Formation of Contracts.

Question 1

What do the rules on a formation of a contract seek to identify?

Answer 1

-What the parties agreed to (not what the parties wanted to agree to).
-The basis upon which they agreed to (terms and conditions)
-Seek to enforce that agreement.

Question 2

What are the four steps for a formation of a contract?

Answer 2

1) Valid offer.
2) An offer must be validly accepted.
3) Intention to create legal relations.
4)Consideration.

Question 3

What is a valid offer?

Answer 3

The person making the offer is the offeror, the offeree is the one receiving the offer.
This identifies the person who made the offer and what the offer is about.

Question 4

What must happen for the offer to be validly accepted?

Answer 4

The issue is identifying the time it was accepted, when acceptance taken place and whether there was something to accept to in the first place.

Question 5

What is the intention to create legal relations?

Answer 5

-Intent to treat whatever is agreed with the other person to be a contract.

-Assessing the mental state of mind and the intent to make a contract which is legally binding,

Question 6

Why is consideration the important final step?

Answer 6

Makes the agreement legally binding.

Question 7

What is consideration?

Answer 7

This is not the promise to do something, rather the exchange of promises which signify what will be done in the contract in consideration for the benefit which will be received.

Question 8

What is not an offer?

Answer 8

An invitation to treat.

Question 9

What is not acceptance?

Answer 9

-Counter offers.
-Questions to do with the offer itself like requests for more information

Question 10

What test is used to determine whether there has been an offer?

Answer 10

The objective test: whether a reasonable person would agree that an offer has been validly made

Question 11

What is the battle of the forms?

Answer 11

Identifies which of the multiple offers proposed, was the one which was accepted.

Question 12

What are online transactions?

Answer 12

○ These are often invitations to treat, when displays flash up.
○ An offer is made not when going to the cart, but when going through checkout process, paid everything and receive an email confirmation.
○ Prior to acceptance of the offer, the offer can be rejected meaning the money is reserved in the bank account, not immediately taken.

Question 13

What is refusal?

Answer 13

This immediately rejects the offer.

Question 14

What is revocation?

Answer 14

Offer made and changed your mind. Yet the offer must be revoked prior to being accepted.

Question 15

What is lapse of time?

Answer 15

Physical deadline or the offer has a clear deadline.

Question 16

What is the objective test of agreement?

Answer 16

This assesses what a reasonable person would have done in that situation/would have concluded from the events.

Question 17

What does a subjective approach assess?

Answer 17

The mind of a party. It aims to discover what that party actually intended and understood.

Question 18

What does an objective approach assess?

Answer 18

The external factors and describes how the reasonable person would have understood what was said and done.

Question 19

What is the promisee or promisor objectivity?

Answer 19

The reasonable person stands in the shoes of either the promisee or the promisor and views the events from that perspective.

Question 20

What is detached objectivity?

Answer 20

The reasonable person stands in no one’s shoes, but observes the events as though a fly on the wall.

Question 21

Why is the subjective approach not favoured?

Answer 21

Due to the ‘impossible to know’ explanation of the individual’s actual intentions. It is impossible for either party to truly be aware of the other’s intentions, let alone for the court to know this.

Question 22

What does an offer require?

Answer 22

One person to intend or appear to intend to make an offer which is capable of being accepted.

Question 23

What can B do if a genuine offer is made?

Answer 23

B can bind the maker by accepting the offer.

Question 24

What can B do if only an invitation to offer is made?

Answer 24

There is nothing for B to accept. B can make an offer in response which A may then choose to accept or reject, but A will have the final say on whether there is an agreement.

Question 25

What is an invitation to treat?

Answer 25

An invitation for the other party to make an offer, which the former party is free to accept or reject.

Question 26

How are auctions similar to the display of goods in a shop window?

Answer 26

An auctioneer displays goods on behalf of the seller. This is an invitation to treat, where the bidders make offers to buy, the highest which is accepted by the fall of the hammer.

The auctioneer can withdraw the goods anytime before the bid is made.

Question 27

What does it mean when an auction is held ‘with reserve’?

Answer 27

There is a minimum price which must be met before the goods can be sold.

Question 28

What does it mean when an auction is held ‘without reserve’?

Answer 28

There is no minimum price which must be met, the goods can be sold for anything irrespective of their value.

Question 29

How is the auction being held ‘without reserve’ different in terms of the offer?

Answer 29

The auctioneer is making only an invitation to treat on behalf of the seller but they will presume that the auctioneer in a personal capacity is making an offer to sell to the highest bidder.

The highest bid will amount to an offer by the bidder to enter into the contract and acceptance.

Question 30

In ‘without reserve’ offers will the seller still be allowed to withdraw the item from the sale?

Answer 30

The seller can do this if the offer from the highest bidder has not yet been accepted by the auctioneer.

Yet the auctioneer would be in breach of their obligation to sell to the highest bidder.

Question 31

What does the auctioneer act as?

Answer 31

Agent for the seller.

Question 32

What is the contract between the auctioneer and the highest bidder?

Answer 32

A collateral contract.

Question 33

What does the collateral contract signify?

Answer 33

That the auctioneer, in his personal capacity, is making a collateral promise to perform his role of agent and create the main contract of sale between the seller and the highest bidder.

Question 34

What can a seller who wishes to attract multiple potential purchases do?

Answer 34

They may invite these potential purchasers to submit a tender.

Question 35

What is a tender?

Answer 35

Each person is asked to make just one bid. The request for tenders is sometimes an invitation to treat, whilst the tenders will constitute offers to buy the goods at the tendered price.

Question 36

What is the intention of the seller during tenders?

Answer 36

The seller who wants to encourage as many offers as possible in order to be able to accept the most attractive one.

Question 37

What does it being an offer or invitation to treat depend on?

Answer 37

The intention of the seller.

Question 38

What happens if the seller’s intentions are unclear?

Answer 38

The court will generally presume that only an invitation to treat was intended.

Question 39

When are the courts more likely to find that an offer existed?

Answer 39

-If it is limited to a certain amount of acceptances.
-It is possible to meet a large number of orders (Lefkowitz).
-It is of a limited nature e,g to consider reply (Blackpool).
-There are other practical reasons for finding an offer.

Question 40

What are inquiries?

Answer 40

These are one way in which a party can introduce potential new terms to the other party without making a counter-offer that is also likely to count as a rejection of the original offer.

Question 41

What is lapse of an offer?

Answer 41

The offeror can place a time limit on the offer.

Question 42

What happens when there is not a specific expiry date?

Answer 42

The court will have to reasonably decide whether too much time has elapsed.

Question 43

What is a unilateral contract?

Answer 43

Only on party assumes an obligation, it is one-sided.