Elements of Contract Formation Flashcards
What are the 5 elements of formation?
1) Offer
2) Acceptance
3) Consideration
4) Certainty
5) Intention
What is an offer? (3 Points)
An offer is an expression of willingness to contract on specified terms, made with the intention that it is to be binding once accepted.
What is acceptance? (4 Points)
An acceptance is a final and unqualified expression of assent to the terms of an offer with intention to be bound by the agreement.
What is consideration? (3 Points)
Consideration is “something of value” which is given for a promise and is required in order to make the promise enforceable as a contract.
What is certainty?
A contract is certain when the provisions are properly described and explained. If a contract is incomplete or uncertain, then it may be found to be unenforceable.
What is intention?
The parties must intend their agreement to be legally binding.
What are the 3 matters affecting the formation?
1) Privity
2) Formalities
3) Capacity
What is privity in terms of contract formation?
Privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract.
What are formalities?
There are two types of contract, informal and formal. An informal contract doesn’t require a written contract etc. A formal contract requires formalities such as written paperwork and undersigning.
What is capacity?
All parties must have a capacity to enter a contract; this means that they must be a legal entity recognised by law, such as a company, or must be a person at least 18 years of age and of sound mind.
What are express terms?
Express terms are ones that the parties have set out in their agreement.
What are implied terms?
A contract may contain terms which are not expressly stated but which are implied, either because the parties intended this or by operation of law.
What does vitiation mean?
To make faulty or defective.
What are the 5 reasons for vitiation of contracts?
1) Misrepresentation.
2) Mistake.
3) Illegality.
4) Undue influence.
5) Duress.
What happens to a contract that is vitiated?
The contract becomes void or voidable.
What are the 2 remedies for a void or voidable contract?
1) Rescission - the revocation or cancellation of the agreement.
2) Rectification - correcting mistakes in recording arrangements
What are the 3 reasons for discharge of contracts?
1) Frustration.
2) Breach.
3) By agreement.
What is frustration?
Where an unforeseen event either renders contractual obligations impossible, or radically changes the party’s principal purpose for entering into the contract.
What is a breach of contract?
A breach of contract is a violation of any of the agreed terms. eg. late payment or failure to deliver a promise.
What is the remedy for termination of a contract?
Damages. Damages in contract law are a legal remedy available for breach of contract. Damages are an award of money to compensate the innocent party. The primary purpose of damages in contract law is to place the injured party in the position they would have been in had the contract been performed.
