Contracts

Question 1

Contracts that do not need to be in writing are?

Answer 1

Simple Contracts

Question 2

Contracts that need to be in writing include? Known as speciality contracts.

Answer 2

Transfers of Land, Guarantees, Bills of Exchange, Consumer Credit Agreements

Question 3

To form a contract you must have?

Answer 3

Capacity - not be a minor or of unsound mind. Must note this does not make the contract void - it is up to the injured party if they would like to VOID the contract once it is formed on these grounds.

Question 4

Contracts can be

Answer 4

Void, voidable or unenforceable

Question 5

Void is?

Answer 5

Not a contract at all, never was one. It did not have the correct terms to be a contract e.g it was formed outside of the acting powers or it was to achieve an illegal purpose.

Question 6

Voidable is?

Answer 6

It can be set aside if the injured party wants to BUT it is not immediately void. E.G the contract was made under duress or with a minor.

Question 7

Unenforceable is?

Answer 7

The contract is valid in itself BUT if one of the parties does not co-operate then you cannot make them. There is no option to compel them in to performing.

Question 8

When would an unenforceable contract happen?

Answer 8

The contract was not in the correct form - e.g a credit agreement that isn’t in writing.

Question 9

What happens when one of the parties has greater bargaining power than the other?

Answer 9

There is the option for the court to intervene. If there has been some dodgy abuses of power it is possible that if the terms are broken you will not be held liable.

Question 10

A contract must have?

Answer 10

Offer and Acceptance. Consideration. Intention to be legally bound.

Question 11

What is an offer?

Answer 11

An offer is a definite promise to be bound on specific terms decided between the parties. Can take any form BUT must be communicated to the offeree. There must be an intention to be bound.

Question 12

What is a unilateral contract?

Answer 12

Only one party is known for example Carlill vs Carbolic Smoke Ball - the offer to provide an £100 reward was binding as there was an intention to be bound and so it was an offer.

Question 13

What is a bilateral contract?

Answer 13

Both parties are known - it is very clear who is involved and bound by the contract.

Question 14

What is an invitation to treat?

Answer 14

Invitation to someone else to make you an offer. Examples include adverts, shop window displays, price lists on websites. It is encouraging you to buy but the person with the display for example is no obliged to sell the product to you. There has to be an OFFER in response to the invite.

Question 15

What is a statement of intention or a supply of info?

Answer 15

Any statement made early on in negotiations will likely not be treated as an offer. Example Harvey v Facey - the couple that asked the man how low he would be willing to sell the land for and the accepted his response - it was too early on to be classed as an offer capable of acceptance.

Question 16

Vague Statements?

Answer 16

Cannot constitute an offer. There has to be clear terms e.g ‘selling a car for about £5000 is not enough’.

Question 17

How can an offer be terminated

Answer 17

Rejection and counter offer. Revocation (by yourself or another RELIABLE third-party). Lapse of time. Failure to meet the pre-conditions of the offer.

Question 18

What happens when you make a counter offer?

Answer 18

The original offer is then taken off the table. You can no longer accept the original offer.

Question 19

What happens when you request additional information about the offer?

Answer 19

It is not terminated. So long as the query does not destroy the offer itself, so for example querying delivery timing is not a counter offer and so does not take the original offer off the table.

Question 20

When can revocation occur?

Answer 20

At any time before acceptance.

Question 21

When can revocation NOT occur? - Collateral Contracts

Answer 21

When the offeree has paid the offeror to keep the offer open. This creates a collateral contract and the offeror could be sued for loss of the opportunity to accept the original offer.

Question 22

When can revocation NOT occur? - Unilateral Contracts

Answer 22

If the performing party in a unilateral contract has started to perform the terms of the contract then revocation cannot occur. Also it would likely be impossible to inform all potential offerees that this contract has been revoked due to the nature of the contracts.

Question 23

What are the terms of Lapse of Time?

Answer 23

There might be a stated amount of time in the acceptance terms OR it just lapses after a ‘reasonable’ amount of time otherwise. If either offeror/ee dies then the offer lapses.

Question 24

What constitutes Acceptance?

Answer 24

Unequivocal and Unconditional agreement to all terms of the contract. It can be oral/in writing/by conduct. Unless the terms state a specific kind then any reasonable acceptance will suffice.

Question 25

Who needs to hear about acceptance?

Answer 25

The offeror must be told about the acceptance. Acceptance doesn’t count until this is done. FAX - the acceptance has been communicated when it is received by the system and can be read. EMAIL - communicated when received by the system and can be read.

Question 26

What is not acceptance?

Answer 26

Silence - this is not valid. There has to be an actual act for it to be acceptance.

Question 27

Postal Rules?

Answer 27

Acceptance counts as soon as the letter has been posted. Acceptance is valid even if the post is never received UNLESS the terms say that it has to be received by the offeror e.g if the contract states the need for acceptance in writing - means it would have to be received.

Question 28

What is consideration?

Answer 28

The price (can be an act or forbearance) that one party bought the other party’s act or promise for. What did one party supply to the other to be able to lock down that contract.

Question 29

What does consideration have to be?

Answer 29

Executed - performed act e.g paying for goods in exchange of a promise. Executory - promise for a promise e.g you will pay at a later date when something is delivered. Sufficient but NOT adequate - so can be anything that is capable of having value attributed to it. BUT it doesn’t need to have a value that aligns with the other half of the deal.

Question 30

Waiving rights and consideration

Answer 30

If you waive your rights to something, so long as a value can be attributed, this could count as a valid consideration.

Question 31

What can consideration NOT be?

Answer 31

Past consideration - something that has already been done is not enough to be consideration for a new contract. Statutory duties doesn’t count as consideration because you already have to do it so you aren’t adding anything new that can be counted as consideration. Similarly performing an existing contractual duty is not enough to be classed as good consideration. It has to be the case that the duties were exceeded for it to be consideration. Anything for an illegal contract is not consideration.

Question 32

Implied promises and consideration

Answer 32

Sometimes what you are being asked to do as part of your side of the contract implies a promise by the other party. This creates implied consideration.

Question 33

Consideration and new contracts

Answer 33

Williams v Roffey Bros - the fact that both parties got something out of the added payment meant that there was effectively a new contract and so this counted as consideration. Even though they weren’t actually doing something out of the realm of the initial contract.

Question 34

Consideration and lesser sums

Answer 34

You cannot give a lesser sum than agreed and call it consideration. Links to idea that you always have to give something.

Question 35

Exceptions to lesser sum

Answer 35

Alternative consideration - agreed with and accepted by the offeror. Bargaining between creditors - all agree to a part payment. Payment by third party - counts as enough.

Question 36

What is intention to create legal relations?

Answer 36

Both parties agreeing to be bound by the terms in a legal relationship. There has to have been a CLEAR intention to have been legally bound for it to count. Normally very obvious but there are two situations where it cannot just be presumed that this was the intention.

Question 37

What are the rebuttable presumptions?

Answer 37

If the arrangement was social/domestic BUT there was clear intention or the partners were separated partners and not living together amicably and capable of forming social/familial casual contracts. Have to see the actual evidence of intention though. In business situations that is always there hence the existence of these waivers specifically for domestic/social.

Question 38

What does subject to contract mean?

Answer 38

That there might not be a contract under which the parties intended to be legally bound, however, the agreement that exists in its place could be enough to constitute some sort of binding agreement that the parties cannot get out of.

Question 39

What does privity of contract mean?

Answer 39

That you were not a party to the contract capable of suing if it is breached. You cannot enforce a contract against parties who didn’t provide consideration. You are not a full party to the contract.

Question 40

Exceptions to privity of contract?

Answer 40

You are explicitly named as a third party on the contract in the context of agents and trusts. Both of these give the power to either claim on a contract or contract on behalf of other parties who would then be the actually privy parties.

Question 41

Terms are?

Answer 41

Part of a contract - the parties are bound by them

Question 42

Representations are?

Answer 42

Statements made during negotiations that may attempt to lure people in - they might eventually become real terms but there is a need to know whether they are or not because if they aren’t the rights to claim against them are different. If it does become a term there is then an option to claim against it for misrepresentation if it was found to be untrue.

Question 43

Express terms are?

Answer 43

Those expressly included, specifically agreed, can be oral/written/both. Must be clear. Must be enforceable.

Question 44

Implied terms are?

Answer 44

Those which are not expressly included but the party knows are there because; of the type of contract - these sorts of terms/duties are just widely known to be something that exists in these contracts. Implied by the courts - they should have been included as express so the courts imply a term because without it the contract is actually unworkable. The court will also put in terms that comply with custom and parliamentary acts.