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Contract Law > Contract formation > Flashcards

Contract formation Flashcards

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1
Q

What are the 2 classifications of a contract?

A
  1. Deeds
  2. simple contracth
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2
Q

What is the difference between a deed and a simple contract?

A
  1. Deed
    - special rules to be valid
    - must be signed, dated, delivered and stated as a deed
    - used when no consideration is being exchanged
  2. Simple contract
    - any contract that isnt a deed
    - can be made orally, by conduct or in writing
    - always requires an exchange of consideration
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3
Q

What is the difference between bilateral and unilateral contracts?

A

Both types of simple contracts.

  1. Bilateral
    - agreement between 2 parties
    - each side agrees to fulfil their side of the bargain
    - e.g. X promises to clean Y’s bike in exchange for payment.
  2. Unilateral
    - promise to do something in return for an act; acceptance at the time where the act is being performed
    - only the party who makes the promise is bound
    - consideration is the promise to pay for the act
    - e.g: X puts up a sign that he will pay £5 to the first person to return his dog and Y does this -> only X is bound to pay; Y does not have to carry out this task
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4
Q

What are the 3 elements of a contract?

A
  1. Offer + acceptance
  2. ICLR
  3. Consideration

+ must have capacity and be legal

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5
Q

In order for there to be a valid offer, this must be made clearly and certainly. What is the test applied to establish whether the offeror intended to be bound by the offer?

A

Objective ‘reasonable man’ test:

would a reasonable man, seeing the offeror give their offer judge that the offeror intended to be bound by it?

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6
Q

Is an invitation to treat an offer?

A

no -> it is an invitation for the other party to make an offer

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7
Q

Give 5 examples of an invitation to treat

A
  1. Auction
  2. Display of goods for sale
  3. advert
  4. Statements of price
  5. invitation to tender
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8
Q

When will an advert be an invitation to treat?

A

i. clear set of actions a customer has to do which is set out in the advert,

ii. in return the customer gets a reward,

iii. and that reward has been set aside -> displays an intention to be bound

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9
Q

When will an invitation to tender not be considered an invitation to treat?

A

Unilateral offere arises where:

  1. undertaking to accept highest bidder
  2. tender made to a specific number of parties and contains clear conditions setting out how bids should be submitted = unilateral offer to consider the bid.
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10
Q

What is an action without reserve?

A

auction where item is sold to the highest bidder = unilateral offer to accept highest bid

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11
Q

What is an action with reserve?

A

a minimum price that a seller would be willing to accept from a buyer. In an auction, the seller is not typically required to disclose the reserve price to potential buyers. If the reserve price is not met, the seller is not required to sell the item, even to the highest bidder.

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12
Q

X asks Y what the lowest price they would be willing to sell their lion for is.

Y says £400.

X accepts.

Is there a contract?

A

no -> Y is inviting X to make an offer at £400 which Y may then accept/ reject

(statement of price)

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13
Q

What are 4 ways in which an offer may be terminated?

A
  1. acceptance
  2. Lapse
  3. rejection
  4. revocation
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14
Q

How must rejection of an offer be made?

A

communicated to offeror

express rejection

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15
Q

Can you accept an offer on new terms?

A

no, this would be a counter-offer which ends the original offer -> new terms become the new offer

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16
Q

What is meant by ‘battle of the forms’?

A

‘last shot wins’

X makes offer (1)
Y rejects via counteroffer (2)
X rejects via counter to counteroffer (3)
Y rejects with another counter offer (4)
X accepts offer (4)

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17
Q

What distinguishes a counter offer form a request for further information?

A

counter offer = proposal of new terms

request for further information = questions about aspects of the offer/ clarifications on the offer; inquiry about ancillary terms

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18
Q

If there is no stipulated time limit by which an offer must be accepted, when would the offer ‘lapse’?

A
  1. acceptance not made within a “reasonable time”
  2. death of a party
  3. conditions of acceptance are not satisfied
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19
Q

When can an offeror revoke an offer?

A

any time before acceptance

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20
Q

What is an ‘option contract’

A

where offeree pays offeror to keep offer open -> separate option contract is formed

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21
Q

When is revocation of an offer effective? What if it is sent by post?

A

Once it is communicated.

If sent by post -> effective from the point that it reaches the offeree

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22
Q

1st Oct -> X posts offer to Y
8th Oct -> X posts revocation of the offer to Y
11th Oct -> Y accepts offer via telegram
20th Oct -> Y receives revocation

Has the offer been successfully revoked?

A

no

23
Q

The general rule follows that a unilateral offer can be revoked prior to the completion of the act which constitutes acceptance.

What is an exception to this where revocation is not possible?

A

Where there has been part-performance of prescribed act and offeree is willing and able to complete it.h

24
Q

Who is a unilateral offer made to ?

A

the world

25
Q

Who can accept an offer

A

offeree or authorised third party

26
Q

Can acceptance be qualified?

A

no

must be on the exact same terms as the offer.

Attempts to accept new terms or add conditions constitutes a counter offer

27
Q

Can silence amount to acceptance?

A

no

28
Q

When does acceptance of an offer take place if it is being communicated via email?

A

When it reaches offeror’s server.

If received during office hours (9-5) = same day acceptance

If received outside of office hours = acceptance on next business day

29
Q

When does acceptance of an offer take place if it is being communicated via phone

A

as soon as the offeror hears the offer

30
Q

What are the 3 exceptions to the general rule that acceptance must be communicated to the offeror?

A
  1. Unilateral contracts (binding when the act is complete as this constitutes acceptance)
  2. Acceptance by conduct (e.g. delivery of goods)
  3. Postal rule
31
Q

What is the postal rule?

A

exceptions to the general rule that acceptance must be communicated to the offeror.

Acceptance of the offer takes place once the letter is properly posted, not when it reaches the offeror.

32
Q

Does the postal rule apply to offer or acceptance?

A

acceptance

33
Q

When can the postal rule not be used?

A
  1. Explicitly excluded by offeror
  2. Unreasonable means of accepting the offer (e.g. offer made via instantaneous method such as email and offeree responds by slow postal method)
34
Q

In commercial agreements, is there a presumption of intention to create legal relations?

A

yes

35
Q

How can parties to a commercial agreement rebut the presumption that there is an intention to create legal relations?

A
  1. parties to make it explicitly clear that there was no ITCLR
  2. Stating that agreement is ‘subject to contract’
36
Q

In social and domestic agreements, is there a presumption of intention to create legal relations?

A

no ICLR

37
Q

How can parties to social and domestic agreements rebut the presumption that there is no intention to create legal relations?

A
  1. money has changed hands between parties
  2. express agreement that a contract is being entered into
  3. formal written agreement
  4. parties dealing at arms’ length
  5. solicitors involved
38
Q

In advertisment agreements, is there a presumption of intention to create legal relations?

A

no ICLR as they are usually invitations to treat

39
Q

What is the rule in Carlill v Carbolic Smoke Ball Company [1892]

A

an advertisement containing certain terms to get a reward constituted a binding unilateral offer that could be accepted by anyone who performed its terms.

40
Q

Can minors be bound by contract?

A

no

41
Q

Can minors be bound by contract if counterparty did not know about their age/ minor lied about it?

A

no

42
Q

What are the 2 exceptions to the general rule that minors cannot be bound by contract?

A
  1. To purchase ‘necessaries’
  • necessaries are for the minor’s benefit
  • minor must pay a ‘reasonable price’
  1. Contract of employment for their benefit
43
Q

Generally, individuals lacking capacity are not bound by contract. What is an exception to the rule?

A

bound by contract to purchase ‘necessaries’ at a reasonable price

44
Q

Does intoxication make a contract void?

A

no -> but may be voidable

45
Q

When can intoxication make a contract voidable?

A

Where the person is so intoxication they do not understand what they are doing -> not bound by contract IF the other party knows they are intoxicated when entering into the contract

46
Q

Are contracts which arise from illegal or immoral conduct void or voidable?

A

void

47
Q

What are 2 exceptions to the principle that contracts which arise from illegal or immoral conduct are void?

A
  1. illegal/ immoral act is not a fundamental part of the contract
  2. only 1 party intends illegality -> innocent party may be able to enforce
48
Q

What is a restraint of trade clause? Are they enforceable?

A

e.g. employment contracts which prevent the employees from having another job after they leave their previous job.

Illegal unless:

  1. Legitimate business interest (e.g.trade secrets), and;
  2. restraint is reasonable (geographical area, duration, scope)
49
Q

Can courts enforce an uncertain/ ambiguous contract? What is the test for certainty of terms

A

no
Reasonable businessman test

50
Q

What is meant by the rule ‘past consideration is not good consideration’?

A

the promise to pay and promise to give the benefit must be made before the benefit is actually given.

e.g. X is away. Y cleans X’s house and invoices X. No consideration as there was no promise to pay; X didn’t even know.

51
Q

What is the exception to the rule ‘past consideration is not good consideration’?

A

all must apply:

i. act done at the request of the party
ii. parties must have understood throughout that act was to be rewarded by payment
iii. intention to create legal relations

52
Q

What must you do if you want to get paid more under a contract?

A

provide fresh consideration

e.g. gone above and beyond the original contract’s obligations

doing more could be offering an additional service or doing what was originally promised but with much more effort than originally envisaged.

53
Q

If a person does more than what was originally in the contract (thus providing fresh consideration), what must the other party have also done in order for a claim for extra payment to be permissible?

A

Other party must have offered to pay more for the additional service.

Must be an offer to do more and acceptance.

Can’t just do more and then claim payment.

54
Q

When does the Wiliams V Roffey rule apply?

A

Practical benefit rule where one party:

i. provides a practical benefit to another;
ii. by completing a pre-existing obligation on time;
iii. at the other party’s promise to pay more in return;
iv. resulting in the other party gaining a benefit/ avoiding a penalty

this practical benefit amounts to consideration and must be paid for in addition to any payment owed under contract.

Contract Law (9 decks)

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