Contracts

Question 1

What is the difference between an offer and an invitation to treat?

Answer 1

When an offer is accepted, the deal is legally binding whereas an invitation to treat is simply an inquiry of the price of a good or service.

Question 2

How does the law decide if there was an intention to create legal relations?

Answer 2

There must be unconditional assent (the mirror rule) to all terms. The last shot rule applies.

Question 3

Explain the concept of consideration in Anglo-American law

Answer 3

A party gives something of value in return for something of value. Can be unilateral or bilateral.

Question 4

What is the doctrine of privity of contract? Name 2 exceptions to this doctrine.

Answer 4

A contract cannot infer rights or impose its obligations upon any person who is not a party of the contract.

Question 5

What effect do exclusion clause have on consumer contracts?

Answer 5

1. Agents entrusted to execute the contract

2. People who would receive benefit from the contract

Question 6

What is the effect of the ‘parol evidence rule?

Answer 6

If the contract is in written terms, no outside evidence can be used to vary the terms of the written contract

Question 7

What is the difference between a void and a voidable contract?

Answer 7

• Void contracts are unenforceable by law

- Voidable contracts are valid agreements, but one or both parties can void the contract at any time

Question 8

What is meant by ‘common mistake’. What is the effect of a ‘common mistake’ on a contract?

Answer 8

Both parties are mistaken by the same thing.

Question 9

What is a misrepresentation?

Answer 9

1. A statement of fact
2. Stated at time before or of contract
3. Induced other party to join contract

Question 10

What are three forms of misrepresentation?

Answer 10

1. Innocent misrepresentation
2. Negligent misrepresentation
3. Fraudulent misrepresentation

Question 11

What constitutes undue influence?

Answer 11

When someone is pressured to enter into a contract. For example where there is a fiduciary relationship

Question 12

Explain the term rescission

Answer 12

The discharge of a contract by:

1. Performance
2. Agreement
3. Breach
4. Frustration

Question 13

What is a contract in restrain of trade and is this a legal contract?

Answer 13

A legal contract that prevents the sellers or employee from engaging in a similar business within a specified geographical area and within a specified period

Question 14

To be classed as a contract for the sale of goods, there must be:

Answer 14

1. A contract
2. Sale of goods
3. Transfer of property
4. Money consideration

Question 15

What is the general rule for transfer of ownership and risk in B2B?

Answer 15

The moment risk pass from seller to the buyer depends on the intention of the parties, as expressed in their agreement

Question 16

What is the retention of title clause?

Answer 16

Seller retains ownership fo the goods until they are paid for in full, but the buyer is allowed to take possession of the goods. But the risk of loss or damage to the goods did pass on to buyer

Question 17

What are the 5 rules for transfer of ownership and risk for specific goods?

Answer 17

1. Unconditional sale of good in deliverable state: ownership passes at the time contract is made
2. Unconditional sale of good not in deliverable state: ownership passes when the good are made in a deliverable state, and notification has been given to buyer
3. Specific goods in a deliverable stat but some action must first be take to determine price: ownership passes when action is done and buyer is notified
4. When goods delivered subject to approval: ownership passes when approval given or the time for the return of goods has expired
5. For unascertained goods: ownership passes when the goods are identified and have been removed for the bulk

Question 18

What is the transfer of ownership rule for consumer?

Answer 18

The goods remain at the seller’s risk until they have been delivered to the consumer

Question 19

What are the 5 implied terms?

Answer 19

1. Seller has the right to sell
2. Description
3. Satisfactory quality
4. Fit for purpose
5. Model, sample and installation

Question 20

What are the aspects of statutory product liability?

Answer 20

It imposes strict liability for products. The consumer does not need to show fault because of a breach of duty of care. Only need to prove the product was defective and it caused the damage

Question 21

What is the privity of contract? What are three exceptions to this?

Answer 21

Only the parties to the contract are entitled or bound by the terms of contract. Exceptions are agency, leasing and insurance.

Question 22

What are three elements for the formation of a contract?

Answer 22

1. Offer and acceptance
2. Intention to create legally binding relationship
3. Presence of consideration

Question 23

What is a warranty?

Answer 23

A breach of warranty gives the innocent party the right to claim damages. It does not give the innocent party the right to treat contract as terminated.

Question 24

What are the requirements for the validity of exclusion clauses?

Answer 24

1. Contra proferentem rule: The exclusion clause must cover the exact circumstances in question
2. Main purpose rule: The clause is not intended to defeat the main purpose of contract
3. Fundamental breach: Judges decide if the parties really meant to exclude liability for fundamental breach

Question 25

How do you test validity of exclusion clauses for B2B transactions?

Answer 25

Is the exclusion clause fair and reasonable given the circumstance in which contract was made?

Question 26

What is discharge by frustration?

Answer 26

It will be frustration if:

• events make it impossible to perform the contract
• outside events have made the contract fundamentally different

Question 27

Reasons for discharge by frustration

Answer 27

1. Destruction of subject matter
2. Inability to achieve main object
3. Changes in the law
4. Dear or permanent illness of a party