Chapters 9&10 Flashcards
Consideration definition
The element of value in an agreement and must be supplied by both parties to form a binding contract eg in the form of money, good, services or the promise of any of these. Moving from the promisee.
Three forms of Consideration
- Executory
The promise to perform an action. - Executed
An act given in return for a promise. - Past
Consideration must be supplied after agreement has been formed. Where its given before, its deemed past and not valid.
(but further promises/comments after a contract have no contractual obligations)
Consideration rules
- Must not be in the past
- Must be legal (courts wont enforce illegal activity)
- Must be possible
- Must be sufficient but need NOT be adequate. some sort of value, courts unlikely to intervene about a bad bargain
Sufficient Consideration
But performance of existing contractual obligations is not sufficient to support a promise of additional award.
(exception though that if both parties have derived a mutual benefit then it could be enforceable)
To support a ‘waiver’ of legal rights where part payment is given in full settlement of a debt, it’s only sufficient when additional consideration has been made.
- debt paid early
- payment made in a different kind
- payment at a different location
- payment made by a third party
- RARE exemption is if performing a statutory duty amounts to additional services
What happens when there is no express statement as to intention to create legal relations?
The courts will make 2 presumptions:
- domestic, social, family arrangements are not usually intended to be binding. UNLESS a business involved, separation, ‘mutuality of interest’
- commercial agreements are usually intended to be legally binding UNLESS suggested otherwise or expressly denied
The burden of proof is on the party seeking to escape liability
Misrepresentation
A false statement of fact made by one party to the other to induce them to contract and so deceiving them.
- but if intention is missing or its a state of opinion then its not misrepresentation
Silence and misrepresentation
Silence will not be misrepresentation unless the following circumstances prevail:
- an earlier statement made is no longer true
- an application is made for insurance
- contracts made between parties in a fiduciary relationship
(so if there’s a duty to give information or correct incomplete/misleading information)
Impact of misrepresentation on a contract
the effect is to render a contract voidable. This gives the injured party the right to:
- declare the contract void and seek rescission (be restored to their pre-contractual position but this isnt always possible eg property sold to 3rd party or physically destroyed)
- affirm the contract and claim damages for any losses
What’s an Express Term?
Express terms are ones that are specifically agreed between the parties either orally / in writing during the formation of the contract.
What’s an Implied Term?
Implied terms are those not agreed on by the parties but are incorporated into the contract in one of the following ways:
- BY STATUTE
eg terms of the consumer rights act 2015 OR employment contracts etc - BY CUSTOM
eg customary through trade usage - BY COURTS
in order to give business efficacy to an agreement
What’s a Condition
An important contract term which is SO fundamental to the contract, that breach would give the innocent party the right to repudiate (to end) the contract and claim damages
What’s a warranty?
A warranty is a minor contract term (is collateral/subsidary to the main purpose of the contract). If broken, the agreement however continues but would give rise to a claim for damage ONLY.
Innominate Terms
Are those terms that cannot be classified as a condition or warranty until the contract has been breached. So the court will class it as innominate and then go on to determine it through evidence eg - by seeing if the innocent party loses the whole of the benefit of the contract.
