Formation

Question 1

4 elements needed for a contract

Answer 1

Agreement (Offer + Acceptance)
Intention to create legal relations
Consideration

Question 2

Agreement - Offer - Advertisements

Answer 2

General rule - invitations to treat
Exception - Unilateral offers (only one party making a promise e.g. a reward)
Advertisement of reward will be classed as an offer

Question 3

Agreement - Offer - Goods on display

Answer 3

On shelves in supermarket? Invitation to treat not an offer

Question 4

Agreement - Offer - Auctions

Answer 4

The auctioneer inviting bids is an invitation to treat. Offer accepted when gaval goes down as an acceptance of the last bid which was the offer.

Exception - an auction without reserve is an offer to sell to the highest bidder and creates a unilateral contract.

Question 5

Agreement - Offers - tenders

Answer 5

General rule - invitations to treat
Exception - e.g. person making the tender states they will accept lowest offer = offer

Question 6

Agreement - Acceptance - definition

Answer 6

(a) an expression of assent,
(b) which is ‘unqualified’

Question 7

Agreement - Acceptance - by post

Answer 7

Postal rule = a letter of acceptance will be effective when posted even if the letter is lost in the post.

If:
(a) it was reasonable in all the circumstances to use the post;
(b) the letter was properly addressed, stamped and posted; and
(c) the postal rule had not been excluded by the offeror

Question 8

Agreement - Offer - termination of offers

Answer 8

An offer cannot be accepted once it has been terminated.

Ways to terminate an offer:
(a) Rejection by the offeree
Expressly or impliedly
(b) Revocation (ie withdrawal) of the offer by the offero
(c) Lapse of time
(d) Counter offer
After a specified time, or otherwise after a reasonable time.

Question 9

Intention to create legal relations - commercial agreements

Answer 9

There is a very strong presumption that the parties intended their agreement to have legal consequences even if the subject matter is trivial.

Can be rebutted.

Question 10

Intention to create legal relations - domestic agreements

Answer 10

Presumption that the agreement is not intended to
be legally binding unless the facts show otherwise.

Examples:
* Husband and wife divorcing through solicitors - intention
* Two cousins one sells house to other - intention
* Parent giving weekly allowance to child - no intention

Question 11

Consideration

Answer 11

= something in return.

Consideration need not be adequate - of same value.

Consideration must be sufficient - sort of thing it is e.g. money, goods and services.

Past consideration is not good consideration. Exception if:
(a) the past act/ promise was done at the promisor’s request;
(b) there was a mutual understanding between the parties that the act/ promise would be compensated for in some way; and
(c) had the promise been made in advance it would have been legally enforceable. This last
condition often hinges on whether, or not, there would have been the necessary intention
to create legal relation.

Question 12

Consideration - alteration promises to pay more

Answer 12

If a party exceeds a contractual obligation owed to the other party in return for a promise of extra money, then there is clearly a detriment to the promisee and a benefit to
the promisor; so it will be consideration for the promise of the extra cash.

Question 13

Consideration - alteration promises to pay less

Answer 13

Rule in Pinnels case - an agreement between a creditor and a
debtor that the creditor will simply accept part payment in full and final settlement of the full amount is not binding on the creditor.

Common law exception - if there is some consideration for the concession.

Question 14

Consideration - alteration promises to pay less - promissory estoppel

Answer 14

Defence - creditor may be prevented from going back on a promise to accept part payment (even if the promise is not supported by consideration) if in all the
circumstances it would be unfair for the creditor to do so.

(a) It can only be used as a defence when a party brings an action at common law to
enforce their legal rights.
(b) There must have been a promise to waive strict legal rights.
(c) The promisee (usually a debtor) must have acted on the promise but not necessarily to
their detriment.
(d) With ongoing payments such as rent, the doctrine operates to suspend the strict legal right, which means the creditor can resume their right to full payment going forward by giving reasonable notice.
(e) To use any equitable doctrine a party must have ‘clean hands’.

Question 15

Elements needed for a binding variation

Answer 15

Agreement (Offer + Acceptance)
Intention to create legal relations
Consideration

Question 16

Parties - Privity of contract

Answer 16

= only the actual parties to a contract are bound by it and therefore have rights and obligations under it.

Means third party has no rights under contract even if contract has been made for their benefit.

Question 17

Parties - Contracts (Rights of Third Parties) Act 1999

Answer 17

A third party can acquire rights if:
* the contract expressly provides that they may acquire a benefit (s 1(1)(a)); or
* the term purports to confer a benefit on them (s 1(1)(b)).

For a third party to
enforce a term of the contract in their own right, they must be expressly identified in the
contract by name or as a member of a class (eg ‘employees’) or answering a particular
description.

Question 18

Parties - agency

Answer 18

Actual authority granted expressly or implied.

Apparent authority:
* at some stage the principal must have represented (by words or conduct) that the agent
had authority;
* the third party must rely on this representation, believing that the agent has authority; and
* the third party must alter their position eg by entering into a contract.

Question 19

Capacity

Answer 19

Occasionally, a contract will not bind a party because the party lacked the
necessary capacity or power to make a contract.

Question 20

Capacity - minors

Answer 20

Basic principle - minors are not bound by contracts they have entered but the other party is bound.

Exception -
Contracts for necessities binds minors. Things necessary for the minor e.g. food, clothes. Depends on their actual requirements at time of purchase.

Question 21

Capacity - mental capacity

Answer 21

e.g. suffer from mental impairment or drunk.

Contracts made with someone in either state will be valid unless at the time the contract was made the person was incapable of understanding
the nature of the transaction and the other party knew that to be the case.

Question 22

Capacity - corporations

Answer 22

A corporation is treated by the law
as having a separate legal identity from the person, or persons, who constitute it.

An unincorporated association, such as a club, is not a competent
contracting party.

Registered companies are bound by contracts entered into with an outsider even if beyond powers granted in constitution.

Statutory corporations e.g. local authorities - any contract entered outside of the stated powers will be
declared ultra vires and therefore void.

Limited liability partnerships have unlimited capacity.