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Contract Formation Flashcards

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1
Q

Define a simple contract

A

A contract that doesn’t need to be made in writing

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2
Q

What types of contract must be evidenced in writing to be valid and enforceable?

A
  1. Bills of exchange
  2. Regulated Consumer Credit Agreements
  3. Transfers of Land
  4. Guarantees
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3
Q

Who doesn’t have the capacity to enter into a contract?

A
  1. Drunkards

2. Parties of unsound mind

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4
Q

What are a minor’s rights with regards to voiding a contract?

A

If someone under the age of 18 enters into a contract, it is voidable at the option of the minor.

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5
Q

Define a voidable contract

A

One which can be set aside at the choice of the injured party

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6
Q

Define an unenforceable contract

A

A valid contract, but if either party fails to fulfil their part of the contract the other party may not be able to compel them to do so

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7
Q

Examples of void contracts

A
  1. A contract intended to achieve an illegal purpose or one contrary to public policy
  2. Where a company acts outside any restriction on its powers (in its constitution) to enter into a contract
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8
Q

Examples of voidable contracts

A
  1. Where a party has been made to enter into the contract by duress or undue influence
  2. Where one party makes a pre-contractual statement that is intended to and does cause the other party to enter into the contract and that statement is untrue (a misrepresentation), the other party can avoid the contract
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9
Q

Examples of unenforceable contracts

A
  1. Where the contract is not in the correct form

2. If there is a transfer of property or a Regulated Consumer Credit Agreement and these are not in writing

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10
Q

Define a contract

A

A legal agreement between two or more parties

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11
Q

What are the essential elements of a contract

A
  1. An offer
  2. Acceptance
  3. Consideration
  4. Intention to be legally bound
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12
Q

Define an offer as an element of a contract

A
  1. The first part of the agreement

2. A definite promise to be bound on specific terms made by the offeror to the offeree

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13
Q

What items are not offers?

A
  1. An invitation to treat
  2. A supply of information or a statement of intention
  3. Vague statements
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14
Q

Define an invitation to treat

A

An invitation to someone else to make an offer to you

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15
Q

What are examples of invitation to treats?

A
  1. Most adverts
  2. Shop window displays
  3. Goods on shop shelves
  4. Company prospectus
  5. Circulation of a price list or displays on a website
  6. Tenders
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16
Q

Define a supply of information or a statement of intention

A
  1. A statement made early in the negotiations is unlikely to be held to be a valid offer
  2. A statement of an intention to sell is not an offer
  3. This would cover when a possible selling price is given during initial discussions.
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17
Q

Define a vague statement

A

A statement cannot constitute an offer if it is not sufficiently specific

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18
Q

How can offers be terminated?

A
  1. Rejection and counter offer
  2. Revocation
  3. Lapse of time
  4. Failure of a pre-condition
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19
Q

Define rejection of an offer

A

Rejection occurs when the offeree turns down the original offer

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20
Q

Is a request for more information a rejection of the offer?

A

No

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21
Q

Is a counter offer a rejection of the offer?

A

Yes

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22
Q

Define counter offer

A

A new offer on different terms. It is a rejection of the offer.

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23
Q

Define revocation

A

Occurs when the offeror withdraws their offer

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24
Q

When can revocation be made?

A

At any time before acceptance

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25
Q

Can revocation be made even if the offeror has agreed to keep the offer open?

A

Yes

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26
Q

Who must communicate revocation?

A

Revocation must be communicated to the offeree by the offeror or by a reliable third party

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27
Q

What are the two conditions under which an offer cannot be revocated?

A
  1. If the offeree pays the offeror to keep the offer open

2. In a unilateral contract

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28
Q

Define a unilateral offer

A

One in which an offer is made to the whole world and as such it would be virtually impossible to notify everyone who saw the offer of the revocation

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29
Q

Can an offer be accepted after the death of the offeror?

A

Only if the offeree accepts in ignorance of the death

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30
Q

Define a conditional offer

A

One which is dependent on a specified event or change in circumstances. It cannot be accepted unless and until the condition or change of circumstances is met.

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31
Q

Define acceptance of an offer

A

The unequivocal and unconditional assent to all the terms of the offer

32
Q

How can acceptance of an offer be expressed?

A
  1. Oral
  2. In writing
  3. By conduct
33
Q

If an offer is accepted by fax or email during normal business hours, at what point is acceptance communicated?

A

When received

34
Q

If an offer is accepted by fax or email outside of normal business hours, at what point is acceptance communicated?

A

Once the business opens

35
Q

Is silence an acceptable form of acceptance?

A

No

36
Q

If an offer is accepted by post, at what point is acceptance communicated?

A

Acceptance is complete as soon as the letter is posted

37
Q

What are the conditions of the postal rule?

A

The letter must be properly stamped and addressed

38
Q

Does the postal rule apply if the letter is never received?

A

Yes unless the offeror states they must actually receive acceptance

39
Q

Define consideration

A

The price by which one party bought the other party’s act or promise

40
Q

Define executed consideration

A

A performed act in exchange for a promise

41
Q

Define executory consideration

A

A promise given in exchange for a promise

42
Q

What are the conditions of consideration?

A

Consideration must be sufficient but need not be adequate

43
Q

Define sufficient consideration

A

Consideration which is capable of being given a value

44
Q

What are valid forms of consideration?

A
  1. Executed consideration

2. Executory consideration

45
Q

What are invalid forms of consideration

A
  1. Past consideration
  2. Existing statutory duty
  3. Existing contractual duty
  4. The promise to do or the act of doing an illegal act
  5. Part payment
46
Q

Define past consideration

A

Consideration that involves something that has already been done at the time the promise is made. Past consideration cannot support a contract.

47
Q

Define existing statutory duty

A

Consideration that involves an action that is merely the performance of an existing statutory duty

48
Q

When are existing statutory duty and existing contractual duty good consideration?

A
  1. If the duty is exceeded

2. If both parties gain an additional practical benefit from the new contract not anticipated in the original agreement

49
Q

What are exceptions to the part payment problem?

A
  1. Alternative consideration
  2. Bargain between creditors
  3. Payment by a third party
50
Q

What are the rebuttable presumptions that can be applied if it is not obvious whether there is an intention to create legal relations?

A
  1. Domestic agreements

2. Commercial agreements

51
Q

What is the presumption regarding the intention to create legal relations in social or domestic agreements?

A

It is presumed there is no intention to be legally bound in a social or domestic arrangement

52
Q

How can the presumption regarding the intention to create legal relations in social or domestic agreements be rebutted?

A
  1. By showing that there was clear evidence that the parties did intend to create legal relations
  2. If the agreement is between spouses where the parties were not living together at the time of the agreement
53
Q

What is the presumption regarding the intention to create legal relations in commercial agreements?

A

It is presumed there is an intention to enter into legal relations in a commercial agreement

54
Q

How can the presumption regarding the intention to create legal relations in commercial agreements be rebutted?

A

If a contrary intention is clearly expressed in the agreement itself

55
Q

What is the presumption when ‘subject to contract’ is included in an agreement?

A

That there is no intention to create an immediately binding contract

56
Q

Define privity of contract

A

Only a person who is a party to a contract has enforceable rights or obligations under it

57
Q

What are the exceptions to privity of contract?

A
  1. The Contracts Act 1999

2. Agency

58
Q

What does the Contracts Act 1999 allow?

A

A person who is not a party to a contract to a enforce it as long as the contract was for their benefit and they were identified expressly by name or description

59
Q

What does agency law allow?

A

An agent to enter into a contract with a third party on behalf of his principal and it is the principal and the third party who have enforceable rights under that contract

60
Q

Define express terms

A

Terms that are the elements of a contract that have been specifically agreed

61
Q

Define implied terms

A

Terms that are not expressly included but are still part of the contract

62
Q

In what situations can terms be implied?

A
  1. Implied due to the type of contract
  2. Implied by the courts in order to give business efficacy
  3. To comply with custom and usage
  4. Implied by Acts of Parliament
63
Q

In what format must an agreement for transfer of land be so that it is enforceable?

A
  1. The agreement must be in writing

2. The transfer itself must be by deed

64
Q

Can a statute override terms of a contract that have been expressly agreed?

A

Yes

65
Q

Do all persons over the age of 18 have capacity to enter into any contract?

A

No

66
Q

Is property transferred before avoidance recoverable from a third party in the case of a voidable contract?

A

It is usually irrecoverable

67
Q

What happens if the event or circumstances on which an offer is conditional does or do not transpire?

A

The offer is no longer capable of acceptance and is terminated

68
Q

Does the postal rule apply to letters of revocation?

A

No. It only applies to letters of acceptance.

69
Q

Must acceptance always be communicated to the offeror in order for it to be effective?

A

No as the offeror may waive the requirement for acceptance to be communicated

70
Q

Whether or not postal acceptance is within the contemplation of the parties is a question of fact and may be deduced from all the circumstances:
True or False?

A

True

71
Q

If the offeror prescribes a mode of communication of acceptance, can the offeree normally use an alternative mode, provided it is at least as expeditious as the mode prescribed?

A

Yes

72
Q

What are the implications on the postal rule if the offeror states that their offer must be accepted by notice in writing?

A

Notice is required to be received by the offeree and so the postal rule does not apply

73
Q

If an offer is posted, when is it made?

A

When it is received

74
Q

If an acceptance is posted, when is it made?

A

When it is posted

75
Q

If a revocation is posted, when is it made?

A

When it is received

76
Q

Where a contract is in writing, will the courts allow the parties to rely on any terms that are agreed between them but not embodied in the written document?

A

Yes, if it can be shown that the document was not intended to comprise all the agreed terms.

77
Q

What requirement must be satisfied for a third party to seek to enforce a contractual term under the Contracts Act 1999?

A
  1. The third party must be identified
  2. Either the contract must expressly provide that the third party can enforce it or the term must confer a benefit on them (unless it appears that the contracting parties did not intend them to be able to enforce the right)
  3. The Act allows enforcement of exclusion clauses as well as positive rights

Law (6 decks)

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