Unit 4 - Rules of Contract, Theory of Contract, Essential Requirements Flashcards
What is the definition of a contract?
An agreement between two parties which is binding in law and therefore enforceable.
What is the definition of a breach of contract?
If either party fails to carry out one of their duties under the contract.
What is the difference between a void contract and a voidable contract?
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.
What is the Latin term in regards to consumer protection which laws in the 20th century looked to change?
Caveat emptor - buyer beware
What are the three essential requirements of a contract?
- Agreement
- Consideration
- Intention to create legal relations
What are the two separate parts of an agreement i/r/t contract law?
Offer and acceptance
What is an offer in contract law?
An expression of one party’s willingness to contract on certain terms, with the intention of this being legally binding on acceptance
What is an invitation to treat and why is this not an offer?
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.
Cases - showing the difference between invitation to treat and an offer
Fisher v Bell (1961) - knife window
Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd (1963) - controlled drugs
Case - showing that an advert placed in the media is also an invitation to treat
Partridge v Crittenden (1968) - bird sale
What is a unilateral offer?
An offer made to “the world”, such as offering a reward on a poster
Case - showing that a unilateral offer cannot be classified as an invitation to treat
Carlill v Carbolic Smoke Ball Company (1893) - influenza ball
What effect does a counter-offer have on the original offer?
Replaces it, rendering it void
Case - showing effect of counter-offer on offer
Hyde v Wrench (1840) - farm sale
Case - showing that offeree cannot accept offer/counter-offer that isn’t communicated to them
Taylor v Laird (1856) - sea captain resigned
What are the three conditions of an acceptance?
- Unconditional
- Must “mirror” the original offer
- Be properly communicated
Case - showing that making enquiries does not constitute a counter-offer
Stevenson v McLean (1886) - iron on credit
Case - showing “battle of the forms” principle
Butler Machine Tool Co Ltd v Ex-Cell-O Corp (1979) - price variation
What is the postal rule i/r/t contract?
In cases where an offer is accepted by post, the contract is considered to be formed when the letter is posted
Case - example of postal rule
Adams v Lindsell (1818) - wool sale
Case - showing that offeror does not need to receive letter for contract to form i/r/t postal rule
Household Fire Insurance Co v Grant (1879) - bankrupt shares
How does the postal rule apply to “instant” communication such as telephone and email?
It does not apply to telephone communication. Through email and online buying, the auto-acknowledgement is considered to be proof of contract
What is consideration?
“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”
Case - defined consideration
Dunlop v Selfridge (1915) - tyre sales
Case - showing that consideration must have real, tangible and inherent value
Ward v Byham (1956) - bastard payment
Case - showing that consideration need not be “adequate”
Thomas v Thomas (1842) - £1 annual rent
Case - showing that consideration must not be in the past
Roscorla v Thomas (1842) - vice horse
What is the exception to the rule that consideration must not be in the past, and what is the case that defines the rule?
“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
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
Stilk v Myrick (1809) - deserter wages
Hartleby v Ponsonby (1857) - half deserted
What is privity of contract?
A common law term which states that only parties subject to the contract may enforce it.
Which act changed the general rule of privity of contract, and what was the change?
Contract (Rights of Third Parties) Act 1999, lets a beneficiary third party to the contract act to intervene.
What are the two “rebuttable presumptions” in relation to the intent to create legal relations?
Social agreements are assumed to not have the intent to create legal relations, and business agreements are assumed to have that intent.
Cases - the two “marriage payment” cases which illustrate the rebuttable presumption in social agreements
Balfour v Balfour (1919) - payments under marriage assumed to be non-legal
Merritt v Merritt (1970) - payments while separated assumed to be legal
Case - example of a non-binding business relationship
Jones v Vernon Pools (1938) - honour coupon