Contract Formation

Question 1

What makes a valid contract?

Answer 1

A legally binding agreement between 2 parties
Offer, acceptance, consideration, intention, capacity and form

Question 2

What is a void or voidable contract?

Answer 2

Void - no contract and goods should be returned
Voidable - contract set aside by injured party

Question 3

What factors make a contract void or voidable?

Answer 3

Void - illegal contract
Voidable - lack of capacity (unsound mind, under 18), under duress/influence, misrepresentation

Question 4

What makes a contract unenforceable?

Answer 4

One party does not complete the contract
Transfer of land agreement/consumer credit not in writing
Guarantees not evidenced in writing

Question 5

What constitutes an offer?

Answer 5

A definite promise made by offeror bound on specific terms
Must be certain/specific
Can be made to the world at large

Question 6

What is an invitation to treat?

Answer 6

Statement of willingness to enter a negotiation eg advertisement, goods displayed, price lists, auction

Question 7

How can a unilateral contract be accepted?

Answer 7

By behaviour, reward type contract

Question 8

How can a contract be terminated?

Answer 8

Rejection
Counter-offer - terminated original offer
Lapse of time
Revocation of offer - withdrawn offer
Pre-condition not satisfied

Question 9

What is acceptance?

Answer 9

Unqualified agreement to all terms of the offer

Question 10

What is the general rule of acceptance and means of communication?

Answer 10

Acceptance not effective until communicated to offeror - can be impliedly/expressly waived
Communicated by any reasonable means or in a way which is less expeditious

Question 11

What is the postal rule and its conditions?

Answer 11

Acceptance by post is valid from the moment the letter is posted
Within contemplation of the parties
Letter correctly addressed and correct postage
Only for acceptance, not revocation

Question 12

What are the 2 rebuttable presumptions for unintentional creation of legally binding agreement?

Answer 12

Social and domestic - family
can be rebutted if husband and wife separate when agreement made
Commercial - difficult to rebut presumption of creating legally binding contract
use of standard terms insufficient to rebut

Question 13

What is consideration?

Answer 13

Executed - act performed in return for a promise
Executory - a promise given for a promise
Past - act already done when promise made

Question 14

What is invalid consideration?

Answer 14

Past consideration cannot form a legally binding contract

Question 15

What is the exception to consideration?

Answer 15

Contracts made by deed:
Conveyancing
Leases over 3 years
Unsupported by consideration - donation

Question 16

Consideration must be……

Answer 16

sufficient and need not be adequate

Question 17

When is consideration held to be insufficient?

Answer 17

Performance of existing statutory duty - need to show extra service over scope being offered
The other party gains extra practical benefit
Performance of duty owed to 3rd party
Forbearance of existing rights

Question 18

What is the waiver of existing debt?

Answer 18

One party accepts part payment of a debt in full satisfaction of the debt the waiver should be supported by consideration

Question 19

What are the exceptions to waiving existing debt?

Answer 19

Alternative consideration
Bargaining between creditors
Third party payments
Early payment

Question 20

What is the statement of fact made before the contract was entered into and what is considered?

Answer 20

A term incorporated into the contract if it induces a party to enter into a contract. I f not part of the contract, claim for misrepresentation
Considered: special knowledge
Time passed between contract and statement
Why statement not included
Importance of statement

Question 21

Is oral evidence used to add to written statements?

Answer 21

No

Question 22

What are the implied terms of a contract?

Answer 22

By reference to custom
By statute
By the courts
Term implicitly required for effective contract

Question 23

What is the privity rule?

Answer 23

Only a person who is a party to a contract has enforceable rights under the contract and can be bound by a contract

Question 24

What are exceptions to the privity rule?

Answer 24

Road Traffic Act
Agency arrangements
Executors of a will
Third party may enforce a term of the contract