Contract: formation, parties, capacity Flashcards
Elements for a valid contract
- Agreement (offer and acceptance)
- Intention to create legal relations
- Consideration
What is agreement
an offer that has been accepted
What is an offer?
‘An expression of willingness to contract on certain terms made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed’
Are requests for tender offers or invitation to treat?
Request for tender: Invitation to treat
Tenders=offer to do the work
If promised to accept lowest tender/impliedly promised to consider all conforming tenders=offer of unilateral contract
Are auctions offers or invitations to treat?
- Request for bids-invitation to treat
- Bids-offer
- Hammer falls-acceptance (If auctioneer acting as agent for the owner, a bilateral contract is formed between owner and bidder once hammer falls)
- BUT ‘Without reserve’-auctioneer must sell to highest bidder, is offer of unilateral contract by auctioneer (not owner)
Is an ad of reward an offer or invitation to treat?
offer of unilateral contract
Are advertisements, menus, promotional materials offers or invitations to treat?
Invitation to treat
BUT is special circumstances showing an intention to be bound, may be offer of unilateral contract
Are goods on display an offer or invitation to treat?
Invitation to treat
Contract made when payment exchanged
Offer=customer taking goods to checkout
What is acceptance?
‘An unqualified expression of assent to the terms of an offer’
‘Expression of assent’=must be communicated
‘Unqualified’=unconditional
What must acceptance be?
Communicated to offeror
Is silence acceptance
NO, even if the offer states it is, unless coupled with conduct that clearly signifies acceptance when viewed objectively
Rule for when acceptance via electronic communication is communicated?
No universal rule, look at all circumstances
Rule for acceptance of unilateral contract?
Offeror deemed to have waived right to have acceptance communicated
Implied promise to consider all conforming tenders
What is a ‘battle of the forms’?
between businesses (send ts and cs back and fourth)-counts as counter offer after counter offer. ‘last shot’ often the winner
What is the postal rule?
Acceptance takes place on posting BUT:
1. post reasonable form of communication
2. Properly stamped, addressed and posted
3. Offeror must not have expressly or implicitly excluded rule
When may the postal rule be impliedly excluded?
If offeror says/implies they need ‘notice in writing’ or be ‘told’ of acceptance, letter will only be effected when received
What is NOT acceptance?
- Where offeree doesn’t know of the offer
- Silence (unless accompanied with conduct that clearly signifies acceptance when views objectively)
- Request for further info
How can an offer be terminated?
- Revocation
- Rejection (by offeree)
- Lapse of time (reasonable time depends on circumstance)
- On occurrence of a condition (eg. goods damaged)
How can an offer be impliedly rejected?
Counter offer
NOT request for further info
When can an offer be revoked
Any time before acceptance, even if the offeror has said they will leave it open for a specified period of time
UNLESS offeree has given (or promised) something to the offeror in return for keeping the offer open
What must be done for an offer to be successfully revoked?
Must be communicated to offeree (can be by reliable 3rd party)
UNLESS last known address not valid or offeree doesnt read it
How can an offer to a business be revoked?
only effective in reasonable business hours
How can offers to the public be revoked?
must be revoked in same channel as it was made
Can an offer of unilateral contract be revoked?
Mostly offeror cannot revoke once the offeree has started to perform the act of acceptance
Presumptions for ITCLR
Commercial agreements: presumption of intention to create legal relations
Domestic/social agreements: presumption of no intention to create legal relations
ITCLR: what do commercial agreements cover?
all agreements that are not made between family and friends
ITCLR: what is needed to rebut each presumption/how strong are they?
- Commercial: V strong presumption, need clear words to rebut
- Domestic: can be rebutted by variety of factors (eg. relationship(divorced ect/£ at stake)
Can there be ITCLR where a business gives away stuff for free
Yes
ITCLR, what is this: For two years a client and their neighbour have acted on an agreement whereby every other week they each buy a ‘Lucky Dip’ lottery ticket on the understanding that if the ticket wins they will share the prize money. Last week the neighbour bought the ticket and it won £1,000,000. The neighbour refuses to share the prize money and the client believes they are entitled to half of it
A joint enterprise, there would be an expectation any prize would be shared.
Consideration definition
A right, interest, profit or benefit accruing to one party, OR some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other
Types of consideration
Executory consideration=promise (normally bilateral contracts)
Executed consideration=an act (normally unilateral contracts)
What must consideration be?
Must be sufficient but need not be adequate
Adequacy=Doesn’t have to adequately reflect the amount/value of the promise in return for which its given (contracts are voluntary)
Sufficiency=BUT must have some value in the eyes of the law
What is sufficient consideration?
Money, goods, services
Promise to refrain from swearing, drinking alcohol, smoking
Exceeding a public duty
What is NOT sufficient consideration?
A promise to stop complaining abt being disinherited
‘In consideration of natural love and affection’
Performance of existing duty (ie. Imposed by law/public duty (unless exceeded)
Is past consideration good consideration?
NO unless:
◊Act done at promisers request
◊Parties understood from start that act was to be rewarded
◊ Had the promise been made in advance it would have been legally enforceable (requirements for binding contract satisfied)
Consideration: rules for alteration to pay MORE?
General rule: Performing existing contractual duty to the party is NOT consideration for promise by other party to pay more.
UNLESS exceed original duty
OR other party has received a practical or commercial benefit AND NO economic duress/fraud
Consideration: rules for alteration to pay LESS?
Part payment of undisputed debt not consideration for a promise to forgo balance
UNLESS give something extra (eg. early payment/goods not cash)
OR Doctrine of Promissory Estoppel defence
What is the Doctrine of Promissory Estoppel defence?
Creditor may be stopped from going back on promise to accept part payment if it would be unfair for them to do so in all the circumstances (even if not supported by consideration)
Conditions:
i) promise to waive a strict legal right
ii) Promisee must act on promise
iii) Inequitable for promisor to go back on promise
iv) Can only be used as defence
v) Must have clean hands to use (as equitable defence)
vi) Ongoing/recurring payments-was p promise was clearly intended to last a certain amount of time? If yes, creditor must give reasonable notice to can resume right to full payment but cannot claim arrears. (unknown for one off)
What is the measure of damages when suing an auctioneer for breach of unilateral contract (without reserve auctions)?
difference between the value of item and the amount of the client’s bid
Certainty: what will be to vague for sufficient certainty to create a contract?
Things like “on industry standard terms”/”on hire-purchase” as there are lots of different types to see what terms have been ra
Certainty: how is it determined whether the parties reached an agreement?
Judged objectively, but in the context of:
(a) parties in same trade?
(b) trade usage
(c) whether the arrangement has been acted on for any length of time
(d) whether there is an objective mechanism for resolving any uncertainty such as an arbitration clause.
What is privity of contract?
Only a contracting party (ie someone who is privy to the contract) are bound by it and so have rights and obligations under it (so can sue for breach of contract or otherwise be liable for breach)
Can third party have rights under a contract?
Even if contract made for benefit of 3rd party, 3rd party have no rights under it
UNLESS…
1. the contract expressly provides that they may acquire a benefit (fall within a class)
2. OR the term purports to confer a benefit on them (DOESN’T APPLY if on a true construction of the contract, it wasn’t intended that the term be enforceable by a 3rd party)
Privity of contract: Where a contract with the object of leisure and enjoyment is made by one party on behalf of a group, who can claim under it?
- only parties to a contract may sue or be sued upon it
- the party to the contract can claim on the group’s behalf
When will a contract made by an agent be binding and who has rights under it?
Can only bind someone to deal if have authority to do so
Agent has no liability under the contract
What types of authority can an agent have which will bind a party to a contract?
□ Actual authority -principle gives required authority
□ Implied actual authority-act within range of activity normally done in that type of job
□ Apparent (ie. Ostensible) authority
a) principle represents that agent had authority at some point,
b) 3rd party relies on/believes this,
c) 3rd p alters their position (ie. By entering contract)
What is ratification?
Validates the unauthorised acts of the agent
When can a contract be ratified?
1) Agency was disclosed
2) Principle was competent at time of contract
3) Contract wasn’t void
4) Within a reasonable time and aware of the facts
What contracts bind a minor?
- For ‘necessities’
- Of service that (on the whole/balance more favourable than not to the minor) are for their benefit (eg. Employment where gain training and experience)
- NOT trading contracts
When may mental incapacity affect capacity?
Mental impairment or drunk when contract was made =contract ‘voiable’ if person was incapable of understanding the nature of the transaction and the other party knew
Capacity: Which contracts can/cant be challenged for being ultra vires?
- Cos: cant be challenged for being beyond the powers granted in cos constitution
- Statutory corporations (eg. LAs): contract made outside statute creating will be void
- LLPs: unlimited capacity
