T4 Intro to Contractual Obligations

Question 1

What are the 5 elements required to form a contract?

Answer 1

• Intent (to create legal relations)
• Capacity (legal capacity)
• Offer
• & Acceptance
• Consideration (UK) or legally binding promise (Scotland)

Note:
- No impediment (objections or hindrances)

Question 2

Definition of a contract?

Answer 2

Agreement between 2+ parties

Creates legally binding rights and obligations

Question 3

Contracts can be written or oral. However, there are some formalities.

Q1. UK - what contract must be in writing?

Q2. Scotland - what additional type of contract must be in writing? (main statutory provisions are found in Requirements of Writing (Scotland) Act 1995)

Answer 3

A1 & A2. Land & buildings (rent, buy, sell)

A2. Non-business related promises

Note:
When contract/promise not in writing, still be valid if
(a) 1 party acted in reliance promise
(b) with knowledge or acquiescence (implicit consent) of other party.
(c) that the person so acting has been affected to a material extent
(d) that person would be adversely affected to a material extent if promise/contract was declared invalid

Question 4

In Neocleous v Rees 2019, the court rendered a land transaction document signed by email auto-signature - true or false?

Answer 4

True

Question 5

The commercial nature of construction contracts, means there is almost always ‘intention’ to create legal relations.

However, in family/social settings, mostly no ‘intention’ to create legal relations.

(no question)

Answer 5

-

Question 6

Capacity - which 4 types of peoples are regarded as being unable to legally contract?

Answer 6

• Children (u18’s except for ‘necessaries’)
• Mentally incapacitated
• Alcohol (although difficult to have contract rejected on this basis)
• Employees not in company constitution (the 2 docs are articles of association and memorandum of association e.g. a directors)

Question 7

What are some essential components/terms of an offer?

offer, not contract

Answer 7

• Price
• Quantity
• Time of delivery
• Payment mechanism

Note:
If unclear, could be argued not a ‘meeting of minds’ (consensus ad idem)

Question 8

What is an invitation to treat?

Answer 8

Invitation to negotiate/ for other party to make an offer

Note:

• falls short of making an offer
• e.g. a request to tender
• Part of the pre-contractual negotiations but falls short of an offer.
• “Any negotiating statement falling short of an offer which furthers the bargaining process”
• Communication is not intended to be accepted to form contract

Question 9

A request to tender is considered as an invitation to treat, seeking tender return offers, to be accepted by Employer, if he so chooses to.

However, there are 2 exceptions in which the RTT itself, can form an offer?

Answer 9

• Must accept most competitive bid
  (either highest/lowest depending on contract)
• Consider all compliant tenders

Question 10

A unilateral offers is?

Answer 10

Open for anyone to accept

Note:
Must be very prescriptive about how the offeree may accept the contract

Question 11

What is revocation (or retraction) of offer?

Answer 11

If offer is withdrawn before it is accepted, it ceases to be open to acceptance

Note:

• Irrespective of how advanced negotiations are
• Revocation must be communicated and received by opposite to be effective (doesn’t have to be e.g. a read email, just delivered)

Question 12

Example of revocation by implication?

Answer 12

Counter-offer or 2nd offer - from the original offeree

Note:
Therefore, you cannot except s/s offers

Question 13

Acceptance of an offer must be communicated.

Q1. Electronic communications are generally treated as effective upon being sent, or upon receipt?

Q2. ‘Postal rule’ provides acceptance is effective upon time of postal, or upon being delivered?

Answer 13

1. Upon receipt

2. Upon time of post

Question 14

Retraction of acceptance is only possible under what circumstance?

Answer 14

When acceptance is not delivered instantly,

retraction is communicated before, or at the same time, as acceptance

Question 15

Silence will not suffice as acceptance of an offer.

However, there are two circumstances in which it will?

Answer 15

• renewal of an existing insurance policy
• where acceptor agrees silence can be treated as acceptance e.g. “if I don’t call you by tomorrow, assume I’ve bought it.”

Question 16

If offer and acceptance do not match completely, is there a contract?

Answer 16

No

Note:

• e.g. labour only vs. supply and fit
• the mirror image rule

Question 16

If party A makes a counter offer (or qualified acceptance) to B.

B rejects counter offer.

Can A accept B’s previous offer?

Answer 16

No, A’s counter offer (or qualified acceptance) rejects/ kills-off B’s previous offer

Question 17

If parties to an existing contract seek to vary the terms during or after it has been agreed, any new promises need new consideration. Under the past consideration rule, if no new consideration, is any new promise unenforceable?

Answer 17

No

Question 18

Scots law makes distinction between offer and promise.

Promise - whereby nothing is to be given or performed by one party

Offer - …?

Answer 18

Something to be done by offering party

It’s not binding till accepted

Question 19

What is an example of consideration, under contract law?

Answer 19

Usually takes form of money,
but it can be goods, labour, promise to do something (or not)

Note:
- Doctrine of consideration requires existence of bargain (but not a good one) (side note, doctrine does not exist in civil law)

England & Wales:

• Party B has to do something, to obligate party A to pay
• e.g. A offers to give something to B. If B does not have to do anything in return, then no legal obligation for A to complete offer to give something to B

Scotland:
- If A’s promise can proven, its obligation is enforceable (consideration is not requirement for a valid contract)

Question 20

Define privity of contract?

Answer 20

Only parties to a contract can enforce it (in court)

Note:
Except for
- Tort/delict (duty of care extends to third-party)
- Third-parties cannot (unless collateral contract)
- Contracts (Rights of Third Parties) Act 1999 (third-party can enforce a term if it benefits third-party)

Question 21

Contracts under civil law system must satisfy what 3 criteria?

Answer 21

Consent to bound

Capability

Lawful and definite subject matter

(CCL)

Question 22

In common law you can revoke an offer. In civil law, you cannot revoke before specified time period in contract, or if none, then a reasonable time period - true or false?

Answer 22

True

Question 23

Can contracts can be agreed in any form?

Answer 23

Yes.

Note:
orally, by formal deed, exchange of faxes, e-mails, telexes, etc

Question 24

Requests for Further Information - should be distinguished from a counter-offer. Sometimes info sought will be simply to clarify a point in the offer.

e.g. person offers to sell TV, potential buyer asks whether cash is required, or if cheque is okay. Inquiry is not a counter offer. Its not suggesting alternative terms, but attempting to clarify the way in which the contract will be performed and whether a specific type of performance will be acceptable

(no question)

Answer 24

-

Question 25

Battle of the forms -
court decided buyer’s terms prevail (court applied strict offer and acceptance scenario: offer made by buyer when order placed. Offer accepted by seller upon delivery.

Delivery notes and invoices came too late

(no question)

Answer 25

-

Continental Tyre and Rubber Co. Ltd. v Trunk Trailer Co. Ltd

Question 26

Provide a practical example of where conduct can complete the contract?

Answer 26

Offer casual job, and they simply turn up for work

Note:
No written contract signed, no oral acceptance

Question 27

What is meant by past consideration is not good consideration?

Answer 27

Person cannot rely on act that has happened,
prior to contract being made,
as consideration