Comtract Formation

Question 1

What is a contract and it’s elements

Answer 1

Legally binding agreement enforceable in law

Offer
Acceptance
Consideration
Intention

Question 2

Vitiating factors

Answer 2

Lack of capacity (voidable)
Absence of free will- duress and undue influence (voidable)
Illegality (void)
Misrepresentation(voidable)

Question 3

Offer

Answer 3

Definite promise to be bound on specific terms and must be capable of acceptance

Not an invitation to treat which includes goods on display/shelf , offer of shares, circulation of prices and most advertisements

Question 4

Termination of offer

Answer 4

Rejection

Counter offer

Lapse of time

Revocation

Failure of precondition

Question 5

Acceptance

Answer 5

Unqualified agreement to all terms of the offer

Question 6

Communication

Answer 6

Express words, oral or written or inferred from conduct

Can not be via silence

Must be communicated in appropriate form

If instantaneous methods of communication acceptance is where and when acceptance is received

Question 7

Exceptions to communication rule

Answer 7

Unilateral acceptance (satisfying all terms off offer)

Postal rules- acceptance completed as soon as letter is posted to subject

If delay is due to offerees negligence (putting wrong address) posting does not amount to acceptance

Use of post must be in contemplation of both parties

Postal rules have not been excluded

Postal rule does not apply to revocation - if revocation sent by letter after acceptance is sent then acceptance takes priority

Question 8

Consideration

Answer 8

Element of value in agreement

Must be supplied by both parties

Three types
Executory- a promise for a promise (valid)

Executed- an act already performed (executed) in return for a promise

Past- consideration must be supplied after agreement formed- if before it’s considered past consideration (generally invalid)

Question 9

Adequacy and sufficiency

Answer 9

Need not be adequate but must be sufficient - as long as some value in deal - courts unlikely to intervene if one party enters bad deal

Question 10

Sufficient

Answer 10

A) Performance of existing contractual obligations not sufficient for additional reward - unless promisee is going over and above or if extra benefit received by both parties

Performance of existing obligation to third party can amount to valid consideration

B) performance of an existing statutory duty not sufficient unless extra service above the stat duty is offered

C)part payment given in full settlement of debt - part payment not sufficient to write off full debt (eg owe a mate 100 pay 80 and he says not to worry about the rest- he can ask for it later)

To support writing off of debt additional consideration can be supplied by :

Alternative consideration (pay in advance or in kind)

Bargain between creditors

Payment made by third party

Question 11

Intention to create legal relations

Answer 11

Normally evident parties intend to be bound

If no express or verbal consent , courts will make the following assumptions :

1)Domestic and family and social arrangements :

Rebuttable presumption that parties do not intend to Create legal relations

Spouses Living together - weak presumption easily rebutted

Spouses separating - presumption rebutted

2) Commercial agreements

Strong presumption of intent can be rebutted with words like subject to contract

Question 12

Pritvity

Answer 12

Doctrine of privity:

Only a party who is party (privy) to a contract may enforce or sue on that contract

Exceptions :

Where an agency relationship exists

Common law and statutory exceptions - motor insurance claims per road traffic act 1988

The contracts act 1999 (right of third parties) where 3rd party has rights provided that:

They are expressly identified in the contract by name class or description

The contract confers a benefit on them

Question 13

Terms of a contract (contents )

Explicit

Answer 13

Express- explicitly agreed by parties orally or in writing during contract formation

Express have precedent over implied

Following must be considered:
1) terms must be substantially complete- parties can leave a term to be decided to a later date - unless left outstanding and no provision for its clarification

2) statements of fact made before contract which induces party to enter contract may become a term
3) oral evidence not usually be admitted to add to, vary or contradict written terms unless it’s shown that the document was not intended to compromise all the agreed terms

Question 14

Implied terms

Answer 14

Terms not agreed on by parties but incorporated in one of the following ways :

Reference to a custom (norm) unless inconsistent with express term

By statute - supply of goods and services act- work materials must be of a satisfactory quality

By courts either to give business efficacy or because it is implicit in the nature of the contract