Lecture 4: Contract Formation Flashcards
1
Q
legal concept of a contract
A
- a contract is a legally enforceable agreement between two or more person who are called the parties to the contract
- contracts create legal obligations which consist of correlative rights and duties
- contractual rights and duties can be discharged by voluntary performance
- failure to perform the contract, may cause a breach to arise
- a breach of contract is a cause of action- it provides the legal basis for bringing an action in court to enforce the agreement
- people tend to do what they have bound themselves by contact to do because it is convenient, it builds trust and it avoids lawsuits
2
Q
capacity to contract
A
- have to be adult person (over 18) who is of sound mind, and artificial persons like corporations, have full contractual capacity
- minors can be bound by contracts for necessities or for things that give a benefit
- persons with a mental disability are bound by agreements reached in lucid periods, but not otherwise
3
Q
the right to enforce contractual obligations
A
- only exist between those who have agreed to undertake them
- only parties to the contract have the right to bring an action to enforce it
ex. P v E, C v B
4
Q
how are contracts created
A
- contracts come into existence when and only when these three elements are all present:
- intention to be legally bound and
- sufficient agreement(consensus); and
- either a) formal execution in a deed or b) consideration
5
Q
the element of intention to be bound
A
- agreement is only legally enforceable if the parties intended to be legally bound
- intention is to be judged objectively, court ask whether a reasonable person would regard the agreement as intended to be binding
- ex. C v CSB
6
Q
factors affecting intention
A
- domestic arrangements and social agreements
- B v B, C v C, and M v M
-commercial or business agreements
E v C
E v G
7
Q
the element of ‘agreement’
A
- agreement means a meeting of the minds (consensus) on at least those essential terms needed for a workable transaction
- ex. in a sale contract, agreement in the least as to what is being bought and sold, the price that is payable, and that the transaction is a sale rather than a lease
8
Q
reaching agreement
A
agreement can be reached in different way like
- after long and complex negotiations
- by accepting standard terms set out, or referred to, in a document or on a notice or ticket
- without expressly stated terms
- when one party offers to do something in exchange for a act
9
Q
general process of reaching agreement
A
- often described or analyzed as involving an ‘offer’ and an ‘acceptance;
- if you can identify an offer and an acceptance, on the facts of a case, then you can conclude that sufficient agreement has been reached for a contract to be created
10
Q
requirements of an offer
A
an offer must be:
- promissory (ex. an undertaking to give or do; or an undertaking of liability)
ex. PD v C - sufficiently complete or setting out all the necessary aspects of a workable transaction
- intended to result in a contract if accepted
ex. P v C - addressed to a particular person or to an identified group of persons
ex. C v C
11
Q
requirements of acceptance
A
acceptance must be:
- in the same terms as the offer
- not still subject to a condition
ex. M v C - made while the offer is still in existence
- made by the person to whom the offer was addressed
- made in acceptable form
12
Q
when acceptance is effective
A
- when communication is instantaneous (ex. between persons present) acceptance takes effect as soon as it is received by the offeror
- acceptance made or fax or telex is considered instantaneous as long as the message is actually received as the offeree’s end
- ex. B v S
- when acceptance is made by post, it is effective when the letter of acceptance is posted
- ex. H v F
13
Q
when acceptance is effective, if communicated via email
A
-legislation determines when receipt of an electronic communication takes place, and each state has similar legislation on this point
general rule:
- if the offer specified an email address as a way in which to accept the offer, then receipt takes place when the email reached that system
- if not, the receipt takes place only when the email comes to the attention of the addressee( the offeror actually opens the email)
14
Q
formal and informal agreements
A
- agreements can be formally executed in a deed in which case there is no doubt that they should be treated as enforceable
- deed requirements-expressed as a deed, sealed and witnessed
- the courts treat informal agreements differently and apply the bargain theory of contract which gives rise to the the requirement of consideration in informal contracts
- informal agreement-can still be in writing
-consideration is something given in exchange for a promised received
15
Q
What consideration can validly consist of?
A
consideration may be anything of value to the person receiving it
- it may be a thing, money or a promise to give or do something, or a promise not give or do something
- ex.T vT
- consideration can’t consist of something previously done, which know as ‘past’ consideration
- ex. S v M
- past consideration exception: if it can be shown that a practical benefit was obtained as a result of promise of the past consideration, then this can constitute good consideration
- ex. M v W
- an act performed with the intention of receiving a promised counter-performance is good consideration; it is called executed consideration to distinguish it from past consideration
- C v C
