Lesson 4: Introduction to Contract Law

Question 1

define contract

Answer 1

set of promises that the law will enforce

Question 2

contract law vs tort law

Answer 2

contract law presupposes some sort of relationship between the parties, unlike tort law where the parties may be complete strangers

Question 3

can contracts be oral contracts?

Answer 3

yes

Question 4

contract law vs tort law and criminal liability

Answer 4

contracts are voluntary legal relationships whereas the others are legal obligations forced on everyone

Question 5

4 basic requirements of legally binding contracts

Answer 5

offer, acceptance, consideration and intention

Question 6

define an offer

Answer 6

description of a promise one party is willing to make subject to agreement of other party

Question 7

define an invitation

Answer 7

An invitation is a statement by an individual showing a willingness to receive an offer

Question 8

difference between offer and invitation

Answer 8

depends on objective test; how a reasonable person would interpret the statement; would it be reasonable to assume the person making the statement was accepting the risk of being legally bound

Question 9

give an example of an invitation

Answer 9

an advertisement in a magazine

Question 10

who may revoke an offer and how?

Answer 10

the party who makes an offer may revoke it at any time before acceptance. the revocation must be properly communicated otherwise the offer remains open for acceptance

Question 11

define acceptance

Answer 11

an unqualified willingness to enter into a contract on the terms in the offer.

Question 12

what is a counter-offer and is it acceptance?

Answer 12

Adding terms or amending some term even in a minor sense is considered a counter-offer and not an acceptance.

Question 13

define bilateral contracts

Answer 13

a promise is exchanged for a promise

Question 14

define unilateral contracts

Answer 14

where an act is exchanged for a promise

Question 15

what is acceptance is unilateral contracts?

Answer 15

performance

Question 16

define standard form contract

Answer 16

an offer prepared in advance by the offeror, including terms favourable to the offeror that cannot be changed by the offeree

Question 17

benefits of standard form contract

Answer 17

good as a business risk management tool; They allow businesses to define the terms upon which they are willing to deal with other businesses and members of the general public. A standard form contract also allows a business to shift the risk of loss to someone else through indemnity clauses

Question 18

negatives of a standard form contract

Answer 18

no ability to negotiate terms; if 2 standard form contracts sent to each other’s business in a sale say different things, the law may look at surrounding circumstances such as practice in the industry or past dealings between the businesses

Question 19

how to defend against a standard form contract

Answer 19

Normally, it is the responsibility of a party to a contract to read and understand the terms of a contract and a party is bound by the terms. However, if a plaintiff can demonstrate that they did not know or suspect the contract contained an exclusion, they were not given an adequate opportunity to review the contract or the clause was not brought to the plaintiff’s attention and the exclusion was not the sort of term one would ordinarily expect, the court may hold the clause is unenforceable as there was no acceptance of it.

Question 20

what happens if one is given goods/services without their request?

Answer 20

if he accepts the services or uses the goods he is presumed to have accepted the offer

Question 21

what is considered reasonably sufficient notice of the terms

Answer 21

If a document contains a short and clear reference to other terms found elsewhere, it is likely that that is considered “reasonably sufficient notice” of the terms; Terms must be brought up to the consumer at the time of making the contract; The best way of proving that a customer has knowledge of the terms is by a written contract signed by the party to be bound

Question 22

what is not considered reasonably sufficient notice of the terms?

Answer 22

If a sign in a parking lot disclaims liability for loss or damage, there may not be sufficient evidence unless the ticket the person receives references the sign
Terms must be brought up to the consumer at the time of making the contract. Even if the sign is predominant, it might not be reasonably sufficient notice of the terms either

Question 23

define lapse

Answer 23

the termination of a contract when the offeree fails to accept it within a specified time or if no time is specified then within a reasonable time

Question 24

3 ways lapse can happen

Answer 24

An offeree fails to accept within a time specified in the offer;
An offeree fails to accept within a reasonable time if the offer has not specified any time limit;
When either party dies or becomes insane prior to acceptance

Question 25

define revocation

Answer 25

the ability of an offeror to withdraw an offer prior to its acceptance.

Question 26

how to prevent revocation

Answer 26

The potential acceptor may bind an offeror to keep his or her offer open for a specified period through two devices: (1) an option, or (2) by placing an offer under seal.

Question 27

explain option in revocation

Answer 27

An option is a contract in which the offeror receives something of value in exchange for a binding promise to hold an offer open for acceptance for a specified period.

Question 28

explain placing an offer under seal in revocation

Answer 28

seal must be affixed “consciously and deliberately”; A seal is an impression or mark on a contract

Question 29

why can an offeror revoke the offer at any point before acceptance even if they said they will keep it open for a period of time?

Answer 29

because there was no option or placing an offer under seal. the offeror did not receive anything in value to keep the offer open

Question 30

what must acceptance be for it to be binding?

Answer 30

Acceptance must be certain and unconditional and must be a positive act or unless silence or some other mode of acceptance has been agreed upon as acceptance before or in the past has been used as a mode of acceptance; If offer states how acceptance must be completed, then it must be completed in exactly that way

Question 31

4 ways an offer can come to an end

Answer 31

Offer may lapse;
Offeror revokes offer before offeree has accepted;
Offeree rejects offer or makes counter-offer;
Offeree accepts before any of the 3 above occurs (in which case the offer becomes the contract)

Question 32

how can acceptance work in a unilateral contract?

Answer 32

can be accepted by performance without prior communication

Question 33

is a vague offer a real offer?

Answer 33

no

Question 34

define consideration

Answer 34

Consideration is the price for which the promise of another is obtained.

Question 35

adequacy of consideration

Answer 35

Although the law does not require the consideration to be adequate in the sense that my promise and your promise do not have to be of equal value, the law does require sufficient consideration. Sufficient consideration is consideration that from a legal perspective has value.

Question 36

what must consideration be for it to be valid

Answer 36

something you had a legal right to

Question 37

where is consideration automatically present?

Answer 37

If parties decide to terminate their contract and replace it with a new agreement altogether, consideration is automatically present because both sides have given up something, namely the old contract.

Question 38

2 cases where consideration is not required?

Answer 38

where a contract is entered under seal or or where the contract can find a promissory estoppel

Question 39

define promissory estoppel

Answer 39

an equitable principle where someone who relies on a gratuitous promise of another and changes his or her position as a result may be able to enforce the agreement, where reliance on the promise resulted in injury to the promisee

Question 40

what happens when parties decide to vary terms of a contract?

Answer 40

where the parties to a contract agreed to vary its terms, such variation will be enforceable even in the absence of new consideration.

Question 41

define gratuitous promise

Answer 41

a promise made without bargaining or accepting anything in return

Question 42

are gratuities promises binding?

Answer 42

no they are not legal contracts, there was no consideration

Question 43

define past consideration

Answer 43

a gratuitous benefit previously conferred upon a promisor

Question 44

define moral cause

Answer 44

moral duty of promisor to perform his promise

Question 45

Where A has an existing contractual duty to B, a later promise by B to pay A something extra to perform that obligation is binding?

Answer 45

no, it was a gratuitous promise

Question 46

explain the promise to accept a reduced debt

Answer 46

not binding only when it applies to payments of money. This can be avoided by promising early payment of a reduced amount before due date. This rule only applies to a debtor and a creditor situation. And this rule can be avoided if the creditor agrees in writing and under seal to accept a reduced amount

Question 47

3 requirements for promissory estoppel to apply?

Answer 47

Some form of legal relationship already exists between the parties;
One of the parties promises (perhaps by implication only) to release the other from some or all of the other’s legal duties to him;
The other party, in reliance on that promise, acts in a way that alters his position and would make it a real hardship if the promisor reneges on his promise

Question 48

define injurious reliance

Answer 48

loss or harm suffered by a promisee who to his detriment relied reasonably on a gratuitous promise; is a cause of action, not just a defense whereas i think promissory estoppel is a defense

Question 49

define document under seal

Answer 49

a covenant recorded in a document containing a wax seal, showing that the covenantor adopted the document as his act and deed

Question 50

define deed

Answer 50

a document under seal, which today is usually a small red gummed wafer

Question 51

does a deed/document under seal require consideration to make it binding?

Answer 51

no

Question 52

explain intention to create legal relations

Answer 52

In most situations (family agreements being the most common exception) the courts will presume that the parties intended to enter a legally binding agreement. In other words, the court usually assumes that the parties intended to enter a contract, but the court is open to evidence to displace that presumption. The onus is on the party who claims there was no intention to create legal relations to prove the allegation.

Question 53

how to defend to say there was no contract formed?

Answer 53

Even when an apparently valid offer has been accepted and consideration is present, there is no contract formed unless both sides intended to create a legally enforceable agreement. To defend this, the defendant may use the external or objective test of the reasonable bystander if to such a person the outward conduct of the parties lacked a serious intention to make an agreement

Question 54

common examples of standard form contract

Answer 54

tickets for theatres, airlines, hotel bookings, credit card agreements, insurance policies, online purchases