Contract Law Flashcards
what are the elements of a valid contract?
- offer - not an invitation to treat (negotiate)
- acceptance
- consideration
- intention to create legal relations
are goods on display an offer or an invitation to treat?
invitation to treat until you pay for them at the checkout.
before this point you can put them back on the shelves without obligation
are advertisements offers or invitations to treat?
invitations to treat
an advert of reward e.g if you provide info you get £100 = offer
what is the distinction between bilateral and unilateral contracts?
which type are offers?
what case?
bilateral = both parties promise to do something
unilateral = only one person promises to do something
unilateral = usually offers - no room for negotiation - if you do X you will get Y
Carlil v Carbolic Smoke Ball (if you try our medicine and contract flu you will be awarded £100)
explain the legal position on auctions and whether they are offers / invitations to treat…
which case?
If an auction item has a reserve price (i.e minimum price that must be reached, otherwise it must be withdrawn) then the auctioneer’s call for bids is an invitation to treat
the bidder then makes the offer which the auctioneer can then accept or reject
if there is no reserve price = an offer by the auctioneer to sell to the highest bidder Barry v Davies
the fall of the gavel is usually acceptance
explain the legal position on tenders and whether they are offers / invitations to treat…
which case?
tenders are usually invitations to treat
but if a company says they will consider all tenders for a contract before X date and they don’t consider them all = those hard done by will be able to sue for breach of an implied unilateral contract
In Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council
explain the legal position on acceptance with case law to support
- unqualified expression of assent
- must be communicated to the offeree or their authorised agent
- acceptance cannot be conditional (this is a counter-offer which destroys the original offer and creates a new one)
Butler Machine Tool v Ex- Cell- O Corp - postal rule
the offer is accepted when the letter is sent, provided:
(a) it was reasonable in all the circumstances to use the post;
(b) the letter was properly addressed, stamped and posted; and
(c) the postal rule had not been excluded by the offeror. - Holwell Securities Ltd v Hughes
- where a party states they need ‘notice in writing’ or notified in writing or ‘told’ of any acceptance = acceptance only takes place once received
- acceptance of a unilateral offer will always be conduct of some sort
An offer cannot be accepted once it has been terminated.
How may an offer may be terminated?
- rejection by the offeree (expressly or impliedly through counter offer)
- lapse of time
- specified or reasonable time - revocation
- exception: offeree gave something in return for the promise to keep the offer open e.g. i give you £10 to keep the offer open until tomorrow - couldnt revoke the offer until after tomorrow
- Mountford v Scott
- must be communicated to the offeror
- The Brimnes - offer was revoked when the form of communication should have been read i.e. if it was in normal business hours
- revoking an offer to the world, the best the offeror can do is publish a notice of revocation in the same place as the offer and with the same prominence
- revocation can be given to the offeree or an objectively reliable third party
- postal rule doesnt apply to revocation
looking at acceptance of unilateral contracts….
Someone offers to pay you £100 if you walk from London to York. Do you accept this offer when you first embark on the walk, or when you actually arrive at York?
When could the person revoke the offer?
when you arrive in York - the general rule is that the offer is only accepted once the specified act is completed
on this basis you could revoke the offer when the person is 1 mile away from reaching York - unfair, s0…
number of judicial authorities that suggest partial performance of a unilateral contract is sufficient to prevent revocation
i.e. there is an implied promise not to revoke if the specified act is started within a reasonable time. The acceptance and consideration for the implied promise is the
commencement of the act.
explain how the intention to create legal relations operates in commercial and domestic settings…
commercial = presumption of intention to create legal relations
- Esso Petroleum v Commissioners of Customs and Excise
- presumption is rebuttable but rare
domestic = no presumption
factors to consider:
the closeness of the family / friend
the value of the consideration - if nominal = may not find intention
how does consideration differ between bilateral and unilateral contracts?
bilateral = exchange of promises
unilateral = promise in return for an act
what can consideration be?
a promise to do something
an act
consideration need not be __________
consideration must be _____________
adequate - e.g. £1 for aston martin = fine
sufficient = What is provided in return must be the sort of thing the law regards as being appropriate
subject matter for a bargain.
e.g.where a promise was made ‘in consideration of natural love and affection’ is not valid consideration
past consideration is not good consideration.
what are the exceptions
which case?
(a) the past act/ promise was done at the promisor’s request;
(b) there was a mutual understanding between the parties that the act/ promise would be
compensated for in some way; and
(c) had the promise been made in advance it would have been legally enforceable. This last condition often hinges on whether, or not, there would have been the necessary intention to create legal relations
Re Casey’s Patents
explain the position on consideration where a contract has been varied…
- As a general rule, performance of an existing contractual duty owed to the other party is
not consideration for a promise of extra payment. - Exceeding a contractual duty is consideration.
- Performance of an existing contractual duty owed to the other party will be consideration for a promise of extra payment if it confers a practical benefit; however, if the promise to
pay more was made under duress the promise may be set aside
what was the rule in Pinnel’s case?
In the case of an undisputed debt, at common law, an agreement between a creditor and a
debtor that the creditor will simply accept part payment in full and final settlement of the full
amount is not binding on the creditor.
what is the exception to the Pinnel’s case rule?
Provided a debtor gives the creditor something (other than just part payment) in return for the creditor’s
promise to forgo the balance of the debt then that something different will be valid consideration.
In Pinnel’s Case, for example, the creditor agreed to accept part payment because it was paid in advance of the due date (which was a benefit to the creditor).
how does promissory estoppel affect consideration?
Pinnel’s case = if creditor accepts part payment from a debtor, it can later go back on its word (unless the debtor gives consideration for the new promise)
HOWEVER
a creditor may be prevented (‘estopped’) from going back on a promise to accept part payment (even if the promise is not supported by consideration) if in all the
circumstances it would be unfair for the creditor to do so
promissory estoppel may apply to prevent the enforcement of strict legal rights in circumstances where it would be unfair (inequitable) to do so.
Central London Property Trust v High Trees House
what are some of the limitations on promissory estoppel as a doctrine?
(a) It can only be used as a defence when a party brings an action at common law to enforce their legal rights.
(b) There must have been a promise to waive strict legal rights.
(c) The promisee (usually a debtor) must have acted on the promise but not necessarily to their detriment. For example the debtor in High Trees simply paid half rent.
(d) With ongoing payments such as rent, the doctrine operates to suspend the strict legal right, which means the creditor can resume their right to full payment going forward by giving reasonable notice.
(e) To use any equitable doctrine a party must have ‘clean hands’.
what is the general rule regarding privity of contract?
which case?
only the actual parties to a contract are bound by it and therefore have rights and obligations under it
Tweddle v Atkinson = The claimant was engaged to be married and his father and future father- in- law made a contract providing that each of them would give a certain sum of money to the claimant. Even though the contract expressly provided that the claimant was to be entitled to enforce it, the court held that he could not do so.
the exceptions to the general rule of privity of contract arise from the Contracts (Rights of Third Parties) Act 1999.
under the act, a third party can acquire rights if….
- the contract expressly provides that they may acquire a benefit
- the term purports to confer a benefit on them
- note the second doesn’t apply if on a true construction of the contract it was not intended that the term be enforceable by a third party
NOTE For a third party to enforce a term of the contract in their own right, they must be expressly identified in the contract by name or as a member of a class (eg ‘employees’) or answering a particular description.
how does the meaning of ‘third party’ change when looking at agency?
parties in this contract =
principal is the one who confers the authority (either express or implied) onto the agent
third party = the person who the agent contracts with on behalf of the principal
for an agent to be deemed to have apparent (or sometimes called ostensible) authority, which three conditions must be satisfied?
- at some stage the PRINCIPAL must have represented (by words or conduct) that the agent had authority
- the third party must rely on this representation, believing that the agent has authority; and
- the third party must alter their position eg by entering into a contract.
An authorised agent may bind a principal to a contract with a third party. How might they do this?
- actual (express or implied)
- apparent authority (authority arising from estoppel) = where the principal gave the distinct but false impression the third party had authority and the third party relied on that representation
what is the general rule about minors entering into contracts?
- minors are not bound by contracts they have
entered
– the other party is bound and can be sued, but not the minor
what is the exception to the general rule regarding minors and their capacity to enter into a contract?
which case
- contracts for necessaries will bind minors
- necessaries =
i) supply of necessary goods and services
- what is necessary will be determined by the minor’s social status and their actual requirements at the time of purchase
ii) contracts of service for a minor’s benefit
- generally refers to contracts of employment under which the minor gains training and experience e.g. an apprenticeship so long as the contract is more favourable than not to the minor
Proform Sports Management Ltd v Proactive Sports
Management [2006]
what is the position regarding the validity of contracts entered into with those mentally impaired?
- mentally impaired or drunk
- contracts usually remain valid unless at the time the contract was made the person was incapable of:
i) understanding the nature of the transaction AND
ii) the other party knew that to be the case
- makes the contract voidable which means it is binding unless, and until, the person suffering from the mental impairment or inebriation terminates it
The owners of a company may limit its range of activities in the documents they register when the company is formed e.g. a restriction on the supply of alcohol.
What is the effect of a company acting outside of the range stated in its documents?
if a third party enters into a contract with the company will it still be valid?
effect = the contract is ultra vires
but if the third party is acting in good faith when it enters into a contract with the company, the company will be bound.
For a special resolution to pass via written resolution, the company must receive what?
agreements representing at least 75% of the total eligible voting rights in time
so if someone doesnt return their agreements to the company in time = doesnt pass
What needs to be filed with the Registrar of Companies following the appointment of the new director and what is the relevant deadline?
A copy of the relevant form within 14 days of the appointment.
