Lecture 3 - Formation of contracts

Question 1

What is a Contract?

Answer 1

A voluntary exchange of promises or commitments that are enforceable in our courts

Question 2

Where are contract laws mostly developed?

Answer 2

in the courts

Question 3

What is a consensus

Answer 3

Process of offer and understand - where parties come to a common understanding

Question 4

The person who makes the offer in a consensus is called?

Answer 4

Offeror

Question 5

The person who accepts the offer is called?

Answer 5

Offeree

Question 6

What is an offer

Answer 6

Tentative promise that contains the terms of the anticipated contract

Question 7

An offer must contain what elements?

Answer 7

Parties - (the people involved in the contract)
Property
Price

Question 8

Most advertisements, catalogues and displays can be classified as ______ not ______

Answer 8

A) invitational treat

b) Offer

Question 9

Offers are only supposed to be in writing. T or F

Answer 9

False, the offer does not have to be in writing

Question 10

If an exemption clause is added after the time of entering the contract or it a place where the other party cannot see it, is it still valid?

Answer 10

No, it is not

Question 11

What are the different ways an offer can end?

Answer 11

end of a specific time, end of reasonable time, death or insanity of offeror, revocation (if communicated), rejection, counter-offer (rejection), option agreement (keeps offer open for a specified time)

Question 12

What do standard form contracts entail?

Answer 12

No bargaining power,
controlled by the statute
and if the contract has any unclear terms, the judge favors the offeree because of lack of bargaining power when accepting the contract

Question 13

If I accept an offer but start changing some terms a little bit, to make it more suitable for myself is it still valid?

Answer 13

The acceptance is not valid, instead it turns into a counter offer

Question 14

An acceptance is confirmed when the offeree accepts the terms even tho the offeror is not yet aware?

Answer 14

False, the acceptance is only confirmed when it is communicated to the offeror, then the contract begins. if the acceptance is not communicated before the end of a specific time, the offer is invalid

Question 15

What is the post box - rule

Answer 15

An exception of the rule that acceptance must be communicated (only applies to acceptance not offers and etc)
- when use of mail is a reasonable form of acceptance, acceptance is effective when and where posted. (reasonable form of acceptance means they ask you to respond via mail, or they send the offer through mail)

Question 16

Excluding mail, what else does the post - box rule and what does not it not apply to?

Answer 16

It applies to telegrams and possibly couriers and not facsimile or email

Question 17

Name the big parts required to fill up a contract

Answer 17

An offer, acceptance, consideration, capacity, legality, intention and requirement of writing

Question 18

Explain the term consideration?

Answer 18

• an exchange of benefits is required (may be money, services, promises etc.)
• The benefit must be specific

Question 19

The consideration must be possible, legal and of some value. T or F

Answer 19

• True

exception for services - quantum meruit - must pay a reasonable amount for services requested and received

Question 20

If consideration has already been given, can it be continued in another contract?

Answer 20

NO, past considerations are no considerations

Question 21

A gratuitous promise is not legally binding on the promisor, except in some cases. What are the cases?

Answer 21

• taking less in full satisfaction of debt is binding by statute
• Promissory Estoppel - (reliance on the gratuitous promise may be used as a defense only)
• with a seal, no need to establish consideration

Question 22

Explain the term Void Contract

Answer 22

There was never a contract and both parties are free from obligations

• every consideration already exchanged goes back to the original owner
• third party does not get to keep the consideration if party A to party B is a void contract and party b to third party is valid

Question 23

Explain the term voidable contract

Answer 23

One party has the right to escape the contract (called rescission); contract valid until this is done
- the third party gets to keep the consideration if the exchange from party a and party b was voidable and party b to third party was valid

Question 24

Can being an infant turn a contract voidable?

Answer 24

Yes

Question 25

If infant ratifies the contract after becoming an adult is he or she still bound even tho the contract was binded when she was an infant

Answer 25

yes, either she does so in writing or by implication

Question 26

When can insanity or intoxication be used to escape a contract for non necessities?

Answer 26

1. you must show you were so insane/intoxicated that you did not understand the transaction
2. Other party to contract knew or should have known of the insanity/intoxication
3. you must repudiate contract as soon as possible when sanity/sobriety is regained

Question 27

A contract that has unlawful objectives or illegal considerations are not void. T or F

Answer 27

False

Question 28

Would a contract that unduly limits competition be permitted?

Answer 28

Nope, the competition act states that agreement that unduly limits competition are prohibited

Question 29

What is a restrictive convenant?

Answer 29

A clause that is put into a contract preventing an individual or business to a particular thing, like working in a particular industry for three months

Question 30

Restrictive covenants are only permissible if ?

Answer 30

• reasonable limit in time
• reasonable limit in area
• public interest is not harmed

Question 31

What is presumption?

Answer 31

No intent to be bound

Question 32

Can presumptions be rebutted?

Answer 32

Yes, apply reasonable persons test

Question 33

Is a contract valid if it possesses a gratuitous consideration (one sided promise/benefit?)

Answer 33

No they are not

Question 34

is itpossible for parties to change existing contract obligations? if so, what has to happen

Answer 34

Yes it is possible, but both parties must receive new considerations