Contract formation Flashcards
what is a simple contract?
a contract which does not need to be in writing
what types of contracts need to be in writing?
- bills of exchange
- regulated consumer credit agreements
- transfers of land (specialty contracts)
- guarantees
What is a void contract?
There is no contract and goods should be returned (even from a third party)
What is a voidable contract?
The contract can be set aside by the “injured” party
What 4 factors can make a contract either void or voidable?
Lack of capacity
Absence of free will
Illegality
Misrepresentation
What is the rule and effect of lack of capacity?
Rule - An individual should be of sound mind and aged 18 or over
Effect - Voidable
What is the rule and effect of absence of free will?
Rule - There should not be duress or undue influence
Effect - Voidable
What is the rule and effect of illegality?
Rule - Contract must not be illegal or against public policy
Effect - Void
What is the rule and effect of misrepresentation?
Rule - An incorrect statement of fact made pre contract which is intended to and does cause the party to enter into the contract
Effect - Voidable
Does the court accept email exchanges as evidence?
Yes
What are the steps to create a valid contract
Offer
Acceptance
Consideration
Intention
Capacity and Form
what is an offer?
An offer is a definite promise made by an offeror to be bound on specific terms.
Is an invitation to treat the same as an offer?
No
An invitation to treat is not an offer but a statement of willingness to enter into negotiations. An invitation to treat cannot be accepted but is an invitation to other parties to make an offer.
what are some examples of invitations to treat?
- Adverts
- Shop window displays
- Goods on shop shelves
- Company prospectus
- Circulation of a price list or displays on a website
- Tenders
what are the different ways in which an offer can be terminated?
-Rejection
-Counter-offer
-Lapse of time
-Revocation by the offeror
-Failure of a pre-condition
How is an offer terminated by rejection?
Rejection by the offeree terminates the offer
How is an offer terminated by counter-offer?
When the offeree proposes new or amended terms, thereby terminating the original offer
How is an offer terminated by lapse of time?
Can be expressed in the offer or after a reasonable period of time
How is an offer terminated by revocation by the offeror?
The offeror may revoke his offer:
- can be made at any time before acceptance
- can be made even if the offeror has agreed to keep the offer open
- revocation must be communicated to the offeree by the offeror or a by a reliable third party
what are the 2 exceptions for revocation of a contract?
- If the offeree pays offerer to keep offer open this creates a collateral contract
- in a unilateral contract
How is an offer terminated by failure of pre-condition?
An offer will automatically lapse if pre-condition is not satisfied
how is an offer terminated by lapse of time?
an offer ceases to exist if not accepted within a specified time limit and if no time limit is specified then it will lapse after a reasonable time
What is acceptance?
An unqualified agreement to all the terms of the offer.
Acceptance - Postal rule
Acceptance by post is valid from the moment the letter is posted regardless or whether it is actually received.
What is consideration?
Each party must provide some form of consideration under the contract
What is invalid consideration?
Past consideration cannot form the basis of a legally binding contract
Where is consideration not required?
When a contract is made by deed (specialty contracts)
e.g. Leases and conveyancing 3 years or more
what is a valid consideration?
both executed and executory consideration
what is an executed consideration?
performed act in exchange for a promise
eg paying for goods at the time goods are delivered
what is executory consideration?
promise given in exchange for a promise
eg promise paying for goods that are to be delivered at a later date
Does consideration need to be adequate?
No, a bad bargain is still a contract
adequate is when the it equals in value to the consideration received in return
Does a contract have to be sufficient?
Yes, consideration must be sufficient
Sufficient is when it has some identifiable value in order to be capable in law of being regarded as valid consideration
What consideration would be seen as insufficient?
Performance of existing statutory duty - unless it can be shown that some extra service over the scope is also being offered
what is sufficient consideration?
consideration which can be given a value
what is adequate consideration?
consideration which is equal in value
What is the presumption on the intention to create legal obligations through social and domestic?
No intention to create legal obligations
When can a social and domestic legal obligation be rebutted?
If husband and wife are separated when the agreement was made.
What is the presumption on the intention to create legal obligations through commercial?
Intention to create a legally bindining contract
what is privity of contract?
only a person who is a party to a contract has enforceable rights or obligations under it
what are express terms?
elements of the contract which have been specifically agreed. These terms are specifically inserted into the contract by either or both parties. Must be clear to be enforceable
what are implied terms?
terms which are not expressly included but are still part of the contract
Three essential elements of a contract:
- agreement
- an intention to create legal relations
- consideration
what contract is used for transfer of land and long leases?
- Specialty contracts (contract by deed)
- signed, sealed and delivered to be binding
Carlill vs carbolic smoke ball
offer can be made to whole world an advert makes it clear to be an offer unless makes it clear no further negotiations
what is the postal rule for acceptance?
acceptance is complete as soon as the letter is posted
what is sufficient consideration?
consideration which can be given a value
what is part payment problem and what are the three exceptions? (waiver of an existing debt)
- can still go back and get the rest of the money that is owed to you
- Alternative consideration - debtor offers alternate type of consideration
- Bargain between creditors- group of creditors jointly agree to part payment
- Payment by third party - payment made by another party this can be good consideration
