Contract law

Question 1

What is a contract?

Answer 1

A contract is an agreement between two or more persons that is legally binding
There has to be intention on both sides to be legally binding

Question 2

What are the elements of a contract?

Answer 2

1. Agreement (offer and acceptance)
2. An intention to create legal relations
3. Compliance with required formalities when applicable
4. Consideration (a promise to give, do, or refrain from doing something)
5. Capacity to contract

Question 3

Form of a contract

Answer 3

Simple contract: can be made in any form eg oral

Specialty contract: contracts have to be in particular form to be legally enforceable

Question 4

Define bilateral and unilateral contracts

Answer 4

Bilateral contract is when one party promises a certain action in response to another party’s action. Each party agrees to some sort of obligation eg buying from a store
Unilateral contract is one party making a promise of an action if another party executes an action but is under no obligation

Question 5

What is an invitation to treat?

Answer 5

Invitation to treat: It is showing that one party is willing to make offers, but is not an offer itself. Cases: Carill vs Carbolic Smoke ball company (1893) or boots vs pharmaceutical society of GB

Question 6

When is a mere puff?

Answer 6

A statement during negotiation to help sell a product

Question 7

Types of termination

Answer 7

Termination by revocation
Withdrawal of offer
Termination by death

Question 8

Types of acceptance

Answer 8

Oral, in writing, hammer fall at auction, indicated by the conduct of the offeree
Acceptance must be a positive act, however in a unilateral contract acceptance does not have to be communicated

Question 9

When is their intention to create legal relations?

Answer 9

Social, domestic and family arrangements are generally presumed not to be legally binding
Commercial or business arrangements are presumed to be legally binding
Honour code being stated means the agreement is not legally binding

Question 10

When does a minor have the capacity to contract

Answer 10

A contract with a minor for necessities will be binding on the minor
What is regarded as necessary will depend on the minor and their social distancing
Certain contracts can be voided by a minor (they can be voided before turning 18 or just after)
Contracts are usually of a continuous nature eg property
Contracts with minors that are not for necessities, beneficial service nor all fall under voidable and will be unenforceable
The minor can rectify a contract too
The contract can not be too harsh

Question 11

How does consideration affect cooperations

Answer 11

A cooperation is a legal entity with its own legal entity
As a general rule, a company as unrestricted objects (no restrictions to enter into legal relations)
A company may chose to restrict its objects by stating restrictions in its constitutions

Question 12

What are the different types of considerations?

Answer 12

Executory considerations: the promise to do something in the future
Executed consideration: consideration has already been completed
Past consideration: (not good consideration) Occurs when the promise is only made after the act has been done

Question 13

What is privity of contract?

Answer 13

persons not part of the agreement cannot be bound by the terms or take actions if the terms are broken

Question 14

What is a void and voidable contract?

Answer 14

Void contract is a contract that never existed (eg lack of capacity, no consideration or illegal)
Voidable contract is when one party has the option to void a contract but until then it is a legal contract (that will not be enforced by the court)

Question 15

Define condition, warranty, innominate term

Answer 15

Conditions are the most important part of the contract, breaking the condition of a contract will be a breach and the other party can terminate the contract
Warranties are a minor breach in the terms of the contract and will not result in the termination of the contract, though legal remedy can be seeked out by the other party
An innominate term could be a condition or a warranty depending on the seriousness of the breach and how much benefit has been lost as to whether the contract has ended

Question 16

What are the types of pre-contractual statements

Answer 16

trader’s hype or puff - no remedy even if claim is false
representation - remedy of misrepresentation if claim is false
Term - Remedy for breach of contract if term is broken

Question 17

When is it a term and not a representation?

Answer 17

It depends on the importance of the statement to both parties, interval of time between statement and contracts, whether the statement is oral or written. knowledge and skill of the party making statement

Question 18

what is an exemption clause and when is it valid?

Answer 18

An exemption clause attempts to exclude all legal liability eg car parking signs (no liability for damage)

For it to be valid it must:
be incorporated into contract
Be clear and unambiguous
Comply with relevant statues
can be in unwritten documents but reasonable steps must be made to make the other party aware

Question 19

When is an exemption clause not valid?

Answer 19

When it includes:
Terms that exclude liability for death or personal injury
Terms that requires consumer who fails to fulfil their obligations to pay a disproportionately higher sum to the trader
A term making the contract binding on the consumer but allows the seller to avoid performance

Question 20

What is a vitiating factor and give examples

Answer 20

When a contract is no longer binding due to invalidating fators
Examples include:
Mistake
Duress
Misrepresentation
illegality
undue influence

Question 21

What must be present for there to be actionable misrepresentation

Answer 21

1. Statement must be made (oral, written or by conduct but silence is not accepted)
2. Statement must be false
3. Statement must be presented as fact
4. The statement must have induced the other party to enter into contract

Question 22

What are the types of misrepresentation? (define them)

Answer 22

Fraudulent misrepresentation: where the party makes a false statement they know is not true
Negligent misrepresentation: a false statement made by a person who believes it is true but has no reasonable ground for that belief
Innocent representation: A false statement made by a person who has honest and reasonable belief in its truth. The belief must be presented when the statement is made up until the contract is signed

Question 23

State and define the types of mistakes possible. What is an operative mistake?

Answer 23

Common mistake: both parties made the same mistake in contract
Mutual mistake: one party thinks its one thing, and the other party thinks it is something else (cross-purposes). If this cannot be rectified, the contract is void]
Unilateral mistake: only one party makes a mistake

Question 24

What is Duress

Answer 24

A threat of unlawful violence is made n order to induce the other party into entering a contract
Economic duress - economic pressure put on

Question 25

What must the innocent party show to claim duress?

Answer 25

illegitimate threats or pressure was applied by the other party
Pressure was significant in making them agree to contract
They had no practical choice but to agree

Question 26

What is undue influence?

Answer 26

Some form of improper pressure has been put on a person to enter into a contract
To prove undue influence, victim must prove they entered into contract as a result of genuine intimidation

Question 27

What is the duty to mitigate?

Answer 27

the claimant must take appropriate steps in order to minimize their losses. They cannot claim for losses that could have reasonably been avoided. The defendant must prove they tried to minimize their losses.

Question 28

What are liquidated damages and how do they differ from penalty clauses?

Answer 28

Contract states the amount of damages to be paid in the event of a breach of contract.
The sum must not be excessive in relation to the loss occurred, as that would be a penalty clause which is not enforceable