Contracts Part 1

Question 1

Contract

Answer 1

a voluntary exchange of promises that is enforceable by courts.

Question 2

Consensus (Meeting of the Minds)

Answer 2

parties must come to a common understanding of their obligations and responsibilities (terms must be clear and unambiguous).

Question 3

The three elements of a contract

Answer 3

1) Offer
2) Acceptance
3) Consideration

Question 4

Offer

Answer 4

tentative promise that contains the terms of the anticipated contract.

Question 5

What must an offer contain?

Answer 5

must contain all important terms such as parties, property, and price.

Question 6

Mellish Rule

Answer 6

exemption clauses must be communicated at the time of entering the contract, no later.

Question 7

Offer Exemption Clauses

Answer 7

meant to limit liability.

Question 8

Standard Form Contracts

Answer 8

no bargaining power and frequently contain one-sided terms.

Question 9

Contra Proferentum

Answer 9

Ambiguities interpreted in favour of the party forced to accept the terms.

Question 10

End of Offer

Answer 10

Can specify a time and not not specified, then end at a reasonable time.

Question 11

What are the three ways to end an offer?

Answer 11

1) Revocation: if communicated.
2) rejection by offer: party who receives offer.
3) Counter-Offer: acts as rejection.

Question 12

Acceptance

Answer 12

Commitment by offer to be bound by terms of offer.

• Must be compete and unconditional (addition of any terms = counter-offer).
• Must be communicated.

Question 13

Unilateral Contract

Answer 13

Acceptance is performance of contract.

Question 14

Consideration

Answer 14

an exchange of benefits which may be money, services, goods, or promises.

Question 15

Gratuitous Promises

Answer 15

These are one-sided promises and are not enforceable.

Question 16

Exception of Services (Quantum Meruit)

Answer 16

must pay a reasonable amount for services requested and received.

Question 17

Consideration Exceptions

Answer 17

Parties can change contract obligations, but all parties must receive ‘new’ consideration.

Question 18

Gratuitous promises are not binding on promisor with some exceptions:

Answer 18

• taking less in full satisfaction of debt is binding.
• Promissory Estoppel: reliance on gratuitous promise may b used as a defence only.

Question 19

Past Consideration is No Consideration

Answer 19

If consideration has already been given, it cannot support a new contract.

Question 20

Void

Answer 20

there never was a contract and both parties are free from obligations (e.g., marriage where one party was already married).

Question 21

Voidable

Answer 21

a valid contract. However, one party has the right to escape the contract if they so choose (e.g., where one spouse was so intoxicated that he/she could not properly cosent).

Question 22

Capacity

Answer 22

some people incapable of entering contracts. Contracts may be void/voidable.

Question 23

What are the two incapable parties?

Answer 23

1) Infants: anyone under the age of majority. Contract is binding on the adult, but not on the infant.
2) Insanity/Intoxication: they can be involved to escape a contract if the three elements are shown:

1) you must show you were so insane/intoxicated that you did not understand the nature of the transaction.
2) other party knew or should have know of the insanity/intoxication.
3) you must repudiate contract as soon as possible when sanity/sobriety is regained.

Question 24

Intention

Answer 24

parties must intend legal consequences to result from contract. In general, you cannot escape a contract by saying ‘I was just kidding’.

Question 25

Statue of Frauds

Answer 25

certain types of contacts must be in writing.

M - marriage
Y - cannot be performed in less than one year.
L - interests in land.
E - executor paying the debt of an estate.
G - purchased of goods of more than $500.
S - sureties (guarantors).