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Contract Law 2024 > Formation > Flashcards

Formation Flashcards

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1
Q

What four elements do you need to have a contract?

A
  1. Agreement / offer + acceptnce
  2. Intent to create relations
  3. Certainty
  4. Consideration
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2
Q

What is consideration?

A

An exchange of promises. Both parties are taking on an obligation or giving something up. It is some onus or payment needed to have a contract.

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3
Q

Why does a contract not work when only one side gives consideration?

A

This could become a one sided promise. If one party doesn’t give something up, they don’t really have a contractual right to demand anything.

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4
Q

Do contract obligations need both people to voluntarily opt into them?

A

Yes.

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5
Q

Do property obligations need both people to voluntarily opt into them?

A

No.

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6
Q

What is objectivity in contract law?

A

Contract law is generally said to take an objective approach to contract formation and obligation . 2 ways:

  1. We look at it from the POV of an informed viewer not personally involved.
    OR
  2. We swap an objective person into the position of one or other of the parties. What would a reasonable person in their position think?
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7
Q

What is freedom of contract?

A

Philosophical theory:
Parties get to choose the terms of their contract, who they contract with and whether they contract at all.
The law should avoid interfering.

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8
Q

What is sanctity of contract?

A

The idea that contracts are promises and people ought to do what they’ve promised.

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9
Q

What is agency?

A

An agent is someone appointed by a party to act on their behalf.
The agent can negotiate with B on behalf of A.

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10
Q

In what scenario are you commonly entering a contract with an agent?

A

Every time you interact with a company, you are entering the contract with an agent.

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11
Q

What two types of authority may an agent have?

A
  1. Actual authority – the principal sets out that the agent can do that specific thing
  2. Ostensible authority – the authority that B reasonably thinks A has been given
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12
Q

Does acceptance have to be by communication? Case?

A

No, Carlil v Carbolic Smoke Ball Co.

An offer can be accepted by conduct / actions. In Carlil, acceptance was in the form of using the smoke ball as instructed.

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13
Q

What is the aim of a contract?

A

An exchange:
- A gives something to B, B gives something to A

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14
Q

What is a foundational value in contract making?

A

We contract on the basis of trust, it is expected that both parties will comply with and fulfil their obligations under the contract.

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15
Q

What is the difference between contracting and contract law?

A

Contracting = making a contract
Contract law = the enforcement of that contract in court

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16
Q

In contract law, what do we assume all contracts to be a product of? (What do contracts result from?)

A

Negotiation.

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17
Q

In reality, what are contracts normally a product of? (What do contracts actually result from?)

A

For the most part we have unilaterally dictated terms - we take the contract with the terms and do not negotiate them.
Example:
- buying from a shop/store

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18
Q

What are industry standard terms?

A

Where the terms of the contract are standardised, usually a contract between financially resourced parties.
Agreement on terms pre-organised to be standard in the industry.

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19
Q

What is agreement?

A

Offer + Acceptance.
When two or more people meet and agree on an exchange of mutual obligations.

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20
Q

Is agreement always express?

A

No, but the way in which parties may conduct themselves can hint at them being done.

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21
Q

Is there an offer without certainty?

A

No! You cannot have an unclear offer. Statements of intention without descernible conditions do not qualify as offers.

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22
Q

Why may a written contract be helpful?

A

To stop people from denying the contract and being more able to enforce it in law (sometimes hard without written contract). Also helps with certainty.

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23
Q

What is intention to create legal relations?

A

The idea that for contracts to be binding the parties need to intend to be legally bound.

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24
Q

What MUST you have for an agreement?

A

Offer and Acceptance.

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25
Q

What is the main thing that written contracts try to prevent?

A

Fraud.

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26
Q

Would the courts enforce a contract without certainty?

A

The courts are very reluctant to enforce a contract without certainty.

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27
Q

What is an example where someone may not be intending to create legal relations?

A

Someone promises to give you a cooking lesson in exchange for driving them to school every morning. You likely cannot take them to court if they fail to do so.

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28
Q

Are variations always made through offer and acceptance?

A

No, quite often variations will be made without the typical offer and acceptance.

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29
Q

What is a traditional offer?

A

An unequivocal statement of interest by a party to another to do something (or refrain from doing something) and to be bound if the party to whom it is expressed accepts that expression of interest.

MUST BE CLEAR STATEMENT OR Indication of what the parties will do.

An offer can tell us the terms of the contract

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30
Q

Can acceptance be made on different terms to the offer?

A

No, this is a counter offer.

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31
Q

Can an offer be subjective?

A

No, an offer must be objectively understood to be an offer.

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32
Q

Is the phrase, “I will buy your house”, an offer or an expression of desire? Why?

A

An expression of desire.
- Not told time, intentions, amount of money, conditions etc.

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33
Q

What is an invitation to treat?

A

An invitation to make an offer.

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34
Q

Once an offer has been accepted, can it be retracted?

A

No.

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35
Q

What is a piece of puffery? Example.

A

An exaggerated, usually vague, non-realistic offer that do not bear any indication of a real offer.
E.g.
- Red bull gives you wings

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36
Q

What is a display of goods?

A

When goods are displayed in a shop, this is an invitation to make an offer to purchase them. It is not an offer as they can say they are out of stock etc.

Goods may just be there to signal to the market that they will soon be available.

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37
Q

When may a display of goods be an offer?

A

If goods are displayed in a way that shows an intention to be bound.
E.g.
- 5 bananas to be sold $1 each and if you are the first to get it, you can buy it
- This is an offer to sell to the first to get the banana’s there is an offer that can be accepted

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38
Q

Can the courts enforce agreements without specific terms?

A

No, there is no contract.
For example, you can’t enforce a contract to buy a house if there is no sale price.

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39
Q

When may the traditional offer and acceptance model not work?

A

Complex commercial settings
Ongoing relationship
Repeat parties

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40
Q

What is an invitation / request for tenders?

A

A tender is a bid on a project, an request for tenders is an invitation to others to put forward tenders.

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41
Q

When does an invitation / request for tenders become an offer?

A

When it is qualified.
E.g. “The person who can build best house at cheapest price will be accepted.”

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42
Q

What are the two elements of a tender deal?

A
  1. Preliminary contract
    - The contract based on accepting the tender
  2. Substantive contract
    - This is the contract for the actual building of the structure
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43
Q

What obligation is key under a preliminary contract?

A

The obligation to enter into a substantive contract.

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44
Q

Who is the offeror?

A

The one who makes the offer.

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45
Q

Who is the offeree?

A

The one to accept the offer.

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46
Q

What is the situation with sale by auction with no reserve?

A

If it is advertised without reserve, this is an offer to sell to the highest bidder. The vendor has an obligation to sell, even if the highest bid is disappointing.

This means that you have to sell the property under an obligation of law, even if the highest bid is disappointing.

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47
Q

Is sale by auction an offer or an invitation to treat?

A

Where there is an advertisement of proposed auction sale, this is not an offer but an invitation to treat.

At any point the auctioneer may take the it off the market. Any expendature is at the potential buyer’s own risk.

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48
Q

Can acceptance be qualified acceptance?

A

No, it must be an unqualified “yes”.

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49
Q

Can acceptance be non-definitive?

A

No, acceptance must be definitive.

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50
Q

Can acceptance be referential?

A

No, acceptance must not be referential.

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51
Q

What does referential mean? Example.

A

Referential example – I’ll buy your house for 10,000 more than the top bidder.

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52
Q

Once an offer is accepted, can the acceptor terminate the contract?

A

No, or at least not without penalties.

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53
Q

Once a counter offer is put forward, what happens to the prior offer?

A

It is void. The initial offeror no longer has to offer to that person. A counter offer takes away the counter offeror’s ability to accept.

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54
Q

Is asking for clarification of an offer a counter offer?

A

This does not amount to a counter-offer so long as what you say does not alter the conditions.

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55
Q

When analysing a contract, what type of acceptance do we initially try to establish?

A

Traditional offer and acceptance.

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56
Q

If you have to move away from the offer and acceptance model, what do you have to do?

A

Explain why you are moving away from it.
E.g. “based on offer offer and acceptance there is no difinative contract, however, following the holistic/global model of contract formation, a contract could be identified.”

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57
Q

What are the two main factors that can make applying the offer/acceptance model difficult?

A
  1. Competition to dictate contract terms
  2. Uncertainty around the meaning of an offer or acceptance
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58
Q

What is competition to dictate terms?

A

Two big, powerful parties competing to have the contract made on their terms.

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59
Q

When would competition to dictate contract terms and uncertainty around the meaning of an offer or acceptance mainly create difficulties?

A

In situations where:
- The parties transact in a complex commercial setting
- The partied are locked in ongoing contractual relations
- The parties are repeat players or transactors in a particular market

60
Q

What are the two types of terms in a contact?

A
  1. essential terms
  2. secondary terms
61
Q

What things may terms govern?

A

Things such as:
- Price
- Time of delivery
- Quantity
- Quality

62
Q

What are essential terms?

A

Terms that are major and can change the contract majorly.

63
Q

What are secondary terms?

A

Terms that are largely unimportant.

64
Q

What does not communicating the terms of a contact do to essential terms?

A

If essential terms are not communicated this can destroy the contract.

65
Q

What does not communicating the terms of a contact do to secondary terms?

A

If secondary terms are not communicated, this cannot destroy the contract.

66
Q

What is a tripartite contract?

A

Three parties entering a contract.

67
Q

What is a multi-party contract?

A

Multiple parties entering a contract.

68
Q

What is a battle of the forms?

A

When parties to a contract compete to dictate contractual terms in making a contract.

69
Q

What is the last shot doctrine?

A

The party who make the last assertion of their contract terms to their counter party and secures that party’s consent (whether in the form of a signature or conduct) is generally deemed to have fired the (metaphorical) last shot and wont the battle.

70
Q

Why may the last shot doctrine not always be the best?

A

The last shot doctrine, as can be perceived, reflects a somewhat strained approach to fitting an unusual situation into the traditional offer/acceptance model.

71
Q

When will the last shot doctrine not apply? How can this be disputed?

A

Where the parties have a transactional history, and there is a custom or tradition recognised by the parties that the party who frequently dictates the terms shall continue to do so.

When a party argues that such custom or tradition does not exist or is to be departed from, they must prove their case to the court’s satisfaction.

72
Q

Where should the last shot doctrine be avoided?

A

Where the counter party includes an anti-last shot provision in their offer (if they are the offeror) or in their acceptance (if they are the offeree).

73
Q

What must acceptance be to be valid?

A

Duly / expressly communicated.
- Silence is not an acceptance.

74
Q

When may silence be accepted as acceptance?

A
  • Complex commercial dealing
  • Ongoing contractural relations
  • Repeat players / transactors
75
Q

If an offer is made one way (e.g. email) can you accept in another way (e.g. text)?

A

That is fine UNLESS the offerer specifies a particular platform for communication.
Here, response in another way would count as a counter offer.

76
Q

What is the postal rule? 17-18th century.

A

The moment you send acceptance by post it became binding on the offeror.
Now falling into disuse.

77
Q

S 217 CCLA?

A
  • The instant the acceptance has entered the online system and is available for the offeror to read, it is deemed there has been an acceptance.
  • Even if the person has not read it, the availability to read it is sufficient.
78
Q

Who can validly accept an offer?

A

Depends on the offer:
- An offer can be made to the world or it may be made to a certain class in society
- We need to bear in mind who the offerer had in mind when they have placed an intention to be bound

79
Q

Can an offer end before acceptance?

A

Yes.
- The offeror may retract the offer
- The offer may lapse

80
Q

When will an offer lapse? 5 options.

A
  1. on specified time
  2. after reasonable time
  3. sometimes on death of the offeror
  4. sometimes on death of the offeree
  5. change in conditions
81
Q

Why does an offer lapse after reasonable time?

A

It allows for understanding that conditions may change.

82
Q

When may an offer not lapse on death of offeror or offeree?

A

If the offeror or offeree’s estate can still perform the contract.

83
Q

Who bears the loss when one party is inadequate in describing the terms?

A

The one who was inadequate at communicating.

84
Q

What is the least cost principle?

A

The blame is placed on the party who could have avoided the problem in the cheapest way.
E.g. Guy riding scooter recklessly. You are walking and don’t move out of his path. The walker is liable, you could have moved easier.

85
Q

Must counter offers be communicated adequatly?

A

Yes

86
Q

What broad conclusions can a court make in a dispute?

A
  1. Contract made on A’s terms
  2. Contract made on B’s terms
  3. Middleground – court creates a hybrid contract from both offers
  4. No contract at all

MORE???

87
Q

When does uncertainty arise?

A

When there is no sure:
- Quantity
- Price
- Quality
- Time

88
Q

Can the court still find there to be a contract if it is uncertain?

A

Yes. The courts may find a contract if the parties show a strong intention to deal/contract or actions to acting on this contract.

89
Q

What is a subjective contract?

A

When parties have an agreed contract subject to the final transcription of their agreement into a formal or consolidated document.
- Courts unlikely to find a contract until such formalisation / consolidation

90
Q

What are process contracts?

A

Process contracts are essentially agreements to agree. They are either preliminary to, or collateral to, a substantive / primary contract.

91
Q

What is a preliminary contract?

A
  • Preliminary to a substantive/primary contract
  • Gives certainty and commitment
92
Q

What is a collateral contract?

A

An agreement to negotiate after the contract has been formed
- Negotiating supply, price, quantity, quality, time etc.
- Price adjustment clause:
- We have a contract
- But if prices change we must meet and talk about this

93
Q

What is a head contract?

A

The main contract
e.g. engineer employed to build a house

94
Q

What is a sub contract?

A

Contracts which are made as a subset of the main contract
e.g. the engineer can sub contract to get someone to do plumbing etc.

95
Q

What are liquidated damages?

A

Term in a contract where parties agree what would happen if one party broke the contract.

96
Q

What are non-liquidated damages?

A

Usually what happens in every day contracts – the courts decide what happens here.

97
Q

Why will a court not enforce a contract without consideration?

A

Equity does not aid a volunteer.

98
Q

What are the three stages of contracts?

A

Formation
Intermediate
Performance

99
Q

What are relational contracts?

A
  • Long term, continual contract
  • Continuing relationship between parties
100
Q

What are executory contracts?

A

One obligation, not ongoing obligations. Where there is intermediate between agreement and performance of a contract.

An ongoing agreement between two parties who are responsible for completing certain obligations over a set period of time.

101
Q

Do promises made in deeds require consideration?

A

No.

102
Q

What must a party have done in order to enforce a contract?

A

Give consideration.

103
Q

Can third parties to a contract enforce it without giving consideration?

A

No.

104
Q

What are guarantee contracts?

A

When someone undertakes the obligation to fulfil the contract in the situation where a specific party cannot pay.
E.g. Mum and Dad for me at Carry

105
Q

Can consideration be in the past?

A

No. It must be prospective to be valid.
- There must be a recent connection between the promise and the price paid.

106
Q

When may consideration be in the bast but the common law will not deem it so?

A

For services
- reasonably expected you will pay
Commercial loans
- It is commercially expected that if you borrow money, you will pay an interest

107
Q

Are promises binding if they occur after formation is complete?

A

Generally no.

108
Q

Where may a promise still be binding even after formation?

A

If there is only a small gap in time, e.g. warrenties

109
Q

What does adequacy mean?

A

More than sufficient, can do the job very well
- Subjective
- Higher bar than sufficiency

110
Q

What does sufficiency mean?

A
  • Baseline
  • Minimum requirements
111
Q

Does consideration need to be sufficient or adequate?

A

Sufficient.

112
Q

What did consideration have to be in the days of equity?

A

Equal to whatever the other side gave - the courts were concerned with fairness.

113
Q

What principle allows for inequity of consideration?

A

Freedom of contract.
- It is for the parties to choose how to enter contracts

114
Q

How may inequity of consideration impact a court’s decision?

A

May have an impact on determining specific performance.

115
Q

When is the only time you have a pre-existing obligation and get payed more?

A

If you do something extra.

116
Q

What two categories are contracts divided into when looking at variation?

A

Relational contracts and executed (executory) contracts.

117
Q

Which kind of contracts does the law more easily allow variation in?

A

Ongoing (relational) contracts.

118
Q

What is opertunism?

A

The taking advantage of someone’s inability to opt out of a contract.

119
Q

Why does the law not like to allow the variation of executed/executory contracts?

A

Opertunism.

120
Q

When will the courts not allow variation in an ongoing contract?

A

Fraud, duress, etc.

121
Q

What is the UK argument for justification of variation?

A

If A had not varied the contract, most likely B would breach the contract.

A wants the contract to be performed and to avoid having nothing, there needs to be variation. Variation arguably has allowed A to achieve something more.

122
Q

Why does the law have sympathy for ongoing relationships? (variation)

A

In long, term relationships, situations can change / be varied based on promises.

123
Q

What do you need to give to vary an executory/executed contract?

A

Consideration.

124
Q

Doctrine of accord and satisfcation

A

Accord – agreement under which the obligation is discharged
Satisfaction – consideration which makes the agreement operative
- Even be just promise of never talking to me again
- Just must be something extra

125
Q

If someone request extra consideration which is agreed upon, but they have not done anything extra, is this binding?

A

No. This is not something that must be held to.

126
Q

Bank example of accord and satisfaction?

A

A bank may say they forgive debt on part payment but in order for this you have to close your accounts - the closing of accounts is the consideration securing the agreement.

127
Q

What are the two ways you can vary an ongoing contract?

A
  • Practical Benefit
  • Promissory Estoppel
128
Q

What is practical benefit? Example.

A

E.g.
- An employee might not go somewhere else for extra pay
- This is a practical benefit to the employer as they do not need to hire someone else and you keep working

129
Q

What is promissory estoppel? Example.

A

Where a rights are agreed to be suspended until the circumstances requiring the estoppel have gone. These rights cannot be enforced at a later time.
e.g.
- you loose your job so your landlord agrees to reduce your rent by $50 until you find work again
- once you find work your landlord cannot make you pay back payments for the $50s that were not paid.

130
Q

What type of contracts does promissory estoppel apply to?

A

Ongoing relational contracts

131
Q

Why might the need for variation arise in an ongoing relational contract?

A

There may come a time when the consideration on one side may not be enough for the other side to perform.

132
Q

Are money contracts executed or ongoing? Why?

A

Ongoing.
The law protects business. Money is what makes the commercial world go round – we need credators and don’t want to disuade them.

If ongoing relational contract:
- would allow for binding variations to pay lesser amounts
- People could use brokeness to force the credator to accept – you get a little or none

If everyone does this, it would be VERY bad for credators

133
Q

What happens when a service has been completed in an executed contract but no price has been agreed on?

A

The price that should be payed can be debated. Once agreed on, this is seen as sufficient to discharge the debt and cannot be debated further.

134
Q

Example of composition payment under executory contract?

A

4 creditors and 1 debtors
Debtor owes them all lots of money
The creditors may come together in a composition agreement and say you owe them less
Once they enter into a compromise agreement, they cannot demand more
Or if someone pays on debtor’s behalf, the money cannot be sought from debtor

135
Q

What two types of relationships may contracts govern?

A

Social and Commercial

136
Q

What are the two main factors courts look at to determine ITCLR?

A
  1. The nature of the relationship
  2. The general impracticality of enforcing certain types of agreements
137
Q

What are typical features of commercial contracts?

A
  • Plan to create commercial consequences
  • Expectations pre-set and formal
  • The parties know and accept the contract as commercial and intend it to be legally binding
  • Clear obligations
138
Q

If a contract is commercial, what is the ITCLR presumption?

A

That ITCLR exists.

139
Q

How can a commercial ITCLR presumption be displaced?

A

If it an be proven that legal relations were not intended to be created.

140
Q

If a contract is social, what is the ITCLR presumption?

A

That there was no ITCLR.

141
Q

How can a social ITCLR presumption be displaced?

A

If intention to create legal relations can be proven.
- Fleming v Beavers

142
Q

What kind of particular social arrangements are held to have ITCLR?

A

Pre-nuptual agreements.

143
Q

What is estoppel?

A

A doctrine of equity. A person with certain rights cannot enforce these rights if it would make the other party suffer an injustice.

144
Q

Elements of promissory estoppel?

A
  1. Clear, unambiguous promise
  2. Other party relied on this promise
  3. The other party will suffer loss/injustice
145
Q

Which approach to battle of the forms are you going to apply?

A

If terms completely contrary:
- Whilst the Court in Goodman v Cospak used the holistic approach to a battle of the forms scenario and reconciled the terms to co-exist as the terms were not inconsistent, the current case is different in that the terms as inconsistent. I therefore find it more likely that the courts would apply the traditional ‘last shot’ approach to this current situation, this traditional approach also having far more precedent. This applies Tekdata which provided that it is hard to displace the traditional approach as certainty is important and desirable.

If the terms not inconsistent:
- Whilst Tekdata provides that the traditional ‘last shot’ approach to a battle of the forms is hard to displace, here because the terms are not entirely inconsistent I find it more likely a court will apply the holistic approach as in Goodman v Cospak. Goodman v Cospak sets out that the holistic approach can be used in a battle of the forms scenario to reconciled the terms to co-exist as the terms were not inconsistent.

Contract Law 2024 (10 decks)

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