Contract

Question 1

Elements of a Contract

Answer 1

Agreement, Consideration, Intent.

The basic principles of contract law are that the parties must be in agreement and have intended to be legally bound, and that this agreement must be supported by consideration, that is, something of value must have been given by each part to support their agreement.

Question 2

Agreement

Answer 2

Offer (promise, undertaking, or commitment with definite and certain terms communicated to offeree).

and

Acceptance (before termination by revocation, rejection, or operation of law).

Question 3

Consideration

Answer 3

Bargained-for exchange (of something of legal value).

OR

Substitute (for consideration, such as promissory estoppel).

Question 4

Intent

Answer 4

Presumption of intent in commercial arrangements - but not in domestic/social situations.

Question 5

Offer

Answer 5

Creates power of acceptance in the offeree and a corresponding liability on the part of the offeror.

Must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of all material terms contained in the offer.

Question 6

Promise / Undertaking / Commitment (Offer)

Answer 6

Must be included for a communication to be considered an offer.

Must be to enter a contract specifically, not just preliminary negotiations.

ie: There must be INTENT to enter into a contract.

Question 7

Definite and Certain Terms (Offer)

Answer 7

Offer must be definite and certain in its essential terms.

The terms must bot be too vague, uncertain, or incomplete.

Basic test is whether there is enough detail provided so that the contract could be enforced by law - terms are clearly defined and therefore enforceable.

Question 8

Communication to the Offeree (Offer)

Answer 8

Offeree must have knowledge of the offer in order to accept the offer.

Proposal must be communicated to the offeree.

Question 9

Communications which do not amount to and offer (Offer)

Answer 9

Responses to requests for information.

Invitations to treat:
-Advertisements
-Shop Sales
-Price Lists
-Tenders
-Auctions
-Price Quotations

Exception: Unilateral Contracts.

Question 10

Offers in Unilateral Contracts

(Offer)

Answer 10

Offer in which the offeror requests performance rather than a promise.

Arises when the offeror promises to do something if the offeree does something in return and the offeree actually does what the offeror has asked.

Considered unilateral because only one party has assumed an obligation to do something (the offeror), and the offeree may choose not to accept.

Exception to the rule that advertisements do not constitute an offer to contract.

Eg: Advertisement promising $100 to anyone who gets a tattoo of the company on their forehead.

Question 11

Revocation (Termination of Offer)

Answer 11

Retraction of an offer by the offeror.

Must occur by communicating to the offeree any time BEFORE ACCEPTANCE.

Exceptions:
-Collateral Contract
-Beginning performance under an offer for a unilateral contract
-Distinguish: Beginning performance under an offer for a bilateral contract can be an acceptance.

Question 12

Indirect Revocation (Termination of an Offer)

Answer 12

Occurs if offeree receives: (1) Correct information,
(2) from a reliable source, (3) of acts of the offeror which would indicate to a reasonable person that the offeror no longer wishes to make the offer.

Question 13

Collateral Contract

(Termination of Offer - Exceptions to limitations on offeror’s power to revoke)

Answer 13

A type of contract where the offeree gives considerations for a promise by the offeror.

Ie: Agreeing not to revoke an outstanding offer.

Question 14

Beginning performance under an offer for a unilateral contract

(Termination of Offer - Exceptions to limitations on offeror’s power to revoke)

Answer 14

An offer in a unilateral contract becomes irrevocable once performance has begun.

It would be unfair if offeror could withdraw their offer once the offeree has started doing what the offeror has asked them to do.

However - no contract until offeree has completed performance, so the offeree may withdraw at any time until then.

Question 15

Distinguish - Beginning performance under an offer for a bilateral contract can be an acceptance

(Termination of Offer - Exceptions to limitations on offeror’s power to revoke)

Answer 15

An offer for a unilateral contract can be accepted only by performance.

Once the offeree begins performance, the offer has been accepted and thus revocation of the offer becomes impossible for this reason.

Question 16

Termination by Offeree

Answer 16

An offeree may terminate an offer by REJECTION - Expressly or impliedly.

Question 17

Express Rejection (Termination of Offer)

Answer 17

Statement by the offeree that they do not intent to accept the offer.

This terminates the offer; the offeree cannot change their mind once effective.

Effective once received by the offeror.

Question 18

Counteroffer as Rejection (Termination of Offer)

Answer 18

Offer made by the offeree to the offeror which relates to the same subject matter as the original offer but differs in its terms.

Both a rejection of the initial offer and a new offer.

Terminates the original offer and reverses the roles of the parties.

Question 19

Distinguish - Mere Enquiry

(Termination of Offer)

Answer 19

Distinguish between a COUNTEROFFER (which consitutes rejection) and a MERE ENQUIRY or request for further information.

An enquiry will not terminate the offer when it is consistent with the idea that the offeree is still keeping the original proposal under consideration.

Test: Whether a reasonable person would believe that the original offer had been rejected.

Question 20

Rejection of Collateral Contract

(Termination of Offer)

Answer 20

Because an agreement to keep the original offer open is often a COLLATERAL CONTRACT, a rejection of the collateral contract does not terminate the original offer. The offeree is still free to accept the original offer.

Question 21

Lapse of Time

(Termination of Offer)

Answer 21

An offer may be terminated by the offeree’s failure to accept within the time specified in the offer.

If no deadline was specified then within a reasonable period. What constitutes a reasonable period is determined by courts, taking into account subject matter of the contract.

Question 22

Termination by Operation of Law

(Termination of Offer)

Answer 22

Offer may be terminated by operation of law through any of the following events:
-Death of offeror or offeree;
-Destruction of the proposed contract’s subject matter;
-Supervening illegality;
-Failure of any condition contained in the offer.

Question 23

Acceptance

Answer 23

Manifestation of unqualified assent to the terms of an offer.

Acceptance must be unqualified because any attempt to vary the terms would constitute a counteroffer. (However - not a mere enquiry / request for further information).

Offeree must know of Offer in order to validly accept it.

Question 24

Power of Acceptance

(Acceptance)

Answer 24

Only the person to whom an offer is addressed OR a member of a class to which an offer has been directed has the power to accept an offer.

Offeree’s power generally may not be assigned (However - an agent may accept on their principal’s behalf).

Question 25

Methods of Acceptance

(Acceptance)

Answer 25

Unless stipulated by the offeror, an offer will be construed as inviting acceptance in any reasonable manner and by any medium reasonable under the circumstances.

Question 26

Method of acceptance stipulated by offeror

(Methods of Acceptance)

Answer 26

If a particular method has been stipulated, the offer is only accepted if that method was used by offeree.

Exception - If the method of acceptance is different but no less advantageous. (ie: Using first class post instead of second class post).

Question 27

Silence as Acceptance

(Methods of Acceptance)

Answer 27

Generally, an offeree cannot be forced to speak or have silence treated as acceptance.

Law requires positive steps taken by offeree to enter into contract, silence is not a positive step.

Exceptions are rare.

Question 28

Acceptance of Offer for Unilateral Contract

Answer 28

The offeror promises to perform on COMPLETION by the offeree of a requested act. Once the act is completed, a contract is formed.

Offeree has no obligation to complete performance - Only completion constitutes acceptance of a unilateral offer.

Offeree is generally not required to give offeror notice that they he has begun the requested performance. However, is required to notify offeror within a reasonable time ager performance is completed.

Question 29

Acceptance by Conduct

Answer 29

An offeree may accept an offer by conduct.

Offeror must be aware of the offeree’s conduct so as to satisfy requirement of communication.

Question 30

Waiving the requirement for communication

(Acceptance - Communication)

Answer 30

Offeror may waive the requirement that acceptance of an offer must be communicated.

Courts may imply this - for example if a seller prepares goods for dispatch and sends them to the buyer. This may be considered acceptance without the seller communicating their acceptance to the buyer.

Question 31

Postal Rule

Answer 31

Acceptance by post creates a contract at the moment of posting, even if the letter is lost in the post, unless:

(1) The letter is not properly addressed and stamped;
(2) It was not reasonable for the acceptance to be communicated by post;
(3) the offer stipulates, expressly or by implication, that acceptance is not effective until received.