Contract Basics Flashcards
What are the three elements for a valid contract?
- Agreement.
- Consideration;
- Intention to create legal relations.
How is agreement shown?
There must be an offer and an acceptance of the offer.
What is an offer?
An expression of willingness to contract on certain terms on which the offeror is prepared to be legally bound following acceptance by the offeree.
What is an invitation to treat?
An invitation to others to make an offer or to open negotiations.
Cannot be accepted and therefore creates no legal liability.
In what situations, is there a presumption that it is an invitation to treat?
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Requests for tender
Auctions with a reserve price.
Display of goods for sale.
Mere statements of price.
What is acceptance?
The final and unqualified agreement to all the terms of the offer.
Acceptance must be correspond exactly with the terms of the offer.
What is consideration?
The price paid for a person’s promise.
Can be money, the promise of money, promise to perform services, to hand over goods, or refrain from a certain course of action.
What are the four requirements for consideration to be valid?
- Consideration must move from the promisee;
- Consideration must not be past (act cannot occur before promise is made);
- Consideration need not be adequate (does not have to be of equal economic value to the thing given in exchange); and
- Consideration must be sufficient (must have value in the eyes of the law).
When is an intention to create legal relations presumed?
When it is made in the course of business.
Presumption can be displaced by:
- Making correspondence subject to contract;
- Where statement is mere puff;
- Where contract contains a clause stating it is not to be legally binding and it is an honourable pledge only.
When is there a presumption that an agreement is not a contract?
When it is between family members, friends or in a social context.
Can be rebutted if:
- It was made between spouses who have separated;
- The agreement was made in writing;
- One party placed themselves at a disadvantage; or
- Some payment was made.
What is privity of contract?
Only the parties to a contract are bound by it. No one other than the parties to a contract action can bring a court action to enforce a contract.
When does the exception to privity of contract under the Contract (Rights of Third Parties) Act 1999 apply?
A contract provision is enforceable by a third party if:
- They are expressly identified in the contract by name, class or description; and
- The confers a benefit to the third party (which is not just incidental but a purpose of the contract).
What is discharge of a contract?
When both parties are freed from their obligations under a contract.
How can discharge of a contract occur?
- Performance - When both parties have done what they promised to do;
- Breach - When one party’s failure to perform is so fundamental that the other is entitled to treat the contract as at an end;
- Agreement - When both parties agree to discharge the other;
- Frustration - When something happens which makes performance of the contract impossible.
What is a term?
The contents of a contract.
A statement that amounts to a promise or undertaking and forms part of the contract.
When can a term be implied into a contract?
- Statute;
- Custom (set implied terms in certain contract); or
- Court - When it is obvious a term should be there for the contract to make sense.
When does the Consumer Rights Act 2015 apply?
Business to consumer contracts.
What terms are implied in contracts for goods by the Consumer Rights Act 2015?
s9 Quality of goods must be satisfactory.
s10 Goods must be fit for the purpose they are sold.
s11 Goods must be as described.
What terms are implied for contracts for services by the Consumer Rights Act 2015?
s49 Trader must perform services with reasonable care and skill.
s52 Where a timescale is not specified in the contract, the service must be performed within a reasonable time.
