Contract W1: Formation (Pt 1)

Comprehensive vocabulary flashcards covering contract formation focusing on the elements of agreement and consideration.

Agreement

The first central element of a valid contract, typically consisting of an offer and an acceptance.

Consideration

The second central element of a contract, referred to as the 'exchange' element where parties trade something of legal value.

Intention to create legal relations

The third central element of a contract, requiring that parties intended for their agreement to be legally enforceable.

Certainty and completeness of terms

The fourth central element of a contract, ensuring the agreement is sufficiently clear and finished to be enforced.

Objective exercise

The legal method for establishing a contract's existence by determining what a reasonable person in the position of the parties would have understood, rather than their subjective intentions.

Reasonable businessperson

The specific standard used by courts to interpret what a reasonable person would understand in a commercial contractual context.

Bilateral contract

A contract formed through an exchange of promises where obligations arise at the point of agreement and the promisee is bound to perform.

Unilateral contract

A contract formed by one party making a promise (e.g., a reward) and the other party performing a specified act; the promisee is not bound to perform but forms the contract upon completion of the act.

Promisor

The party in a contract who makes a promise to another party.

Promisee

The party in a contract who receives a promise from another party.

Offer

A proposal by an offeror to enter into a binding contract on certain terms, giving the offeree the opportunity to accept or reject those terms.

Offeror

The party who makes a proposal to enter into a binding contract.

Offeree

The party to whom a proposal to enter a binding contract is made.

Supply of information

Communications like price mentions or item specifications that resemble offers but are merely providing details, as seen in Harvey v Facey ($1893$).

Puffs

Bold, hyperbolic, or exaggerated marketing claims that are not intended to be taken literally and do not constitute legal offers.

Invitation to treat

An indication of a party's willingness to negotiate; it is not an offer but an invitation for others to make one.

Pharmaceutical Society v Boots Cash Chemists ($1953$)

Case establishing that the display of goods in a shop is an invitation to treat, not an offer.

Auctions (Legal Nature)

The call for bids is an invitation to treat; bidders make offers, and the contract is formed 'when the hammer falls'.

Tenders (Legal Nature)

A public announcement calling for tenders is generally an invitation to treat, while the submitted tenders themselves represent offers.

Process contract

A contract that may arise regarding the procedure of a tender process, distinct from the ultimate contract for the work itself.

Electronic Communications Act $2000$ (SA)

Statute establishing a presumption that proposals made through generally accessible electronic communications (like websites) are invitations to treat.

Revocation

The withdrawal of an offer, which can be done any time prior to acceptance but is only effective upon receipt by the offeree.

Lapsing

The termination of an offer that occurs if it is not accepted within a reasonable time when no specific deadline was stipulated.

Option

A promise to keep an offer open for a specific time that is legally enforceable because the offeree provided consideration.

Acceptance

When an offeree provides unqualified assent to the terms stipulated in an offer, creating consensus ad idem.

Consensus ad idem

A 'meeting of the minds' where both parties agree on the same terms, essential for a valid acceptance.

R v Clarke ($1927$)

Legal authority stating that a person must be conscious of an offer in order to accept it.

Silence in Acceptance

The general rule from Felthouse v Bindley ($1862$) that remaining quiet does not constitute acceptance of an offer.

Inertia selling

The prohibited practice of sending unsolicited goods and treating a lack of rejection as acceptance, regulated by ACL $ss\,39-43$.

Rejection

A communication that terminates an offer so that it cannot later be accepted unless the offeror makes the offer again.

Counteroffer

A response to an offer that changes its terms, which legally acts as a rejection of the original offer and the creation of a new offer.

Postal acceptance rule

A $19\text{th}$-century rule stating that acceptance is effective the moment it is sent by post, provided post is the expected method of communication.

Instantaneous communication (Acceptance)

Modes like telephone, fax, or email where acceptance is only effective upon receipt rather than transmission.

Electronic Communications Act $2000$ (SA) - Transmission

Defined under $s\,13$ as occurring once the communication leaves the information system under the sender's control.

Electronic Communications Act $2000$ (SA) - Receipt

Defined under $s\,13A$ as occurring when the communication is capable of being retrieved by the addressee at their electronic address.

Battle of the forms

A dispute where parties agree on terms but exchange inconsistent standard form agreements.

Last shot rule

The English approach to the 'battle of the forms' where the party who sends the last form is considered to have made a counteroffer that was accepted.

Automated message system

Under $s\,14C$ of the SA Act, a contract formed by these systems is not invalid simply because no natural person reviewed the individual actions.

Thornton v Shoe Lane Parking Ltd ($1971$)

Case determining that carpark ticket machines make an offer that is accepted when the customer takes the ticket.

Benefit or detriment

The first component of consideration, requiring a right or profit for one party or a forbearance or loss undertaken by the other.

Bargain

The second component of consideration, requiring that the price (act or promise) is given specifically in return for the other party's promise.

Deed

A specific legal document that serves as an exception to the requirement for consideration; agreements captured within it are binding without an exchange.

Sufficiency vs. Adequacy

The principle that consideration must have legally recognized value (sufficiency) but does not need to represent a fair market price (adequacy).

Peppercorn principle

The concept that even a very small item of value, like a peppercorn, is legally sufficient consideration to support a contract.

Chappell & Co Ltd v Nestle Co Ltd ($1960$)

Case illustrating that nominal items (like chocolate bar wrappers) can constitute sufficient consideration.

Illusory promise

A promise that cannot serve as consideration because the party has absolute discretion whether or not to perform it.

Quid pro quo

The requirement that a promisor is seeking something in return for their promise, as established in Australian Woollen Mills Pty Ltd v Commonwealth ($1954$).

Past consideration

An act done before a promise is made, which is generally not sufficient to support that subsequent promise (Roscorla v Thomas ($1842$)).

Equitable estoppel

A doctrine that can enforce gratuitous promises if the promisee relied on them to their detriment, even in the absence of a contract.

Consideration Clause

A specific provision in a contract, often featuring phrases like 'in consideration of X doing Y,' used to explicitly identify the exchange.