Contract Final Exam Flashcards

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1
Q

What are some of the ways you interact with contract law?

A
  1. Electricity
  2. Mobile phone services
  3. Attendance at school
  4. Shopping
  5. Entertainment
  6. Employment
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2
Q

What is a contract?

A

A contract may be defined as an agreement between two or more parties that is intended to be legally binding.

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3
Q

What makes a PROMISE legally enforceable?

A
  1. Capacity
  2. Valid offer
  3. Valid acceptance
  4. Consideration
  5. Intention to create legal relations
  6. No duress
  7. Legal objectives and not contrary to public policies
  8. Formality
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4
Q

What are the two types of contract?

A
  1. Express
  2. Implied
    Implied-in-fact
    Implied-in-law
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5
Q

What is an express contract?

A

Express contracts consist of agreements in which the terms are stated by the parties. The terms may be stated orally or in writing, but the contract as a whole must reflect the intention of the parties.

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6
Q

What is an Implied-in-fact contract?

A

Contracts implied in fact are inferred from the facts and circumstances of the case or the conduct of the parties. However, such contracts are not formally or explicitly stated in words. a contract implied in fact is just as binding as an express contracts that arises from the parties’ declared intentions, with the only difference being that for contracts implied in fact courts will infer the parties’ intentions from their business relations and course of dealings.

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7
Q

What is an Implied-in-law contract?

A

Contracts implied in law are agreements imposed by courts or statute despite the absence of at least one element essential to the formation of a binding agreement.

For example, the law creates these types of agreements to prevent one party from being unjustly enriched at the expense of another.

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8
Q

What are the major sources of contract law?

A

These are:

  1. Common Law
  2. Statute Law
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9
Q

What are the elements of a contract?

A
  1. Offer
  2. Acceptance
  3. Consideration
  4. Mutuality of obligation
  5. Competency and capacity
  6. A written instrument
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10
Q

What is an offer?

A

An offer is an expression of willingness to contract made with the intention (actual or apparent) that it shall become binding on the offeror as soon as it is accepted by the person to whom it is addressed.

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11
Q

To who may an offer be made?

A

An offer can be made to:

  1. one person;
  2. a group of persons; or
  3. to the world at large
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12
Q

What are the types of offer?

A
  1. Unilateral

2. Bilateral

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13
Q

What is an Unilateral offer?

A

This is a purely “one-sided” offer and is made without the offeror’s having any idea whether they will ever be taken up and accepted, and thereby transformed into a contract.

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14
Q

What is a Bilateral offer?

A

1,Most offers are bilateral

  1. Negotiated on a promise for a promise basis
  2. Usually involves a person making an offer to a specific person (or small group of persons) and both persons are able to negotiate a promise for a promise.
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15
Q

What are the communications that DO NOT constitute an offer?

A
  1. Advertisements
  2. Display of goods
  3. Opinions
  4. Letters of Intent
  5. Invitation to submit a bid
  6. Mass mailings
  7. Price estimates
  8. Catalogues
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16
Q

When is an offer effective?

A

1.Receipt of offer:
An offer is not valid until received by offeree or his agent
2. Duration of offer:
If the offer has a stated time within which the acceptance must be made, any attempted acceptance after the expiration of that time will fail and will merely constitute a counter-offer by the offeree.

If no specific time is stated within which the offeree must accept, it is assumed that the offeror intended to keep the offer open for a reasonable period of time, to be determined based on the nature of the proposed contract, trade usage, prior dealings and other circumstances of which the offeree knows or should know.

Generally, the time for accepting an offer begins to run from the time it is received by the offeree. If there was a delay in delivery of the offer of which the offeree is aware, the usual inference is that the time runs from the date on which the offeree would have received the offer under ordinary circumstances.
3. Telephonic or face-face offer
Generally, courts hold that in telephonic or face-to-face communications in which an offer is made, the offer lapses when the conversation terminates in the absence of a clear indication or inference that the offer remains open beyond the conversation.

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17
Q

How is an offer brought to an end?

A
  1. Revocation
  2. Rejection by the offeree
  3. Lapse of time
  4. Occurrence of a terminating condition
  5. Death
  6. Insanity, incapacity, insolvency or impossibility
  7. Illusory, incomplete consideration or contract
18
Q

What is a valid acceptance?

A

Valid acceptance is an essential component of a valid contract. As such, it is important that the principles pertaining to acceptance be understood

19
Q

What is acceptance?

A

Acceptance is a final and unqualified acceptance of/agreement to the terms of an offer.

20
Q

What is the mirror image rule?

A

Themirror image rule statesthat an offer must be accepted exactly without modifications. An attempt to accept the offer on different terms instead creates a counter-offer – which constitutes a rejection of the original offer.

21
Q

What is said about the communication of acceptance?

A

Even if the offeree has made up his mind to a final acceptance, the agreement is not yet complete.

There must be an external manifestation of assent, some word spoken or act done by the offeree or by his authorised agent, which the law can regard as the communication of the acceptance to the offeror.

22
Q

What are the communication of acceptance exceptions?

A
  1. Waiver of requirement for communication
    Where the offeror expressly or impliedly waives the requirement that acceptance be communicated. This is generally the case with unilateral offers and may sometimes be the case with bilateral agreements.
  2. Offeror estopped from denying communication of acceptance
    The offeror may be estopped in some circumstances from denying that the acceptance was communicated. This will be the case if it was in fact sent or spoken by the offeree, but was not received or heard by the offeror as a result of his own fault or omission.
  3. Communication to offeror’s agent
    Communication need not be made to the offeror but to the offeror’s agent if the agent has authority to receive that acceptance on behalf of his principal.
  4. The Postal rule
23
Q

What does the postal rule state?

A

Where the postal rule applies, acceptance can be effective before it is in fact received by the offeror.
The postal rule applies where there is a lag between dispatch of an acceptance and receipt of that acceptance by the offeror. That is, where acceptance is by letter or telegram. In such a case, acceptance is communicated when the offeree posts the letter or telegram. This is an exception to the general rule, under which acceptance is only complete when it is received by the offeror.

24
Q

What are the two agreements under intention to create legal relations?

A
  1. Social/Domestic Agreements - rebuttable presumption that the parties DO NOT intend to be legally bound
  2. Business Agreements – rebuttable presumption that the parties DO intend to be legally bound
25
Q

What are domestic agreements?

A

This group covers agreements between family members, friends and workmates. The law presumes that social agreements are not intended to be legally binding.

26
Q

What are social agreements?

A

Like domestic agreements, these agreements are also considered to lack the intent to be contractually bound.
“To offer a friend a meal is not to invite litigation”
Examples: dinner plans, carpooling and gas-sharing agreements

27
Q

What are letters of comfort?

A

This is a document supplied by a third party to a creditor, indicating a concern to ensure that a debtor meets his obligations to the creditor. Depending on the terms, such letters may be either binding contracts or informal and uncertain assurances resting entirely upon business goodwill.

28
Q

What are letters of intent?

A

This is a device by which one person indicates to another that he is likely to place a contract with him, but is not yet ready to be bound. A typical example of a situation where a letter of intent might be provided is where a main contractor is preparing a tender and he plans to sub-contract some of the work. He would need to know the cost of the sub-contracted work in order to calculate his own tender, but would not want to be committed to that sub-contractor until he knows whether his tender has been successful. In these circumstances, the main contractor writes to tell the sub-contractor that he has been chosen.

29
Q

What are collective agreements?

A

This is an agreement between a trade union and an employer regulating pay rates and working conditions. IF the terms of a collective agreement are incorporated into an individual employee’s contract of service, it will be legally binding.

30
Q

What are the remedies for breach of contract?

A

There are several remedies for breach of contract, such as award of damages, specific performance, rescission, and restitution. In courts of limited jurisdiction, the main remedy is an award of damages. Because specific performance and rescission are equitable remedies that do not fall within the jurisdiction of the magistrate courts,

31
Q

What does discharge of a contract mean?

A

Discharge of a contract relates to the circumstances in which the contract is brought to an end. Where a contract is discharged, each party is freed from their continuing obligations under the contract. A contract may be discharged in one of the following ways:

  1. Discharge by Performance
  2. Discharge by Repudiatory breach
  3. Discharge by Agreement
  4. Discharge by Frustration
32
Q

Explain discharge of a contract by performance?

A

A contract becomes discharged through performance where both parties have fully performed their contractual obligations. If one party does not fully perform the contract this will amount to a breach of contract and the other party may have a claim for damages unless the contract has been frustrated. If the non-performance amounts to a repudiatory breach (breach of condition) the other party will be released from their obligations. Where a contract is one where the price is payable on completion, then completion is generally required in order to discharge the contract. This is often expressed in the terms of being a condition precedent.

33
Q

Explain discharge of a contract by agreement.

A

A contract may be discharged by agreement when both parties agree to bring the contract to an end and release each other from their contractual obligations. For a contract to be discharged through agreement there must be Accord & Satisfaction.

Accord = agreement

Each party must agree to end the contract. The agreement must be freely given.

Satisfaction = consideration

Both parties must also provide consideration. If both parties have continuing obligations then generally the consideration will be simply each of them giving up their rights under the contract. The only time consideration becomes an issue is where one party has fully performed their part of the contract when the other has not. The non-performing party must then provide consideration to make the agreement binding. Also if the agreement is made by deed there is no requirement to provide consideration. There is in effect a contract to end a contract.

34
Q

Explain discharge of a contract by frustration?

A

A contract may be discharged by frustration. A contract may be frustrated where there exists a change in circumstances, after the contract was made, which is not the fault of either of the parties, which renders the contract either impossible to perform or deprives the contract of its commercial purpose. Where a contract is found to be frustrated, each party is discharged from future obligations under the contract and neither party may sue for breach.

35
Q

Explain discharge of a contract by repudiatory breach.

A

A contract may, in some circumstances, be discharged by a breach of contract. Where there exists a breach of condition (as oppose to breach of warranty) this will enable the innocent party the right to repudiate the contract (bring the contract to an end) in addition to claiming damages. A contract cannot be discharged by a breach of warranty.

36
Q

What is privity of a contract?

A

A doctrine of contract law that prevents any person from seeking the enforcement of a contract, or suing on its terms, unless they are a party to that contract.

37
Q

Define repudiatory breach

A

A repudiatory breach of contract is a breach which is sufficiently serious to entitle the innocent party to bring the contract to an end.

38
Q

What are the three types of mistake?

A
  1. Common mistake - Where both parties make the same mistake
  2. Mutual mistake - Where the parties are at cross purposes
  3. Unilateral mistake - Where only one party is mistaken
39
Q

What is duress?

A

Duress in contract law relates to where a person enters an agreement as a result of threats. Where a party enters a contract because of duress they may have the contract set aside.

40
Q

What is misrepresentation?

A

A misrepresentation is a false statement of fact or law which induces the representee to enter a contract. Where a statement made during the course of negotiations is classed as a representation rather than a term an action for misrepresentation may be available where the statement turns out to be untrue. There are three types of misrepresentation:

  1. innocent misrepresentation
  2. negligent misrepresentation and
  3. fraudulent misrepresentation.