The Law of Contract

Question 1

What is the definition of contract law?

Answer 1

“An agreement between two or more parties under which legal rights and obligations are created which will be enforced in the courts…a promise(s) that the law will enforce.” (text)

Question 2

What is the difference between a contract and an agreement?

Answer 2

A contract is an agreement but an agreement is not necessarily a contract. It may lack one of the elements (principles) that need to be present.

Question 3

What are the essential elements of a contract?

Answer 3

Agreement/Acceptance
Intention
Consideration
Capacity
Purpose

Question 4

What are formal contracts?

Answer 4

Contracts under seal. Require a special form or method or creation but DO NOT need consideration (contracts of record, some loan agreements, hire purchases)

Question 5

What are simple contracts?

Answer 5

All contracts (other than contracts under seal) are simple contracts. They require consideration and some must be in writing to be enforceable (i.e. real estate contracts)

Question 6

What is an express contract?

Answer 6

contract is where the parties have used express (specific) words - written &/or oral (e.g. lease)

Question 7

What is an implied contract?

Answer 7

Implied by conduct - i.e. taxi

Question 8

What is a Quasi-contract?

Answer 8

Agreement imposed by law (i.e. compulsory third party insurance)

Question 9

What is a unilateral contract?

Answer 9

An act in exchange for a promise (Mobil Oil Australia x. Welcome International Pty Ltd ( 1998)

Question 10

What is a bilateral contract?

Answer 10

A promise for a promise: an exchange of promises .

Question 11

What is a valid contract?

Answer 11

All elements are enforceable by another party - usually a remedy for breach (damages) but equitable remedy may also be available

Question 12

What is a voidable contract?

Answer 12

A valid contract that contains some defect (allows the innocent party to enforce or rescind the contract)

Question 13

What is an uneforcable contract?

Answer 13

Valid (prima-face_ on its face but no legal action can be brought on the contract - often because of a technical defect. Correction will generally render a contract enforceable if done within a reasonable time

Question 14

What is a void contract?

Answer 14

Lacks legal validity and is unenforceable by either party

Question 15

What is an illegal contract?

Answer 15

The purpose of the contract contravenes a statute or the common law - generally treated as void ab inito (void from the beginning)

Question 16

When does a contract come into existence?

Answer 16

After an offer has been made - the point at which it is ACCEPTED is when the contract begins

Question 17

What is considered “acceptance”?

Answer 17

Written, oral or implied by conduct of the parties (did they show intention to create legal relations)

Question 18

What is an invitation to treat?

Answer 18

An “invitation to treat” is just an indication of a willingness to deal or trade and is not an offer.

Question 19

Is a tender an offer?

Answer 19

Not usually unless the tender states its exact needs as opposed from what it may require

Question 20

Can an offer be withdrawn?

Answer 20

Offer can revoke the offer any time up until acceptance - even if the offeror has said the offer will remain open (unless an agreement was created with consideration or under a deed)

Question 21

What should a party do if they would like to withdraw an offer?

Answer 21

Ensure that they bring the withdraw to the other parties attention before acceptance. They can learn directly or indirectly.

Question 22

What is an example of puffery?

Answer 22

Leonard vs. Pepsi Co. Pepsi said one could win a harrier jet as a prize for someone who claimed enough points - not reasonable, pure puffery.

Question 23

What are the exceptions to an acceptance requiring it to be communicated?

Answer 23

• Notification can be dispensed with by offeror
• Acceptance can take the form of performance of an act
• Acceptance can be implied by conduct

Question 24

What does not constitute acceptance?

Answer 24

Silence.

Question 25

Can an acceptance be made in reliance of the offer?

Answer 25

Yes however they must intend to accept the offer. This can be very risky.

Question 26

In a unilateral contract, an offeror has waived its right to ____________ ___ ____________.

Answer 26

Communication of acceptance.

Question 27

What is the postal acceptance rule?

Answer 27

The rules as to the time of acceptance are as follows:

• An offer by letter is NOT effective until received by the offeree
• Acceptance is effective as soon as it is posted
• Acceptance is not affected by delay or loss of letter (provided the parties contemplated post as means of communication).

Question 28

When can the postal acceptance rule be excluded?

Answer 28

Where intention is that communication is required (which an offeror can stipulate) i.e. postal exclusion clause

Question 29

What is intention?

Answer 29

Intention to create legal relations.

Question 30

How does intention differ between social, domestic, voluntary vs. business relationships?

Answer 30

Courts presume there is/was no intention to create legal relations in social/domestic/voluntary agreements

Courts presume parties DO intend to create legal relations but can be rebutted if not of a commercial nature

Question 31

Explain the difference between social, domestic and voluntary agreements?

Answer 31

Social - made between friends or acquaintances
Domestic - made between family members
Voluntary - parties volunteer their services