Contract Law: Formation Of A Contract

Question 1

What are the key elements for forming a contract?

Answer 1

1. Offer
2. Acceptance
3. Consideration
4. Intention to create legal relations
5. Certainty of terms

If any element is missing there is no legally binding contract

Question 2

What is a valid offer?

Answer 2

An offer is a clear and definite promise to be bound by specific terms once accepted.

Example of offer: carlill v carbolic smoke ball company promised to pay £100 to anyone who used the smoke ball

Example of what is not an offer: goods on a shelf in a supermarket does not constitute an offer - this is simply an invitation to treat which does not create any legal obligation

Question 3

What is acceptance?

Answer 3

• acceptance is the unconditional agreement to all the terms of the offer

Question 4

What are the key elements for acceptance to be valid?

Answer 4

• acceptance must mirror the terms of offer meaning if the offer was £500 it must be accepted at £500 not £520 (mirror image rule)
• must be communicated to the silence is not acceptance (felthouse v bindly)
• Method of acceptance must be followed if specified

Question 5

If a counter offer is made does this mean the offer is still valid?

Answer 5

• no a counter offer destroys the original offer

Question 6

What is the postal rule
Of acceptance?

Answer 6

• the postal rule means acceptance is complete once posted regardless if there is delays to delivering the letter

Case: Adam’s v lindsdell

Question 7

What is consideration?

Answer 7

• consideration is providing something of value in exchange between parties to make the contract binding

Question 8

What are the key principles of consideration?

Answer 8

• consideration should be sufficient but need not be adequate (Thomas v Thomas £1 rent was sufficient consideration)
• past consideration is not valid (meaning consideration can not be promised after the act or item has been provided)
• performance of an existing duty is not sufficient consideration ( foaks v beer)

Question 9

When can past consideration be considered sufficient?

Answer 9

• when the act was carried out as a result of a request made by the other party and there was an implied expectation of payment and the sum is reasonable

Question 10

What constitutes the intention to create legal relations?

Answer 10

• when both parties enter into an agreement intended to be legally binding

Question 11

What is the previous request rule?

Answer 11

-previous request” rule states that past consideration can be valid if the act was performed at the request of the promisor, with an understanding that payment or compensation would be given later.

Question 12

What is the presumption regarding legal intent in business agreements?

Answer 12

• there is a general presumption that the parties had the intent to create legal relations

Question 13

What is the presumption regarding legal intent in social and domestic agreements?

Answer 13

• general presumption of no legal intent

Question 14

How can the presumption of no legal intent in domestic agreements be rebutted?

Answer 14

• if the agreement is written
• if the conduct of parties suggest that the contract was intended to be legallly binding

Question 15

What does certainty of terms mean?

Answer 15

A contract must be clear definite and enforceable terms

Question 16

What is revocation of an offer in contract law?

Answer 16

• Revocation is the withdrawal of an offer by the offeror before it is accepted. It must be communicated to the offeree (Byrne v Van Tienhoven [1880]) and can be done by a third party (Dickinson v Dodds [1876]).

Question 17

does the postal rule apply when retracting a offer?

Answer 17

• no postal does not apply the party in which the offer has been made to must receive the offer

Question 18

What are the conditions to the postal rule?

Answer 18

• that it reasonable to use post
• the letter was properly addressed stamped and posted
• and the postal rule had not been excluded as part of the offer

Question 19

difference between an unilateral and bilateral contract?

Answer 19

• a bilateral contract is where both parties promise to perform certain obligations
• where as a unilateral contract is a promise that only one party makes but dos not have to perform

example: I promise to sell my bike to my friend for £50 they agree once payment is made I then deliver the bike this is a bilateral contract a promise in return for a promise

Example 2: I lose my cat and make a poster saying anyone who find my cat gets £100 this is only binding on me on the basis someone find my cat but there is no other party promising to complete the act

Question 20

Can an offer be terminated?

Answer 20

Yes

Question 21

What methods can me use to terminate an offer?

Answer 21

(A) rejection by the offeree
(B) revocation
( c) laps of time

Question 22

who can a offer be addressed to?

Answer 22

• An individual or the whole world

Question 23

what is required for a offer to be certain and complete?

Answer 23

• judged objectively:
• the offer must include all the material terms eg price etc
• if parties are within the same trade this information may be used to fill any gaps

example terms that are too vague for example on a Hire purchase can render the offer void making the contract unenforceable

Question 24

What is an Arbitration Clause?

Answer 24

An arbitration clause is a provision in a contract that requires any disputes between the parties to be resolved through arbitration rather than going to court.

note: this may be to settle any disputes on certainty of price or parts of the contract that need clarification

Question 25

What is Executed vs. Executory Consideration?

Answer 25

- Executed consideration = Performance is completed (the act has already been carried out). -Executory consideration = Promise to act in the future (the act or performance is yet to happen).

Question 26

what must be done if two parties which to vary a contract?

Answer 26

- agreement - consideration - and intention to create legal relations

Question 27

What does "variation cannot be one-sided; consideration must vary" mean in contract law?

Answer 27

- Essentially, both parties must benefit from varying the terms of the contract. If one party benefits from the variation but the other does not receive any additional benefit (consideration), the variation may be considered void because the consideration is insufficient.

Question 28

what does it mean to 'confer a practical benefit?

Answer 28

To confer a practical benefit" means providing something of real value or advantage to the other party, which makes the contract change beneficial and enforceable. This could include saving time, money, or effort for one party. - note this is relevant in identifying if consideration is sufficient when a contract is varied

Question 29

what is promissory estoppel?

Answer 29

-Promissory estoppel prevents a party from going back on a promise, even if there was no formal contract

Question 30

What is the difference between an agent with actual authority and an agent with apparent authority?

Answer 30

Actual Authority: The agent has been expressly or impliedly granted authority by the principal to act on their behalf. • Apparent Authority: The agent appears to have authority due to the principal’s representations to a third party, even if no actual authority was given.

Question 31

What is an agent?

Answer 31

- An agent is a person or entity authorized to act on behalf of another (the principal) to create legal relations with third parties This authority can be actual or apparent

Question 32

When an agent acts on behalf of the principle to whom does the contract bind to?

Answer 32

- the principle no contract exists with the third party

Question 34

what is privity of contract ?

Answer 34

- only contracting parties can sue for breach of contract example: if A breaches contract to B then Bs friend can not bring forward a claim for privity of contract as they are not an intended benefiting party to that contract Exceptions apply under: contracts (rights of third parties) act 1999

Question 35

What are the exceptions to the privity of contract rule?

Answer 35

A third party can enforce a contract if: a) The contract expressly states they can. b) The contract benefits them, and the parties intended for them to enforce it.

Question 36

what is an agent?

Answer 36

- this is a party acting based on implied or apparent authority for the principle example below example: supermarket (principle) employs a store manager (agent) the principle can be held liable for actions of the agent

Question 37

when may the postal rule be invalid?

Answer 37

- if the letter is not properly addressed and posted - if the offer had specific instructions on how to accept and it did not include post - if it is not reasonable to post

Question 38

if a contract is frustrated what damages is available?

Answer 38

-if a contract is frustrated the contract automatically comes to an end so no damages for breach are available

Question 39

what remedies are available for a frustrated contract?

Answer 39

Under the Law Reform (Frustrated Contracts) Act 1943 – Money paid can be recovered, expenses may be compensated, and benefits must be paid for.

Question 40

who are the main categories of people whose power, or capacity, to enter contracts is limited by law?

Answer 40

- children under the age of 18 (unless it is a contract for necessary goods) - people with mental incapacity due to mental breakdown or drunkness

Question 41

what is meant by necessary goods in reference to a contract being binding on a person under the age of 18?

Answer 41

- cloths food, mobile phone etc (this is also dependant on their social status and the requirement at the time) - contracts of service if they were to benefit the minor

Question 42

what are the general rules when establishing if a contract is binding on someone who has impaired mental capacity?

Answer 42

- the contract will be valid unless at the time of creating the contract the individual was incapable of understanding the terms and the contract and the other party was aware of this (making the contract voidable)

Question 43

what are express terms?

Answer 43

- the terms of a contract agreed upon by both parties can be written or spoken

Question 44

how can terms be incorporated into a contract?

Answer 44

three ways: -by signature (even they did not read it) - reasonable notice ( if a party gives notice of a term before or when the contract is made) - by previous consistent course of dealing ( if both parties have dealt with each other on those same terms in the past)

Question 45

what are the three classification of terms?

Answer 45

- Conditions (Major terms) - warranties (minor terms) - Innominate Terms ( depends on the breach)

Question 46

what remedies are available for breach of major terms?

Answer 46

1.If there is a breach of major terms the innocent party can terminate the contract -2.or/and claim damages example of a major term: A concert performer signs a contract to perform at a music festival. If they fail to show up, this breaches a condition, allowing the festival organizer to cancel the contract and sue for damages.

Question 47

what remedies are available for breach of warranties?

Answer 47

1. innocent party can only claim damages example of a warranty: A company orders branded uniforms for its staff, and the supplier delivers them a day late. The delay is inconvenient but not crucial, so the company cannot cancel the whole contract but can claim compensation for any extra costs.

Question 48

what are the remedies available for breach of Innominate Terms?

Answer 48

- depends on the nature of the breach as they can either fall into warranty or condition - if the breach is considered a condition then party is able to terminate contract and claim damages - if the breach is considered warranty then only damages can be claimed Example: A software company provides a cloud service with a 99% uptime guarantee. If the system goes down for a few minutes, it’s a minor issue (warranty). But if it crashes for weeks, preventing customers from running their business, it becomes a serious breach (condition).

Question 49

what are implied terms?

Answer 49

Implied terms are contract terms that are not explicitly stated but are still legally binding because they are assumed to be part of the agreement.

Question 50

what are the four main categories of how terms can be implied into a contract?

Answer 50

1. terms implied by statute ( example sales of goods act) 1979 2. term implied by custom or trade usage ( it is a common practice for that trade) 3. by fact ( the term is needed in order for the contract to work) 4. terms implied by law (Terms that the courts impose on all contracts of a certain type to ensure fairness example: based on common law rather than legaslitvie law)