Formation Of Legally Enforceable Contract Agreements

Question 1

Capacity to contract

Answer 1

Some people may be limited in their power to make contracts i.e. they lack contractual capacity

Question 2

Contracts and minors

Answer 2

• a contract with a minor for necessaries will be binding on the minor, as long as it does not contain harsh terms that are detrimental to the minor
• education or employment is binding
• certain contracts can be voidable by a minor
• Contracts with minors that are not for necessaries will be regarded as non enforceable

Question 3

Intoxication

Answer 3

• It is presumed that people under the influence of alcohol or drugs still have the capacity to know what they are doing
• not enforceable if the intoxicated party does not comprehend the nature of the transaction regardless

Question 4

Corporations and capacity

Answer 4

• A corporation is a legal entity with its own legal personality
• as a general rule, a company has unrestricted objects, meaning it has no restrictions to enter into legal relations
• however, a company may choose to restricts its objects by stating restrictions in its constitution

Question 5

Consideration

Answer 5

• A binding contract must have consideration from both parties
  unless made under a deed, gratuitous promise will not be enforced
• consideration is the promise to give, do something or refrain from doing something

Question 6

Executors or executed consideration

Answer 6

• executory consideration - the promise to do something in the future
• executed consideration - consideration that has already been completed

Question 7

Past consideration

Answer 7

this occurs when a promise is only made after an act has been done
e.g. if a person were to find and return an expensive item to you before you realised that you lost it
usually not accepted as consideration

Question 8

A request with an implied promise to pay

Answer 8

if a request is made for a service and the request implies a promise to pay for it, then completing the service is consideration, not past consideration
e.g. hiring a taxi or ordering at a restaurant

Question 9

Consideration must be sufficient, but it need not be adequate to be valid

Answer 9

• sufficient: it must have measurable and material value. It must be real, legal and certain
• need not be adequate: provided it has some value in the eyes of the law, the consideration will be regarded as valid

Question 10

Privity of contract

Answer 10

persons not party to the agreement cannot be bound by the terms or take action if the terms are broken

Question 11

Exemptions to the rule of privity

Answer 11

e.g. if the contracts were made for the benefit of a group of people such as a family

Question 12

Void contract

Answer 12

If a contract never existed:
- made by parties without the capacity to agree
- contains unlawful goods
- no consideration offered
- ownership of items cannot pass between parties

Question 13

Voidable contract

Answer 13

one party has the option to void the contract but until that point, it is targeted as a valid contract and goods can be legally transferred under it

Question 14

unenforceable contract

Answer 14

is a valid contract, but if one of the parties does not carry out their side of the contract, the courts will not enforce it