Unit 1

Question 1

What are the 3 essential elements required to form a legally binding contract?

Answer 1

1) Agreement (offer + acceptance)

2) Intention to create legal relations and capacity

3) Consideration

Question 2

What are the requirements of a valid offer?

Answer 2

1) clear + certain
2) addressed from the offeror to the offeree;
3) demonstrate intention to enter into a legal relationship
4) An offer must be communicated to the offeree either orally, in writing or by conduct

Question 3

Is an advert an offer?

Answer 3

No. It is an invitation to treat.

Question 4

What are the exceptions to the general rule that an advert is a invitation to treat?

Answer 4

1. Rewards – an advertisement of a reward usually constitutes an offer.
2. Unilateral offers – A unilateral offer prescribes an act, the performance of which constitutes an acceptance.

Question 5

Is an invitation to tender an offer?

Answer 5

No. It is an Invitation to treat.

Question 6

What is the exception to the general rule that an invitation to tender is an offer?

Answer 6

Where the party calling for bids makes a commitment in relation to the tender, then it constitutes an offer.

Question 7

When is the sale at an auction complete?

Answer 7

The sale is complete when the auctioneer (as agent for the seller) accepts a bid from a buyer with the fall of the hammer.

Question 8

What is the auctioneer’s call for bids?

Answer 8

Invitation to treat.

Question 9

For goods auctioned with a reserve price, are the bids offers?

Answer 9

Before the auctioneer’s acceptance, the bids are offers which can be withdrawn at any point. This provision applies only for goods being auctioned with a reserve price.

Question 10

What type of contract is formed between owner and bidder when the auctioneer accepts by hammering down?

Answer 10

When or after a reserve price is hit, this constitutes an offer of a bilateral contract. When an auctioneer accepts a bid, as the auctioneer is acting as agent for the owner, a bilateral contract is formed between the owner and the bidder.

Question 11

In an auction sale with no reserve, what type of contract would this form?

Answer 11

An offer of a unilateral contract. I.e., a promise to sell to the highest bidder.

Question 12

In a no reserve auction, if the auctioneer refuses to accept the bid, who will the bidder have a claim against?

Answer 12

The auctioneer but not the owner. Highest bidder cannot sue the owner/seller of the items because there is no contract between the parties.

The auctioneer is bound to accept the highest bid and if they do not the bidder can sue for damages, but not the item itself.

Question 13

What are the 3 ways an offer can be terminated?

Answer 13

1) Rejection

2) Revocation (by the offeror, before acceptance)

3) Lapse

Question 14

What is the effect of a counter offer?

Answer 14

Rejection of the first offer. Counter offer terminates the original offer.

Question 15

What is the general rule on revocation by the offeror?

Answer 15

Can occur any time before acceptance, even if the offeror promises to keep the offer open.

Note that the rule that a promise to keep an offer is not binding only applies to gratuitous promises (i.e., no consideration given for the promise to remain open).

Question 16

Exception to the general rule on revocation?

Answer 16

1) An offer cannot be revoked if the offeree has provided extra consideration to keep it open.

2 )If an offeree has begun to accept a unilateral offer and if that offeree would suffer inequity in the event of revocation, then the offeree must be allowed to try to complete the act (i.e., allowed to try to pay off the mortgage), and the offeror cannot meanwhile withdraw the offer.

Question 17

Does revocation need to be communicated?

Answer 17

Yes. It is only effective on receipt by the offeree themselves or a trusted third party.

Question 18

Exceptions to general rule that revocation needs to be communicated:

Answer 18

1) If it can be reasonably assumed that staff would be at work, the failure to read a notice of revocation will not amount to a failure to communicate revocation

2) If the offer was advertised via a public medium (i.e., a newspaper), revocation may be adequately communicated if the revocation is made through a medium of similar prominence NOTE: US authority; persuasive, not binding)

Question 19

Does acceptance need to be communicated?

Answer 19

Yes.

Question 20

What are the rules on acceptance?

Answer 20

– Can be communicated by a 3rd party authorised.

– Acceptance by conduct is possible.

– Silence does not amount to acceptance.

– Acceptance of a unilateral offer can be done by performance of the act.

– Acceptance does not need to be communicated where failure to communicate the acceptance is the offeror’s fault.

Question 21

What are the terms of the postal rule?

Answer 21

– For acceptance sent by post, acceptance occurs at the moment of posting.

– Offeror cannot revoke their offer after the acceptance is posted, even if they’re unaware of its posting, as their offer has already been accepted

– The acceptance is still valid, even if the letter is lost or destroyed in the post

Question 22

Limitations to postal rule

Answer 22

1) ouster clauses – if the postal rule is expressly or impliedly ousted by the offeror (i.e., “i need to hear from you by X” or “need notice of acceptance”) the postal rule does not apply.

2) if it is unreasonable to use it, i.e., postal strikes, then it does not apply.

Question 23

Acceptance by email

Answer 23

Occurs when the communication is received.

Question 24

Rules on acceptance by email:

Answer 24

– If acceptance is received within office hours but the offeror does not read it, that still counts as communication as the offeror is to blame for ignoring it

– If acceptance is received outside office hours, then it counts as having been received at the beginning of the next working day

– Ordinary Office Hours = “no universal rule” must be resolved by referring to the parties & sound business practice

Question 25

What presumption is there in commercial arrangements (ICLR)?

Answer 25

Strong presumption of intention to create legal arrangements. Can be rebutted on facts.

Question 26

What presumption is there in family/ domestic arrangement? (ICLR)

Answer 26

Strong presumption of NO intention to create legal relations. Can be rebutted on facts, e.g., drawing up contract, parting of ways, formalities etc.