1. Contracts

Question 1

What are the three forms of contract

Answer 1

Simple contracts
Written contracts
Speciality contracts

Question 2

What contracts must be in writing to be valid and enforceable?

Answer 2

Bills of exchange
Consumer Credit Agreements
Transfers of land (evidenced by Deed, aka speciality contracts)
Guarentees

Question 3

If a minor enters a contract, is it voidable at the option of the minor?

Answer 3

Yes

Question 4

Give 2 examples of someone without the capacity to enter a contract.

Answer 4

Minors
Parties of unsound mind
Companies before incorporation

Question 5

What is a contract

Answer 5

A legally binding agreement formed by the mutual consent of the contracting parties

Question 6

What is a simple contract

Answer 6

A contract that means they do not have to be in any particular form

Question 7

What is a speciality contract

Answer 7

Contracts used for agreements such as transfers of land and long leases

Question 8

What makes a speciality contract binding

Answer 8

It must be signed, sealed and delivered i.e. intended to take effect

Question 9

What is the limitation period (time limit from the breach to bring an action) for most contracts and what’s the limitation period for speciality contracts (if different)

Answer 9

6 years, 12 years

Question 10

What are 3 elements that would make a contract invalid

Answer 10

Void, voidable, unenforceable

Question 11

What essential elements make a contract valid

Answer 11

An offer
Acceptance
Consideration
Intention to be legally bound

Question 12

What is an offer

Answer 12

An offer is a definite promise to be bound on the specific terms made by the offerer to the offeree.
The offer can be made in any form but must be communicated to the offeree who can can anyone including the whole world.

Question 13

What is not an offer

Answer 13

An invitation to treat (invitation to someone else to make you an offer)
A supply of information or statement of intention
Vague statements (not sufficiently specific)

Question 14

How can an offer be terminated

Answer 14

Rejection/counter offer
Revocation (withdrawal of offer)
Lapse of time
Failure of pre-condition

Question 15

3 terms of revocation

Answer 15

Can be made at any time up to the point of acceptance
Can be made even if the offerer has agreed to keep the offer open
Must be communicated to the offeree by the offerer or reliable 3rd party

Question 16

What are the 2 exceptions to revocation rules

Answer 16

If the offeree pays the offerer to keep the offer open this creates a collateral contract and therefore revocation of the original contract would be in breach of that collateral contract. The offeree could claim damages for the loss of opportunity to accept the original offer.
In a unilateral contract - an offer made to the whole world. In addition if the offeree has begun performance of the unilateral contract then revocation is not effective as by beginning performance of the act, they are in the process of accepting the offer.

Question 17

How does Lapse of time effect an offer

Answer 17

If not accepted within specified time of if no time specified then after a reasonable time, the offer will cease to exist.
An offer will lapse upon death unless offeree accepts in ignorance of death.

Question 18

What is failure of precondition

Answer 18

Unless the condition or change of circumstance is met, the offer cannot be accepted.

Question 19

What is acceptance

Answer 19

Unconditional agreement to all terms of the offer

Question 20

What format must acceptance be in

Answer 20

Can be written, verbal or shown by conduct. The offerer can specify a method of acceptance, in which case it will only be binding if made in that format.

Question 21

What must the acceptance be in order to be binding?

Answer 21

Communicated unless this requirement is waived.
If acceptance is sent by email etc it becomes ‘communicated’ during business hours.

Question 22

If the offerer says ‘if i don’t hear from you I will assume you have accepted’. Can this be deemed communicated?

Answer 22

No, however the offerer can make a way that the offeree doesn’t have to communicate their acceptance.

Question 23

What is the postal rule?

Answer 23

When an acceptance is posted, it is deemed communicated when the letter is posted providing it’s stamped, addressed, posted and if post is deemed a reasonable method of communication.
If it acceptance is specified as ‘notice by writing’ the postal rule does not apply here.

Question 24

Does the postal rule apply to revocation

Answer 24

No, the postal rule only applies to acceptance. Revocation must be received before being deemed withdrawn.

Question 25

What is consideration

Answer 25

The give and take in a contract. There must be both in order to make the contract valid.

Question 26

What is the rule of consideration

Answer 26

Consideration must be sufficient (capable of being given value) but need not to be adequate (each parties consideration does not need to be be equal).

Question 27

What are the two types of adequate consideration

Answer 27

Executed consideration - provided at the time of the agreement
Executory consideration - promise to do something in the future

Question 28

What does forbearance/waiver of rights mean

Answer 28

One party can forfeit their rights to something which could be good consideration if it is capable of being assigned a value

Question 29

What is considered invalid consideration

Answer 29

Past consideration - something already done at the time of the agreement.
Performance of an existing statutory duty as this is something you are already legally bound to do. (Unless exceeded as this creates a new contract)
Performance of an existing contractual duty - already bound to perform this duty (Unless exceeded as this creates a new contract or is for a new third party).
Performance of an illegal act.

Question 30

Is past consideration ever considered to be valid consideration

Answer 30

Generally no, however if an act was done in response to a specific request and payment might be expected in such a situation, then there is an implied promise to pay and this constitutes good consideration

Question 31

What is the part payment problem?

Answer 31

Payment of a lesser sum in satisfaction of a greater sum cannot be any satisfaction for the whole sum. An extension of the rule that performing an existing contractual promise cannot be consideration for a further contract with the promiser.

Question 32

What are the exceptions to the part payment problem?

Answer 32

Alternative consideration can be accepted.
Bargain between creditors - group of creditors can jointly agree to part payment in lieu of full debt as all creditors bound to specified terms.
Payment by third party.

Question 33

What is the intention to create legal relations

Answer 33

For a contract to be created, both parties must intend to enter a legal relationship.

Question 34

If it’s not obvious of the intentions to enter a legal relationship, what are the two rebuttable presumptions that can be applied?

Answer 34

Domestic agreements - presumed there is no intention to be legally bound in a social or domestic arrangement. However can be rebutted or overturned by showing clear evidence to suggest otherwise. Also rebutted if agreement between spouses where parties were not living together happily.
Commercial agreements - it is presumed there is intention in a commercial agreement. Possible to rebut this if contrary intention is clearly expressed in the agreement itself but courts reluctant to do so.

Question 35

What does it mean when ‘subject to contract’ is included in the agreement

Answer 35

There is a strong presumption that there is no intention to be immediately legally bound.

Question 36

What is Privity of contract

Answer 36

Only a person who is a party to a contract has enforceable rights or obligations under it. Parties who have not contributed consideration to a contract cannot sue for breach as they are not privy to the contract.

Question 37

What are the exceptions to privity of contract

Answer 37

The Contracts (Rights of Third Parties) Act 1999 - beneficiaries explicitly named in the contract can enforce it provided the contract expressly allows them to.
Trust law allows beneficiaries to enforce a trust as a third party.
Agency law allows an agent to enter into a contract with a third party on behalf of his/her principal.

Question 38

What forms the contract once it’s been determined there is one?

Answer 38

Terms - expressed (must be clear to be enforced) or implied (not specifically agreed by the parties but part of the contract none the less)
Representation - something a party says to get the other to enter into the contract with them (could become a term but doesn’t have to be). Can sue for misrepresentation otherwise.

Question 39

How may implied terms arise in a contract

Answer 39

Due to the type of the contract.
To give business efficacy (term is needed in order for the contract to work practically).
Custom and usage - usual things for that type of contract.
Acts of parliament - e.g. Consumer Rights Act allows businesses to sue for breach of contract where goods supplied are not fit for purpose.

Question 40

What is Battle of the Forms

Answer 40

Where contracting parties each have their own standard terms, the parties should determine which terms apply. If not done the court will decide which takes precedence.

Question 41

What happens if an implied term contradicts a written express term?

Answer 41

The express term will prevail.

Question 42

Where a contract is in writing, will the courts allow parties to rely on terms agreed but not embodied in the contract?

Answer 42

Yes providing it can be shown that the document was not intended to comprise of all the agreed terms otherwise general rules apply that oral evidence cannot be relied on.