Law of Contract: Offer, Acceptance, Consideration Flashcards
Business relies on ____ and regulated by ____
Exchanges with are regulated by contracts
CMA
Certified Management of Accountants
Contract definition from CMA
mutual agreement of at least two parties to do or refrain from something. Parties create rights and duties that did not exist prior to relationship. Enforced by court of law so created rules of conduct they are obliged to observe and follow.
What does the contract create between 2 or more parties CMA definition
legal obligations or laws governing their relationship for own purpose.
CMA definition laws of contract
legal rules parties must follow to establish own rights and duties
5 main components of CMA contract definition
- Contracts are mutual agreements courts will enforce
- two or more parties
- There is an exchange
- Law is created through contract which both parties follow rules and obligations.
- There is freedom in design
Free contract
- type of political approach
- what does it differentiate and describe the creation of liabilities
- Entering the contract what do we create?
- liberal capitalist
- Contractual liability - we choose provisions of liability vs tort creates liability obligations
- Free to design and create the laws defining contract and relationship
Contract gives degree of?
- why is it important
- what is it more important than in the contract design
Certainty
dealing with value for business
freedom in contract design
For a contract to be created what needs to be present? List 6 elements
All 6 elements:
1. Offer
2. Acceptance
3. Consideration
4. Intention to Create legal relations
5. Capacity
6. Legality of Contract
Contract Offer:
most significant element
Tentative promise, condition or request made by one party. When accepted transformed into contract and no longer tentative.
Contract Offer: Offeror
person subject to a condition or containing a request to other party
Contract Offer: Offeree
Person accepting the condition or request
Contract Offer:
1. Who is bound to carry out the promise
2. Who is bound to carry out the condition or request
- Offeror
- Offeree
Contract Offer:
What does contract metamorphoses mean?
Offer accepted you have contract so offer is contract in draft
Contract Offer:
Distinction of attempt to elicit an offer or invitation to do business
Through advertisements and display shelves, stores making invitations to elicit an offer from you at a price which they will then accept
Contract Offer:
Pharmaceutical Society of Great Britain V Boots Cash Chemist Case
describe
Regards display in stores and advertisement. Conclusion for policy reasons then logic. Too many cases would clog up courts. Customer picks up product from the shelves and doesn’t amount to an acceptance of an offer to sell.
Contract Offer:
Pharmaceutical Society of Great Britain V Boots Cash Chemist Case Ratio and why created
It is an offer by the customer to buy, and no sale until buyer’s offer to buy is accepted by acceptance of the price, created for certainty and efficiency
Contract Offer:
What happens when offer lapses?
It is not accepted
Contract Offer:
3 reasons for offer to lapse
- Offeree fails to accept offer within time frame specified
- Offeree fails to accept offer within reasonable time if time frame unspecified
- One of the parties die or become mentally insane prior to acceptance
Contract Offer:
Revocation Principle
offeror may revoke or withdraw an offer from offeree at any time before acceptance, even when it has promised to hold for specified time
Contract Offer: Revocation Principle - 2 ways to keep offer open and enforceable
offer made under seal
option contract is created -> contract where someone promises to keep option open for agreement
Contract Offer: Fundamental Breach and what clause doesn’t apply
Fundamental portion of contract is breached and exception of liability clause no longer applies
Contract Offer: counter offer
Bargaining takes place and offers exchange back and forth (volley of offer)
What happens if a party accepts but then changes even one aspect
you don’t have acceptance as now the original offer has variation , must resubmit
Other rules regarding offer: Offer is communicated by offeror through
writing, orally or gesture but must be unequivocal
Other rules regarding offer: offer cannot be accepted by offeree until they have _______ _______ of it so must be ______
first learned
communicated
Other rules regarding offer: Standard Form Contracts and examples
presented to general public on high volume basis etc tickets and passes, contracts when accepted
Other rules regarding offer: Standard Form Contracts Provisions (3)
- No negotiation, take or leave it
- providers of service go far to protect themselves
- exception of liability clause for consumers
Standard Form Contracts - Exception of Liability Clause
if person does not know terms of contract they cannot be bounded by it unless reasonable steps were taken to bring the contractual term to their intention
Contract Offer: Contra Preferentum (Ambiguous contract)*
If multiple interpretations of a contract the court will read it against the interest of the party that created it
Contract Offer: Rejection
offeree rejects then original offer terminated
Contract Offer: Revocation
1. Also known as
2. What happens
3. What needs to be done for it to be effective withdraw?
- Buyers remorse
- Withdrawal of an offer and prevent acceptance (offeror point of view)
- Communicated to offeree by offeror or reliable source
Contract Offer: Revocation
1. How could it still be accepted despite revocation?
offer arrives at destination but revocation did not reach the offeree and they signed/agreed.
Contract: Acceptance
what is unequivocal?
made in unequivocal form by words or conduct
no doubt
Contract: Acceptance
Offeror and their acceptance control
Offeror has full control over the mode and method of acceptance, state required methods of communication of acceptance
Contract: Acceptance
What can the offeror require for acceptance (2)
- Actual receipt by mail or other mode
- performance of an action
Contract: Acceptance
What can the offeror require for acceptance - Carlyle vs smoke ball case description and ratio
person did the act, inhaled smoke ball but didn’t buy but essentially accepted contract.
Ratio: performance is sufficient
Contract: Acceptance
Offeror will not be bound unless and until they receive the acceptance, and before they revoke but what are 2 exceptions?
- Mail Exception
- Telegram Acceptance
Contract: Acceptance
Mail Exception
offeror chooses mail as means of acceptance then it is accepted when the offeree returns it in mail to address and stamped. So if offeror tried to revoke but already returned in their mailbox, nothing they can do
Contract: Acceptance
Telegram Acceptance
Instantaneous methods like phone, text, fax and not bound until reaches offeror from offeree
Contract: Acceptance
How could an Offer terminate BEFORE acceptance (x4)
Rejection
Lapse
Counter
Revocation
Contract: Acceptance
1. Certainty of an offer
Certain or uncertain:
i) agreement to agree
ii) arbitrator or formulas sets amount
- contract and preceding offer must be certain in wording.
i) uncertain as agreeing later but this is vague
ii) certain as can conclude price
What law governs particular contract?
Lex Causae - governing law: determined by principles of conflict of law
Contract: Consideration
Essence of contract as it is the exchange or bargain.
Contract: Consideration - contract to be valid….
each and every party to a contract must give up consideration
Contract: Consideration
Three categories of consideration
- Property
- Service/labour
- Money
Contract Consideration: Property Category (2 types)
Personal and real Property
Contract Consideration: Personal Property 2 types and description
Chattels - tangible like possessions or objects
Choses in action - intangible like contractual rights, shares
What is a property assignment?
transfer a choses in action
Contract Consideration: Gratuitous Promise and what is it not enforceable by and why?
promise without returning consideration and not enforceable by laws of contract as no exchange of consideration
Manifestations of Gratuitous promise x3
- past consideration
- existing legal duties
- Rule of Foakes and Beer
Manifestations of Gratuitous promise: Past consideration
No consideration, reward for act previously done is not binding, reciprocity does not make for new contract
Manifestations of Gratuitous promise: Existing Legal duties
“A” bound by existing contractual duty to B, later B promises to pay A something extra to perform same obligation is not binding
Manifestations of Gratuitous promise: Existing Legal duties example with the sailor and when to pay higher??
Sailor wold be hired to make transport trip, then decide want to increase pay. Captain agrees but later pays original amount.
Pay higher if sailor does another duty or have some new consideration confirmation like a seal
- Manifestations of Gratuitous promise: Seal?
- Seal and common Law
- Seal and Equity Law
- Element of consideration is covered
- Nominal token and sufficient for common law (recognized as acceptance, agreement)
- Need more consideration, seal is not enough, need transfer of substantial consideration
Manifestations of Gratuitous: Rules of Foakes and Beer
Ratio and why
creditors gratuitous reduction of debt for a payment is not enforceable for contract because no consideration was done as he just said “I’ll forgive payments
Manifestations of Gratuitous: Rules of Foakes and Beer
How to make enforceable??
Person who was lent money must use a nominal consideration to cover themselves, etc seal or smaller payment. Once creditor receives then he is not able to collect remaining loan balance. Now consideration given up
