Legal Lecture week 2 (Contracts)

What is a contract?

A contract is a legally enforceable agreement.

What is the difference between a simple promise and a contractual promise?

A simple promise is not legally enforceable, while a contractual promise is enforceable by law.

How are torts different from contracts?

Tort law imposes involuntary duties not to harm others; contract law enforces voluntary promises.

What are the essential elements of a valid contract?

1. Intention to create legal relations 2. Meeting of the minds (offer and acceptance) 3. Consideration (exchange of value) 4. Capacity of the parties 5. Legality of subject matter

What does 'intention to create legal relations' mean?

The parties must intend their agreement to be legally binding, judged using an objective test.

When is intention presumed to exist?

Presumed in commercial/business relationships; not presumed in social or family relationships.

What is an offer?

An offer is a clear indication of willingness to enter a contract on stated terms.

What is required for an offer to be valid?

It must be communicated, communicated as an offer, and may be written, oral, or implied by conduct.

What is the difference between an offer and an invitation to treat?

An offer is ready to be bound upon acceptance; an invitation to treat is an invitation to receive offers.

How do courts distinguish between offers and invitations to treat?

Using an objective test: would a reasonable person think the speaker was prepared to contract immediately?

How can an offer be terminated?

Revocation, lapse of time, death or insanity, rejection, counter-offer.

What is revocation of an offer?

Revocation is the withdrawal of an offer by the offeror, communicated before acceptance.

What is a firm offer and is it enforceable?

A firm offer is a promise to keep an offer open; it is not enforceable unless supported by a seal.

What is an option contract?

An option is a binding promise not to revoke an offer, supported by consideration or a seal.

What is a counter-offer and its legal effect?

A counter-offer rejects the original offer and creates a new offer, reversing the roles of offeror and offeree.

What is acceptance?

Acceptance is unconditional agreement to the exact terms of the offer, creating a contract immediately.

What are the rules for valid acceptance?

Must comply with offer's terms, must be communicated, must be in response to an offer, must be reasonable if no method specified.

What are the types of acceptance?

Acceptance by promise (bilateral contract) and acceptance by performance (unilateral contract).

Can silence be acceptance?

No, silence alone is not acceptance unless combined with prior agreement or conduct.

How does acceptance work at a distance?

Rules depend on communication type: instantaneous acceptance is effective when received; non-instantaneous has different rules.

What is consideration?

Consideration is the mutual exchange of value that makes a promise enforceable.

What counts as sufficient consideration?

Any value recognized by law, even a peppercorn or $1; love and affection are not valid consideration.

What is past consideration?

Past consideration is not valid because it was given before the promise was made.

What is adequate consideration?

Courts do not require fairness—only existence; a bad bargain is still enforceable.

What is forbearance to sue?

Giving up a legal right to sue can be valid consideration if the claim is honest and reasonable.

What is a seal and its legal effect?

A seal makes a promise enforceable without consideration, symbolizing seriousness.

What is promissory estoppel?

A doctrine preventing a party from retracting a promise when another party reasonably relied on it.

What are the elements of promissory estoppel?

1. Existing legal relationship 2. Promise not to enforce rights 3. Reasonable reliance 4. No inequitable behaviour.

What is privity of contract?

Only parties to a contract can sue or be sued under it; third parties generally have no rights.

What is assignment?

Assignment transfers contractual rights, not obligations, from assignor to assignee.

What is misrepresentation?

A false statement that induces someone to enter a contract, causing loss.

What are the three types of misrepresentation?

Innocent, negligent, and fraudulent.

What remedies are available for misrepresentation?

Rescission, restitution, and damages (only for negligent or fraudulent misrepresentation).

What is an express term?

A statement intended by the parties to be a binding contractual promise.

What is the parol evidence rule?

Courts generally cannot use external evidence to alter written contract terms.

When is parol evidence allowed?

To fix mistakes, resolve ambiguity, show no contract existed, or prove a collateral contract.

What is an implied term?

A term inserted by courts or statute to reflect the parties' presumed intentions.

What is a standard form contract?

A mass-produced, take-it-or-leave-it contract used to reduce transaction costs.

What is an exclusion clause?

A clause that excludes, limits, or caps liability.

What makes an exclusion clause enforceable?

Clear and unambiguous wording, reasonable notice, proper assent, and not unconscionable.

What is contra proferentem?

Ambiguous terms are interpreted against the drafter of the contract.

What are boilerplate clauses?

Standard clauses dealing with risk, dispute resolution, and interpretation.

Name common boilerplate clauses.

Force majeure, confidentiality, arbitration, jurisdiction, entire agreement clauses.

Why use plain language in contracts?

To improve understanding, reduce disputes, save costs, and improve business relationships.