Contract Formation (C2) Flashcards
1
Q
Q: What is a Simple Contract?
A
A: A contract that does not need to be in writing to be valid.
2
Q
Q: Which contracts must be in writing?
A
A: Bills of exchange, regulated consumer credit agreements, transfers of land, and guarantees.
3
Q
Q: What is the capacity to contract?
A
A: Minors can void contracts; individuals of unsound mind or intoxicated cannot contract.
4
Q
Q: What are Void Contracts?
A
A: Contracts that are not valid at all, e.g., illegal contracts or those beyond a company’s powers.
5
Q
Q: What are Voidable Contracts?
A
A: Contracts that can be set aside by the injured party, often due to duress or misrepresentation.
6
Q
Q: What are Unenforceable Contracts?
A
A: Valid contracts that cannot be enforced due to lack of required form or writing.
7
Q
Q: Can parties freely contract?
A
A: Yes, but courts may intervene if there is an unfair advantage in bargaining power.
8
Q
Q: What is the Consumer Rights Act 2015?
A
A: Legislation that implies terms ensuring goods are fit for purpose in contracts.
9
Q
Q: What is the first essential element of a valid contract?
A
A: Offer: A proposal made by one party.
10
Q
Q: What is the second essential element of a valid contract?
A
A: Acceptance: Agreement to the terms of the offer by the other party.
11
Q
Q: What is the third essential element of a valid contract?
A
A: Consideration: Something of value exchanged between the parties.
12
Q
Q: What is the fourth essential element of a valid contract?
A
A: Intention to be Legally Bound: Both parties must intend for the agreement to be legally enforceable.
13
Q
Q: What is an offer in contract law?
A
A: A definitive promise by the offeror to the offeree, stating specific terms.
14
Q
Q: Can an offer be communicated in any form?
A
A: Yes, it can be made in any form but must be communicated to the offeree.
15
Q
Q: What is an invitation to treat?
A
A: An invitation for someone else to make an offer, not a binding contract.
16
Q
Q: Are statements of intention considered valid offers?
A
A: No, preliminary statements or intentions to sell are not valid offers.
17
Q
Q: What constitutes a vague statement in contract offers?
A
A: An offer that lacks specificity, such as “one of my cars for about £5,000,” is too vague to be valid.
18
Q
Q: What constitutes a vague statement in contract offers?
A
A: An offer that lacks specificity, such as “I will sell one of my cars for about £5,000,” is too vague to be valid.
19
Q
Q: What happens when an offer is rejected?
A
A: The original offer is terminated; a counter offer also terminates the original offer.
20
Q
Q: What is revocation in contract law?
A
A: If the offeree has begun to accept a unilateral contract or if a payment has been made to keep the offer open.
21
Q
Q: How does an offer lapse?
A
A: It lapses if not accepted within a specified time, after a reasonable time, or upon the death of either party.
22
Q
Q: What is a conditional offer?
A
A: An offer that depends on a specified event or change in circumstances; it cannot be accepted until those conditions are met.
23
Q
Q: What constitutes a statement of intention in contract law?
A
A: A statement expressing a desire or plan to sell or engage in an action, which is not considered a valid offer and does not create a binding contract.
24
Q
Q: In Carlill v Carbolic Smoke Ball (1893), the manufacturers advertised: “Anyone who bought and used the ball as directed and still contracted influenza would be paid a £100 reward.” The manufacturers later claimed there was no contract because an offer could not be made to the whole world. Did the court determine that this created a valid contract with Mrs. Carlill?
A
A: Yes, the court held it was a valid contract because the advertisement constituted a definite offer to the whole world, which Mrs. Carlill accepted by using the product as directed, entitling her to the £100 reward.
25
Q: In Harvey v Facey (1893), the claimants sent a telegram asking the owners to state the lowest price they would accept for some land. The owners replied with a price, but when the claimants attempted to accept, what did the court determine?
A: The court held that the statement of price was merely an early stage in negotiations and not a valid offer, meaning there was no binding contract.
26
Q: In Harris v Nickerson (1873), an auction was advertised, and a broker traveled to attend, only to find the items he wanted had been withdrawn. The broker claimed the advert was an offer for sale and his attendance was acceptance. What did the court decide?
A: The court held that the advert was not an offer because it was not clear and definite that the auctioneers intended to sell the items.
(However, if the auction is held without reserve, once a lot is put up, it constitutes an offer to sell to the highest bidder, and withdrawing it after a bid constitutes a breach of contract.)
27
Q: In Hyde v Wrench (1840), Wrench offered to sell Hyde a farm for £1,000. Hyde countered with an offer of £900, which Wrench rejected. Later, Hyde attempted to accept the original offer of £1,000. What did the court rule?
A: The court held that Hyde could no longer accept the original offer because it no longer existed after his counter offer. Hyde’s statement to pay £1,000 constituted a new offer, which Wrench did not accept.
28
Q: In Stevenson v McLean (1880), M offered in writing to sell a quantity of iron to S at a given price. S queried the delivery time but sent a letter accepting the offer before receiving a reply. M later claimed that S’s query was a counter offer and refused to supply the iron. What did the court decide?
A: The court held that S’s query was not a counter offer; it was merely an enquiry about the delivery terms. It did not destroy the original offer, which was still open when S accepted it.
29
Q: What are examples of invitations to treat in contract law?
A: Examples include:
• Most advertisements (except when clearly stating no further
negotiations are required, as in Carlill)
• Shop window displays
• Goods on shop shelves
• Company prospectuses
• Circulation of price lists or website displays
• Tenders (the request for tenders is an invitation to treat; the
submitted tender is an offer).
30
Q: What are examples of invitations to treat in contract law?
A: Examples include:
• Most advertisements (except when clearly stating no further
negotiations are required, as in Carlill)
• Shop window displays
• Goods on shop shelves
• Company prospectuses
• Circulation of price lists or website displays
• Tenders (the request for tenders is an invitation to treat; the
submitted tender is an offer).
31
Q: What is acceptance in contract law?
A: Acceptance is the unequivocal and unconditional assent to all terms of the offer, completing the second essential element of a valid contract.
32
Q: What forms can acceptance take?
A: Acceptance can be oral, written, or implied by conduct.
33
Q: What forms can acceptance take?
A: Acceptance can be oral, written, or implied by conduct.
34
Q: What must be done if the offeror stipulates a method of acceptance?
A: The specified method of acceptance must be used; if merely requested, other reasonable methods can also form a binding contract.
35
Q: When must acceptance be communicated to the offeror?
A: Acceptance must be communicated to be effective; it is not effective until this happens.
36
Q: How is acceptance communicated via fax?
A: Acceptance is communicated when a fax is received during normal business hours; outside those hours, it’s communicated when the business opens.
37
Q: What is the status of acceptance communicated by email?
A: Acceptance is considered effective when received and accessible in the offeror’s email system.
38
Q: What does acceptance require from the offeree?
A: There must be some act indicating acceptance; silence cannot be presumed to mean acceptance.
39
Q: What is the Postal Rule in contract law?
A: Acceptance is complete once a letter of acceptance is posted, provided it is properly stamped and addressed.
40
Q: Does the Postal Rule apply if the acceptance letter is not received?
A: Yes, the Postal Rule applies even if the letter is never received, unless the offeror requires actual receipt of acceptance.
41
Q: When does the Postal Rule not apply?
A: It does not apply if the offeror states they must have “notice in writing” of acceptance, indicating receipt is required for binding acceptance.
42
Q: In Felthouse v Bindley (1862), the claimant offered to buy his nephew’s horse, stating, “If I hear no more about him, I consider the horse to be mine.” The nephew did not reply. What did the court decide?
A: The court held that the offer had not been accepted, as the nephew’s silence was not sufficient to constitute acceptance.
43
Q: What does “forbearance” mean in the context of consideration?
A: Forbearance is when one party waives their rights to something, which can be good consideration if it holds value.
44
Q: What is past consideration, and is it valid?
A: Past consideration is something already done before a promise is made, and it is generally not valid unless payment was implied.
45
Q: What is the definition of consideration in contract law?
A: Forbearance is when one party waives their rights to something, which can be good consideration if it holds value.
46
Q: Are contracts made by deed required to have consideration?
A: No, contracts made by deed (specialty contracts) do not require consideration unless specified.
47
Q: What are the two types of valid consideration?
A: Executed consideration and executory consideration.
48
Q: What is executed consideration?
A: A performed act given in exchange for a promise, like paying for goods upon delivery.
49
Q: What is executory consideration?
A: A promise given in exchange for a future promise, such as agreeing to pay for goods that will be delivered later.
50
Q: Does consideration need to be adequate in value?
A: No, consideration must be sufficient (have assignable value) but does not need to be adequate (equal in value).
51
Q: Can performing an existing statutory duty be good consideration?
A: No, unless additional services beyond the statutory duty are provided.
52
Q: Can performing an existing contractual duty be good consideration?
A: Generally no, unless the duty is exceeded, or both parties gain an additional benefit.
53
Q: Is performing an illegal act valid consideration?
A: No, a contract involving an illegal act cannot be enforced.
54
Q: Can part payment of a debt satisfy the entire debt owed?
A: No, paying less does not satisfy the full debt unless specific exceptions apply.
55
Q: What are exceptions to the part payment rule?
A: Accepting alternative consideration, a joint agreement among creditors, or payment by a third party.
56
Q: In Thomas v Thomas (1842), why was a promise to allow Mrs. Thomas to use a house for £1 per year considered binding?
A: The promise was binding because the consideration (rent of £1) had value, even though it was inadequate.
57
Q: In Chappell & Co v Nestle (1960), why were chocolate wrappers considered part of the consideration in Nestle’s promotion?
A: The wrappers were part of the consideration because they had value, even though it was minimal.
58
Q: In White v Bluett (1853), why was the son’s promise not to complain about his father’s will not considered valid consideration?
A: The promise was too insubstantial to amount to real consideration, as it could not be measured in value.
59
Q: In Re McArdle (1951), why was the promise to reimburse a couple for house improvements already carried out, not considered valid consideration?
A: The promise was made after the work was completed, making it past consideration, which is not valid consideration.
60
Q: In Re Stewart v Casey (Casey’s Patents) (1892), why was the employer’s later promise to pay the employee a share of the profits, for work done, considered binding?
A: The employer’s request for the employee’s services was treated as an implied promise to pay, making the later promise binding.
61
Q: In Collins v Godefroy (1831), why was the promise to pay a witness for attending court not considered valid consideration?
A: There was no valid consideration because the witness had a statutory duty to attend court.
62
Q: In Glasbrook Brothers Ltd v Glamorgan County Council (1925), why was payment to the police for extra protection during a miners’ strike considered valid consideration?
A: The payment was for protection beyond the police’s statutory duty, making it good consideration.
63
Q: In Stilk v Myrick (1809), why was the captain’s promise to share the deserters’ wages with the remaining crew not considered binding?
Q: In Stilk v Myrick (1809), why was the captain’s promise to share the deserters’ wages with the remaining crew not considered binding?
64
Q: In Hartley v Ponsonby (1857), why was the captain’s promise of extra pay to the remaining crew members, after a large number of seamen deserted and the ship became undermanned and unseaworthy, considered binding?
A: The promise was binding because the remaining seamen were in a dangerous situation and undertook more than their original contractual duty by completing the voyage.
65
Q: In Williams v Roffey Bros. (1990), why was Roffey Bros.’ promise to pay Williams extra for timely completion of work on a block of flats considered binding, even though Williams was already contractually obligated to complete the work?
A: The extra payment was binding because it established a new contract that provided benefits to both parties. Roffey Bros. avoided penalties from the main contract with the property owner and didn’t have to find new contractors to finish the project. Williams received additional payment for completing the work on time. The court found it inequitable for Roffey Bros. to retract their promise, as they voluntarily offered the extra payment without any coercion.
66
Q: In Foakes v Beer (1884), why was Foakes required to pay interest on a debt, even after Beer agreed to accept payment by installments and not to take further action on the judgment?
A: Foakes was required to pay the interest because payment of the debt alone was not valid consideration for the entire amount owed, which included interest. The court held that merely paying the principal sum did not satisfy the whole debt obligation.
67
Q: In Balfour v Balfour (1919), why was Mr. Balfour’s promise to pay his wife £30 per month not considered legally binding?
A: The promise was not legally binding because it was a domestic arrangement, and it was presumed that the parties did not intend to create legal relations.
68
Q: In Merritt v Merritt (1970), why was the husband’s promise to transfer the house to his wife considered legally binding?
A: The promise was legally binding because the agreement was made when the husband and wife were not living together amicably, indicating an intention to create legal relations.
69
Q: What does the term “privity of contract” mean?
A: It means that only parties to a contract have enforceable rights and obligations under it.
70
Q: Can individuals who have not contributed consideration to a contract sue for breach?
A: No, they typically cannot sue because they are not considered parties to the contract.
71
Q: What is required for a contract to be enforced against a party?
A: There must be a promise of consideration to that party.
72
Q: What does the Contracts (Rights of Third Parties) Act 1999 allow?
A: It allows a third party to enforce a contract if it was intended for their benefit, they are identified, and the contract permits enforcement.
73
Q: What remedies can a third party exercise under the Contracts (Rights of Third Parties) Act 1999?
A: A third party can exercise remedies such as damages for breach of contract, specific performance, and injunctions, similar to what parties of the original contract could seek.
74
Q: How does trust law relate to privity of contract?
A: Trust law allows a beneficiary to enforce a trust as a third party, enabling them to assert their rights in court.
75
Q: How does agency law affect privity of contract?
A: Agency law allows an agent to enter contracts on behalf of a principal, creating enforceable rights between the principal and the third party.
76
Q. In Tweddle v Atkinson (1861), T was engaged to marry G. Their respective fathers contracted they would pay a sum of money when the marriage took place. G’s father died before making the payment.
Why couldn’t T sue G’s estate for the money?
A. T had no right to sue G’s estate for the money since he had provided no consideration for the promise and was merely a beneficiary under a contract to which he was not a party.
77
Q: What is the importance of examining the contents of a contract after it has been formed?
A: It is crucial to identify express and implied terms to understand the rights and obligations of the parties involved.
78
Q: What is the difference between a contractual term and a representation?
A: A term is part of the contract, while a representation is a statement made to induce a party to enter the contract; it becomes a term when included in the written contract.
79
Q: What remedies are available if a representation is included as a term and found untrue?
A: The misled party can claim remedies for breach of contract as well as for misrepresentation.
80
Q: What are express terms in a contract?
A: Express terms are specific provisions that have been agreed upon by the parties, which can be written, oral, or a combination of both.
81
Q: What are implied terms, and when can they be included in a contract?
A: Implied terms are not explicitly stated but are still part of the contract. They can be implied due to the type of contract, to ensure business efficacy, through custom and usage, or by legislation.
82
Q: What does the Consumer Rights Act 2015 ensure regarding goods?
A: It ensures that goods must be of satisfactory quality and fit for purpose.
83
Q: According to the Partnership Act 1890, how are profits shared among partners in the absence of contrary provisions?
A: Profits will be shared equally among partners.
84
Q: What is the “battle of the forms” in contract law?
A: It refers to disputes that arise when parties use their own standard terms, necessitating careful negotiation to identify applicable terms.
85
Q: How do courts resolve disputes in the “battle of the forms”?
A: Courts look at the contract objectively, using the “factual matrix” to determine which terms apply based on the parties’ conduct.
