The Essential Featurese Of Contract Law

Question 1

What is the definition of a contract?

Answer 1

There is no formal definition. But it can be defined as;

A mutual agreement between 2 or more parties that something shall be done or forborne (given up) by one or both;
Also a writing in which the terms of a bargain are concluded;
In law, an agreement enforceable by law.

Question 2

What are the basic principles defining the formation of a contract can be determined with reasonable certainty.

They are:

Answer 2

1. That the parties have made an agreement through a process of offer and acceptance;
2. That the parties have provided ‘consideration’ to each other.
   Consideration - each party has given the other, and in return received from the other, something of value.
   In this context, a promise in exchange for a promise counts as ‘something of value’.
3. That the parties intended to create legal relationship between them.

If all 3 element are present, then - subject to certain exceptions - English law recognises a legally binding contract.

Question 3

For a contract to be legally enforceable, a number of additional criteria must be met. What are they?

Answer 3

1. The offer and acceptance must match exactly otherwise no valid agreement had been made. An agreement ‘subject details’ is not enforceable as the parties have not yet reached a final agreement on all terms.
   E.g. a ‘yes, but…’ answer is not a clean acceptance - it is probably a counter-offer.

Question 4

Continuing with the criteria for a contract to be legally enforceable…
What is the second criteria?

Answer 4

There must be a meeting of the minds; the parties must have agreed on the same thing. If they have not the contract will be unenforceable.

Question 5

Third criteria for a contract to be legally enforceable?
(There are 5)

Answer 5

3. If one party has been induced to enter into a contract in reliance on statements made to them by the other party that turn out to be untrue, the innocent party will be able to rescind - cancel - the contract

Question 6

4th criteria for a contract to be legally enforceable?

Answer 6

The parties must possess the legal capacity to enter into a binding contract.

E.g. those under the age of majority do not in general have capacity to enter into an enforceable contract;
Neither do those who suffer from mental capacity.

Question 7

5th criteria for a contract to be legally enforceable?

Answer 7

As a matter of public policy, the courts will not enforce a contract under which the parties engage in unlawful activities.

Question 8

The aforementioned basic principles apply to every type of contract under English law but insurance contracts have some additional and important aspects.

What are those that are relevant to P& contracts?

Answer 8

1. The Marine Insurance Act 1906 - MIA 1906
2. The Insurance Act 2015
3. The Enterprise Act 2016

Question 9

Forms of contract

In general, under English law, it is a requirement for a contract to comply with particular formalities

TRUE or FALSE?

Answer 9

FALSE

Except for contracts relating to the sale or other disposition of an interest in land - these must be in writing.

Similarly, a contract of guarantee needs to be evidenced, but not necessarily made, in writing.

An oral contract is as enforceable at law as a written contract provided its terms can be proved.

Question 10

What other method may a contract come into existence?

Answer 10

• simply through the conduct of the parties.

E.g. a contract is created by the sale of goods in a shop or by taking a ride on a bus although no words may have passed between shopper and shopkeeper or between passenger or driver.

Question 11

PARTIES TO A CONTRACT

What is the general rule in English law regarding who has rights and obligations under a contract?

Answer 11

• only the parties to the contract can have rights and obligations under it.
• a third party cannot acquire rights nor be subject to any burdens under a contract to which they are not a party.
• This is so even where the contract was specifically expressed to be for their benefit.

Question 12

How do you get round the ‘problem’ where a third party cannot acquire rights or be subject to any burdens under a contract to which they are not a party?

I.e.: what is the doctrine of PRIVITY OF CONTRACT?

Answer 12

• To obtain the contracted benefit the beneficiary has to persuade the promisee <the> to sue the promisor <the> on their behalf.</the></the>

Question 13

What is the Himalaya clause?

(Named after a vessel involved in a particular legal case involving the issue of the doctrine of the privity of contract)

Answer 13

• servants, agents and sub-contractors of the contracting party, usually the carrier by sea, were able to take advantage of defences to and limitation of liability available to the carrier under the contract of carriage.