Module 11 - Entering Into Contracts Flashcards
Definition of a contract
An agreement that the law will enforce
What are the essential elements of a valid contract?
Consensus in idem
Consent
Consideration (England only)
Capacity
Formality
No legal prohibition
What are the general features of an offer?
It should be definite
Capable of being accepted
The person making the offer must intend to be legally bound by it
How may an offer come to an end? (Just two)
Either expressly or
Impliedly
Does Acceptance have to match the offer in every respect in order to form a contact?
Yes
Does the general rule of acceptance require the offeror to receive the acceptance (communication)
Yes
Does an agreement have to be supported by valid consideration in order to form a contract?
In England only - yes
What is a void contract?
One which is flawed to such a serious degree that no contractual obligations ever existed
What is a voidable contract?
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
Contracts are most often discharged by what?
Performance
Both parties complete duties and contract comes to an end
Contracts are most often discharged by performance, but can also be discharged by?
Agreement
Frustration
Breach
Remedies for breach of contract include:
Damages
Rescission
Specific implement
Interdict
Retention
Lien
Misrepresentation can be:
Fraudulent
Negligent
Innocent
With misrepresentation, the innocent party may seek what?
A remedy
What is a typical remedy?
Damages
Contract definition
An agreement that gives rise to obligations which the law will enforce
Essential elements of a valid contract
Offer plus acceptance
Consideration
Consent
Capacity
Formality
No legal prohibition
Is consideration required under English law?
Yes
Does consideration apply under Scots law?
No
What are the general features of an offer:
It should be definite
Capable of being accepted
Person making the offer intends to be bound by the consequences of it being accepted
What is an express offer? (How is an express offer given?)
Written or spoken
Can an offer be implied by the actions of the offeror?
Yes
Is supply of information an offer to sell?
No
Is an ‘invitation to treat’ an offer?
No
Example of an invitation to treat
Exhibition of goods for sale on shop shelves or in shop windows
Are there exceptions to the rule that adverts are merely invitations to treat
Yes
In Scotland can an offeror withdraw their offer to potential offerees at any point before it’s accepted?
Unless what?
Yes
Unless they have promised to keep it open for a specified time
In England, are promises to keep an offer open generally valid?
Why?
No
Due to lack of consideration
What is express revocation?
Who does it have to be communicated with?
Offeror expressly (clearly) tells the other party the offer is being withdrawn
Must be communicated to whom the offer was made
What is implied revocation?
Offer lapses without any need for communication of that fact to the offeree
In what ways can an offer be withdrawn?
Expressly
Impliedly
Implied revocation can occur in several different ways:
Rejection
Counter-offer
Death, insanity, bankruptcy
Time limits
What is the meaning of ‘Acceptance’?
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
Do parties need to communicate with each other when discussing offers and potential acceptance?
Yes
What forms can acceptance come in?
How may someone accept a contract?
Words
Actions
Inferred from the conduct of the parties
Is passive inaction sufficient to constitute acceptance?
Generally not
What is the general rule of acceptance?
The contract is concluded when the acceptance is received by the offeror
In England, is it possible to respond to an offer without accepting or rejecting it by accepting ‘subject to contract’
Yes
In England, the preferred wording for correspondence and draft agreements would be:
“Confidential, Without Prejudice and Subject to Contract”
In England, correspondence and draft agreements usually involves what?
Following up with a formal contract outlining the terms agreed
In Scotland, it is good practice to include what wording for correspondence and draft agreements:
“Confidential and Without Prejudice”
In Scotland, what should be stated in the correspondence
The provision of drafts shall not constitute an agreement
All documents should be marked with “Draft”
What is Consideration?
Each party must bring something of value to the bargain
Is consideration required in English law?
Yes
Is consideration required in Scots law?
No
What form can Consideration usually take?
An act in return for a promise,
A promise in return for a promise
If there is no consideration in English law, is there an enforceable contract?
No
Does consideration have to be adequate? In English law
No but must be sufficient
Factors affecting regulation of the modern contract
Law seeks to protect the idea of ‘freedom of contract’
However, sometimes the law will intervene to regulate the making of a contract
What is a standard form contract?
One prepared by a large organisation which sets out the terms to their customers
Do the parties of a contract have to consent to contract with one another?
Yes
Do most people have the capacity to enter into legally binding contracts?
Who are there exceptions with?
Yes
There are exceptions with minors though
In England, can an adult contracting with a minor enforce the contract against the minor?
No
In England, can a minor contracting with an adult enforce the contract against the adult?
Yes
In English law, how old is a minor?
Someone under the age of 18
In Scotland, do minors below the age of sixteen have the capacity to contract?
No
Can someone who is intoxicated contract?
No
Do lesser forms of drunkenness result in incapacity?
No
Are there special statutory rules in England and Scotland protecting adults who are mentally incapacitated?
Yes
Do most contracts require formalities?
No
Can be formed verbally or implied
Are some contracts required to be formed in writing in order to be valid and enforceable?
Yes
Is an agreement which is illegal a contract?
No
Where a change in the law after a contract is formed, making a previously valid contract unlawful, what happens?
The contract is brought to an end by frustration
What is a void contract?
No contract - flawed to such a serious degree
What is a voidable contract?
Exists but is flawed
If neither party seeks action of reduction the contract continues as valid
A contract may be discharged in a number of ways: (for a number of reasons)
Agreement
Performance
Frustration
Breach
Does frustration make a contract void?
No
Should any money already paid over in a ‘Frustration’ be returned?
Yes
When does a breach of contract occur?
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
What happens with a material breach / breach of a condition
Innocent party has access to greater remedies
Including the right to bring the contract to an end
Make a claim for damages
What happens with a non-material / breach of warranty
Innocent party no right to bring contract to an end
Can sometimes make claim for damages though
Examples of types of breach
Failure to perform the contract
Delayed performance
Defective performance
What is the most common remedy in contracts
Damages
Damages definition
A sum of money to compensate the innocent party for losses resulting from the breach of contract
What is the aim of damages
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)
Principles which may limit liability include:
Causation
Mitigation
Remoteness of loss
Other remedies for breach of contract
Rescission
Specific implement / specific performance
Interdict / injunction
Retention
Lien
What is misinterpretation? (With contracts) (should it be misrepresentation?)
An untrue statement of fact made by one party to the other which induces him to enter into the contract
Essential elements of misinformation
Can a statement of opinion amount to a misrepresentation?
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
Three kinds of misinterpretation
Fraudulent misinterpretation
Negligent misinterpretation
Innocent misinterpretation
Name of specific legislation which applies to electronic contracts
Consumer Contracts (Information, Cancellation and Additional Charged) Regulations 2013
Consumer contracts (information cancellation and additional charges) regulations 2013 are more commonly referred to as:
Consumer Contracts Regulations (“the Regulations”)
Info a trader has to give to a consumer with the regulations
Description
Total price
Cost of delivery
Details of any right to cancel
Info about seller
Do consumers have the rights to cancel orders?
Yes
Duration of right to cancel orders
When does it start?
When does it finish?
Starts when places order
Finishes 14 days from the day on which the consumer receives goods
If there are multiple goods how long does cancellation last?
14 days from when last good received
If the consumer cancels goods how long do they have to return the goods to the trader?
A further 14 days
Are there goods with no right to cancel?
Yes - eg is a seal is broken on a sealed CD
How long with cancelling services?
14 days
Should a trader start providing a service before the 14 days cancellation period?
Technically no
But they can if the customers requests it
What period should delivery take place within?
Within 30 days
Do traders have to provide basic rate numbers? For customer service calls
Yes
What is consensus in idem
Meeting of the minds
For agreeing contracts
What does capacity mean in accepting contracts?
Parties must be legally able to enter the contract
What does formality mean in acceptance of contract?
The contract must conform to any requirements regarding its form
Eg some contracts have to be in writing
What does no legal prohibition mean with accepting contracts?
The agreement entered into by the parties must not be prohibited by law
What does offer plus acceptance mean when entering into contracts?
Agreement is required on all material aspects of the contract
What is invitation to treat in an online environment? (Might be bad wording)
Made by the customer placing their order in a virtual basket and then proceeding to the payment page
What is a click wrap agreement?
Customers will be asked to read and confirm their acceptance of the sellers terms and conditions online
What does consumer law involve?
Contracts between a business and a consumer
What is a way an online business can communicate their acceptance?
Confirmation email
Do certain contracts require the signatures to be witnessed?
Yes
What is a gift in relation to consideration?
Something given for no consideration and is therefore not a contract
UNLESS, it is made by a deed
Examples of standard form contracts
Website purchasing terms
Terms on the back of quotations
Can consumer rights be overridden by the express terms of a contract?
Generally no
What does consent have to be to count?
Full
Free
Voluntary
What does voluntary consent mean?
Having the capacity to enter into the relationship having had the opportunity to properly acquaint oneself with the relevant terms
In certain circumstances can powers of attorney be granted to a third party to act on behalf of someone who is incapacitated?
Yes
Example of contract that needs to be in writing to be enforceable
Sale of land / buildings
What is performance (with discharge of a contract)
Where both parties fully perform their respective obligations under the contract
The most common way of discharging a contract
What is agreement (with discharge of contract)
Both parties agree the contract should end
What is breach (discharge of contract)
One of the parties fails to meet their obligations
What is frustration (discharge of contract)
Where, after contract has been formed, it becomes impossible or illegal to perform the contract
With damages - the party that has experienced a loss - what forms can loss come in
Lost profit on resale of goods
Extra cost of replacement goods or performance
Wasted expenditure
Cost of curing defective performance
Principles which may limit liability - what is causation?
Loss suffered by party must be shown to have been caused by the breach
Principles which may limit liability - what is mitigation?
The party claiming damages must take reasonable steps to minimise their los
Principles which may limit liability - what is remoteness of loss
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)
What is rescission?
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
What is specific implement / specific performance?
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
An order from a court requiring positive action is…
An order for specific implement / specific performance
What is an interdict / injunction
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
With Interdict / Injunction, the court may grant an “X” what does this mean?
An interim order (granted if reasonable)
Prevent action until a full hearing takes place
Prevent action of party breaching restrictive covenant
What is retention?
Party not in breach withholds performance of his own obligations
With Retention, would an obligation need to be counterparts?
What does this mean?
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)
What is a Lien?
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
What is negligent misrepresentation
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
What is innocent misrepresentation
A false statement made by someone who had reasonable grounds to believe that the statement was true
What is fraudulent misrepresentation
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
The consumer contracts regulations 2013 can be referred to as
The distance selling regulations
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?
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
What happens if retail/service provider fails to provide relevant info (description/price etc) required by the regulations what penalty could be faced?
Consumers cancellation rights are extended by up to a year
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?
Info about goods/services being bought
Price and delivery costs
No, although certain info still needs to be provided
Do the Regulations expand certain existing consumer rights?
Yes
If a trader starts providing a service and within 14 days the customer cancels what happens?
They can cancel but must pay
What happens if trader fully provides service in 14 day window?
Right to cancel is lost
Once digital downloads have been supplied the consumer will lose what?
So what must happen?
Their right to cancel
They must acknowledge this before supply is made
How does it work with digital downloads
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
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?
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
The regulations provide that who is responsible for the condition of the goods and for how long
The trader
Until they are received by the customer
Does delivery have to take place within 30 days?
Yes
Unless a longer period has been agreed
What happens if delivery is later than agreed and it was essential that it was delivered on time?
Consumer has right to terminate the contract and receive a full refund
If the delivery is non essential but the delivery is late nonetheless what happens
If an alternative cannot be agreed
The consumer is within his rights to cancel the order and receive a full refund
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?
Yes
Out of:
Offer Statement of intention Supply of information Invitation to treat Advert
Which are capable of being accepted
An offer
