Contract Law

Question 1

What is a Contract?

Answer 1

An agreement between two or more parties, and enforceable by the courts.

Question 2

What is Contract Law?

Answer 2

Contract Law is the body of law that protects the agreements that arise out of the contract.

Question 3

What are the five requirements to form a Contract?

Answer 3

• Offer
• Acceptance
• Consideration
• Legal Capacity
• Intention to create legal relations

Question 4

What constitutes an Offer?

Answer 4

An offer to do, or not to do, something in return for something else. An offer cannot be just an intention to do something in return for nothing.

Question 5

What is the difference between Offer and Invitation to Treat?

Answer 5

Offer indicates a willingness to enter into a contract, whereas Invitation to Treat lacks an intention to create legal obligations and is rather a willingness to negotiate.

Question 6

What is consideration?

Answer 6

Consideration is something of value that is exchanged by the contracting parties.

Question 7

What constitutes Legal Capacity?

Answer 7

The contracting parties must be capable of appreciating the significance and consequences of entering into a contract.

e. g. of individuals without legal capacity:
- Infants
- Intoxicated
- Mentally incompetent
- Unincorporated organizations

Question 8

What is Certainty of Terms?

Answer 8

A requirement that the terms of the contract must be precise and definite in order to be subject to acceptance.

Question 9

What is Intention to Create Legal Relations?

Answer 9

It is whether a reasonable person would conclude that the parties intended to create contractual relations.

Question 10

What type of contract must be in writing?

Answer 10

Purchase and sale of land

Question 11

What is Privity of Contract?

Answer 11

Non-parties cannot be bound to a contract. (e.g. a supplier that has not entered into contract)

Question 12

What does an Agent do within a contract setting?

Answer 12

An Agent can negotiate the contract on behalf of the principal. (e.g. a construction manager may be the agent for the owner and enter into contracts with other companies)

Question 13

What is the “Term” within the contract setting?

Answer 13

The period for which a contract is binding.

Contract is binding until:

• Obligations are fulfilled
• It is terminated
• It is amended by consent of each party