Contract Law basics

Question 1

What is a Contract?

Answer 1

A private law agreement between two or more parties, and enforceable by the courts.

terms are chosen by parties

Question 2

What is Contract Law?

Answer 2

body of law that protects the agreements and enforces the rights that arise out of the contract

Question 3

What are the five requirements to form a Contract?

Answer 3

• Offer
• Acceptance
• Consideration
• Legal Capacity
• Intention to create legal relations

Question 4

What constitutes an Offer?

Answer 4

An offer to do, or not to do, something in return for something else. An offer cannot be just an intention to do something in return for nothing.

Question 5

What is the difference between Offer and Invitation to Treat?

Answer 5

Offer is made when someone intends to enter into a legally binding contract, whereas Invitation to Treat is a supply of info to tempt someone into making an offer.

Question 6

What is consideration?

Answer 6

Each party must give something of value
- make a payment
- perform an act

Question 7

What constitutes Legal Capacity?

Answer 7

The contracting parties must be capable of appreciating the significance and consequences of entering into a contract.

e.g. of individuals without legal capacity:
- Infants (less than 19 y/o)
- Intoxicated
- Mentally incompetent
- Unincorporated organizations

Question 8

intention

Answer 8

all parties have to intend to be bound

• bound by the terms of contract
• must understand the terms
• most contracts are in writing unless a third party is witness

ALWAYS WANT A WRITTEN CONTRACT

Question 9

contracts - other considerations

Answer 9

1. writing
   - not required but always use a written contract
2. certainty of terms
   A requirement that the terms of the contract must be precise and definite in order to be subject to acceptance.
3. interpretation
   - precise meaning
   - no ambiguity
4. privity of contract
5. agency
6. term
7. amendment
8. subcontracting
9. remedies -> monetary

Question 10

What type of contract must be in writing?

Answer 10

Purchase and sale of land

Question 11

What is Privity of Contract?

Answer 11

Non-parties cannot be bound to a contract. (e.g. a supplier that has not entered into contract).

Question 12

What does an Agent do within a contract setting?

Answer 12

An Agent can negotiate the contract on behalf of the principal. (e.g. a construction manager may be the agent for the owner and enter into contracts with other companies).

Question 13

What is the “Term” within the contract setting?

Answer 13

The period for which a contract is binding.

Contract is binding until:
- Obligations are fulfilled
- It is terminated
- It is amended by consent of each party

Question 14

offer and acceptance

Answer 14

offer must be accepted as proposed

if the party purpoting to accept the offer changes some of the terms:
- initial offer is rejected
- revised terms are a counter offer