Function of Contract

Question 1

What does contract law govern?

Answer 1

Contract law governs agreements between parties, ensuring enforceability and fairness in dealings.

Question 2

What are the two main types of liability in contract law?

Answer 2

Promise-based and reliance-based liability.

Question 3

What is the Promise-Based Theory?

Answer 3

It emphasizes moral and ethical obligations to honor promises voluntarily made.

Question 4

What is the Reliance-Based Theory?

Answer 4

It protects parties who incur costs or take actions based on promises, preventing unjust harm.

Question 5

What is the purpose of protecting reasonable expectations in contract law?

Answer 5

It ensures that parties can rely on contractual promises, balancing intention and fairness.

Question 6

How do contracts contribute to economic efficiency?

Answer 6

Contracts facilitate market exchanges, maximizing utility by reallocating resources where they are most valued.

Question 7

What role does legal enforcement play in market confidence?

Answer 7

Legal enforcement builds trust in markets, enabling cooperation and reducing reliance on informal enforcement mechanisms.

Question 8

What is the key principle of the objective approach in contract law?

Answer 8

Contract law assesses intention objectively based on how a reasonable person interprets words and actions.

Question 9

What are the justifications for the objective approach?

Answer 9

1. Promotes certainty and predictability in planning.
2. Prevents self-serving claims of misunderstood intentions.
3. Acknowledges the impossibility of proving subjective intent without objective evidence.

Question 10

What was the focus of the case Storer v Manchester CC (1974)?

Answer 10

It focused on outward expressions rather than internal thoughts.

Question 11

What was established in the case Smith v Hughes (1871)?

Answer 11

It bound parties based on reasonable interpretation of conduct.

Question 12

How do courts interpret agreements contextually?

Answer 12

Courts consider the broader factual context when interpreting agreements.

Question 13

What are limits to contextual interpretation in contract law?

Answer 13

Conventional categories like offers and acceptances and signature rules in written contracts.

Question 14

What are the key ingredients for contract formation?

Answer 14

1. Agreement or consensus (offer and acceptance).
2. Certainty in terms.
3. Intention to create legal relations.
4. Consideration (reciprocity).
5. Capacity to contract.
6. Formality requirements for specific contracts.

Question 15

What can void a contract?

Answer 15

Illegality or mistake can void contracts.

Question 16

What factors can make a contract voidable?

Answer 16

Contracts may be voidable due to misrepresentation, duress, or undue influence.