Contents and terms of a contract Flashcards
Formation - what does a contract consist of?
Agreement - offer and acceptance
Offer - offeror, make clear and certain offer, with intention to be bound
Acceptance - offeree, accepts offer clearly and unequivocally, on exactly same terms as given by offeror.
Intention to create legal relations - capacity and consideration
What are the two types of contract?
1) Bi-lateral - executory consideration
- 2 or more parties exchanging promises to do something in the future
- promise to do - executory
2) Unilateral - executed consideration
- promise by one party to do something (pay) in return for act performed by another party
- when performed party to pay
- past consideration, executed consideration
- payment when act done - executed.
Offer =
Invitation to treat =
- Clear and certain offer - NOT MAY or MIGHT
- intention to be bound
- if clear and certain offeror bound
- Must distinguish between an offer and intention to treat
INVITATION TO TREAT=1st step in negotiations= - advert, display goods, auctions, invitation to tender, statements of price
- advert can become unilateral offer, if it crosses threshold and becomes clear and certain, with intention to be bound
Offer Terminated
- Acceptance = contract formed
- Rejection - outright, says don’t want it
- battle of forms = 1 party offer other party counter offer, terminates 1st offer so on and so on. Most current offer is the binding one
- LAPSE
- reasonable time
- death of offeror
- offeree dies
- REVOCATION
- offeror revokes offer before acceptance. If accepted the offeror is bound. If revoke successfully before acceptance, then will be revoked, then terminated.
- must be communicated to offeror
- if send by post and offeree accepted by phone - offeror bound.
Acceptance =
- accepts unequivocally and clearly on terms as stated
- if offer not terminated, counter offer terminates contract. Has to be on exact terms
- must be in response to offer
- unqualified - same terms
- communicated to offeror
- silence does not amount to acceptance
- must say “I accept” - exception to this is Postal rule, can validly take place if a letter validly posted (at time of posting)
- Can’t use postal rule if parties exclude it or unreasonable ie email correspondence prior to posting.
- unilateral act - acceptance
- course of dealing =
- offer and party deliver and acceptance = course of dealing and will be accepted.
Method of how accepted=
- can accept by phone, voicemail - when received - by email but must reach offeror
- phone must speak to offeror
-post - when posted - email - when sent, if outside office hours and communications in office hours deemed to arrive 9am next morning
Intention to create legal relations (ICLR)
= be legally bound
- COMMERCIAL AGREEMENTS
- presumption ICLR, legally bound
- rebutted by explicitly clear dealing or terms that no ICLR
- DOMESTIC AGREEMENTS
- presumption no ICLR
- rebutted by evidence of formalities, legal document, money changing hands, solicitor involved
ADVERTS
- Presumption no ICLR
- rebutted if advert is unilateral contract
-Presumptions therefore evidence otherwise will rebut
- if advert has enough detail, money set aside can form unilateral contract.
Capacity =
- usual rules adults ,over 18 and of sound mind deemed capable entering into contract
- minors, intoxicated or mentally incapacitated cannot be contract - void
- minor - void
- intoxicated - voidable
- Minor - if necessaries = contract. Necessaries = something necessary purchased for a reasonable price eg is minor can be bound - minor went into shop and ordered expensive suit and then left.
- If drunk or high not bound if other party knows this. If other party doesn’t know under influence drink/drugs will be bound
- necessaries applies intoxicated
-necessaries applies where mentally incapacitated as does if doesn’t know
Illegality =
= breach parliamentary law, or against public policy morals
- courts have wide discretion re approach
- if contract based on illegality then contract will be void if court agrees
- Ct may render valid - courts discretion - partner returned to position prior to contract
- CT won’t let anyone profit from illegal contract ie award damages
- CT won’t enforce where purpose contrary to law
- Otherwise it is up to the courts, their discretion
- CT address severity and knowledge of parties
Certainty terms =
- certain, complete
- not vague
- if vague/incomplete - not enforceable
- the court will try to enforce and interpret terms, by severing different terms
- CT use terms adopting reasonable person test
Consideration =
- stuff exchanged in contract - promises - money, service, something exchanged
- unilateral contract becomes Act which becomes promise
- consideration need only be sufficient not adequate
- CT happy to see some consideration, not necessarily of value - peppercorn rent
- Past consideration is not good consideration
- can’t do something then say have to pay, if haven’t said would prior to this.
Pre- existing obligations =
-if you go beyond pre existing obligations can you enforce against the offeror.
- Potentially Yes - if do only what said can’t get anything more if do more
- Unless provide fresh consideration, but other party must agree to pay past consideration.
Practical Benefit Rule =
Difference between practical benefit and duress?
What is the practical benefit?
- obligation under contract performed but because 1 party performed practical benefit to other, and other party agreed to pay
- Williams v Roffey =
- party offered to finish contract on time and to pay more to be done, and in turn received practical benefit. Therefore performed no more than contract, BUT received practical benefit therefore enforceable.
- Promise to pay more than offeror and accompanied by practical benefit, or have in mind.
- if comes from other side and threat to breach contract more a kin to duress - threatening to breach or not perform
What is the practical benefit? =
- no fixed rule:
- commission
- avoiding penalty, fine
- another contract, another party
Terms of a contract - 2 types =
1) Express - intentionally agreed by parties
2) Implied - by law
Express Terms =
- have to check if they are incorporated - in written contract validly executed
-Rules which allow terms to be incorporated even though both parties haven’t written down in agreement. Rules are quite restrictive
1) reasonable notice - is method used to try to incorporate document outside of contractual agreement, method = - document outside of agreement can be a sign or T & C’s stapled to agreement.
- can be either contained or referred to in contractual documents, for instance as T & C’s
- reasonable notice must be given in a sperate document at time of contracting. Will then be incorporated in contract
- example = sign in hotel behind desk, referred to in contract = reasonable notice
Other situations considered=
2) ex- parties dealing with each other for some time, on well established terms, previous and consistent dealing
3) oral statements prior to contract - negotiations then enter into a written agreement, oral statements prior to contract, can then be incorporated? CHECK Entire agreement clause as would exclude such previous oral statements, such states could be representations and not terms.
Will be terms if using objective test, reasonable person, following factors used:
- how important
- made at time, just before contract, next or subsequent to contract
- written down
- giving statement benefit special knowledge/skill
In summary 3 ways can incorporate express terms into written agreement is by
1) Reasonable notice - referred to in document at time of contract
2) Pre existing dealings
3) Oral Statement
