Formation of Contract

Question 1

Offer definition

Answer 1

A clear and unambiguous undertaking to be bound by specified terms, which becomes binding upon acceptance.

Question 2

Offer terms

Answer 2

Offer must be definite and clear in its terms. An offer may be made to:
- A person; or
- A group of persons; or
- All the world.

Question 3

Responses to offers

Answer 3

• Accept the offer and all of its terms; or
• Reject the offer; or
• Ask for further information or seek clarification; or
• Make a counter offer.

Question 4

Counter offers definition

Answer 4

Amounts to the rejection of the original offer and the substitution of a new offer.

Question 5

Termination of offer

Answer 5

• Revocation of offer
• Rejection of offer
• Lapse of time
• Death of a party
• Supervening incapacity

Question 6

Acceptance definition

Answer 6

Unconditional assent by the offence to the terms of the offer communicated to the offeror.

Question 7

Acceptance general principle

Answer 7

• The acceptance must come to the notice of the offeror before the offer expires.
• The manner of acceptance may be specified in the offer.
• Mere silence will not constitute acceptance.

Question 8

The postal rule

Answer 8

• Acceptance is effective where written acceptance by post or telegram is contemplated by the parties.
• It becomes effective on posting (not on receipt)
• This rule only applies to letters and telegrams.
• Postal rule will not apply if letter (or telegram) is wrongly addressed due to fault of offeree.

Question 9

Ostensible Authority

Answer 9

A representation that a person has authority:
- Either express or implied conduct; or
- By appointing a person to a position that would normally include the authority to enter into an agreement of that kind.

Question 10

Revocation of acceptance

Answer 10

• Acceptance may be revoked if revocation is communicated to the offeror before acceptance is received.
• Revocation of acceptance is not possible if postal rule applies.

Question 11

Intention to be Bound presumptions

Answer 11

1. Parties to business and commercial agreements intend to be legally bound.
2. Parties to a social or domestic agreement do not intend to be legally bound.

Question 12

Executory consideration

Answer 12

A promise to do something (or refrain from doing something) in the future.

Question 13

Executed consideration

Answer 13

Something given or done etc. at the moment of the contract coming into existence.

Question 14

Sufficiency of Consideration - Existing duties

Answer 14

• Existing duties imposed by law.
• Existing contractual duty to the other party.
• Part payment of a debt.
  But note 292 Judicature Act

Question 15

Forbearance

Answer 15

• Agreeing not to do something you are otherwise entitled to do.
• Forbearance to sue, provided the case is at least arguable will be good consideration.

Question 16

Property Law Act 2007

Answer 16

• Contracts for the disposition of land (s24)
• Dispositions of certain interests in Land (s250)
• Guarantees (s27)

Question 17

Supervening Incapacity

Answer 17

If the offeror had full capacity when the offer was made but lost that capacity before the offer could be accepted, the offer would no longer be valid.

Question 18

Invitation to treat

Answer 18

Preliminary communication that invites other to make an offer, but is not itself an offer, meaning it cannot be accepted to form a binding contract.

Question 19

Unilateral Contract

Answer 19

One party makes a promise, the other party accepts by performing an act.

Question 20

Bilateral Contract

Answer 20

Both parties make promises, and are both obligated to fufil them.

Question 21

Consideration

Answer 21

The price paid by the promisee for the promise of the promisor.

Question 22

Orthodox view of consideration

Answer 22

Consideration is essentially the value that is promised in return for a performance or promise from the other party. It can be money, goods, services, or a pledge to refrain from an action.