Contract Law: Formation and Content

Question 1

Contract

Answer 1

An agreement between two or more parties that is legally enforceable

Question 2

The privity of contract rule

Answer 2

States that only the parties that are involved in the contract are bound or entitled by its terms. Third parties have no obligations, but also no rights (there are exceptions).

Question 3

Formation of a contract, what are the elements?

Answer 3

1. Agreement consistent of offer and acceptance
2. Intention to create a legally binding relationship
3. Presence of consideration

Question 4

An offer becomes legally binding if it fulfills these points:

Answer 4

1) It is unequivocal (ondubbelzinnig)
2) It is communicated
3) Terms are certain
4) Offer must not have been terminated

Question 5

Offer

Answer 5

Statement of willingness to contract according to the terms proposed with the intent that it will become a binding contract if accepted

Question 6

Invitation to treat

Answer 6

Invitation to negotiate

Question 7

Invitation to tender

Answer 7

It invited people to state how much they are going to charge to supply a good or a service. If a person responds by making a tender, it becomes an offer. If accepted, the terms that were agreed upon in the tender are then binding.

Question 8

When can an offer be terminated?

Answer 8

When it has been REVOKED (withdrawn by offeror), LAPSED (it automatically terminates after reasonable time interval or specified time limit), or when is met with a COUNTER OFFER

Question 9

Postal rule

Answer 9

The acceptance via post becomes effective once the letter has been posted. In civil law systems, acceptance via post becomes effective only once it is received.

Question 10

Last shot rule

Answer 10

Conditions laid down in acceptance will govern the contract

Question 11

Two types of consideration

Answer 11

• Bilateral / Executory (tweezijdig)
  (sides exchange promises)
• Unilateral / Executed (eenzijdig)
  (an act that was done in return for a promise)

Question 12

Characteristics of consideration

Answer 12

• Must be mutual
• Does not need to be adequate (value doesn’t have to be equal)
• Must be sufficient (it needs to have a recognizable economic value)

Question 13

Parol Evidence Rule

Answer 13

If a contract is in a written form and can be treated as an entire contract, no external evidence will be considered. This can be circumvented if the party can prove that the contract was partly oral and partly written.

Question 14

Representation

Answer 14

Refers to a statement that was made only as an inducement to enter the contract

Question 15

Contract terms are classified into…

Answer 15

• Conditions
• Warranty
• Innominate term

Question 16

Express terms

Answer 16

Terms that have been specifically agreed upon. However, the court does not have to accept these own classifications as warranties or conditions.

Question 17

Implied terms

Answer 17

Terms that are implied into the contract. This can be done through customs, statute, or by court.

Question 18

The English law has a two stage approach for exclusion clauses

Answer 18

1) Judicial rules (rules of construction)

2) Legislation

Question 19

Judicial rules applied to exclusion clauses are:

Answer 19

• Contra proferentem rule:
  Exclusion clause must cover the exact circumstances in question. the exclusion clause will be interpreted strictly and any ambiguity will be interpreted as a disadvantage for the party relying on the clause
• Main purpose rule:
  Presumes that the exclusion clause is not intended to defeat the main purpose of the contract
• Fundamental breach:
  Parties should not have meant to exclude liability for fundamental breach

Question 20

Exclusion clause / Exemption clause

Answer 20

Excludes all liability of the party for breach of contract, misrepresentation or negligence

Question 21

Limitation clause

Answer 21

Aims not to exempt a party from all liability, but to reduce that liability

Question 22

The acceptance via post becomes effective once the letter has been posted. In civil law systems, acceptance via post becomes effective only once it is received.

Answer 22

Postal rule

Question 23

Aims not to exempt a party from all liability, but to reduce that liability

Answer 23

Limitation clause

Question 24

Excludes all liability of the party for breach of contract, misrepresentation or negligence

Answer 24

Exclusion clause / Exemption clause