Formation of Agreements Flashcards
Chapter 1
What are the three essential elements of a binding contract?
Agreement (offer and acceptance), intention to create legal relations, and consideration.
What is an offer?
An expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed. The expression can be in many forms such as a letter, email or conduct. The intention is judged objectively, by what a reasonable person would think was going on.
What is an invitation to treat?
A preliminary statement inviting negotiations, not a definite promise to be bound. Examples include goods on display in a shop and most advertisements.
How are goods displayed in a shop treated in contract law?
As an invitation to treat, not an offer. The customer makes an offer to buy the goods at the checkout, which the cashier can accept or reject.
How are most advertisements treated in contract law?
Generally, as an invitation to treat, not an offer. However, advertisements of rewards are treated as offers. An advertisement may be an offer if it shows an intention to be bound, such as in a unilateral contract.
What is a unilateral contract?
A contract where only one party makes a promise in return for an act by the other party. An example would be a reward for the completion of a specific task.
How are auctions generally treated in contract law?
The auctioneer’s invitation for bids is an invitation to treat, and each bid is an offer. Acceptance occurs when the auctioneer’s gavel goes down.
What is a reserve price at an auction?
A minimum price below which the auctioneer will not sell the property. Potential bidders will be made aware that there is a reserve price but not what it is.
What is the significance of an auction being advertised as “without reserve”?
The auctioneer promises to sell to the highest bidder. This is a unilateral contract. If the auctioneer does not accept the highest bid, they are in breach of contract.
How are tenders generally treated in contract law?
An invitation to tender is usually an invitation to treat, and the tenders themselves are offers. However, a promise to accept the lowest tender can be an offer of a unilateral contract.
What is acceptance in contract law?
An unqualified expression of assent to the terms of an offer. It must be communicated.
What is a counter-offer?
A conditional response to an offer that changes the original terms. It effectively rejects the original offer and becomes a new offer.
What is the ‘battle of the forms’?
When businesses attempt to contract on their own standard terms and conditions, creating a series of counter-offers. The ‘last shot’ wins, meaning the last set of terms sent and accepted prevails.
What is the postal rule?
A letter of acceptance is effective when posted, not when received, provided it is reasonable to use post, the letter is correctly addressed and stamped, and the postal rule has not been excluded by the offeror.
When can an offer be terminated?
An offer can be terminated by rejection (including a counter-offer), revocation (withdrawal by the offeror), or lapse of time.
