Contract Unit 1 Flashcards
What must you have to enter a contract?
Capacity
what are the 3 elements to contract formation
- agreement (offer and acceptance)
- intention to create legal relations
- consideration
Intention does not necessarily mean the offeror’s actual intention, what point of view do courts consider
reasonable person
what does invitation to treat imply?
a preliminary statement, ‘thinking’ of, not an offer
True or False, advertisements are usually invitations to treat?
True, however adverts can be an offer (Carill V Carbolic Smoke Ball Co 1893)
in general terms what is an offer?
offer is a definite promise with specific terms
What is a Bilateral contract
promise in return for a promise –> offer and acceptance take the forms of a promise
What is a unilateral contract
only one party makes a promise–> promise in return for a reward
What are unilateral contracts otherwise known as?
IF contracts
Is an auctioneers request for a bid an ITT?
Yes
Why do businesses outsource functions?
on the basis it makes it more commercially viable to pay outside contractors
is a request for a tender generally an ITT?
Yes, can however be unilateral contracts in specific circumstances
What are the three types of termination of offers?
Revocation, Rejection, Lapse
What is rejection
offeree express rejects an offer
What does a counter offer do?
impliedly rejects the offer
what is revocation
offeror takes the offer off the table
what does successful revocation require
communication to the offeree
suggest how revocation may be communicated
by a reliable third party
how can an offeree reject an offer?
expressly or by implication
what is meant by a lapse?
offer disappears from the table by itself
an offer can expire after a reasonable amount of time, what circumstances show reasonability?
an offer on perishable goods would terminate after a short time
what is acceptance?
the unqualified assent to the terms of the offer
what is assent?
the expression of approval or agreement, voluntary
what does unqualified mean?
not messing around with the terms of offer, aka full acceptance
what do you need for acceptance?
unqualified assent which is communicated to the offeror
Describe Battle of the forms
a situation where it may be vital to decide whether a particular communication is an acceptance or counter offer is where there is a BOF between 2 businesses
Whether parties have reached a complete agreement is judged objectively, however what context needs to be considered?
- Whether parties are in same trade
- Trade usage
- Whether agreement has been acted on for any length of time and
- Whether there is an objective mechanism for resolving any uncertainty eg an arbitration clause
what is the general rule of acceptance?
it MUST be communicated
what is the postal rule?
an exception to the general rule that acceptance must be communicated, providing certain conditions are satisfied a letter of acceptance will be binding when posted
What are some limitations of the postal rule? (name 3)
o Only applies to acceptances, not other types of communication
o Only applies where was reasonable to accept by post
o Must be stamped, addressed, posted
o Postal rule can be excluded by the offeror [explicit of implied, aka if says to ring?]
o BUT an example in engage says they need to ‘hear by’ a certain date, which in this case means they have implied that if acceptance is made by post, it must be received in order to be effective
o Offeror can also always contact offeree to check acceptance – offeree may not know letter has been lost of delayed whereas offeror will know they have no received reply
o Need to also query if has been properly stamped, addressed, posted
is there the possibility for retraction of the postal rule?
- Strict application of postal rule would mean retraction of acceptance is impossible
- BUT if offeror is ignorant of acceptance, then cannot have acted on it therefore cannot suffer from its withdrawal
- Position unknown, no English authority
What does a commercial agreement entail?
- Not just agreements between businesses
- Also businesses and individuals
- And agreements between individuals not in business [eg individuals on ebay, online shopping]
what does a domestic agreement entail?
- There is some other relationship between parties- family, close friends
- The presumption that there is no intention to create legal relations unless the facts show otherwise Balfour and Balfour (1919)
what is a rebuttable assumption?
a legal principle that presumes something to be true unless proven otherwise
what is meant by capacity
the legal power to make a contract
what types of people don’t usually have the capacity to make a contract?
minors, mentally impaired or certain corporations
why are minors exceptions to the rule they cannot make contracts?
not bound by contracts they have entered into
what other contracts are not binding on minors?
trading contracts e.g., selling products- don’t fall under contracts for necessaries (Wayne Rooney case)
what are contracts of necessaries?
include supplies of goods and services, extend beyond essentials
what type of people fall under the category of mental incapacity?
mental impairments or drunk when a contract is made
what contracts are minors bound by?
contracts of service, as on a whole they are beneficial to them e.g., contracts of employment where a minor receives training
what happens if someone with a mental incapacity makes a contract?
its generally valid unless the person was incapable of understanding and the other party knew this
its voidable, which means its binding unless and until the person suffering rescinds it
how is a constitution formed?
when 2+ people form an enterprise they are regarded as an independent person by law
what is a constitution?
an independent person by law
how are corporations treated?
as a separate legal entity from people constituting it
what are the three types of corporation?
registered companies, statutory corporations, limited liability corporations
describe what is meant by a registered company
- Most corporations = registered under the Companies Act 2006
- CA 06 effectively abolished ultra vires
- Therefore if company acts contract beyond the powers granted in its constitution, then both parties are still bound by the act
describe what is meant by a statutory corporation
- Made by statute
- Include local authorities
- Any contract entered outside of the stated powers will be declared ultra vires and therefore void
describe what is meant by a limited liability partnership
- Created by Limited Liability Partnerships Act 2000, unlimited capacity
James put an advertisement in a newspaper saying he will give £100 reward to anyone who returns his lost wallet.
Indicate whether the following statement is TRUE or FALSE.
The advertisement is an invitation to treat.
False
Although most advertisements are invitations to treat, an advert of reward has traditionally been treated as an offer as there is an intention to be bound as soon as the information is given – Williams v Carwardine (1833).
Sally attends an auction to be held without reserve. She makes the highest bid for a grandfather clock but the auctioneer refuses to knock the clock down to her.
Which one of the following statements is CORRECT?
As the auction was without reserve and Sally was the highest bidder the auctioneer should have accepted her bid. As he did not, he may be liable to Sally in damages.
Is the following statement TRUE or FALSE?
The postal rule will not apply if the offeror stipulates that he needs to be notified of acceptance
true
Holwell Securities v Hughes in which the offeror required “notice in writing”
Kamla sends an e-mail to Tony offering to sell him her computer for £500. Tony sends an e-mail back saying that he is only prepared to pay £450. Later that day, not having received a reply from Kamla, Tony changes his mind and sends her an e-mail saying ‘ I’ll buy the computer for £500. Can you deliver it to me or should I collect?’. Kamla no longer wants to sell the computer.
Which one of the following is CORRECT?
There is no contract between Tony and Kamla.
Kerry offered to buy Rafiq’s car for £5,000. She said that she would keep her offer open until 1 June. On 14 May, Rafiq posted a letter accepting Kerry’s offer. This letter was lost in the post. In the meantime on 13 May Kerry posted a letter revoking her offer which Rafiq received on 18 May.
Which one of the following statements is CORRECT?
If the postal rule applies Rafiq’s acceptance is effective when the letter of acceptance is posted.
Faro sent a letter to Paul asking if Paul would like to buy her exercise bike for £200. Before Paul replied he met Faro’s brother who told him that Faro had sold the bike to someone else.
Is the following statement TRUE or FALSE ?
Faro’s offer has not been revoked because revocation must be by the offeror or the offeror’s agent.
False
Max sent an e mail to Gareth offering to sell his plasma TV for £150. Gareth immediately sent an e mail to Max asking if Max would be able to deliver the TV to his home. Max did not reply and sold the TV to his neighbour for £200. The next day, not realising that the TV had been sold, Gareth e mailed Max and said he would buy it for the £150 asked.
Is the following statement TRUE or FALSE?
There is not a contract between Max and Gareth as Max revoked his offer when he sold the item to his neighbour.
False
Is the following statement TRUE or FALSE?
Minors do not have legal capacity to enter contracts and so will never be liable for breach of contract.
False
An unincorporated association is not a separate legal entity with capacity to enter a contract.
True or False
True
A registered company can be bound by a contract outside its stated range of activities provided the other party acted in good faith.
True or false
True
Limited liability partnerships have limited legal capacity to enter contracts.
True or False
false- unlimited capacity
