Unit 4 - Rules of Contract, Theory of Contract, Essential Requirements

Question 1

What is the definition of a contract?

Answer 1

An agreement between two parties which is binding in law and therefore enforceable.

Question 2

What is the definition of a breach of contract?

Answer 2

If either party fails to carry out one of their duties under the contract.

Question 3

What is the difference between a void contract and a voidable contract?

Answer 3

A void contract is deficient from the start and cannot be legally binding. A voidable contract is legal and enforceable unless an issue is raised by one of the parties.

Question 4

What is the Latin term in regards to consumer protection which laws in the 20th century looked to change?

Answer 4

Caveat emptor - buyer beware

Question 5

What are the three essential requirements of a contract?

Answer 5

1. Agreement
2. Consideration
3. Intention to create legal relations

Question 6

What are the two separate parts of an agreement i/r/t contract law?

Answer 6

Offer and acceptance

Question 7

What is an offer in contract law?

Answer 7

An expression of one party’s willingness to contract on certain terms, with the intention of this being legally binding on acceptance

Question 8

What is an invitation to treat and why is this not an offer?

Answer 8

An invitation to treat is when objects are displayed to a potential buyer, such as in a shop, and buyers are invite to “make an offer” to purchase these. This is legally distinct from an offer as the shop owner can choose whether to accept this at a given price.

Question 9

Cases - showing the difference between invitation to treat and an offer

Answer 9

Fisher v Bell (1961) - knife window

Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd (1963) - controlled drugs

Question 10

Case - showing that an advert placed in the media is also an invitation to treat

Answer 10

Partridge v Crittenden (1968) - bird sale

Question 11

What is a unilateral offer?

Answer 11

An offer made to “the world”, such as offering a reward on a poster

Question 12

Case - showing that a unilateral offer cannot be classified as an invitation to treat

Answer 12

Carlill v Carbolic Smoke Ball Company (1893) - influenza ball

Question 13

What effect does a counter-offer have on the original offer?

Answer 13

Replaces it, rendering it void

Question 14

Case - showing effect of counter-offer on offer

Answer 14

Hyde v Wrench (1840) - farm sale

Question 15

Case - showing that offeree cannot accept offer/counter-offer that isn’t communicated to them

Answer 15

Taylor v Laird (1856) - sea captain resigned

Question 16

What are the three conditions of an acceptance?

Answer 16

1. Unconditional
2. Must “mirror” the original offer
3. Be properly communicated

Question 17

Case - showing that making enquiries does not constitute a counter-offer

Answer 17

Stevenson v McLean (1886) - iron on credit

Question 18

Case - showing “battle of the forms” principle

Answer 18

Butler Machine Tool Co Ltd v Ex-Cell-O Corp (1979) - price variation

Question 19

What is the postal rule i/r/t contract?

Answer 19

In cases where an offer is accepted by post, the contract is considered to be formed when the letter is posted

Question 20

Case - example of postal rule

Answer 20

Adams v Lindsell (1818) - wool sale

Question 21

Case - showing that offeror does not need to receive letter for contract to form i/r/t postal rule

Answer 21

Household Fire Insurance Co v Grant (1879) - bankrupt shares

Question 22

How does the postal rule apply to “instant” communication such as telephone and email?

Answer 22

It does not apply to telephone communication. Through email and online buying, the auto-acknowledgement is considered to be proof of contract

Question 23

What is consideration?

Answer 23

“an act of forbearance of one party, or the promise therefore, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable”

Question 24

Case - defined consideration

Answer 24

Dunlop v Selfridge (1915) - tyre sales

Question 25

Case - showing that consideration must have real, tangible and inherent value

Answer 25

Ward v Byham (1956) - bastard payment

Question 26

Case - showing that consideration need not be “adequate”

Answer 26

Thomas v Thomas (1842) - £1 annual rent

Question 27

Case - showing that consideration must not be in the past

Answer 27

Roscorla v Thomas (1842) - vice horse

Question 28

What is the exception to the rule that consideration must not be in the past, and what is the case that defines the rule?

Answer 28

“Rule in Lampleigh v Braithwaite” - if there is a reasonable implication payment may be made based on the type of act performed, consideration may be in the past

Question 29

Cases - the two “ship cases” which show that performance of existing obligations cannot be used as consideration, unless a part goes above and beyond their duties

Answer 29

Stilk v Myrick (1809) - deserter wages

Hartleby v Ponsonby (1857) - half deserted

Question 30

What is privity of contract?

Answer 30

A common law term which states that only parties subject to the contract may enforce it.

Question 31

Which act changed the general rule of privity of contract, and what was the change?

Answer 31

Contract (Rights of Third Parties) Act 1999, lets a beneficiary third party to the contract act to intervene.

Question 32

What are the two “rebuttable presumptions” in relation to the intent to create legal relations?

Answer 32

Social agreements are assumed to not have the intent to create legal relations, and business agreements are assumed to have that intent.

Question 33

Cases - the two “marriage payment” cases which illustrate the rebuttable presumption in social agreements

Answer 33

Balfour v Balfour (1919) - payments under marriage assumed to be non-legal
Merritt v Merritt (1970) - payments while separated assumed to be legal

Question 34

Case - example of a non-binding business relationship

Answer 34

Jones v Vernon Pools (1938) - honour coupon