CONTRACT LAW

Question 1

What are the basic requirements to form a legally binding contract?

Answer 1

1. consideration
2. intention to create legal relations
3. agreement (offer and acceptance)

An OFFER must be valid (clear, certain and addressed to offeree), communicated to offeree; and not rejected revoked or lapsed.

ACCEPTANCE must be a mirror image of the offer, made by the offeree in response to offer; and communicated to the offeror.

Question 2

Most contracts do not need to be in writing to be enforceable. What are the exceptions?

Answer 2

1. a guarantee
2. a contract for the sale of land
3. consumer credit transactions

*** A claim under a simple contract must be brought within 6 years.

Question 3

What makes a DEED?

Answer 3

A deed is a document that makes it clear on its face that is a deed. Additionally:
1. It must be executed in the presence of a witness, and
2. it must be delivered to be effected
3. A promise to make a gift (that is, to give something without receiving consideration) is enforceable if made by deed
4. A conveyance of land must be by deed

*** A claim under a contract by deed must be brought within 12 years.

Question 4

When is there a valid offer?

Answer 4

An expression of willingness to contract on specified terms made with the intention that it is to become legally binding as soon as it is accepted by the person to whom it is addressed.

Question 5

An offer must be…

Answer 5

1. clear and certain (no further clarification needed);
2. addressed (from offeror) to the offoree; and
3. demonstrates intention to enter into a legal relationship (this is PRESUMED in commercial relationships. NOT presumed in non-commercial and family agreements –> this can be rebutted with evidence)

Question 6

What is an INVITATION TO TREAT? (consider exceptions)

Answer 6

an invitation to treat is the preliminary stage of negotiations e.g., ADVERTISEMENTS. An ITT is NOT an offer.

Examples:
1. the display of goods in a shop window.
2. placing goods on supermarket shelves.

EXCEPTIONS:
1. an advertisement of a REWARD usually constitutes an offer.
2. An advertisement may be a UNILATERAL OFFER - it prescribes an act, the performance of which constitutes acceptance [Carlill v Carbolic Smoke Ball: use of the ball constituted acceptance of the offer; created a contract].

Question 7

ITCLR

Explain Parker v Clark

Answer 7

1. Clarks were an elderly married couple
2. Parker was Mrs Clark’s niece - she suggested Mrs Parker move in with them. Mrs P was concerned as it meant she would have to sell her home.
3. Mr C wrote to Mr P stating that they would leave their home to Mrs P on their death. Ps sold their home and moved in with the Cs.
4. Cs then told Ps the arrangement was not working and they would have to move out. Ps brought action for breach of contract.
5. Ps were successful; Language in letters and surrounding circumstances indicated both parties ITCLR.
6. Ps entitled to damages.

Question 8

Consideration and ITCLR

Explain Esso Petroleum v Commissioners of Customs and Excise

Answer 8

1. Esso told customers that they would receive one free World Cup coin for every 4 gallons of petrol purchased.
2. They ran advertisements. C&CE claimed that the coins were liable to purchase tax as goods.
3. Esso claimed the coins were free gifts and therefore no sale - no ITCLR.
4. Court held there was ITCLR by Esso to supply the coins. Transaction was in a business setting, and was itself a legal offer beyond mere ‘puff.’
5. For contract of sale, there must be a transfer of the goods for monetary consideration. C held that despite ITCLR, there was NO consideration. Accordingly, there was no contract of sale by Esso.

Question 9

Part payment of debt.

Explain Re Selectmove

Answer 9

1. The company, Selectmove, had accrued arrears in the tax it owed under PAYE system of tax collection.
2. Company appealed on the grounds that a tax collector had met with the company and agreed that the company could pay arrears in intalments instead of being wound up.
3. Judge considered Williams v Roffey (varied agreement, good consideration if other party obtains some practical benefit).
4. Outcome: tax collector lacked actual authority to bind the Revenue, therefore agreement was not binding.
5. AND, did not go against decision in Foakes v Beer: practical benefit was not good consideration in law…
6. Practical benefit has not been extended to part payment of debt.

Question 10

Consideration

Explain Chappel v Nestle

Answer 10

1. Nestle contracted with a company manufacturing gramophone records to buy several recordings of music.
2. Chappel & Co held the copyright in these recordings.
3. Nestle offered to sell these records at a discount price to anyone presenting three wrappers from their chocolate bars.
4. The wrappers themselves were worthless and thrown away by Nestle.
5. HofL decided held that the wrappers did form part of the consideration for the sale of records despite the fact they had no intrinsic economic value in themselves.
6. Consideration need not be adequate, but must be sufficient. I.e., it should have some economic value.