Formation of a Contract Flashcards
What is an offer
An offer is when there is a proposal by one party to enter into a legally binding agreement with another party
What must a contract contain
A contract must contain definite terms an demonstrate an intention to be legally bound upon acceptance
When is a legally binding contract formed
If the offeree accepts, a legally binding contract is formed
What must an offer be
An offer must be specific and certain in its terms
What must the offeror intend to do
The offeror must intend to be legally bound by the offer if accepted
Who can offers be made to
Offers can be made to an individual, a group of people, or the general public
What is an invitation to treat
An invitation to treat is not an offer but an indication that a party is willing to negotiate
What are the key differences between offer and invitation to treat
The key differences between offer and invitation to treat are:
Offer
- Capable of being accepted, leading to a legally binding contract
- Shows intent to to be legally bound
- Must contain definite terms
Invitation to treat
- Encourages offers but does not itself create a legally binding contract
- Lacks the intention to be legally bound
- Often general or vague
What are the different types of offers
The different types of offers are:
- Unilateral offer
- Bilateral offer
- Express offer
- Implied offer
Who are unilateral offers made to
Unilateral offers are made to the general public or a specific person
How does unilateral acceptance occur
Unilateral acceptance occurs through performance of an act rather than a verbal or written agreement
Who are bilateral offers made between
Bilateral offers are made between two or more parties where both sides have obligations
What does bilateral offer acceptance require
Bilateral offer acceptance requires communication and agreement on terms
How are express offers stated
Express offers are clearly stated verbally or in writting
What do implied offers arise from
Applied offers arise from conduct rather than explicit communication
How can a contract be terminated
A contract can be terminated by:
- Revocation
- Rejection by offeree
- Counter-Offer
- Laps of time
- Death of the offeror or offeree
- Failure of a condition precedent
How can an offer be revoked
An offer can be revoked anytime before acceptance
Who must revocation be communicated to
Revocation can be communicated to the offeree
What happens if the offeree rejects the offer
If the offeree rejects the offer, it is no longer available
What happens to the original offer if a counter offer is made
If the offeree makes a counter-offer, the original offer is destroyed
What happens if an offer isn’t accepted in a reasonable time
If an offer isn’t accepted in a reasonable time, it lapses
What happens to the contract if someone dies
If either party dies before acceptance, the offer usually lapses
What happens if the condition of a contract is not met
If the offer is conditional and the condition is not met, the offer terminates
What is needed for a contract to be formed
For a contract to be formed there must be accpetance
What must acceptance in a contract be
Acceptance in a contract must be:
- Unequivocal
- Communicated
What does unequivocal in a contract mean
Unequivocal in a contract means no new terms should be introduced
When is acceptance effective
Acceptance is effective when posted, not when received
When does acceptance via instant messaging take effect
Acceptance via instant messaging takes effect when received not when sent
What are the key components of a contract formation
The key components of a contract formation are offer, acceptance, and consideration
What are the characteristics of an offer
Characteristics of an offer are:
- Must be clear, specific, and certain
- Must demonstrate an intention to be legally bound
- Can be made to an individual, a group, or the general public
What are the different methods of acceptance of a contract
The different methods of acceptance of a contract are:
- Express acceptance
- Implied acceptance
- Acceptance by performance
What is express acceptance
Express acceptance is verbal or written confirmation of an agreement
What is implied acceptance
Implied acceptance is conduct implicating agreement
What is acceptance by performance
Acceptance by performance in unilateral contracts is where acceptance occurs when the offeree performs the required act
What is consideration
Consideration is something of value exchanged between parties
What are the different types of consideration
The different types of considerations are:
- Executory consideration
- Executed consideration
What is executory consideration
Executory consideration is a promise to do something in the future
What is executed consideration
Executed consideration is consideration that has already been performed
What are the different rules of consideration
The different rules of consideration are:
- Considerations must move from the promise
- Considerations must be sufficient but need not be adequate
- Past consideration is not valid
- Consideration must be legal
Who can enforce the contract
Only those who provide consideration can enforce the contract
What did Thomas vs Thomas 1842 establish about consideration
Thomas vs Thomas 1842 established that consideration does not need to be of equal value, but it must be legally sufficient
Does a promise made after an act that has already been performed count as consideration
A promise made after an act that has already been performed does not count as consideration
What does the doctrine of privity of contract state
The doctrine of privity of contract states that only the parties to a contract can enforce its terms
Can third parties claim rights under a contract
Third parties cannot claim rights under a contract
What are the exemptions to privity of contract
Exemptions to privity of contract are:
- Contracts to the benefit of a group of persons
- Contracts where the benefit is held in trust for a third party
- Contractual rights assigned to a third party
- Contracts are made between one party and an agent
- Collateral contracts
- Contracts of insurance
- Contracts act 1999
What does the contracts act 1999 allow third parties to do
Contracts Act 1999 allows third parties to enforce contracts terms if:
- The contract states they can enforce it
- The contract benefits them directly
What are express terms
Express terms are terms explicitly agreed upon by the parties
What do express terms provide and define
Express terms provide certainty and define key obligations
Are implied terms specifically stated
Implied terms are not expressly stated
How may implied terms be included in a contract
Implied terms may be included in a contract through:
- Statute
- Trade Custom and Practice
- Common Law
What does the consumer rights act 2015 imply
The consumer rights act 2015 implies that goods must be of satisfactory quality, fit for purpose, and as described
What do courts imply terms to give effect to
Courts imply terms to give effect to the presumed intention of the parties
What does warranty mean
Warranty means the innocent party can only claim damages, not terminate the contract
What are innominate terms
Innominate terms is a term that depends on the severity of the breach to determine the legal consequences
What can happen if a condition of a contract is breached
If a condition of a contract is breached the innocent party can terminate the contract and claim damages
What is an exemption clause
An exemption clause is a contract term that limits or excludes liability
What is the criteria for a valid exemption clause
The criteria for a valid exemption clause are:
- Incorporation into the contract
- Clear and unambiguous languages
- Compliance with statutory controls
What must exemption clauses comply with
Exemption clauses comply with the unfair contract terms act 1977 for business contracts and the Consumer Rights Act 2015 for consumer contracts
What does unfair contracts terms act 1977 apply to
Unfair Contract Terms Act 1977 applies to business-to-business contracts
What does the unfair contracts terms act 1977 prevent businesses from excluding
The Unfair Contracts Terms Act 1977 prevents businesses from excluding liability for death or personal injury caused by neglegence
Who does the consumers rights act 2015 apply to
The consumers rights act 2015 applies to consumer contracts
What can’t a trader exclude liability for under the consumer rights act 2015
A trader can’t exclude liability for:
- Death or personal injury caused by negligence
- Defective goods/services that do not meet statutory requirements
- Unfair terms
What does a resident of trade clause seek to limit
A resident of trade clause seeks to limit a parties ability to engage in business, trade, or profession
What is the criteria for reasonableness
Criteria for reasonableness is:
- Legitimate business interest
- Geographical scope
- Duration of restriction
When does misrepresentation occur
Misrepresentation occurs when one party makes false statements of facts that includes the other party to enter into the contract
What can happen if misrepresentation is proven
If misrepresentation is proven, the innocent party can rescind the contract or claim damages
What are the key elements of misrepresentation
The key elements of misrepresentation are:
- Unambiguous false statement of fact
- Made before or at the time of contract formation
- Induced the other party into entering the contract
- Materiality of the statement
- Statement can be made orally, in writing, or by conduct
- Obligation to disclose information
What are the different types of misrepresentation
The different types of misrepresentation are:
- Fraudulent misrepresentation
- Negligent misrepresentation
- Innocent misrepresentation
What are the remedies for fraudulent misrepresentation
Remedies for fraudulent misrepresentation is recession + damages for all losses
What is negligent misrepresentation
Negligent misrepresentation is a false statement made without reasonable care without reasonable care as it is truth
What is fraudulent misrepresentation
Fraudulent misrepresentation is a false statement made knowingly, without belief in its truth
When the right to rescind be lost with misrepresentation be lost
The right to rescind may be lost if:
- The contract is affirmed
- Restitution is impossible
- Lapse of time
What is innocent misrepresentation
Innocent misrepresentation is a false statement made with honesty and reasonable belief that it was true
What are the remedies for innocent misrepresentation
Remedies for innocent misrepresentation are rescission or damages under s.2(2) of the misrepresentation act 1967 if the court finds damages more appropriate
What are the remedies to negligent misrepresentation
Remedies to negligent misrepresentation are rescission + damages under s.2(1) of the misrepresentation act 1967
What do exclusion causes attempt to limit liability of
Exclusion causes attempt to limit liability for misrepresentation
What does it mean if the contract is affirmed
The contract is affirmed if the innocent party continues with the contract despite knowing about the misrepresentation
What is an example of case law on misrepresentation
Case law on misrepresentation is Walker vs Boyle 1982
What is bilateral discharge
Bilateral discharge is when both parties release each other from obligations
What is a common mistake
A common mistake is where both parties share the same mistaken belief
What happened in Walker vs Boyle 1982
Walker vs Boyle 1982 a sellers exclusion cause for misrepresentation was not reasonable
What does a mistake involve
A mistake involves an error in judgement or assumption
What are the different types of mistakes
The different types of mistakes are:
- Common mistake
- Mutual mistake
- Unilateral mistake
What is a mistake in contracts
A mistake is a misunderstanding between parties that prevent a valid contract from being formed
What is an example of a common mistake
An example of a common mistake is Bell vs Lever bros 1932
What did bell vs lever 1932 state
Bell vs level 1932 states that a mistake must be fundamental to void a contract
What is case law of a mutual mistake
Raffles v Wichelhaus (1864)
What is case law of a unilateral mistake
Hartog v Colin & Shields (1939)
What is a mutual mistake
A mutual mistake is where both parties misunderstand each other
What happened in Raffles v Wichelhaus (1864)
Raffles v Wichelhaus (1864) – A misunderstanding about shipment dates meant no valid contract
What is discharge by performance
Discharge by performance is where a contract is discharged when both parties fulfil their obligations
What is a unilateral mistake
Unilateral mistake is where only one party is mistaken
What happened in Hartog v Colin & Shields (1939)
Hartog v Colin & Shields (1939) – The seller mistakenly listed a price per pound instead of per piece
How can a contract be discharged
A contract can be discharged by:
- Discharge by Agreement
- Discharge by Performance
- Discharge by Frustration
- Discharge by Breach
How can discharge by agreement happen
Discharge by agreement can happen through a new agreement that overrides the old one or a waiver where one party agrees not to enforce their rights
What are the two types of agreements to end a contract
The two types of contracts to end an agreement are:
- Bilateral discharge
- Unilateral discharge
What is discharge by agreement
Discharge by agreement is when both parties mutually agree to end the contract
What does suitable payment mean
Suitable payment means if a party has performed most obligations, they may still be entitled to payment
How does discharge by frustration work
A contract may be discharged if an unforeseen event occurs that makes performance impossible through no fault of either party
What is unilateral discharge
Unilateral discharge is where on party releases the other from obligations
Why might the contract not be discharged if one party fails to perform completely
If one party fails to perform completely, the contract may not be discharged unless:
- Substantial Performance
- Divisible Contracts
What must the event be to be able to be discharge by frustration
The event must be beyond the control of both parties, and neither party must have assumed the risk
What is discharge by breach
A contract can be discharged if a condition (fundamental term) is breached
What may breach of warranty allow for
Breach of warranty (a minor term) does not lead to discharge but may allow for damages
What are the different types of breach
The different types of breach are:
- Actual Breach
- Anticipatory Breach
What is actual breach
Actual breach is where on party fails to perform their obligations at the agreed time
What is anticipatory breach
Anticipatory breach is when one party indicates in advance that they will not perform
What is case law of anticipatory breach
Hochster v De La Tour (1853)
What did Hochster v De La Tour (1853) state
Hochster v De La Tour (1853) – an employee could sue before the start date when an employer wrongfully terminated the contract early
What are the different remedies for breach of contracts
Different remedies for breach of contracts are:
- Damages
- Equitable Remedies
What are the different types of damages
Different damages are:
- Unliquidated damages
- Liquidated damages
How is unliquidated damages compensation determined
Unliquidated damages compensation is determined by the court
What is compensation like in liquidated damages
Compensation of liquidated damages is a fixed amount agreed on in the contract
What is case law for liquidated damages
Dunlop Pneumatic Tyre Co v New Garage & Motor Co (1915)
What did Dunlop Pneumatic Tyre Co v New Garage & Motor Co (1915) state
Dunlop Pneumatic Tyre Co v New Garage & Motor Co (1915) – liquidated damages must be a genuine pre-estimate of loss, not a penalty
What are the types of loss recoverable in damages
The types of loss recoverable in damages are:
- Direct losses
- Consequential losses
What are direct losses
Direct losses are losses directly caused by the breach
What are consequential losses
Consequential losses are indirect losses that arise as a result of the breach
What are the different equitable remedies
The different equitable remedies are:
- Quantum Meruit (“As much as he has earned”)
- Specific Performance
- Injunction
- Repudiation
- Restitution
What is Quantum Meruit
Quantum Meruit means a claim for payment where one party has partially performed their obligations
What is specific performance
Specific performance is a court order requiring a party to fulfil their contractual obligations
When is specific performance granted
Specific performance is only granted when damages are inadequate
What is an injunction
An injunction is a court order preventing a party from breaching the contract
What is repudiation
Repudiation is where the innocent party can treat the contract as ended and stop performing their obligations
What is restitution
Restitution is returning benefits received under a contract
What does Consumer Rights Act 2015 ally to
Consumer Rights Act 2015 applies to all consumer contracts made
What is a consumer contract
A consumer contract is where a trader sells goods, services, to an individual for personal use
