 4

1. Acceptance must be definite

2. Acceptance must be communicated

Question 5

What is a counter-offer?

Answer 5

An introduction of a new term

Question 6

Who does not have full capacity to contract?

Answer 6

1. Minors (or infants)
2. Other persons of diminished contractual capacity
3. Corporations
4. Native Peoples

Question 7

Why are there special rules of contract with respect to certain classes of people?

Answer 7

Due to:

1. Lack of ability
2. Lack of competence
3. Lack of capacity

Question 8

Define consideration in the context of contract law.

Answer 8

is that which one gives or promises to give in exchange for the act or promise of the other party. The giving of consideration is evidence that the parties intended to be bound by the contract. The law does not recognize the validity of a contract in which there has been no consideration.

Question 9

What is gratuitous promise?

Answer 9

A promise made by a person to another with the element of bargain absent. It is not a contract and not enforceable at law.

Question 10

What is genuine intention?

Answer 10

The intention of the parties to create a legally binding agreement.

Question 11

How do you determine whether the object of a contract is legal?

Answer 11

If the act doesn’t violate common law or statute law.

Question 12

What is the difference between a void contract and a voidable contract?

Answer 12

1. Void contract - is one that is treated as if it never existed. It cannot confer rights on anyone and does not have any legal effect.
2. Voidable contract - can be affirmed or rejected at the option of the aggrieved party.

Question 13

What FOUR (4) reasons might cause a contract to be set aside?

Answer 13

1. Mistake
2. Misrepresentation
3. Undue influence
4. Duress

Question 14

Describe TWO (2) types of mistakes that may occur in contracts.

Answer 14

1. Mistakes about the terms

2. Mistakes in assumptions

Question 15

How can misrepresentation affect a contract?

Answer 15

Misrepresentation affects a contract by:

1. innocent misrepresentation
2. material fact
3. fraudulent misrepresentation
4. non-disclosure or concealment

Question 16

What is a material fact?

Answer 16

is a fact that is so basic and important to the contract that withholding this fact could alter the terms of the contract or even cause it not to be made.

Question 17

What is the difference between innocent and fraudulent misrepresentation?

Answer 17

Innocent misrepresentation - is an incorrect statement made innocently concerning a material fact which influences the other party to enter into the contract.

Fraudulent misrepresentation - is a false statement made deliberately or knowingly or with reckless disregard for the truth or as an intentional half-truth.

Question 18

Give an example of a contract entered into under duress, and comment on its legal status.

Answer 18

Use of violence or threat of violence will never be legal. It does not contain all the elements of a legally binding contract. There is intention but there is no acceptance.

Question 19

What are the methods of discharging a contract?

Answer 19

1. Performance
2. Agreement
3. Frustration
4. Operation of law
5. Breach

Question 20

If one part commits a breach of contract but the other party has already had some benefit from the contract, what action should be taken?

Answer 20

The other party cannot repudiate all liability on the contract