Formation: Agreement, Intention & Consideration Flashcards

Question

what is a reserve price?

Answer 1

the owner and the auctioneer have agreed a minimum price for which the asset must sell. If the reserve price is not met, the assets is withdrawn from the sale. Bidders are told that there is a reserve price in place but not the amount.

Answer 2

the auctioneer must sell the item to the person who makes the highest bid, regardless as to whether or not they know they can fetch a higher price. This is a unilateral contract because only one party makes a promise i.e. the auctioneer promises to sell the item to whoever might make the highest bid.

Answer 3

the purchaser should sue the auctioneer for breach of unilateral contract. It would be pointless to sell the owner of the item because the auctioneer had not accepted his bid and so there was no contract of sale with the owner.

Answer 4

o if the item is sold without a reserve place o if words to the effect of '..be sold that day whatever price they fetch'

Answer 5

the difference between the value of the item and the amount of the claimant's bid

Answer 6

Tendering is a formal process where businesses are invited to bid for contracts

Answer 7

tenders are an ITT unless it amounts to a unilateral contract i.e. if the company specifically promises to accept the lowest tender or if they will consider all confirming tenders. If the company didn’t comply with its promise it would be liable for breach of contract.

Answer 8

A counter-offer effectively destroys the original offer and represents a new offer which the other party can accept or reject Example - I agree to buy your car, but can only afford to pay you half the price now and the rest next week’

Answer 9

Acceptance has been defined as an unqualified expression of assent to the terms of an offer.

Answer 10

This means that acceptance must be communicated and must be communicated by the offeree or their authorised agent

Answer 11

o by words or conduct (i.e. possibly a nod or wink) o re - unilateral contracts: acceptance will always be conduct of some sort (i.e. an advertisement of reward, the acceptance by the offeree would be the supply of the information sought after) o silence can amount to acceptance if coupled with conduct that objectively signifies acceptance

Answer 12

if there are any conditions attached to the response then this will not amount to acceptance (and therefore a contract hasn’t / can’t be created). This is known as a counter offer.

Answer 13

When one party submits a document (i.e. a quote / form) to the other party they will attach their T&Cs. The other party might send back the document with their own T&Cs. This is a counter-offer after counter-offer, the ‘last shot’ wins.

Answer 14

if the contract is performed, this might be regarded as acceptance by conduct of the last set of standard terms to be proffered.

Answer 15

This involves acceptance of an offer by post. The letter of acceptance will be effective (i.e. create a binding contract) when posted even if the letter is lost in the post.

Answer 16

o it was reasonable in all the circumstances to use the post (i.e. this can mean many things but one thing to consider is if the situation is urgent); o the letter was properly addressed, stamped and posted; and o the postal rule had not been excluded by the offeror.

Answer 17

A offeror may specifically say that the postal rule is excluded or this can be implied

Answer 18

if the offeror uses wording such as 'need to know by [DATE], ‘notice’, ‘in writing’ or ‘told’ of the acceptance then the letter of acceptance only becomes effective when it is received i.e. if the letter never arrives then the offer is not deemed to be accepted

Answer 19

a offeror states the offer needs to be accepted by Friday 19 April and the offeree sends the letter in the post just a few days before

Answer 20

o Rejection by the offeree o Revocation (withdrawal) by the offeror o Lapse of time

Answer 21

* Rejection can be expressed or implied * An offer will be rejected by implication if the offeree makes a counter offer

Answer 22

The general rule is that an offer can be revoked any time before acceptance even if the offeror promised to keep the offer open for a certain period of time

Answer 23

If the offeree gave something in return for the promise to keep the offer open, then the offer cannot be revoked by the offeror in the agreed period of time i.e. the offeree paid the offeror £1 to keep the offer open for a period of time

Answer 24

* Authority states that partial performance of a unilateral contract is sufficient to prevent revocation by the offeror * It has been suggested that there are two offers in this situation, the express offer and an implied offer not to revoke if the specified act is started within a reasonable time (acceptance and consideration for the implied promise is the commencement of the act)

Answer 25

it must be communicated by the offeror or reliable third party NB: the postal rule does not apply to revocation

Answer 26

There is no universal rule so a court would look at the circumstances and the intentions of the parties, however the court may follow the rational in Brimnes which provided that revocation would be effective when the message should have been read i.e. if an email was sent during business hours and the business failed to read the email and performed the act anyway then this is the offeree's failure

Answer 27

the offeror would need to publish a notice of revocation

Answer 28

when the offeree receives the communication i.e. if the offeror leaves a voicemail on Tuesday, but the recipient does not listen to this until Thursday, the revocation of the offer is deemed to take place when the voicemail is listened to.

Answer 29

the aim of contractual damages is to compensate the innocent party for loss of bargain

Answer 30

An offer will lapse after the specified time or otherwise a reasonable time. What is reasonable will depend on the circumstances.

Answer 31

a judge will look objectively to determine whether a contract has been formed. They will look at the context i.e.: * Trade usage * Whether the arrangement has been acted on for any length of time * If there is an objective mechanism for resolving such uncertainty i.e. an arbitration clause then this will be a binding contract * A provisional agreement in operation until a contract is drawn up will be binding * Whether parties are in the same trade - an agreement to buy ‘timber of fair specification’ was binding. The parties had worked together before, were both in the timber trade and the contract had been partly performed.

Answer 32

Scammell v Outson - you agree to buy a car on ‘hire purchase terms’ but there are no other details (i.e. duration, number) this is too vague to be a contract.

Answer 33

If the agreement was commercial, there will be a very strong presumption that parties intended their agreement to have legal consequences

Answer 34

(i.e. between friends and family) the presumption is that there was no intention to create legal relations

Answer 35

o Business to business o Business to individual o Individual to individual i.e. buying a second hand bike from an ad in a newspapers

Answer 36

the principle that contracts must involve an exchange of value. In other words, each party has to give something and get something in order for the contract to be legally binding

Answer 37

It doesn’t matter is the subject matter is trivial i.e. Esso Petroleum v Commissioners of Customs and Excise [1976] 1 WLR 1 - there was a sales promotion offering a free world cup coin if 4 gallons of fuel was purchased. It was held there was intention to create legal relations.

Answer 38

There would need to be a clear, express statement that the agreement was not meant to be legally binding (i.e. binding in honour only) Not many cases have successfully rebutted this presumption

Answer 39

this can be rebutted depending on the facts. A key factor will be whether there is a lot of money at stake, this suggests there was intention to create legal intentions

Answer 40

1. husband and wife - settling financial terms of divorce 2. two friends - reaching an agreement on how they will contribute capital to a joint venture 3. brother and sister - expressly agreeing the agreement will be legally binding 4. two cousins - one sells their hose to the other

Answer 41

o Consideration may be a promise or an act given in return o Detriment OR benefit o Consideration must not be past o Consideration need not be adequate o Consideration must be sufficient

Answer 42

this is a promise to do or not do something in the future in exchange for another promise that is also yet to be performed.

Answer 43

In bilateral contracts, there is an exchange of promises (i.e. executory consideration)

Answer 44

There must be benefit to the promisor or detriment to the promisee. There need not be both but often there will be both.

Answer 45

when a party has already given or done something in exchange for a promise

Answer 46

Unilateral contracts require a promise in return for an act (i.e. executed consideration)

Answer 47

I agree to buy a laptop off you for £500. I can hold you to the deal because I have agreed to pay for it. I have ‘provided consideration’ for your promise to sell me the laptop. The consideration would be my promise to pay £500 for it: that is a benefit to you and a detriment to me. Equally, you could hold me to the deal: you agreed to hand over the laptop in return for getting my £500.

Answer 48

Past consideration will be good consideration if: o The past act/promise was done at the promisor’s request o There was a mutual understanding that the act/promise would be compensation for in some way; and o Had the promise been made in advance it would have been legally enforceable

Answer 49

Re Casey Patents: o The owner of an invention asked a manager to promote the invention. o Afterwards, the owner (the promisor) promised him a share in the patent rights for what he had done. o The promisor later tried to argue that the promise was unenforceable as it was past consideration. o The court held the promise was enforceable because there was an implied promise to pay and the manager must have assumed he would be rewarded.

Answer 50

a thing already done cannot form consideration for an agreement reached subsequently. Generally, past consideration is not good consideration, but there is an exception to this.

Answer 51

the amount or value of the act or promise in return (i.e. the consideration) does not need to be of equal value to the initial object of the contract being exchanged i.e. if a seller offers to sell an Aston Martin for £1, the £1 is sufficient consideration.

Answer 52

means that each party in a contract must provide something of value that the courts can see (albeit it does not need to be adequate). This often involves consideration as to whether there has been a sufficient detriment/benefit.

Answer 53

you promise your uncle to give up your bad habits in exchange for money. However, the uncle doesn’t benefit at all from the promise. The court found that there was consideration. If the promisor had never smoked etc, there would still be consideration because people have a right to smoke etc, by promising not to do these things you are promising to refrain from something you have the right to do. This would be a detriment so sufficient for consideration.

Answer 54

performance of a public duty is not sufficient consideration but exceeding performance of a public duty would be Example: You are summoned to appear as a witness in a criminal trial. The defendant promises to pay you £50 for doing so but afterwards refuses to pay. You could not enforce the promise because you were legally obliged to give evidence and so had not given consideration. If you had exceeded a legal (public) duty, though, that would have been different; that would have been consideration.

Answer 55

Two parties are engaged in a contract. The contract needs to change for some reason i.e. increase in the value of raw materials.

Answer 56

In order for the variation to be binding and legally enforceable, there needs to be agreement, consideration and intention to create legal relations for the variation. Consideration is often the stumbling block with contractual variations.

Answer 57

performance of an existing contractual duty owed to another party is not good consideration for a promise to pay more money: o this is the case even if the promisor offers less money and this is agreed by the promisee (Foakes v Bear) o this is also the case even if the promisor offers more more money (Still v Myrick)

Answer 58

i.e. one party promises to pay the other party extra money to complete the job on time. In order for there to be consideration, the promisor needs to benefit and the promisee needs to suffer detriment. The promisor would not be getting any benefit beyond what was already agreed. Likewise, the promisee is not suffering any detriment beyond what has been agreed. Therefore, there has been no good consideration and a legally binding contract has not been created. If the promisor did not uphold their promise, the promisee would not be able to enforce this.

Answer 59

1) If the promisor makes a promise of additional payment and the promisee goes beyond their contractual obligations, then this will be good consideration. 2) If the promisor acquires a practical benefit (or obviating a disbenefit) as a result of the promisee completing their pre-existing contractual obligation, then this will be sufficient consideration (Williams v Roffey Bros), unless this was made under duress

Answer 60

o An employer and an employee have an employment contract. o The employer asks the employee to work non-compulsory overtime in exchange for money o Here, there is sufficient consideration. o The employee (the promisee) is going beyond their contractual obligations (i.e. their normal working hours) by working non-compulsory overtime. Therefore, this is sufficient consideration. o Whilst you don’t need to have benefit and detriment, the employer would also happen to benefit in this instance. o The employer (the promisor) has promised to pay extra money to employee. The employer is benefitting for the employee doing extra work beyond what was agreed.

Answer 61

Roffey Bros - by the promisee completing the work on time, the promisor avoided needing the pay any penalty fees and this was a practical benefit. Therefore, the promise to pay £10k was legally enforceable.

Answer 62

The variation is voidable and the contract can be set aside

Answer 63

The rule states that an agreement between the debtor and creditor to pay part of a debt or the payment of part cannot be sufficient consideration for discharging the whole debt. Therefore, there is no binding agreement. This is the case even if this is expressly agreed between the debtor and creditor. The effect is that even if an agreement is reached, the creditor can change their mind and demand payment

Answer 64

This is because there is no new consideration provided for the second agreement, and therefore it is not binding on the parties, i.e.: o The creditor promises to forgo the remaining balance of the debt, so the debtor does not need to repay the full amount o The creditor is the promisor and the debtor is the promisee o Good consideration requires either benefit to the promisor (the creditor) or detriment to be promisee (the debtor) o In this scenario, the promisor has not received a benefit and the promisee has not suffered detriment. Therefore, there is no consideration or binding agreement.

Answer 65

part payment of a debt will be good consideration when: * the debtor gives the creditor something in exchange for the promise to forgo the balance of the debt (aside from payment) * part payment by the debtor on an earlier date at the creditor’s request * part payment by the debtor at a different place at the creditor’s request * when the debtor offers something other than money and the creditor accepts * when a third party make payment for the debtor

Answer 66

i.e. the debtor is due to pay the creditor back £100 on 5 Jan 2023. The creditor calls the debtor and says ‘pay me back £50 on 4 Jan 2023 instead’. This part payment will then be considered to full payment because the debtor has furnished consideration in the form of paying earlier than agreed

Answer 67

i.e. the debtor is to pay £300. The debtor proposes to pay £100 and give them a phone. The value of the other thing is irrelevant.

Answer 68

i.e. we agree I will pay back £100 on Saturday in Essex. The creditor calls on Saturday and asks me to bring £90 to Thurrock

Answer 69

i.e. you owe a debt. Your parents say to the creditor ‘will you accept half?’, if the creditor accepts they cannot then pursue the debtor for the remaining money.

Answer 70

This is an equitable doctrine. Promissory estoppel is the principle that if you have made a promise not to enforce your legal rights and someone has relied on that promise (even if they didn’t provide consideration), then you may be estopped from enforcing your legal right (i.e. enforcing the promise) if it would be inequitable in all the circumstances to do so

Answer 71

i.e. if a creditor promised a debtor to accept part payment and then sought full payment, the debtor might be able to rely on the doctrine of promissory estoppel to stop the creditor from going back on their promise

Answer 72

o It can only be used as a defence when a party bring an action at common law to enforce their rights o There must have been a promise to waive strict legal rights o The promisee (usually the debtor) must have acted on the promise, this doesn’t necessarily need to be to their detriment o With ongoing payments (like rent), the doctrine operates to suspend the strict legal right (rather than cancelling it). This means that the creditor can resume their right to full payment by giving reasonable notice. o To rely on any equitable doctrine, a party must have ‘clean hands’

Answer 73

i.e. if a debtor sought to take advantage of a creditor in a poor financial state, they would be unable to use promissory estoppel as a defence

Answer 74

The doctrine of promissory estoppel operates to temporarily suspend a creditor’s right to full payments but does not cancel that right entirely 1. suspension of rights: when a creditor (like a landlord) makes a promise to reduce or waive payments temporarily, promissory estoppel can prevent them from later demanding full payments for that period. The landlord, in effect, suspends their right to full rent because the tenant relied on the promise (e.g., paying reduced rent) in good faith 2. right to resume full payments with notice: the doctrine allows the creditor to resume their right to full payments going forward, but they must provide reasonable notice to the debtor. This means that while the concessionary period is protected by estoppel, it doesn’t grant the debtor a permanent reduction in obligations—just a temporary one that can end with notice. 3.no claim for back payments: the creditor cannot claim back payments or arrears for the period when the concession was in place. Promissory estoppel prevents them from demanding any additional amounts for that period because the debtor relied on the reduced amount as agreed.

Answer 75

The concessionary period refers to the specific timeframe during which a creditor (such as a landlord) agrees to temporarily reduce or waive their rights to full payment, often due to difficult circumstances faced by the debtor. In this period, the debtor benefits from a concession—a form of relief or reduced obligation—that would not typically be available under the strict terms of the contract. For example, in High Trees, the landlord allowed the tenant to pay a reduced rent during World War II, when many tenants struggled financially due to the war. This time period, during which the landlord accepted a lower rent, is the "concessionary period."

Answer 76

1. starting point - part payment is not sufficient consideration (Pinnel's case) 2. do any of the exceptions apply? (therefore meaning part payment would be sufficient consideration and there is a contract) 3. if not, can promissory estoppel be relied upon?