Contract Law Flashcards
What is a contract?
A contract is a legally binding agreement between two or more parties that creates mutual rights and obligations.
— It establishes a commitment by each party to perform certain actions or refrain from specific activities and is enforceable by law if the terms are breached.
What is a Void Contract?
A void contract is a contract that never had legal effect from the beginning because it lacks essential elements (eg. An illegal purpose). It is as if the contract never existed.
What is a Voidable Contract?
A voidable contract is a contract that is valid but can be cancelled by one party due to certain issues (eg. Misrepresentation or coercion).
— It remains enforceable unless the party with the right to void it (the party who was coerced) chooses to do so.
What is an Unenforceable Contract?
An unenforceable contract is a contract that is valid but cannot be enforced in court due to a lack of legal evidence (eg. Not in writing when required by law, like under the Statute of Frauds) (eg. A will that was written without witnesses)
What is an Offer?
An offer is a clear and unambiguous statement of the terms upon which the offeror (person who makes the offer) is willing to contract, should the offeree (person to whom the offer is made) decide to accept.
What is a Unilateral Offer?
The offeror makes a promise.
The contract is formed when the offeree performs the required act.
The offeree is not obligated to act.
Example: Reward contracts (Carlill v. Carbolic Smoke Ball Co.)
What is a Bilateral Contract?
Both parties exchange promises.
The contract is formed upon mutual promises.
Both parties are obligated to perform.
Example: Sale of Goods, Employment Contracts
What are the Requirements of a Valid Offer?
The terms of the offer must be clear, certain and complete.
The offer must be communicated to the other party.
The offer must be made by written or spoken words or inferred by the conduct of the parties.
The offer must be intended as such before a contract can arise.
What is an Invitation to Treat?
An invitation to treat is a statement made in circumstances where it is not intended that a contract will result if the person to whom the statement is made indicated their agreement to its terms.
An invitation to treat only invites an offer to be made.
What are the conditions of the Termination of an Offer?
An offer that is validly terminated cannot later be accepted, and likewise, once an offer has been accepted, it cannot be terminated.
1. Rejection or Counter-offer
2. Revocation
3. Lapse of Time
4. Death
Termination of an Offer: Rejection
Once the offeree chooses to reject the offer then the offer is terminated.
A counter-offer will also be viewed as a rejection - “If the response to the offer is anything less than a clear and unequivocal acceptance of the exact terms of the offer, then the response will be seen as a counter-offer.”
Termination of an Offer: Revocation
As a general rule, an offeror can revoke an offer at any time until it is accepted. This rule applies even where an offer states that it will remain open for a specified time.
For revocation of an offer to become effective, it must be communicated to the offeree.
Termination of an Offer: Lapse of Time
Offers do not remain open indefinitely.
Where no express deadline has been set by the offeror, acceptance must take place within a reasonable time, that being judged on a case-by-case basis.
Termination of an Offer: Death of the Offeror
After acceptance of the offer, depends on the nature of the contract. The Courts will have regard as to whether the contract be performed (by someone else in the offeror’s life who may be able to perform the contract), whether the death frustrated the contract, etc.
Termination of an Offer: Death of the Offeree
An offer, even one made to the world at large, is made on the assumption that it is to living people and that it is not made to death people (ie. The offer lapses on the death of the offeree).
Acceptance of an Offer
Acceptance is a final and unequivocal expression of agreement to the terms of an offer.
Conditions of a Valid Acceptance
Must be oral, written or implied from conduct.
Must be clear, unconditional and unequivocal.
Must be communicated to and received by the offeror.
Must be made by the person to whom the offer was made or someone with the authority to accept on their behalf.
What is Express Acceptance?
A party may indicate acceptance expressly, by making a definitive statement, either orally or in writing, to the effect that they accept the offer without condition.
What is The Postal Rule?
This is a rule established by case law, which constitutes an exception to the normal rule that an acceptance only becomes effective once it is actually received by the offeror.
The postal rule provides that where both parties contemplate acceptance, taking place by post then the acceptance become effective once it is posted, rather than once it is received.
This only applied to letters of acceptance sent by post, and telegrams.
What are Contractual Terms?
Contractual terms are the provisions or stipulations that form part of a legally binding agreement between parties. These terms outline the rights, responsibilities and obligations of the contracting parties.
What is the Parol Evidence Rule?
The Parol Evidence Rule is a principle in contract law that restricts the use of the extrinsic (oral or written) evidence to alter or add to the terms of a written contract.
Under this rule, when a contract is fully written and intended as the final expression of the parties’ agreement, evidence of prior or contemporaneous oral agreements or statements cannot be introduced to contract, vary or add to the written terms.
Exceptions to the Parol Evidence Rule
- To prove custom or trade usage.
- To clarify any ambiguous language.
- To rectify a mistake of the parties where the terms were not clearly expressed in the written contract.
What is the Contra Proferentem Rule?
The Contra Proferentem Rule states that if there is ambiguity in a contract term, the term will be interpreted against the party that drafted or imposed the term. This rule aims to protect the weaker party in cases where one party has more control over the contract’s wording, often in standard-form contracts.
What are Implied Terms?
Implied Terms are provisions that are not expressly stated in a contract but are introduced by the courts or statutes to reflect the intention of the parties or the ensure fairness.
Common Basis for Implied Terms
- Implied by Fact.
- Implied by Custom or Usage.
- Implied by Law.
- Implied by Fact
Terms are implied because they are necessary to effect the parties’ presumed intentions. This is often assessed using the business efficacy or officious bystander tests.
- Implied by Custom or Usage
Terms can be implied if they are standard in a particular trade or industry, provided both parties are aware of the custom.
- Implied by Law
Statute and Common Law
What is the Business Efficacy Test?
A term will be implied if it is necessary to make the contract work.
What is the Officious Bystander Test?
A term would be implied if an obvious bystander would think the term was so obvious that it goes without saying.
What are Warranties?
Warranties are less important terms that are ancillary to the main purpose of the contract.
They do not form the core of the agreement.
What are Innominate Terms?
Innominate or Intermediate Terms are contractual terms that cannot be classified strictly as conditions or warranties at the outset.
What is an Exclusion Clause?
An exclusion clause is an provision in a contract that seeks to limit or exclude one party’s liability for certain types of breaches, losses or damages.
When does a contract end?
- Performance
- Agreement
- Frustration
- Breach
