contract

Question 1

3

the requirements for a contract to be formed

Answer 1

1. An agreement between the parties;
2. An intention to be legally bound; and
3. Consideration-which is the ‘price’ paid by each i party in return for the obligations assumed by the other party or parties.

Question 2

4

Agreement

Answer 2

1. Typically, this arises when one party accepts the other party’s offer.
2. An offer needs to be **sufficiently certain **to be capable of being enforced if it is accepted.
3. 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.
4. If the offeree does not accept the offer but instead makes their own offer, this is a ‘counteroffer. A counteroffer overrides the original offer.

Question 3

2

offer vs. pre contractual communications

Answer 3

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.

Question 4

unilateral contracts

Answer 4

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.

Question 5

3

INTENTION TO CREATE LEGAL RELATIONS

Answer 5

1. 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.
2. 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.
3. Of course, these presumptions can be rebutted by appropriate evidence to the contrary

Question 6

capacity

Question 7

6

consideration

Answer 7

1. 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.
2. Consideration must be provided by the **parties to the contract **(not by a third party).
3. 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.
4. 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
5. Past considerationsomething that has already been done or promised-is not sufficientconsideration.
6. 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.

Question 8

3 exceptions

PRIVITY OF CONTRACT

Answer 8

1. 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.
2. 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)

Question 9

6

Term of the Contract

Answer 9

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.

Question 10

2

rules on incorporation

Answer 10

1. The rules on incorporation apply to all express contract terms, including in particular exclusion clauses (see below).
2. 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.

Question 11

3

exclusion clauses

Answer 11

1. 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),
2. 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.**
3. There are statutory rules on exclusion clauses in the Unfair Contract Terms Act 1977 and (for consumer contracts) the Consumer Rights Act2015.

Question 12

4

vitiating factors

Answer 12

1. 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.
2. 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.
3. Duress arises when one party has used illegitimate pressure to cause the other party to enter into a contract
4. 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

Question 13

3

misrepresentation

Answer 13

1. 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.
2. 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.
3. 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.**

Question 14

4

discharge and variation of the contract

Answer 14

1. ‘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.
2. 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.
3. 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.
4. 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.

Question 15

types of contract

Answer 15

1. simple contract
2. 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.
3. 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.

4. 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.

Question 16

4

offer

Answer 16

1. an offer must create** reasonable expectation **in the oferee
2. For a communication to be an offer it must contain** an expres- sion of a promise, undertaking, or commitment** to enter into a contract, rather than a mere invitation to begin preliminary negotiations.
3. An offer must be definite and certain in its **essential terms, **that is, the terms must not be too vague, uncertain, or incom- plete. The basic enquiry is whether enough of the essential terms have been provided so that a contract including them would be capable of being enforced.
4. Communication to the Offeree
   To have the power to accept, the offeree must have knowl- edge of the offer. Therefore, the proposal must be communi- cated to them.

Question 17

3

Termination of an offer

Answer 17

1. termination by offeror
2. termination by oferee
   3.termination by operation of law

Question 18

3

termination by offeror

Answer 18

**1. An offeror may terminate an offer by revocation. A revocation is the retraction of an offer by the offeror.
2. an offeror may re- voke by directly communicating the revocation to the offeree at any time before acceptance
3. An offer may also be revoked indirectly if the 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 19

3

Limitations on Offeror’s Power to Revoke

Answer 19

Offers can be revoked at will by the offeror at any time up until acceptance, even if there has been a promise not to revoke for a certain period, except in the following circum- stances:
1. Collateral Contract
A collateral contract is a distinct contract in which the offeree gives consideration for a promise by the offeror, for example, not to revoke an outstanding offer.
2. Beginning Performance Under an Offer for a Unilateral Contract.
Note that there is still no contract until the offeree has completed performance, so the offeree may withdraw at any time until then.
3. Beginning Performance Under an Offer for a Bilateral Contract Can Be an Acceptance
A bilateral contract arises from an offer that can be
accepted by a promise or by performance. In contrast, an offer for a unilateral contract can be accepted only by performance, as we’ve seen. Provided that the offeror has not stipulated a method of acceptance, once the of- feree begins performance, the offer has been accepted and thus revocation of the offer becomes impossible for that reason.

Note that beginning performance under a bilateral contract has the same effect as beginning performance under a unilateral contract-once performance begins, it is too late to terminate the offer. The rationale is dif- ferent though-beginning performance under an offer for a bilateral contract does not simply make the offer irrevocable; rather beginning performance of a bilateral contract constitutes an acceptance, and a contract has been formed.

Question 20

4

termination by offeree

Answer 20

1. express rejection
a rejection is effective when received by the offeror.
The offeree cannot accept the offer in the future if the offeree changes his mind.
2.counteroffer as rejection
A counteroffer is an offer made by the offeree to the offeror which relates to the same subject matter as the original offer but differs in its term.
A counteroffer is both a rejection of the original offer and a new offer. It terminates the original offer and reverses the roles of the parties

3. rejection of collateral contract
   Because an agreement to keep the original offer open is of- ten a collateral contract, a rejection of, or counteroffer to, the collateral contract does not terminate the original offer.The offeree is still free to accept the original offer.
4. lapse of time
   An offer may be terminated by the offeree’s failure to accept within the** time specified** in the offer or, if no deadline was specified, within a reasonable period. What constitutes a reason**able period will be determined by the courts, taking into account the subject matter of the contract.

Question 21

mere enquiry vs. counter offer

Answer 21

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. The test is
whether a reasonable person would believe that the orig- inal offer had been rejected.

Question 22

4

termination by operation of law

Answer 22

Death of the offeror or the offeree;
Destruction of the proposed contract’s subject matter;
Supervening illegality; or
Failure of any condition contained in the offer.

Question 23

Acceptance of an offer

Answer 23

An acceptance is a manifestation of unqualified assent to the terms of an offer. The acceptance must be unqualified because any attempt to vary the terms of the offer would constitute a counteroffer, which ends the original offer and therefore makes it incapable of acceptance.

Question 24

2

who may accept

Answer 24

1. Only the person to whom an offer is addressed has the
   power of acceptance. A member of a class to which an offer has been directed will also have the power of acceptance.
2. the right to accept offer cannot be assigned (exception: agent)

Question 25

offeree must know the offer

Question 26

3

method of acceptance

Answer 26

1. Unless a method is stipulated by the offeror, an offer will be construed as inviting acceptance in** any reasonable manner** and by** any medium reasonable** under the circumstances. As mentioned above, an offer to enter into a bilateral con- tract can be accepted either by a promise to perform or by the beginning of performance (compare offers for unilateral contracts, which may be accepted only by full performance).
2. lf a particular method of acceptance is required by the offeror and the offeree does not use that method, then there has been no valid acceptance. However, an exception to this rule applies when the method of acceptance is different, but **no less advantageous **to the offeror.
3. Generally, an offeree cannot be forced to speak or have si- lence treated as acceptance. The law requires **positive steps **to be taken by the offeree before they can be bound by a contract.

Question 27

2

Acceptance of Offer for Unilateral Contract

Answer 27

a. Offeree Has No Obligation to Complete Performance
b. Notice
Generally, the offeree is not required to give the offeror notice that he has begun the requested performance, but is required to notify the offeror within a reasonable time after perfor- mance has been completed.

Question 28

acceptance by conduct

Answer 28

An offeree can accept an offer by conduct. In such a case,** the offeror must be aware** of the offeree’s conduct so as to satisfy the requirement of communication. For example, in a sale of goods context, it is common for acceptance to take place by the seller delivering the goods or by the buyer ac- cepting delivery of the goods.

Question 29

Requirement for Communication to Be Waived

Answer 29

**The offeror can waive the requirement that acceptance of an offer must be communicated. **They may do this expressly. For example, a buyer may offer to buy 100 tonnes of wool and tell the seller that they can deliver the wool if they are happy with the price. A court may also find that the offeror has waived the requirement for communication even though they never actually said so. This means that, in a contract to buy goods, the seller can often accept the order by simply preparing the goods for dispatch and sending them to the buyer.

Question 30

Instantaneous Methods of Communication

Answer 30

The** postal rule** does not apply to instantaneous methods of communication such as email. A contract accepted by one of those methods will therefore be formed at the time theofferor receives the acceptance, for example, by opening the .relevant email.

Question 31

Battle ofthe Forms’

Answer 31

Difficulties arise in commercial situations if both parties wish to conclude the contract on their own standard form terms, which are likely to differ. The question that has come be- fore the courts is therefore who wins the so-called ‘battle of forms’ if the correspondence between the parties refers to both sets of terms. The approach generally taken is to find that a contract has been formed after the last set of terms has been sent and not objected to and performance of the contract has begun. **“The battle is won by the person who fires the last shot”. **In other words, the last party to make an offer on their own terms is likely to win the battle, because the other party will then have accepted that offer by their conduct in performing the contract.

Question 32

3

types of contracts

Answer 32

1. simple contracts
2. contracts that require writing
3. contracts by deed

Question 33

simple contracts

Answer 33

can be made in any form:written, oral, or through the conduct of teh parties

Question 34

3

contracts that require writing

Answer 34

1. guarantee
   where A (the guarantor) promise that B will perform their obligations, for example, to pay a debt.
2. a contract for the sale or other diposition of an interest in land; and
3. consumer credit agreements

Note that contracts made in electronic form will be treated as if they were in writing and will be consideredproperly excecuted.

Question 35

6

contracts by deed

Answer 35

1. a deed is a document which makes clear on its face that it is inteded to be a deed.
2. it must be executed by the parties to it in the** presence of a witness **and delivered.
3. “delivered” in this context means that the parties to the deed must have shown their intention to be bound by it.
4. typically, this is done by including words such as “delivered as a deed on (date)”
5. promise where nothing is received or promised in return can be binding if they are made in a deed. A classical exapmle is a promise to make a gift.
6. conveyance of land mast be made by deed.

Question 36

3

difference between simple contract and contranct by deed

Answer 36

1. the time limit in which a claim for breach of contract can be made.
2. a claim under a contract which is not made by deed must be brought within 6 years rfrom the date of breach,

3.but a claim under a contract by deed can be brought uup to** 12 years** from the date o breach.

Question 37

Definition of contract

Answer 37

the both parties must be in agreement and have intended to** be legally bound**, and that this agreement must be supported by consideration.

Question 38

3

when communication by the offeree is effective

Answer 38

1. acceptance by post creates a contract at the moment of posting.
2. even the letter gets lost in the post.
3. unless：
   （1）the letter was 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 the acceptance is not effective until received, that is , the parties have effectively contracted out the post rule.

Note. Postal rule only applies to acceptance

Question 39

acceptance must be communicated

Answer 39

generally acceptance of an offer to enter into a bilateral contract must be communicated to the offeror.
exception:waive