Contract Law

Question 1

What are the essential elements required to form a contract?

Answer 1

Agreement (offer and acceptance)
consideration
Intention to create relations
capacity

Question 2

What form must a contract take?

Answer 2

A simple contract can be in any format, some contracts must be written in order to be enforced, for example:
consumer credit agreements
bills of exchange
transfers of land

Question 3

What is an offer?

Answer 3

A definite promise to be bound on specific terms made by the offeror to the offer.
Note an invitation to treat is not an offer.

Question 4

How can something not be an offer?

Answer 4

IT is unspecific/vague.
it is an invitation to treat
is is a supply of information or statement of intention.

Question 5

How can an offer be terminated?

Answer 5

Rejection & counter offer - rejected offer no longer exists
Revocation - can be done at any time up to acceptance
Lapse of time - specified time to accept offer, reasonable time or death.
Failure of pre condition -

Question 6

What is acceptance of an offer?

Answer 6

This is deemed as unconditional acceptance of all terms of the offer.
And can be done in writing, verbally or through conduct.
Note - Acceptance must be communicated, so where this is done by letter/email it is deemed to have occurred where it would be read not where it would be sent from.

Question 7

What is the postal rule in relation to acceptance>

Answer 7

Acceptance is deemed to have been communicated when posted provided that:
It is properly stamped addressed and posted
Post is an acceptable method of communication

Question 8

What is Consideration?

Answer 8

This is the value each party is bringing to the contract, it does not have to be adequate only suitable.
It can be:
Executed - provided at the time of the contract
Executory - provided in the future.

Question 9

What would not be accepted as consideration?

Answer 9

Goods or services that have been provided before the promise was made.
An existing statutory duty - unless extra service is required.
Performance of an existing contractual duty.

Question 10

What is the part payment rule?

Answer 10

Payment for part does not discharge the debt for the whole, except:
When a different type of consideration is offered and accepted.
All creditors jointly agree to accept a lesser amount.
Part payment is received from a third party.
Promissory Estoppel - courts will hold it is unfair to let a creditor go back on an agreement to accept a lesser amount.

Question 11

What is meant by intention for form legal relations?

Answer 11

This must exist for a contract to be enforceable, the contract may specifically state this however if it does not the following presumptions will be made:
Domestic/Social - Agreements between friends/family will be assumed as no intention unless separated/diviorced.
Commercial/business agreements - intention will be assumed unless stated other wise.

Question 12

What is Privity of Contract?

Answer 12

Only parties to the contract have enforceable rights except:
If the contract is for a third parties benefit and they are expressly named
Collateral contract relating to the same matter as between 1st parties.
Under land law - restrictive covenants
Insurance law - i.e. life insurance benefit
Trust law - beneficiary can enforce the trust
Executor - can enforce contracts made by the deceased.

Question 13

What is a representation in relation to a contract?

Answer 13

Something to encourage the other person to enter in to the contract, it may become a contract term but does not have to.

Question 14

What are contract terms?

Answer 14

These are part of the contract and if breeched the injured party may sue, can be:
Express - specifically agreed, so must be clear.
Implied - Not specifically stated, but treated as part. May relate to the type of contract e.g. Consumer rights act.

Question 15

What are the types of contract terms?

Answer 15

Conditions - Important and relevant to the main purpose of the contract, breech of this type of term can result in damages or discharge.
Warranty - incidental to the main purpose of the contract, breech results in damages.
Innominate - Neither condition or warranty, remedy depends on effect of breech.
Trivial - damages only/Serious - damages and/or discharge.

Question 16

What about exclusion clauses?

Answer 16

These will be interpreted strictly against the party that seeks to rely on them.
To be valid it must pass the following 2 tests:
Must be an integral part of the contract, incorporated by signature, notice or previous dealings.
Interpretation - it covers the loss the claimant has suffered.
It must also satisfy the statutory rules under:
Unfair contract terms act - clauses relating to negligence are void.
Consumer rights act - basically the clause must be fair.

Question 17

How does a contract end?

Answer 17

Also known as discharge:
Performance - Both parties have met their obligation under the contract.
Frustration - the contract becomes impossible to enforce due to outside forces.
Breech - Failure by 1 party to fulfil their contractual obligations.

Question 18

What are the two type of contract breech?

Answer 18

Actual - No or inadequate performance of contract obligation by one party.
Anticipatory - 1 party declares or indicates through actions that the contractual obligation will not be met.

Question 19

What is the purpose of damages?

Answer 19

Intended to put both parties in the position they would have been in before the loss.
The amount of damages, if no provision in the contract, will be decided by the court - this is known as unliquidated damages.

Question 20

What may impact the level of damages awarded?

Answer 20

Remoteness - is it justifiable to blame the party at fault for all consequences, would the party at fault known of the potential losses?
Financial Value of the loss - usually valued as the cost to put the claimant back in the position they would have been in if the contract was properly performed.

Question 21

What other types of damages are there?

Answer 21

Damages for loss of margin - Basically difference in cost if the goods have to be sourced else where.
Reliance losses - compensation for expenses incurred in performing part of the contract before breech occurred.