Contracts

Question 1

Definition

Answer 1

An agreement made between two or more parties whereby legal rights and obligations are created which the law will enforce.

Question 2

Examples of contracts

Answer 2

• NDA
• Buying/selling a house
• Applying for a credit card
• Netflix
• Applying for a loan

Question 3

3 elements of a contract

Answer 3

1. Intention to create legal relations
   Is there an agreement between two parties?
2. Offer and acceptance
   Did they intend their agreement to be legally binding?
3. Consideration
   Was the agreement supported by consideration?

Question 4

Offer

Answer 4

A proposal by one party to enter into a legally binding contract with another. Can be made orally, in writing, or by conduct.

Question 5

Principles to an offer

Answer 5

1. Made to a particular person, class of person, or to all the world
2. Offer must be communicated to the person accepting the offer
3. Terms must be communicated by the offeror to the offeree, and brought to his/her notice
4. May specify conditions to be followed by the person accepting the offer
5. An offer can be withdrawn at any time before acceptance
   An offer will lapse if not accepted within a time stated.

Question 6

Invitation to treat

Answer 6

Invitation to a party or parties to make an offer or what might appear to be an offer is a mere willingness to trade or deal. E.G. Shop owner displaying goods is inviting customers to make an offer.

Question 7

What are Terms

Answer 7

Promises/statements that parties have agreed will form part of their contract.

Question 8

Representations

Answer 8

Statements made by parties in the negotiating phase, does not become terms of the contract.

Question 9

Why is it important to state terms in a contract?

Answer 9

Because damages for breach of contract will be unavailable unless the statement breach was of a written term.

Question 10

Types of Terms

Answer 10

Conditions and Warranties

Question 11

Conditions

Answer 11

• Most important
• Breach of a condition will allow the other party to end the contract and seek damages

Question 12

Warranties

Answer 12

• Less important
• Not essential to a contract and are regarded as a subsidiary of the main purpose
• Basic nature of a contract is not changed by a failure to perform a warranty term.

Question 13

Express terms + example

Answer 13

• Promises or statements that the parties have made known to each other (oral or written)
• E.g. A tiler does the job but he does it well.

Question 14

Implied terms + example

Answer 14

• Implied a fact through the course of dealings, by necessity or by custom or trade usage.
• Implied by custom: routinely followed by the industry
• E.g. A repair man has the implied term that reasonable care and skill will be exercised in the performance

Question 15

Exclusion Clauses

Answer 15

• Seek to exclude or limit the liability that one party owes the other
• Business people attempt to limit their responsibilities under a contract so risk is reduced.
• Must be listed as a term of the contract.
• Must be known to the public.
  E.g. parking contracts, postage/transit contracts.

Question 16

Grounds for voiding contracts

Answer 16

• Lack of legal capacity
• Lack of genuine consent
• Legality of object

Question 17

Lack of legal capacity

Answer 17

• Parties must have the power to enter into an agreement
• Contracts which are entered into between people who aren’t equal

Question 18

Examples of lack of legal capacity + brief explanation

Answer 18

• Minors and Contractual Capacity Minors have protection and require contractual capacity, and contracts can’t be enforced unless it is for necessaries (Basics like food, education, health care, etc) or beneficial (Mostly work contract, enables to allow minors to earn a living)
• Mistake of Law/Fact
  Parties cannot claim they did not know applicable law when entering contract. Parties make a mistake of the facts in a contract, when entering.

Question 19

Lack of genuine consent

Answer 19

Where both of either party did not fully agree with the contract.

Question 20

Examples of lack of genuine consent + brief explanation

Answer 20

• Misrepresentation
  Statement of fact which is untrue and misleads one party, can be innocent or deliberate.
• Duress
  Forcing someone to sign a contract through excessive pressure.
• Undue influence
  When someone uses their power over another person
• Unconscionable Conduct
  When one party has taken advantage over a special disability of the other party

Question 21

Legality of object

Answer 21

If the object (purpose) of a contract is illegal the contract is void and has no legal effect.

Question 22

Examples of legality of object + brief explanation

Answer 22

• Restraint of Trade
  Purpose is to protect business interests/secrets. Involves terms that limit where, who, or what the employee may work.
• Void and Voidable contracts
  Formal contract that is illegitimate ad unenforceable because there was no true agreement at the information stage.

Question 23

Recession

Answer 23

Act of party ending a contract

Question 24

Types of discharge (There’s 5) + brief explanation

Answer 24

• By performance: Both parties have carried out their obligations
• By agreement: Contract ends when parties mutually agree to end it
• By operation of the law: Statute specifies that contracts will be ended without reference to wishes of the parties
• Frustration: Contracts cannot be performed because of circumstances
  outside the control of the parties
• Breach of Contract: Contract can be breached by breaking part of the contract or renouncing the contract