Chapter 2 - Contract formation

Question 1

What is a valid contract?

Answer 1

Legally binding agreement between 2 parties which agreement may be evidenced by writing, words or action.

Question 2

What is meant by void and voidable?

Answer 2

Void - There is no contract and goods should be returned (even from a third party)

Voidable - The contract can be set aside by the “injured” party

Question 3

What factors make a contract void/voidable?

Answer 3

Void - illegality

Voidable:
- Lack of capacity
- Absence of free will
- Misrepresentation

Question 4

What contracts cannot be oral?

Answer 4

Transfer of land and credit agreements - must be in writing

Guarantees - evidenced in writing

Question 5

Are email exchanges valid as a contract?

Answer 5

Yes

Question 6

What is an offer?

Answer 6

A definite promise made by an offeror to be bound on specific terms.

Must not be vague

Question 7

What is an invitation to treat?

Answer 7

A statement of willingness to enter into negotiations.

E.g. Advertisements

Question 8

What are the ways an offer can be terminated?

Answer 8

rejection
counter-offer
revoke
lapse of time
failure of pre-condition

Question 9

What is the definition of acceptance?

Answer 9

An unqualified agreement to all the terms of the offer.

Some act is required

Question 10

How is acceptance communicated?

Answer 10

General rules is that acceptance is not effective until it is communicated to the offeror.

Any reasonable means of communication

Question 11

What are the exceptions to the communication rule?

Answer 11

Communication has been waived - unilateral contracts (no need)

Question 12

What are the conditions of the postal rule?

Answer 12

Use of post is reasonably within the contemplation of the parties.

The letter must be correctly addressed and the correct postage paid.

Applies only to acceptance, not revocation.

Acceptance by notice in writing overrides postal rule

Doesn’t apply to instantaneous communication

Question 13

What are the court’s 2 rebuttable presumptions made to decide whether intention exists?

Answer 13

Social, domestic and family - no intention to create legal obligations

Commercial - intention to create a legally binding contract

Question 14

What is executed consideration?

Answer 14

An act performed or executed in return for a promise

Question 14

What is consideration?

Answer 14

Right, interest, profit or benefit accruing to one party or something borne by the other

Price for which the promise of another is bought

Question 15

What is executory?

Answer 15

A promise given for a promise

Question 16

What is past consideration?

Answer 16

Generally invalid

Question 17

What are the exceptions to when consideration is not required?

Answer 17

When a contract is made by deed, contracts that are required to be made by deed:

Conveyancing - transfer of property
Leases over 3 years
Promises unsupported by consideration

Question 18

Does consideration need to be adequate and sufficient?

Answer 18

Adequate - no
Sufficient - yes, must have some identifiable value

Question 19

Is the performance of an existing statutory duty considered?

Answer 19

No

Question 20

What is the rule for the wavering of an existing debt?

Answer 20

Must be supported by consideration

E.g. Foakes vs Beer

Question 21

What are the exceptions to the rules in Foakes vs Beer?

Answer 21

Third party payment

Bargain by creditors that each will accept part payment acceptable despite no consideration

Question 22

What are terms of an oral contract?

Answer 22

If wholly oral, must ascertain what was expressly agreed

Oral evidence won’t usually be admitted to add to, vary or contradict written terms

Question 23

What are the terms of a written contract?

Answer 23

Must be substantially complete

Question 24

How can additional terms be implied?

Answer 24

By reference to custom provided the custom is not inconsistent with the express terms of the
contract

By statute

By the courts

Question 25

What is the rule for privity of contract?

Answer 25

Only a party to a contract can enforce it

Question 26

Is advertising at an auction an offer?

Answer 26

No, statement of intention

Question 27

What is the postal rule?

Answer 27

Effective when posted unless offeree negligent and post within contemplation of parties

Question 28

What is meant by subject to contract?

Answer 28

Strong presumption that there isn’t a legally binding contract

Question 29

What is the presumption used when major works are being carried out?

Answer 29

Contract already formed

Question 30

Is the performance of an existing contractual duty considered?

Answer 30

No unless:
- Can be shown that the promise is giving/doing something over and above the scope of obligation
- Other party obtains some extra practical benefit
- Performance of a contractual duty owed to a third party
- Forbearance of existing rights

Question 31

Can a statement of fact become a term in a contract?

Answer 31

Yes

If it was made before the signing and induced the other party to sign

Question 32

What is the Road Traffic Act 1972?

Answer 32

Person injured can claim against motorist’s insurers

Question 33

Can an agent enforce a contract?

Answer 33

No, contract is between their principal and third party

Question 34

What is a deed?

Answer 34

Formal promise between parties which must be signed and in writing

Question 35

Where a contract is in the form of a deed, is consideration required?

Answer 35

No

Question 36

What contracts must be in the form of a deed?

Answer 36

Conveyances - where property is transferred

Leases exceeding 3 years

Promises unsupported by consideration - promise to pay a regular amount to another party with nothing expected in return

Question 37

What is Rome II?

Answer 37

EU legislation adopted by Uk after brexit

Question 38

Where does Rome II apply?

Answer 38

If parties are based in different Eurpoean countires and have a commercial/civil dispute

Not agreed which countries law to apply

Applicable law is the law of the country where the damage occurs

Question 39

What happens if the event or circumstances on which an offer is conditional does or do not transpire?

Answer 39

Offer is terminated