Week 11 - Introduction to Business Law Flashcards
What is a valid contract?
a legally binding agreement between two parties
can be formed in writing, orally or through action
When is a contract only legally binding?
- there has to be an offer and acceptance
- consideration
- intention to create legal relations
- Privity
- Capacity
What is an offer?
a definite promise to be bound on specific terms. It is made by an offeror
What cannot be an offer?
A statement that is vague
A statement which sets out possible terms
What is a statement of intention?
an offer that must be something more than just the supply of information
What is an invitation to treat?
when a party is initiating negotiations
What is an invitation to treat an indication of?
that a person is prepared to receive offers with a view to entering into a binding contract
When can an invitation to treat cannot be accepted?
to form a binding contract
What are 4 ways an offer may be terminated?
- Rejected by the offeree
- Counter-offer by the offeree
- Lapse of time
- Revocation (withdrawal) by the offeror before acceptance has taken place
What is a counter offer?
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
What is lapse of time for an offer?
If no express time limit is provided then the offer expires after a reasonable time has elapsed
When does revocation take place?
when it is communicated to or received by the offeree. The postal rule only applies to acceptance, not revocation of an offer
What does the postal rule state?
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
What is acceptance?
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
What must acceptance be?
a positive act (silence or lack of action cannot be taken as acceptance)
it must be communicated to the offeror
What do we need after an offer and acceptance for a legally binding contract?
- an intention to create legal relations
What is an intention to create legal relations?
considers whether the two parties could reasonably be assumed to have intended to create a contract
Does intention to create legal relations link to social, domestic and family relationships?
It is presumed that arrangements arent intended to create a legally binding contract unless there is clear evidence to the contrary
Does intention to create legal relations link to commercial relationships?
It is presumed that there is an intention to create a legally binding contract unless it is expressly disclaimed
What is consideration?
it is what each party gives or agrees to give to the other, usually payment or a promise to do something in return
What 2 things can consideration include?
- An act in return for a promise
eg payment of goods when the goods are delivered - A promise for a promise
eg promise of payment for goods which
What is not valid within consideration?
past consideration is not valid
ie you cannot promise something that has already been done at the time the promise has been made
What must consideration be?
sufficient, it must have some identifiable value in order to be capable in law of being regarded as valid consideration
What does consideration need not be?
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
What is capacity?
Parties to a contract must legally and mentally be able to enter into a contract
What is privity?
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.
What are 3 examples of capacity?
- eg an individual must be of sound mind and of free will
- eg an individual must be over the age of 18
- eg a contract shouldnt be illegal
What is a general rule of contract terms?
the parties to a contract may expressly include in the agreement whatever terms they choose
What can become a term in contract terms?
a statement of fact made before the contract can become a term
What can be disregarded in contract terms?
meaningless or vague terms can be disregarded
Who are terms also implied by?
terms may also be implied into the contract by the courts, by statue or by custom
When can terms not be implied into the contracts?
if they would cause inconsistency with express terms
What does statute mean?
legal regulations and Acts such a The Supply of Goods and Services Act
What is employee status?
an employee can be distinguished from an ‘independent contractor’ or self-employed person
How is an employee treated differently from an independent contracts?
like taxation, social security, health and safety, employment protection and liability
What are the 5 tests to determine employee status?
- Control test
- Integration test
- Economic reality test
- Mutuality of obligations test
- Multiple test
5 tests to determine employee status context
- Control test
Is a person subject to the orders of his employer? - Integration test
Is the work done as an integral part of the business? - Economic reality test
How far is a personal in business on his own account? - Mutuality of obligations test
Is the employer obliged to provide work and the employee obliged to accept it? - Multiple test
An example of a multiple test
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
What are 4 reasons why the distinction important for an employee status?
- Employees can claim wrongful dismissal
- Employees have minimum periods of notice and entitlement to statutory redundancy
- Employees rank more highly in the case of liquidation of the company
- Differences in who pays the taxes/ national insurance contributions
