contract Flashcards
the requirements for a contract to be formed
- An agreement between the parties;
- An intention to be legally bound; and
- Consideration-which is the ‘price’ paid by each i party in return for the obligations assumed by the other party or parties.
Agreement
- Typically, this arises when one party accepts the other party’s offer.
- An offer needs to be **sufficiently certain **to be capable of being enforced if it is accepted.
- lt must be communicated to the recipient (known as the ‘offeree’).
If the offeree accepts the offer, then a contract may be formed immediately. If the offeree rejects the offer, then there will be no contract. - If the offeree does not accept the offer but instead makes their own offer, this is a ‘counteroffer. A counteroffer overrides the original offer.
offer vs. pre contractual communications
1.response to request for information
2. an invitation to treat
Advertisements, price lists, listings of goods on Inter- net pages, and displays of goods in shop windows,tender, auction are generally invitations to treat.
unilateral contracts
1.Unilateral contracts are special cases in which the analysis is different-in these cases an advertisement does constitute an offer.
2.A unilateral contract arises when the person making the offer (the offeror) promises to do something if the person receiving the offer (the offeree) does something in return and the offeree actually does what the offeror has asked.
3. These contracts are called ‘unilateral’ because only one party assumes an obligation (for example, a promise of payment) when the offer is made.
4. The other party can choose to accept and become bound to the contract only by** perfor- mance.** These offers are often (although not always) made to the whole world, frequently in an advertisement-say, an advertisement promising a payment or other reward in return for particular actions. Such advertisements are treated as offers because it is clear the offeror intends to be bound.
INTENTION TO CREATE LEGAL RELATIONS
- In some situations, there is a presumption that the parties do not intend their agreement to have legal force-for example, family, domestic, and social situations.
- In a commercial context, on the other hand, the opposite is true-it is pre- sumed that the parties do intend to create legal relations.
- Of course, these presumptions can be rebutted by appropriate evidence to the contrary
capacity
consideration
- An agreement is enforceable as a contract only if each party receives ‘consideration’ for the promises that they make. Consideration is the price that each party receives.
- Consideration must be provided by the **parties to the contract **(not by a third party).
- There is no need to check whether the consideration is ‘adequate‘-a nominal amount will be enough, and a contract will still be binding even though one of the parties has made a bad bargain. But the consideration must** be sufficient **to be recognised by the law as such.
- Difficulties can arise when the parties are already under a legal duty to one another. Perfor- mance of an existing duty does not count as consideration
- Past considerationsomething that has already been done or promised-is not sufficientconsideration.
- And a promise to accept part payment of a debt instead of the whole debt is not normally binding, because the debtor is not giving any new consideration for the promise to accept less.
PRIVITY OF CONTRACT
- The normal rule is that only the parties to a contract can have rights and obligations under the contract. A third party cannot sue or be sued under the contract.
- Exceptions:
(1)The Contracts (Rights of Third Parties) Act 1999, which specifically allows a non-party to
enforce a contract in certain circumstances.
(2) When the courts conclude that there is a separate ‘collateral’ contract between the third party and one or more of the parties to the contract.
(3)When the courts conclude that one or more of the parties is holding their rights under the contract on trust for the third party.
(4)
Term of the Contract
1. Terms in a contract can be classified as conditions or warranties.
2. The terms may be expressly stated or they may be implied.
3. A ‘condition’ is a term which is **fundamental to the contract. If it is breached, the innocent party has the option to terminate **the contract and can also claim **damages.
4. A ‘warranty’ is a term which is not fundamental to the contract. The main remedy for breach of a warranty is damag- es.
5. Express terms can be oral or written.
6. . Other terms can be implied. They may be implied by statute** (such as the Sale of Goods Act 1979 or the Consumer Rights Act 2015), by virtue of custom and usage in a particular field, or by virtue of a **previous course of dealings **between the parties. Terms may also be implied by the courts when necessary to make the contract work.
rules on incorporation
- The rules on incorporation apply to all express contract terms, including in particular exclusion clauses (see below).
- A party who signs a contract including a term will normally be deemed to have agreed to it. Otherwise, the party relying on the term will have to show that they gave notice of it, or that it has been incorporated by virtue of a previous course of dealings between the parties.
exclusion clauses
- Particular issues arise in relation to clauses which seek to** exclude or limit a party’s liability **for breach of contract. If they are incorporated into the contract (see above),
- terms excluding or limiting liability will be effective if** (1) they are construed (interpreted) so as to cover the breach that has arisen, and (2) they are not prohibited by statute.**
- There are statutory rules on exclusion clauses in the Unfair Contract Terms Act 1977 and (for consumer contracts) the Consumer Rights Act2015.
vitiating factors
- A contract which meets the normal requirements for validity m ay nonetheless be void or void- able. A void contract has no effect at all. A voidable contract re emains in effect unless and until it is ‘avoided’ (‘rescinded’) by one of the parties.
- A contract may be void by reason of mistake or illegality/breach of public policy.A contract may be voidable by reason of duress, undue influence, or misrepresentation.
- Duress arises when one party has used illegitimate pressure to cause the other party to enter into a contract
- Undue influence can be** actual or presumed. **There is actual undue influence when one party applies improper pressure (falling short of duress) to cause the other party to enter into the
contract. Presumed undue influence arises when the law assumes that one party has exercised undue influence over the other because of a special relationship between the parties. Howev- er, the presumption of undue influence can be rebutted by evidence
misrepresentation
- A misrepresentation is a false statement of** fact or law** made by one party to another party who** relies** on the statement in deciding to enter into the contract.
- A misrepresentation will be actionable only if the party to ‘ whom it was addressed relied on it, so that it** induce**d them to enter into the contract.
- An act tionable misrepresentation may be fraudulent, negligent, or innocent. Any misrepresentation makes the contract voidable, so that the innocent party can usually rescind it. If the misrepresentation is fraudulent or negligent, the innocent party can also claim damages to put them back in the same position as if the misrep- resentation had not been made.**
discharge and variation of the contract
- ‘Discharge’ of a contract means bringing it to an end. A contract may be discharged by agree- ment, by performance, by breach, or by frustration.
- A contract will normally be discharged by performance. Generally, only** full performance** will discharge a party from their obligations (and entitle them to payment, if applicable). However, the courts may infer that the parties have agreed that substantial performance is sufficient, that the contract is divisible into stages, each of which can be performed separately, or that one party has accepted the other party’s incomplete performance.
- A party who** breaches** a condition of the contract or who otherwise expresses an intention not to be bound by it thereby repudiates the contract. The other party then has the option to terminate the contract. Whether or not the innocent party terminates the contract, they can also claim damages.
- A contract is frustrated if its subject matter is destroyed or if e events after the contract was con- cluded make performance** illegal, impossible, or substantially differen**t from that intended by the parties.
types of contract
- simple contract
- contract that requires writing
(1) guarantees
(2) A contract for the sale or other disposition of an interest in land; and
(3) Consumer credit agreements.
Note that contracts made in electronic form (typically con- sumer contracts) will be treated as if they were in writing and will be considered properly executed. - contract by deed
A deed is a document which makes clear on its face that it is intended to be a deed. It must be executed by the parties to it in the presence of a** witness** and delivered. ‘Delivered’ in this context means that the parties to the deed must have shown their intention to be bound by it. Typically, this is done by including words such as “Delivered as a deed on [date].’
Certain contracts must be made in a deed to be enforceable, including:
a. Promises Where Nothing ls Received or promised in return can be binding if they are made in a deed. A classic example is a promise to make a gift.
b. Conveyance of Land
A conveyance of land (which is a transfer of land) must also be made by deed.
- An important difference between a simple contract and a contract by deed is the time limit in which a claim for breach of contract can be made. A claim under a contract which is not made by deed must be brought within** six years from the date of the breach,** but a claim under a contract by deed can be brought up to 12 years from the date of the breach. This is a reason why some contracts are made by deed even when there is no other reason to do so.