3. Law: Law of Contracts

Question 1

Can verbal contracts be legally binding?

Answer 1

Yes. They do not have to be signed, written down or witnessed

Question 2

Give the Mnemonic for the 7 factors for a contract to be legally binding

Answer 2

Only 
A 
Cat 
In 
Consideration 
Legally 
Flies

Question 3

Give the 7 factors that must be present for a contract to be legally binding?

Answer 3

1. Offer
2. Acceptance
3. Capacity
4. Intention
5. Consideration
6. Legality
7. Formalities

Question 4

Explain “Offer” for a contract to be legally binding

Answer 4

Offeror = Person making

Offeree = Person receiving

Offeror is clear on the terms & conditions of the contract

Question 5

Explain “Acceptance” for a contract to be legally binding

Answer 5

The offeror can withdraw at any time before the offeree accepts

Offeree can accept the contract by:

1. Face to face
2. Phone
3. Email
4. Post

Once offeree accepts, the offeree can sue the offeror for breach of contract if the offer is withdrawn

Question 6

Explain “Capacity” for a contract to be legally binding

Answer 6

1. Must be of sound mind

2. Over 18

Question 7

Explain “Intention” for a contract to be legally binding

Answer 7

Both parties must understand this will be a legally binding contract

Without this understanding it will only be an agreement, not a contract

Question 8

Explain “Consideration” for a contract to be legally binding

Answer 8

1. Both parties must benefit

2. The consideration does not have to be fair

Question 9

Explain “Legality” for a contract to be legally binding

Answer 9

The nature of the contract must not be illegal or be completed by illegal means

It must be able to be performed & fulfilled. A contract that required an impossible ask would be invalid

Question 10

Explain “Formalities” for a contract to be legally binding

Answer 10

Any formalities must be completed by law

Example: Deeds for the sale of land

Question 11

What can happen if one of the parties fails to meet their part of the agreement?

Answer 11

they can be sued by the other party in the civil courts for breach of contract

Question 12

An “Invitation to Treat” is

Answer 12

an indication of a persons willingness to negotiate a contract

is not an offer

Question 13

Discharge of a contract occurs when?

Answer 13

the main obligations of a contract are completed

Question 14

The ending of a contract due to the main obligations having been completed means?

Answer 14

the termination of contractual relationship

Question 15

Parties may “terminate” a contract early even when?

Answer 15

they have not completed their primary obligations required by the contract

Question 16

What is the main difference between “discharge” and “termination” of a contract?

Answer 16

the conditions under which the contractual relationship ends

Question 17

Lien is?

Answer 17

a right to keep possession of another persons assets until a debt owed by that person is discharged