Contract Law - Acceptance, Legal Intention and Capacity

Question 1

Acceptance

Answer 1

• Offeree agreeing to be bound by the offer
• Offeror can specify method of acceptance
• Must be unqualified otherwise this would constitute a counteroffer and makes the original offer incapable of acceptance
• Offer can only be accepted by the person to whom it is addressed/a member of a class to which an offer has been directed
• Offeree must know of the offer in order to accept it (applies to both bilateral and unilateral contracts)
• Requires a positive action by offeree - therefore, silence does not usually constitute acceptance
• If no time for acceptance agreed the offer will lapse after a reasonable time which will depend on the nature of the subject matter

Question 2

Postal Rule

Answer 2

Acceptance by post creates contract at the moment of posting unless:

• Letter was not properly addressed and stamped
• Not reasonable for acceptance to be by post
• Offer stipulates that acceptance is not effective until it is received

Only applies to acceptance

Question 3

Order online

Answer 3

Is an OFFER

Question 4

Rebuttable presumption parties did NOT intend to be legally binding

Answer 4

Domestic situations

Question 5

Rebuttable presumption that parties DID intend to be legally binding

Answer 5

Commercial situations

Not easy to rebut - there must be clear and unambiguous evidence

Question 6

Lacking capacity to be bound

Answer 6

1) Minors
2) Mental incapacity
3) Intoxication

Question 7

If contract entered into by someone who lacks the capacity

Answer 7

Voidable

In the case of mental incapacity and intoxication the other party must KNOW they lacked capacity

Can ratify the contract if they later recover

Also required to pay a reasonable amount for necessary goods and services

Question 8

Offers

Answer 8

Must be definite and certain in its essential terms

Subject matter must be certain

Statement made in response to a request for information is not an offer (e.g. asking someone how much they would sell their car for, a response of £5,000 is not an offer)

Question 9

Invitations to Treat

Answer 9

Fall short of being an offer

First step in the negotiations of a contract

Question 10

Unilateral contracts

Answer 10

Advertisements do constitute an offer

Offeror promises to do something if the person receiving the offer (offeree) does something in return and the offeree actually does what the offeror has asked

E.g. reward in return for a lost dog

Not accepted until performance is completed

Question 11

Termination by Offeror

Answer 11

Retraction of an offer by the offeror prior to acceptance

Direct revocation: direct communication with the offeree

Indirect revocation: if offeree receives

1. Correct information;
2. From a reliable source;
3. Of acts of the offeror which would indicate to a reasonable person that they no longer wish to make the offer

Revocation must be received by the offeree to be effective and can take place at any time up until the point of acceptance (save for collateral contracts and unilateral contracts once performance has begun)

Question 12

Bilateral Contracts

Answer 12

Offer can be accepted by promise or performance provided the offeror has not stipulated a method of acceptance

Question 13

Termination by Offeree

Answer 13

Express rejection: statement by offeree that they do not intend to accept the offer. Effective once received by the offeror

Counter-offer: offer made by the offeree to the offeror which relates to the same subject matter as the original offer but differs in its terms. A rejection of the original offer and, thus, terminates it

Lapse of time: failure by offeree to accept offer within a specified time frame or if no deadline was specified, within a reasonable period. What constitutes a “reasonable period” will be determined by the courts taking into account the subject matter of the contract

Question 14

Termination by Operation of Law

Answer 14

• **Death ** of offeror or offereee
• Destruction of subject matter
• Supervening illegality
• Failure of any condition contained in the offer

Question 15

Method of acceptance stipulated in offer

Answer 15

If offeree does not use this method then offer has not been accepted unless the method used is no less advantageous than the one prescribed

Question 16

Acceptance by Conduct

Answer 16

E.g. buying something online, the seller delivering it is acceptance of your offer to buy

Question 17

Acceptance must be communicated

Answer 17

Unless this requirement has been waived by the offeror

Question 18

Minors

Answer 18

Minors cannot be bound by a contract but can ratify it once they turn 18

General rule is contract is voidable

Exceptions:

1. Contract entered into for necessary goods and services at a reasonable price
2. Employment contracts
3. Contracts for the acquisition of a permanent interest in property

Minors’ Contracts Act 1987: if someone has transferred property to a minor, Act provides that a court can require the minor to transfer property back