Contract

Question 1

What are the basic requirements for a contract to exist?

Answer 1

1. An agreement between the parties;
2. Intention to be legally bound;
3. Consideration (something of legal value) from each party supporting the agreement.

Question 2

Which contracts must be in writing?

Answer 2

1. Guarantees;
2. A contract for the sale or other disposition of an interest in land;
3. Consumer credit agreements.

Question 3

What is a deed?

Answer 3

A document that makes it clear on its face that it is a deed.

It must be executed in the presence of witness.

It must be delivered to be effective.

Question 4

Which contracts must be made as a deed?

Answer 4

1. Promises where nothing is received in return.
2. Conveyance of a land.

Question 5

What is a time limit for bringing a claim under a contract and a deed?

Answer 5

Contract: 6 years;
Deed: 12 years.

Question 6

What are the conditions for an offer to be valid?

Answer 6

1. It must express an intent to be bound in contract (promise, undertaking, or commitment to enter into a contract).
2. The terms of the offer must be definitive and certain (must not be too vague, uncertain or incomplete) = a contract containing them must be capable of being enforced.
3. It must be communicated (an offeree must have knowledge of the offer).

Question 7

Is a request for information an offer?

Answer 7

No.

Question 8

What is an invitation to treat?

Answer 8

A first step in the negotiations for a contract.

1. Advertisement.
2. Shop sales.
3. Price lists.
4. Tenders.
5. Auctions.

(Price quotations: depends on the prior correspondence).

Question 9

When will an advert be treated as an offer?

Answer 9

When it is an offer to enter a unilateral contract.

Question 10

Can an offeror revoke the offer?

Answer 10

Yes, at any time before the offer is accepted.

Question 11

How can the offerror revoke the offer?

Answer 11

1. Directly.
2. Indirectly: if the offeree receives correct information from a reliable source of acts by the offerror that would indicate the offer was revoked.

Question 12

When is a revocation of an offer effective?

Answer 12

When received.

Question 13

When an offer cannot be revoked?

Answer 13

1. When there is a collateral contract to keep the offer open.
2. The offer was for making a unilateral contract and the offeree has begun performance.
3. The offer was for making a bilateral contract and the offeree accepted the contract by beginning performance.

Question 14

How can an offeree terminate the offer?

Answer 14

1. By expressly rejecting it.
2. By making a counteroffer.
3. By failure to accept within the time stated or if no deadline was specified, within a reasonable time.

Question 15

When an offer may be terminated by operation of law?

Answer 15

1. If the offeror or offeree dies.
2. The subject matter is destroyed
3. … or becomes illegal.
4. A condition in the offer is not met.

Question 16

How can the offer be accepted?

Answer 16

1. Unless the offer stipulates a method of acceptance, it may be accepted in any reasonable manner and by any reasonable medium.
2. An offer to enter a bilateral contract can be accepted by a promise or performance.
3. Even if the offer stipulates a method of acceptance, another method will be valid if it is no less advantegous.

Question 17

Can an offer be accepted by silence?

Answer 17

No.

Question 18

What is the postal rule?

Answer 18

Acceptance by post creates a contract at the moment of posting.

Question 19

What are the exceptions to the postal rule?

Answer 19

1. The letter isn’t properly addressed and stamped.
2. It wasn’t reasonable to accept by post.
3. The offer stipulates (expressly or by implication) that acceptance isn’t valid until received.

Question 20

Does the postal rule apply to emails?

Answer 20

No.

Question 21

Who wins the battle of forms?

Answer 21

The party who sent the last set of terms before the performance begins.

Question 22

Must the acceptance of the offer (for bilateral contract) be communicated?

Answer 22

Generally yes; unless waived by the offerror.

Question 23

What is the presumption re intention to be legally bound in domestic situations?

Answer 23

The parties did not intend to be legally bound by their agreements.

Question 24

What is the presumption re intention to be legally bound in social situations?

Answer 24

The parties did not intend to be bound by their agreements.

Question 25

What is the presumption re intention to be legally bound in commercial settings?

Answer 25

The parties did intend to be bound unless there is clear and unambiguous evidence otherwise (e.g. a statement “binding in honour only” or “subject to conract”).

Question 26

Are minors bound by a contract?

Answer 26

1. In general, contracts entered by a minor is voidable by the minor when they turn 18.
2. Contracts for necessary goods or services at a reasonable price: a minor is bound by the contract
3. Minors can enter employment contracts.
4. If a minor voids a contract and the other party has transferred property to the minor, a court may require the minor to transfer the property back.

Question 27

Is a contract entered by a person without mental capacity valid?

Answer 27

The contract is voidable by that person but only if the other party knew they lacked capacity.

A contract for necessary goods or services at a reasonable price is binding.

Question 28

What is required for a consideration to be valid?

Answer 28

1. It needs to be sufficient (have some legal value). It does not need to be adequate.
2. It must not be illusory.

Question 29

What is not considered a valid consideration?

Answer 29

1. A promise to perform a duty already owned (an existing contractual duty).
2. A promise to perform a duty required by statue.
3. Past consideration.

Question 30

Three ways by which an (exclusion) clause can be incorporated into a contract?

Answer 30

1. By signature.
2. By notice.
3. Through custom or previous dealings.

Question 31

Three conditions for an exclusion clause to be valid

Answer 31

1. The clause must have been incorporated into the relevant contract.
2. The clause must have been properly drafted so that it is constructed (interpreted) as excluding liability effectively.
3. The clause must not be prohibited by statute.