U3. Intention to Create Legal Relations

Question 1

What are the 4 Essential Elements of a Contract?

Answer 1

1. Offer
2. Acceptance
3. Consideration
4. Intention to Create Legal Relations

Question 2

What is the rebutable presumption with regards intention to create legal relations in Social and Domestic Contexts?

Answer 2

There is not an intention to create legal relations, but this can be rebutted.

Question 3

What is the rebutable presumption with regards intention to create legal relations in Commerical Contexts?

Answer 3

There is an intention to create legal relations, but this can be rebutted with clear evidence.

Question 4

What is an intention to create legal relations?

Answer 4

An intention to be legally bound by the agreement

Question 5

What 4 factors can rebut the presumption that there in no intention to create legal relations in Social and Domestic Contexts?

Answer 5

1. The terms of the agreement are certain
2. The parties are not on friendly terms when they make the agreement
3. The agreement is serious
4. One party has relied on the agreement to his detriment

Question 6

When rebutting a presumption of intention to create legal relations, is the factors looked at subjectivley or objectivley?

Answer 6

Objective Test

Question 7

What are the 2 factors that can rebut the presumption to create legal relations in commerical contexts?

Answer 7

1. Uncertainty in the agreement terms

2.Clear words that the agreement shall not have legal affect (‘IE Binding in Honour Only’)

Question 8

What are comfort letters?

Will they rebut the presumption of creating legal relations?

Answer 8

A comfort letter may simply describe the companies current policy, or make a promise / gaurantee as to the future.

They will only show evidence of intention to create legal relations if they contain a promise as to the future.

Question 9

When can an advertisment demonstrate intention to create legal relations?

Answer 9

Advertisements giving an intention to perform on a promise are legally binding, for instance providing holiday insurance or depositing money into an account on sign up as a reward.

Question 10

What is the affect of an agreement being uncertian?

Answer 10

If an agreement is uncertain, it will be found that the parties did not intend to create legal relations

Question 11

What are the main reasons for an agreement being found to be uncertian, and so not legally binding?

Answer 11

1. Too Vague
2. Incomplete (Essential Term Missing)
3. Mistake (Dealt with in a later class)

Question 12

Give an Example of a term that is uncertian, and so lacking intention to create legal relations?

Answer 12

At prices that are in all the circumstances reasonable

Question 13

What is the affect of having a term stating uncertian terms will be decided by an Arbitrator?

Answer 13

If there is such a term, and an independet arbitrator would be able to reach a decision on the uncertian term, then the contract is not uncertian and is binding.

Question 14

What is the affect of Past Transactions when dealing with Uncertian Terms with relation to deciding if the contract is legally binding?

Answer 14

The Court can also look at past transactions to find certainty.

For example, if past contracts were for ‘Baskets of Apples’ and a new contract said ‘Baskets’, The courts can find certain from past transactions that Baskets refers to Baskets of Apples.

Question 15

What is the affect of key terms missing from a contract?

Answer 15

If terms such as the price or quantity have not been agreed by the parties, the contract will be void to lack of certanity

Question 16

What is the affect of peformance of a contract where there are missing key terms, and so usually void?

Answer 16

If part of the contract has been performed, the contract may still be valid.

Question 17

What is the affect of a clause stating determination of a matter by a third party when there is missing key terms, and so usually void?

Answer 17

if there is a term that key terms will be determined by a third party, such as an arbitrator or valuer, it will not be void for uncertainty.

Question 18

What happens to a contract if it is found one of the parties did not have mental capacity to enter into the agreement?

Answer 18

The contract will be voidable

Question 19

What 2 tests must be met to establish mental incapacity and make a contract voidable?

Answer 19

1. The person did not have mental capacity at the time to enter into the agreement
2. The other party knew, or should have known, that he did not have capacity.

Question 20

What is the diffence between a void contract, and voidable contract?

Answer 20

A void contract has no legal affect

A voidable contract has legal affevt until one of the parties choses to set it aside

Question 21

What factors make a person not have the mental capacity to enter into legally binding agreements?

Answer 21

A person lacks mental capacity if he is unable to ‘make the decision himself.’

A person is unable to do so if:

1. Understand the information relevant to the decision
2. Retain that information
3. Use or weigh that information as part of making a decision

4.Communicate his decision.

Question 22

What is the affect of someone being intoxicated when entering into a contract?

What 2 elements must be met?

Answer 22

The Contract will be voidable if:

1. One party was intoxicated or otherwise unable to understand the nature or his actions at the relevant time
2. The other party knew, or ought to have known, the above.

Question 23

Are contract made by minors legally bidning?

Answer 23

Contracts made by under 18’s are voidable unless they are a contract for Employment or Education / Training.

The only time a contract for employment / education is voidable is if the minor loses more than what he gains under the contract

Question 24

If a minor enters into a contract, but has an adult gaurantee the contract, can it be legally binding?

Answer 24

The minor will not be bound, but the gaurantor will be bound by such a agreement.

Question 25

If a companies constitunal documents restricts a certian activity, and that activity is the subject of a contract, can the contract sill be binding?

Answer 25

if a party enters into an agreement in good faith, the company will be bound even if the activity conflicts with a restriction in its constitutional documents.

Question 26

What is an agreement to agree?

What is the affect?

Answer 26

An agreement to agree is a term such as ‘Subject to conditions to be agreed by the parties’

Such agreements are uncertian, and is not enforceable.

Question 27

What is the principle of Necessaries?

Answer 27

Necessaries are goods or services suitable to the persons condition in life, such as good, clothing, accomodation, education and training.

Even if someone lacks capacity to enter a contract, if they have recieved such necessaries, they may have to pay a REASONABLE Price for that.