Week 11 - Introduction to Business Law

Question 1

What is a valid contract?

Answer 1

a legally binding agreement between two parties

can be formed in writing, orally or through action

Question 2

When is a contract only legally binding?

Answer 2

1. there has to be an offer and acceptance
2. consideration
3. intention to create legal relations
4. Privity
5. Capacity

Question 3

What is an offer?

Answer 3

a definite promise to be bound on specific terms. It is made by an offeror

Question 4

What cannot be an offer?

Answer 4

A statement that is vague
A statement which sets out possible terms

Question 5

What is a statement of intention?

Answer 5

an offer that must be something more than just the supply of information

Question 6

What is an invitation to treat?

Answer 6

when a party is initiating negotiations

Question 7

What is an invitation to treat an indication of?

Answer 7

that a person is prepared to receive offers with a view to entering into a binding contract

Question 8

When can an invitation to treat cannot be accepted?

Answer 8

to form a binding contract

Question 9

What are 4 ways an offer may be terminated?

Answer 9

1. Rejected by the offeree
2. Counter-offer by the offeree
3. Lapse of time
4. Revocation (withdrawal) by the offeror before acceptance has taken place

Question 10

What is a counter offer?

Answer 10

When the offeree proposes new or amended terms, thereby terminating the original offer (since acceptance must amount to an unqualified agreement to all the terms of the offer). The counter-offer is then open to the offeror to accept or reject

Question 11

What is lapse of time for an offer?

Answer 11

If no express time limit is provided then the offer expires after a reasonable time has elapsed

Question 12

When does revocation take place?

Answer 12

when it is communicated to or received by the offeree. The postal rule only applies to acceptance, not revocation of an offer

Question 13

What does the postal rule state?

Answer 13

that where the use of the post is within the contemplation of both the parties, the acceptance is complete and effective as soon as a letter is posted, even though it may be delayed or even lost altogether in the post

Question 14

What is acceptance?

Answer 14

the offeree’s response must amount to an unqualified agreement to all the terms of the offer in order to constitute a valid acceptance.

acceptance may be made by express words to that effect, or it can be inferred from conduct

Question 15

What must acceptance be?

Answer 15

a positive act (silence or lack of action cannot be taken as acceptance)

it must be communicated to the offeror

Question 16

What do we need after an offer and acceptance for a legally binding contract?

Answer 16

1. an intention to create legal relations

Question 17

What is an intention to create legal relations?

Answer 17

considers whether the two parties could reasonably be assumed to have intended to create a contract

Question 18

Does intention to create legal relations link to social, domestic and family relationships?

Answer 18

It is presumed that arrangements arent intended to create a legally binding contract unless there is clear evidence to the contrary

Question 19

Does intention to create legal relations link to commercial relationships?

Answer 19

It is presumed that there is an intention to create a legally binding contract unless it is expressly disclaimed

Question 20

What is consideration?

Answer 20

it is what each party gives or agrees to give to the other, usually payment or a promise to do something in return

Question 21

What 2 things can consideration include?

Answer 21

1. An act in return for a promise
   eg payment of goods when the goods are delivered
2. A promise for a promise
   eg promise of payment for goods which

Question 22

What is not valid within consideration?

Answer 22

past consideration is not valid

ie you cannot promise something that has already been done at the time the promise has been made

Question 23

What must consideration be?

Answer 23

sufficient, it must have some identifiable value in order to be capable in law of being regarded as valid consideration

Question 24

What does consideration need not be?

Answer 24

adequate (that is, equal in value to the consideration received in return). There is no remedy at law for someone who simply makes a poor bargain

Question 25

What is capacity?

Answer 25

Parties to a contract must legally and mentally be able to enter into a contract

Question 26

What is privity?

Answer 26

only a person who is party to a contract has enforceable rights or obligations under it

where A promises B that (for a consideration provided by B) A will confer a benefit on C, then C cannot as a general rule enforce A’s promise since C has given no consideration for it.

Question 27

What are 3 examples of capacity?

Answer 27

1. eg an individual must be of sound mind and of free will
2. eg an individual must be over the age of 18
3. eg a contract shouldnt be illegal

Question 28

What is a general rule of contract terms?

Answer 28

the parties to a contract may expressly include in the agreement whatever terms they choose

Question 29

What can become a term in contract terms?

Answer 29

a statement of fact made before the contract can become a term

Question 30

What can be disregarded in contract terms?

Answer 30

meaningless or vague terms can be disregarded

Question 31

Who are terms also implied by?

Answer 31

terms may also be implied into the contract by the courts, by statue or by custom

Question 32

When can terms not be implied into the contracts?

Answer 32

if they would cause inconsistency with express terms

Question 33

What does statute mean?

Answer 33

legal regulations and Acts such a The Supply of Goods and Services Act

Question 34

What is employee status?

Answer 34

an employee can be distinguished from an ‘independent contractor’ or self-employed person

Question 35

How is an employee treated differently from an independent contracts?

Answer 35

like taxation, social security, health and safety, employment protection and liability

Question 36

What are the 5 tests to determine employee status?

Answer 36

1. Control test
2. Integration test
3. Economic reality test
4. Mutuality of obligations test
5. Multiple test

Question 37

5 tests to determine employee status context

Answer 37

1. Control test
   Is a person subject to the orders of his employer?
2. Integration test
   Is the work done as an integral part of the business?
3. Economic reality test
   How far is a personal in business on his own account?
4. Mutuality of obligations test
   Is the employer obliged to provide work and the employee obliged to accept it?
5. Multiple test

Question 38

An example of a multiple test

Answer 38

Does the person have to turn up to work when expected? Yes
Does he have to do what the organisation tells him to do? Yes
Is he expected to do it personally? Yes
Can he send someone else to do the work? No
Then he is an employee

Question 39

What are 4 reasons why the distinction important for an employee status?

Answer 39

1. Employees can claim wrongful dismissal
2. Employees have minimum periods of notice and entitlement to statutory redundancy
3. Employees rank more highly in the case of liquidation of the company
4. Differences in who pays the taxes/ national insurance contributions