CIPS L4M3 Chapter 1 (1.2) Flashcards
What are the five (5) condidtions for a contract to exist?
- Offer
- Acceptance
- Consideration
- Intention
- Capacity
What is an Offer?
It is a full statement of what the offeror is willing to provide and the terms by which they are willing to provide it.
Who is an Offeror?
A person making an offer
Who is a Plaintiff?
The person bringing a legal claim
What are four actions that are NOT offers?
- Invitation to treat
- Declaration of intention
- A ‘mere puff’ (or boast)
- Provision of information
What are the six (6) ways in which an offer will end (ie cease to be capable of being accepted)
- Withdrawal
- Lapse
- Death
- Rejection
- Failure of conditionalty
- Acceptance
What is Specific performance?
this is where a court orders a party in breach of the contract to perform exactly what is required to be done under the contract. Specific performance might be ordered in addition to damages. The remedy exists so that parties to a contract cannot simply get out of their obligations by accepting the financial cost of damages.
Who is a Defendant?
The person defending a claim brought against them
What are Express Terms?
Contractual terms which are specifically stated in contract documents
What are Implied Terms?
Contractual terms that exist but are not written within the contractual documentation, i.e. the law of the land
What are the conditions of Acceptance?
- Can only occur while the offer is open
- It must be absolute and unconditional
- It cannot be made by someone with diminished capacity
What is the meaning of Diminished Capacity?
A person’s inability to enter a contract, e.g. because they are a minor, are suffering from mental health issues, or are under the influence of drugs
What is a Subject to contract?
Heading used on letters, to indicate that matters are still being discussed and that the letter must not be taken as a formal offer or an acceptance of any terms referred to within it (particularly in land transactions)
What is a Letter of intent?
A letter issued by a purchaser indicating that they intend to accept a tender, usually subject to certain preconditions having been met, such as obtaining any legal or financial consents
What is Title of goods?
Legally recognised ownership
What is Acceptance by Performance?
It is an acceptance implied by actions, e.g. if a purchaser uses the goods supplied.
A purchaser/buyer cannot assume title to goods
When the seller is silent about an offer made, even if the buyer has made a payment - particularly if that payment did not require action on the part of the seller.
What are the two (2) rules which override the need for acceptance to be communicated?
- The person making the offer decide they do not require it.
- The mailbox rule, this principle holds that if a letter accepting an offer has been properly posted, then it will be effective from the date of posting, even if it never arrives. There must be evidence of posting.
What is the Vienna Convention?
The United Nations Convention on the International Sale of Goods
What does The Vienna Convention state?
- That the postal rule does not generally apply (as a means of establishing when and where the contract was concluded) but it does retain the part of the rule which says that an offer cannot be withdrawn after an acceptance has been sent, whether or not the acceptance is received.
Consideration
In commercial contracts, consideration can be thought of as what?
- Payment for goods or services being provided.
What is Past consideration?
- Something which has already been done or given cannot act as consideration
What is Implied consideration?
- If the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such a promise would be forthcoming, this may be a valid consideration.
What is A promise to perform an existing obligation?
- If the existing obligation is a legal one, it must be performed whether or not the goods or services at issue are delivered, so it cannot be said to be in exchange for them
What is A promise to perform over and above an existing obligation?
This is a consideration e.g. police presence inside football grounds before, during and after matches, which has to be paid for by the football clubs. Conversely any police presence outside the ground is at the discretion of the force and comes under its existing public order duties.
What is A promise given to a third party?
A contract known as privity of contract, namely that a contract is a private arrangement between the parties to it.
What is the meaning of Sufficient consideration?
- Capable of having a monetary value and does not fall into any of the categories mentioned that are defined as being ‘not’ consideration.
What requirements are sufficient to meet the test of law for Consideration?
- it must be present or future consideration
- it must be something which the provider is not already obliged to perform or provide
- it must be provided from one of the contract parties to the other
- it must have (or be capable of having) monetary value
- it must be more than a vague promise
What is A collateral warranty?
It is an agreement under which a subcontractor guarantees to a third party that it will fulfill its obligations under a contract. It is only legally binding if executed as a deed.
What is the major exception when consideration is not required to form a contract?
- Where the promise is made by way of a deed.
What is the meaning of Intention to create legal relations/to be legally bound?
It is intending that an agreement should be capable of being enforced via the courts
Capacity to contract
When does a person have the capacity to contract, which is sometimes referred to as ‘legal capacity’ or ‘legal competency’?
- If there is no legal reason why they cannot enter into a contract
List the categories of people who do not have the capacity to contract
- infants/minors
- people suffering from mental health issues
- people under the influence of drugs
What are the Ultra Vires Rules?
Where the organization may only legally be able to contract to do certain things (public sector)
What sets out in law that limits Public sector organisations of their duties and obligations?
Acts of parliament, or equivilent, which will describe the following
- What the body is intended to do
- What the body is required to do
- What the body is able to do in order to meet the needs of the two points above
What are Articles of Incorporation?
- The legal document creating a commercial company and setting out its purpose.
Companies are not permitted to do anything beyond what is set out in their articles of incorporation
What is Battle of the forms?
- A series of forms issued in sequence by the purchaser and the supplier, each containing terms that appear to override those on the previous document such as orders, delivery notes, etc.
- And it is usually the most recently used issued set of terms and conditions that will take precedence
What are the standard documents that can be included in the battle of the forms?
- RFQs
- Quotations submitted
- Order forms
- Delivery notes
- Goods received notes
- Invoices
What is a ‘full agreement’ clause?
A clause which explicitly states that anything discussed prior to the final drafting and signature of the contract shall be ignored and that the contract itself represents the full agreement of the parties
What is an order of precedence or a hierarchy of clauses?
- Clause/s that explicitly sets out which terms take the lead
- When there is a definite conflict that cannot be resolved by any sensible reading of the contract, the courts will rely on the order of precedence clause
What will Express terms override?
- Implied terms, unless the implied term is created by a statutory regulation
What are the risks of accepting the suppliers terms which means accepting a contract that is drafted entirely in the suppliers favour?
- No warranty of quality or fitness for purpose
- A specification that reflects what the supplier wishes to sell, rather than what the purchaser wishes to buy
- All risks of damage in transit resting with the purchaser
- Payment terms which might result in cash flow issues for the purchaser
- Exclusion of all liability for any damage or injury caused by the goods being purchased or as a result of the services provided
- Lack of protection against time and/or budget overruns
- Inability to change the original specification without extra costs
- Lack of protection of any of the purchasers intellectual property, which might need to be deployed to make the contract function
- Inability to control any shared data, which apart from the personal impacts of a data breach, could result in significant legal penalties, particularly within the EU under the new GDPR
What is the risk on relying on oral contracts?
It is difficult to say what each party thought it had agreed to, in terms of the warranty, specification, timescales, cost and liabilities
What is the Vienna Convention on Contracts for the International Sale of Goods (CISG)?
- It is a United Nations treaty seeking to harmonise contract terms for the sale of goods between different countries
What is a Contracting state?
A country which has signed the Vienna Convention on CISG
What are the possible reasons that the UK have not sign the Vienna Convention treaty?
A lack of parliamentary time to debate adoption and other legislative priorities
A lack of interest in the business community
A concern that London might lose its position in international litigation
When is The Vienna Convention applicable?
it only applies to goods (not services or works), but does include goods to be manufactured to the specifications of the buyer
it only applies to private commercial (business-to-business) transactions, not to public sector contracts or sales to consumers
it only applies where the parties to the contract have their place of business in different contracting states
When does the CISG does NOT apply?
Distribution agreements, since these are about the organisation or transport of the goods, not the transfer of ownership
Goods bartered for other goods or services
Framework agreements, which are generally accepted not to be actual contracts
Franchise agreements
The sale of ships or aircraft
The sale of electricity
Anything sold at auction
What does The Vienna Convention cover in the formation of contracts?
Offer
Acceptance
Consideration
Explain how offers and acceptance are considered under the CISG
The offer must be addressed to a person, definitively describe the goods, quantity and price, and indicate an intention to be legally bound on acceptance.
An offer may be revoked, provided that the withdrawal is received before an acceptance is sent
Silence cannot be taken to mean that an offer has been accepted
What matters are determined by national laws that the CISG does NOT cover?
Because it does not cover validity or enforceability of the contract -
Capacity, Illegality, Mistake, Duress or fraud, Damages and penalty clauses, Validity of assignments or settlements, Retentions or deposits, Liability for death or personal injury caused by the goods
What does the CISG not require for contracts or amendments?
It does not require the contracts or amendments to be in writing.
What are Incoterms?
Series of commercial terms published by the International Chamber of Commerce, covering the allocation of costs and transfer of risks between buyer and seller. The various options are abbreviated to three letter codes.
What do the remedies for breach of contract include?
Damages, specific performance or adjustment of price, and will depend on the facts of the case and the nature of the breach
What is a Force Majeure?
An exclusion clause that relates to things which are not only outside the control of the parties, but which by their nature are unforeseeable. Normally including events such as natural disasters, civil unrest and war.
What is the meaning of Misrepresentation?
A false statement of fact made by one of the contracting parties before, or at the time of, entering into the contract which led or encouraged the other party to contract.
What are the necessary conditions for misrepresentation?
There must be a statement made
The statement must relate to a fact
The statement must be false
The statement must be made by the contracting party
The statement must induce the contract (have direct influence on the other party’s willingness to contract)
What are the types of Misrepresentation?
- Fraudulent
- Negligent
- Innocent
What is a Fraudulent Misrepresentation?
- where the person making the misleading statement does not believe it to be true
What is Negligent Misrepresentation?
- where the person making the statement has a duty of care and fails to take such reasonable care as to the accuracy of the statements.
What is Innocent Misrepresentation?
- where the misleading statement is neither fraudulent nor negligent, because it is genuinely and reasonably held to be true by the person making it.
What are the remedies for misrepresentation?
- Rescission of contract
- Damages
What is Rescission of contract?
An equitable remedy that seeks to place both parties in their pre-contractual position, as though the contract had never existed
What are instances which rescission of contracts will not be possible and the courts may still choose to award damages?
Where the innocent party has affirmed the contact
Where the claim has not been brought within a reasonable time
Where restitution (returning to the pre-contractual position) is impossible
Where there has been intervention of innocent third-party rights
