Consumer Legislation & Contract Law

Question 1

What is a contract

Answer 1

A contract is a formal agreement between two or more people that is enforcable by law

Question 2

What are the elements of a contract

Answer 2

1. Offer
2. acceptance
3. intention to contract
4. capacity to contract
5. consent to contract
6. consideration
7. legality of form
8. legality of purpose

Question 3

What is an offer

Answer 3

An offer is a clear indication of the parties willingness to enter into an agreement under specified terms. the offer can be made orally, in writing or by conduct. An offer can expire if: it is rejected, withdrawn

Question 4

What is an acceptance

Answer 4

The party receiving the offer accepts all terms of the offer as it stands. if new terms and conditions are put forward this is called a counteroffer.

Question 5

What is an agreement

Answer 5

Once a clear, complete and unconditional offer and a full acceptance of that offer are in place, there is a agreement. until the remaining six elements are satisfied, this is not yet a contract.

Question 6

Intention to contract

Answer 6

both parties must be aware that they are entering into a legally binding agreement that could see them in court if they fail to keep their side of the agreement.

Question 7

capacity to contract

Answer 7

all people and organisations have the legal right to enter into a legally binding contract except:
minors
people of unsound mind
bankrupt individuals
diplomats
somebody under the influence

Question 8

consent to contract

Answer 8

the parties entering the contract must do so voluntarily, with full knowledge of all elements of the contract. there should be no use of force, lies or misrepresentation.

Question 9

consideration

Answer 9

each party in the contract must givec something of real value (benefit) to the other party. both parties must gain from the contract. consideration usually involves monetary payment.

Question 10

legality of form

Answer 10

contracts must be of the correct legal format. certain contracts must be in writing if they are to be legally valid:
insurance policies
hire purchase agreements
sale of property or land
share transactions
consumer credit and bank loans

Question 11

legality of purpose

Answer 11

a contract put in place must not break any laws. it must be for legal transactions. a legally valid contract cannot exist for something illegal or itself be involved in breaking the law.