Introduction Flashcards
(13 cards)
What is a contract?
An agreement between a minimum of two parties that is legally enforceable.
What does it mean for a contract to be legally enforceable?
It creates obligations for the parties involved.
What happens if a party does NOT perform their obligation after the formation of a valid contract?
They are liable for breach of contract.
What does freedom of contract mean?
There’s freedom of
- Whether to make a contract
- With whom to make a contract
- On what terms.
What are the four elements that make a contract valid?
Offer, Acceptance, Intention to create legal relations, Consideration.
What is the formula for a valid contract?
Offer + Acceptance = Agreement → Agreement + Intention + Consideration = Valid contract.
How do we determine the intention of a party in a contract?
Through the subjective and objective tests.
What is the subjective test in determining intention?
Applied in scenarios where the non-mistaken party intends to take advantage of the mistaken party.
Also called the “exceptional test”
In Hartog v Colin and Shields, the parties have agreed in the contract for the sale of rabbit skin that the price is calculated on the basis of per piece. But the written contract mistakenly documented that the price is calculated on the basis of per pound.
The buyer is aware of the fact that the seller had made a mistake and intended to take the advantage of the seller’s mistake.
Is there a legal contract?
There is no legal contract.
- It was a mistake.
- Rabbit skin is never sold at a price that low. Buyer was aware of mistake and wanted to “snap up” the offer.
What is the objective test in determining intention?
Applied by using the reasonable person point of view.
Also called the “normal test”
In Smith v Hughes, the seller party is selling oaks to the buyer. They did not state if the oaks are new or old. The buyer, mistakenly, believes that the oaks are old and ends up buying them.
Is there a legal contract? Answer through the objective and subjective tests.
There is a legal contract.
Objective: A reasonable person wouldn’t expect the oaks to be old, as it was never mentioned nor guaranteed by seller.
Subjective: Buyer’s true intentions were to buy old oaks.
True or False: A party can always enforce a contract even if they were aware of a mistake made by the other party.
False.
What does the case of Hartog v Colin and Shields demonstrate about mistakes in contracts?
If one party is aware of the mistake, they cannot simply ‘snap up’ the offer.
