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EY Accounting - Business Acumen > Module 11 - Entering Into Contracts > Flashcards

Module 11 - Entering Into Contracts Flashcards

1
Q

Definition of a contract

A

An agreement that the law will enforce

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2
Q

What are the essential elements of a valid contract?

A

Consensus in idem

Consent

Consideration (England only)

Capacity

Formality

No legal prohibition

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3
Q

What are the general features of an offer?

A

It should be definite

Capable of being accepted

The person making the offer must intend to be legally bound by it

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4
Q

How may an offer come to an end? (Just two)

A

Either expressly or

Impliedly

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5
Q

Does Acceptance have to match the offer in every respect in order to form a contact?

A

Yes

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6
Q

Does the general rule of acceptance require the offeror to receive the acceptance (communication)

A

Yes

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7
Q

Does an agreement have to be supported by valid consideration in order to form a contract?

A

In England only - yes

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8
Q

What is a void contract?

A

One which is flawed to such a serious degree that no contractual obligations ever existed

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9
Q

What is a voidable contract?

A

One which is less seriously flawed than a void contract

And which proceeds as a valid contract until steps are taken to have it set aside

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10
Q

Contracts are most often discharged by what?

A

Performance

Both parties complete duties and contract comes to an end

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11
Q

Contracts are most often discharged by performance, but can also be discharged by?

A

Agreement

Frustration

Breach

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12
Q

Remedies for breach of contract include:

A

Damages

Rescission

Specific implement

Interdict

Retention

Lien

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13
Q

Misrepresentation can be:

A

Fraudulent

Negligent

Innocent

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14
Q

With misrepresentation, the innocent party may seek what?

A

A remedy

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15
Q

What is a typical remedy?

A

Damages

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16
Q

Contract definition

A

An agreement that gives rise to obligations which the law will enforce

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17
Q

Essential elements of a valid contract

A

Offer plus acceptance

Consideration

Consent

Capacity

Formality

No legal prohibition

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18
Q

Is consideration required under English law?

A

Yes

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19
Q

Does consideration apply under Scots law?

A

No

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20
Q

What are the general features of an offer:

A

It should be definite

Capable of being accepted

Person making the offer intends to be bound by the consequences of it being accepted

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21
Q

What is an express offer? (How is an express offer given?)

A

Written or spoken

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22
Q

Can an offer be implied by the actions of the offeror?

A

Yes

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23
Q

Is supply of information an offer to sell?

A

No

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24
Q

Is an ‘invitation to treat’ an offer?

A

No

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25
Q

Example of an invitation to treat

A

Exhibition of goods for sale on shop shelves or in shop windows

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26
Q

Are there exceptions to the rule that adverts are merely invitations to treat

A

Yes

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27
Q

In Scotland can an offeror withdraw their offer to potential offerees at any point before it’s accepted?

Unless what?

A

Yes

Unless they have promised to keep it open for a specified time

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28
Q

In England, are promises to keep an offer open generally valid?

Why?

A

No

Due to lack of consideration

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29
Q

What is express revocation?

Who does it have to be communicated with?

A

Offeror expressly (clearly) tells the other party the offer is being withdrawn

Must be communicated to whom the offer was made

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30
Q

What is implied revocation?

A

Offer lapses without any need for communication of that fact to the offeree

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31
Q

In what ways can an offer be withdrawn?

A

Expressly

Impliedly

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32
Q

Implied revocation can occur in several different ways:

A

Rejection

Counter-offer

Death, insanity, bankruptcy

Time limits

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33
Q

What is the meaning of ‘Acceptance’?

A

A contract is formed when an offer is accepted

The acceptance must match the offer in every respect, it must not contradict the terms of the offer, nor introduce new terms

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34
Q

Do parties need to communicate with each other when discussing offers and potential acceptance?

A

Yes

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35
Q

What forms can acceptance come in?

How may someone accept a contract?

A

Words

Actions

Inferred from the conduct of the parties

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36
Q

Is passive inaction sufficient to constitute acceptance?

A

Generally not

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37
Q

What is the general rule of acceptance?

A

The contract is concluded when the acceptance is received by the offeror

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38
Q

In England, is it possible to respond to an offer without accepting or rejecting it by accepting ‘subject to contract’

A

Yes

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39
Q

In England, the preferred wording for correspondence and draft agreements would be:

A

“Confidential, Without Prejudice and Subject to Contract”

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40
Q

In England, correspondence and draft agreements usually involves what?

A

Following up with a formal contract outlining the terms agreed

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41
Q

In Scotland, it is good practice to include what wording for correspondence and draft agreements:

A

“Confidential and Without Prejudice”

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42
Q

In Scotland, what should be stated in the correspondence

A

The provision of drafts shall not constitute an agreement

All documents should be marked with “Draft”

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43
Q

What is Consideration?

A

Each party must bring something of value to the bargain

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44
Q

Is consideration required in English law?

A

Yes

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45
Q

Is consideration required in Scots law?

A

No

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46
Q

What form can Consideration usually take?

A

An act in return for a promise,

A promise in return for a promise

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47
Q

If there is no consideration in English law, is there an enforceable contract?

A

No

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48
Q

Does consideration have to be adequate? In English law

A

No but must be sufficient

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49
Q

Factors affecting regulation of the modern contract

A

Law seeks to protect the idea of ‘freedom of contract’

However, sometimes the law will intervene to regulate the making of a contract

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50
Q

What is a standard form contract?

A

One prepared by a large organisation which sets out the terms to their customers

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51
Q

Do the parties of a contract have to consent to contract with one another?

A

Yes

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52
Q

Do most people have the capacity to enter into legally binding contracts?

Who are there exceptions with?

A

Yes

There are exceptions with minors though

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53
Q

In England, can an adult contracting with a minor enforce the contract against the minor?

A

No

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54
Q

In England, can a minor contracting with an adult enforce the contract against the adult?

A

Yes

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55
Q

In English law, how old is a minor?

A

Someone under the age of 18

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56
Q

In Scotland, do minors below the age of sixteen have the capacity to contract?

A

No

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57
Q

Can someone who is intoxicated contract?

A

No

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58
Q

Do lesser forms of drunkenness result in incapacity?

A

No

59
Q

Are there special statutory rules in England and Scotland protecting adults who are mentally incapacitated?

A

Yes

60
Q

Do most contracts require formalities?

A

No

Can be formed verbally or implied

61
Q

Are some contracts required to be formed in writing in order to be valid and enforceable?

A

Yes

62
Q

Is an agreement which is illegal a contract?

A

No

63
Q

Where a change in the law after a contract is formed, making a previously valid contract unlawful, what happens?

A

The contract is brought to an end by frustration

64
Q

What is a void contract?

A

No contract - flawed to such a serious degree

65
Q

What is a voidable contract?

A

Exists but is flawed

If neither party seeks action of reduction the contract continues as valid

66
Q

A contract may be discharged in a number of ways: (for a number of reasons)

A

Agreement

Performance

Frustration

Breach

67
Q

Does frustration make a contract void?

A

No

68
Q

Should any money already paid over in a ‘Frustration’ be returned?

A

Yes

69
Q

When does a breach of contract occur?

A

When either party to a valid and binding contract refuses or fails, without legal justification to perform in an acceptable manner any number of the things which they are required by the contract to do

70
Q

What happens with a material breach / breach of a condition

A

Innocent party has access to greater remedies

Including the right to bring the contract to an end

Make a claim for damages

71
Q

What happens with a non-material / breach of warranty

A

Innocent party no right to bring contract to an end

Can sometimes make claim for damages though

72
Q

Examples of types of breach

A

Failure to perform the contract

Delayed performance

Defective performance

73
Q

What is the most common remedy in contracts

A

Damages

74
Q

Damages definition

A

A sum of money to compensate the innocent party for losses resulting from the breach of contract

75
Q

What is the aim of damages

A

To put the innocent party in the position he would have been in had the contract been performed

(Or for losses resulting from a breach)

76
Q

Principles which may limit liability include:

A

Causation

Mitigation

Remoteness of loss

77
Q

Other remedies for breach of contract

A

Rescission

Specific implement / specific performance

Interdict / injunction

Retention

Lien

78
Q

What is misinterpretation? (With contracts) (should it be misrepresentation?)

A

An untrue statement of fact made by one party to the other which induces him to enter into the contract

79
Q

Essential elements of misinformation

Can a statement of opinion amount to a misrepresentation?

A

A false statement of fact

A statement of opinion cannot normally amount to a misinterpretation

Misinterpretation must have been material inducing the other party into the contract

80
Q

Three kinds of misinterpretation

A

Fraudulent misinterpretation

Negligent misinterpretation

Innocent misinterpretation

81
Q

Name of specific legislation which applies to electronic contracts

A

Consumer Contracts (Information, Cancellation and Additional Charged) Regulations 2013

82
Q

Consumer contracts (information cancellation and additional charges) regulations 2013 are more commonly referred to as:

A

Consumer Contracts Regulations (“the Regulations”)

83
Q

Info a trader has to give to a consumer with the regulations

A

Description

Total price

Cost of delivery

Details of any right to cancel

Info about seller

84
Q

Do consumers have the rights to cancel orders?

A

Yes

85
Q

Duration of right to cancel orders

When does it start?

When does it finish?

A

Starts when places order

Finishes 14 days from the day on which the consumer receives goods

86
Q

If there are multiple goods how long does cancellation last?

A

14 days from when last good received

87
Q

If the consumer cancels goods how long do they have to return the goods to the trader?

A

A further 14 days

88
Q

Are there goods with no right to cancel?

A

Yes - eg is a seal is broken on a sealed CD

89
Q

How long with cancelling services?

A

14 days

90
Q

Should a trader start providing a service before the 14 days cancellation period?

A

Technically no

But they can if the customers requests it

91
Q

What period should delivery take place within?

A

Within 30 days

92
Q

Do traders have to provide basic rate numbers? For customer service calls

A

Yes

93
Q

What is consensus in idem

A

Meeting of the minds

For agreeing contracts

94
Q

What does capacity mean in accepting contracts?

A

Parties must be legally able to enter the contract

95
Q

What does formality mean in acceptance of contract?

A

The contract must conform to any requirements regarding its form

Eg some contracts have to be in writing

96
Q

What does no legal prohibition mean with accepting contracts?

A

The agreement entered into by the parties must not be prohibited by law

97
Q

What does offer plus acceptance mean when entering into contracts?

A

Agreement is required on all material aspects of the contract

98
Q

What is invitation to treat in an online environment? (Might be bad wording)

A

Made by the customer placing their order in a virtual basket and then proceeding to the payment page

99
Q

What is a click wrap agreement?

A

Customers will be asked to read and confirm their acceptance of the sellers terms and conditions online

100
Q

What does consumer law involve?

A

Contracts between a business and a consumer

101
Q

What is a way an online business can communicate their acceptance?

A

Confirmation email

102
Q

Do certain contracts require the signatures to be witnessed?

A

Yes

103
Q

What is a gift in relation to consideration?

A

Something given for no consideration and is therefore not a contract

UNLESS, it is made by a deed

104
Q

Examples of standard form contracts

A

Website purchasing terms

Terms on the back of quotations

105
Q

Can consumer rights be overridden by the express terms of a contract?

A

Generally no

106
Q

What does consent have to be to count?

A

Full

Free

Voluntary

107
Q

What does voluntary consent mean?

A

Having the capacity to enter into the relationship having had the opportunity to properly acquaint oneself with the relevant terms

108
Q

In certain circumstances can powers of attorney be granted to a third party to act on behalf of someone who is incapacitated?

A

Yes

109
Q

Example of contract that needs to be in writing to be enforceable

A

Sale of land / buildings

110
Q

What is performance (with discharge of a contract)

A

Where both parties fully perform their respective obligations under the contract

The most common way of discharging a contract

111
Q

What is agreement (with discharge of contract)

A

Both parties agree the contract should end

112
Q

What is breach (discharge of contract)

A

One of the parties fails to meet their obligations

113
Q

What is frustration (discharge of contract)

A

Where, after contract has been formed, it becomes impossible or illegal to perform the contract

114
Q

With damages - the party that has experienced a loss - what forms can loss come in

A

Lost profit on resale of goods

Extra cost of replacement goods or performance

Wasted expenditure

Cost of curing defective performance

115
Q

Principles which may limit liability - what is causation?

A

Loss suffered by party must be shown to have been caused by the breach

116
Q

Principles which may limit liability - what is mitigation?

A

The party claiming damages must take reasonable steps to minimise their los

117
Q

Principles which may limit liability - what is remoteness of loss

A

Loss may not be recoverable where it is too remote

I.e. it must arise naturally from the breach or be reasonably foreseeable as a result of the breach (may be shown that both parties had considered the loss at the time of the contract)

118
Q

What is rescission?

A

Only if the breach is material (or breach’s a condition) will the innocent party be entitled to declare the contract at an end and withdraw from the contract

119
Q

What is specific implement / specific performance?

A

The innocent party should take this route where he wants to force the contract breaker to perform his contractual obligations

Harder to obtain than an order to pay damages

120
Q

An order from a court requiring positive action is…

A

An order for specific implement / specific performance

121
Q

What is an interdict / injunction

A

An order that requires the contract breaker not to do something

E.g. to prevent a party from acting in breach of a restrictive covenant

122
Q

With Interdict / Injunction, the court may grant an “X” what does this mean?

A

An interim order (granted if reasonable)

Prevent action until a full hearing takes place

Prevent action of party breaching restrictive covenant

123
Q

What is retention?

A

Party not in breach withholds performance of his own obligations

124
Q

With Retention, would an obligation need to be counterparts?

What does this mean?

A

Yes

The obligations would need to be reliant on each other (eg not paying for non-delivery)

Unconnected obligations may not offer this remedy (obligations arising under separate agreements should not be used as counterparts)

125
Q

What is a Lien?

A

Involves the party not in breach retaining or refusing to deliver the other party’s goods in his possession until the other party performs his contractual obligations

E.g a repairer of goods may only give goods back once payment has been received

126
Q

What is negligent misrepresentation

A

A false statement made by a person who had no reasonable grounds for believing the statement to be true

However, liability only arises if the person making the misrepresentation owes a duty of care to the other party

127
Q

What is innocent misrepresentation

A

A false statement made by someone who had reasonable grounds to believe that the statement was true

128
Q

What is fraudulent misrepresentation

A

A false statement of material fact made:

Knowing it to be false

Believing it to be false

Recklessly not caring whether it was true or false

129
Q

The consumer contracts regulations 2013 can be referred to as

A

The distance selling regulations

130
Q

If a contract is formed at a distance or face-to-face off-premises. Does a trader have to provide info of price/description etc?

A

Yes

Description (including how long any commitment will last in the part of the consumer) 
Price
Delivery cost
Details of right to cancel
Info about seller
131
Q

What happens if retail/service provider fails to provide relevant info (description/price etc) required by the regulations what penalty could be faced?

A

Consumers cancellation rights are extended by up to a year

132
Q

How are on-premise sales different in terms of what info needs to be provided:

In on-premise sales is the seller required to provide the consumer with as much info?

A

Info about goods/services being bought

Price and delivery costs

No, although certain info still needs to be provided

133
Q

Do the Regulations expand certain existing consumer rights?

A

Yes

134
Q

If a trader starts providing a service and within 14 days the customer cancels what happens?

A

They can cancel but must pay

135
Q

What happens if trader fully provides service in 14 day window?

A

Right to cancel is lost

136
Q

Once digital downloads have been supplied the consumer will lose what?

So what must happen?

A

Their right to cancel

They must acknowledge this before supply is made

137
Q

How does it work with digital downloads

A

Like with a trader

Company has 14 days to supply - customer can cancel anytime in this 14 days

If the customer asks for delivery in those 14 days they must acknowledge that they will lose the right to cancel if they get it early

138
Q

When is a customer entitled to a refund? (Duration of time) (once goods have been sold back)

Does the refund have to include basic delivery costs?

A

Within 14 days of either the trader getting the goods back or the consumer provide evidence of having return the goods. Whichever is easier

Refund must include basic delivery costs

139
Q

The regulations provide that who is responsible for the condition of the goods and for how long

A

The trader

Until they are received by the customer

140
Q

Does delivery have to take place within 30 days?

A

Yes

Unless a longer period has been agreed

141
Q

What happens if delivery is later than agreed and it was essential that it was delivered on time?

A

Consumer has right to terminate the contract and receive a full refund

142
Q

If the delivery is non essential but the delivery is late nonetheless what happens

A

If an alternative cannot be agreed

The consumer is within his rights to cancel the order and receive a full refund

143
Q

If a consumer is forced to call a company on a surcharged number about goods or services he has purchased or has greed to purchase, does the consumer have an automatic right ti claim back the surcharge from the company?

A

Yes

144
Q

Out of:

Offer
Statement of intention
Supply of information 
Invitation to treat
Advert

Which are capable of being accepted

A

An offer

EY Accounting - Business Acumen (16 decks)

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