Contract - FLK1

What are the 3 basic requirements of a contract?

1. offer

2. Acceptance

3. consideration

What is consideration?

Price that each of the party recieves

How many elements need to be checked for there to be a contract?

All 3 elements need to be present

Do contracts need to be in writing?

No they do not (bar exceptions)

What 3 types of contracts need to be in writing?

• A guarantee

• A contract for sale of land

• Consumer credit transactions

What is a guarantee?

an agreement where a third party (the guarantor) promises to cover a debt or fulfill the obligations of a borrower (the primary obligor) if that borrower fails to pay or perform under their original contract with a lender (the creditor).

What is a consumer credit transaction?

agreement in which a lender or business provides an individual with credit (a cash loan, credit card, or hire-purchase facility) for personal use, rather than for a business or trade

What is a deed?

a document that makes it clear on its face that it is a deed - document that creates a binding obligation or transfers a right or property. Unlike a standard (simple) contract, a deed does not require consideration

What 4 things need to be considered with a deed?

1. It must be executed in the presence of a witness;

2. It must be delivered to be effective;

3. A promise to make a gift if enforceable if made by a deed;

4. A conveyance of land must be by deed

When must a claim for a simple contract be brought?

within 6 years

When must a claim under a contract by deed be brought?

within 12 years

What must communication have for it to be an offer?

It must express an intent to be bound in contract

What do the terms of an offer need to be?

Definite & certain

Does the offeree need to have knowledge of the offer?

Yes they must have knowledge

Is a request for information an offer?

No it is not an offer e.g. “Whats the lowest price you’ll take?”

What is an invitation to treat?

words or conduct that invite another person to make an offer

What is a unilateral contract?

for example, an advert promises soemthing if the reader does something (lost dog reward)

When can an offeror revoke an offer?

They can revoke most offers before acceptance

Can revokation be direct?

Yes, such as communication

Can an offer be revoke through information

Yes, if it is correct information from a relaible source

When is revocation effective?

When it is recieved

When can an offer NOT be revoked? (3)

• A collateral contract was made to keep the offer open

• The offer was for making a unilateral contract & the offeree has begun performance

• The offer was for making a bilateral contract & the offeree has accepted the contract by beginning performance

How can an offeree terminate an offer?

By expressly rejecting it

Will a counteroffer fromt he offeree constitute a rejection?

Yes it will, just not by mere inquiry

What happens if an offeree fails to accept within the time stated or reasonable?

It is implied to be rejected

What is termination of a contract by operation of law?

When the offeror or offeree dies, the subject matter is destroyed or becomes illegal, or a condition in the offer isnt met

How can an offer be accepted?

If not specified, it may be accepted in any reasonable manner and by any reasonable medium

If an offer specifies a method of acceptance, will another method be valid?

Yes, if it is no less advantagous

Is silence acceptance?

No, an offer must be communicated

When is an offer for a unilateral contract accepted?

It is not accepted until completion of the requested act

When is acceptance given within the postal rule?

The moment of posting

What would create post invalid within the postal rule? (3)

1. If the letter is not properly addressed or stamped

2. it wasn’t reasonable to acceot by post

3. the offer states that acceptance isn’t valid until recieved

Does the postal rule apply to email?

No it doesn’t apply

If there are two conflicting offers & acceptances with terms - which one prevails?

Usually the last set that were not objected

When is there a rebuttable presumption? (2)

1. Domestic arrangements (Family)

2. Social Situations (Close friends)

What is a rebuttable presumption?

The parties did not intend to be bound by their agreements

Is there a rebuttable presumption in commerical settings?

No - presume the parties did intend to be bound UNLESS there is clear and unambiguous evience otherwise

What phrases may be clear and unambiguous evience that there was no intention to be bound?

• “binding in honour only“

• “subject to contract“

Do you need capacity in a contract?

Yes

Is a contract entered into by a minor voidable?

Yes - it is voidable by the minor

Can a minor ratify a contract?

Yes - when they turn 18 they can adopt a contract

Is a minor bound to a necessary goods or services contract?

Yes if it is a reasonable price

Can a minor enter an employment contract?

Yes they can

Is a contract entered into by someone without mental capacity voidable?

Yes it is voidable but only if the other person knew they lacked capacity

If a person (lacking capacity) enters a contract for necessary goods and services - is it binding?

Yes, if it is a reasonable price

What are things that could be consideration? (3)

1. Acting

2. a promise to act

3. promise to forbear

What is executory consideration?

When an act or forbearrance is promised in the future

When does consideration become executed?

When an act or forbearnace is performed

What makes consideration sufficient?

It must have some value

What does it mean if consideration is illusory?

The consideration offered has no value

What is an existing contractual duty?

A promise to perform a duty already owed

Does an existing contractual duty hold valid consideration?

The person making the promise is not valid consideration BUT more can be offered to make it valid

If the duty owed is to a 3rd party, and a promise is made to someone else to perform the duty - does this constitute consideration?

It does constitute valid consideration

What is past consideration?

The act has already been performed before the promise was made

Is past consideration valid?

not usually considered valid - UNLESS there was an understanding that a payment would be made

Whats the general rule for past consideration?

the promise is not enforcable because the promise is given in exchange for past acts

Is a promise to accept part of a debt as full payment enforceable?

It is not due to lack of valid consideration

What are the exceptions for making a promise to accept part of a debt as full payment enforceable? ()

1. The debt was disputed in good faith

2. The claim was unliquidated (that is, uncertain)

3. Payment is at a different place or time, or by different means

4. A composition with creditors

What is Composition with creditors?

an agreement from a number of creditors that they each will take less than is owed from the debtor

Does performance act as acceptance or consideration in an unilateral contract?

Both!

What is promissory estoppel?

It is a legal doctrine that prevents a party from breaking a promise if the other party reasonably relied on that promise to their financial or personal detriment, even if no formal contract or exchange of consideration

Can promissory estoppel substitute consideration?

Yes it can

What is needed for promissory estopple to apply?

• Promise not to rely on existing legal rights

• the promise must have detrimentally relied on the promise by altering thier position

• it would be inequitable (unfair) for the promisor to go back on their promise

What does the doctrine of privity of a contract prevent?

it prevents people who are not parties to a contract from enforcing a contract or being obligated under a contract

When can a 3rd party enforce a term of a contract? (2)

1. Contract expressly says they can

2. The contract confers a benefit with the apparent intent to allow them to enforce it

Are employment contracts included in the Contracts (3rd party rights) Act 1999?

No they are excluded from the act

Can the 3rd party be specifically named or within a described group?

Yes they can be

can parties change the contract to the detriment of the 3rd party if they have rights? (includes 3 points)

No they cannot if:

• the 3rd party has agreed to the term benfiting them

• 3rd party has relied on the term & the promiser is aware of this

• the promiser should have foreseen the 3rd party would rely on it

can a principle enforce a contract if it is made by an agent?

Yes they can enforce it as they gave the agent authority to act on thier behalf

Can rights under a contract be assigned to a 3rd party?

Yes they can , and then the 3rd party can enforce the rights assigned

If a guarantor pays the debts of another under a guarantee, do they get the rights of the person whose debt they paid?

They do gain the rights

Is the remedies for misrepresentation & breach of contract the same?

No they are not the same

What is a representation?

A statement which induces someone to enter a contract

What is a term?

a statement of law or fact which is part of the contract

What can contract terms be? (2)

conditions or warranties

Do contract terms need to be expressed or implied?

Both

If an oral statement is made but not included in the writing of a contract - what would it be considered as?

a representation

If a statement is fundamentaly important - would would it be considered to be?

It is likely to be term

If a statement is made long before the contract is made - what is it considered to be?

It’s likely to be a representation

If an expert makes a statement - what is it considered to be?

It is likely to be a term

What is a condition?

a term that is so fundamental that it is said to go to the root of the contract

What does it mean when a condition is breached?

The contract does not work without it

What can the non-breaching party do if a condition is breached?

They can terminate the contract & sue for damages

What is a warranty?

a term which is incidental or collateral to the main terms of the contract

What can the non-breaching party do if a warranty is breached?

sue for damages (cannot terminate the contract)

What do you call a term when you are unsure if it is a condition or a warranty?

innomiante term

What does the court look at if an innomiante term is breached?

The look at the effect of the breach to determine the remedy

How will a innomiante term be treated if when breached the other party will lose the whole benefit of the contract?

As a condition (otherwise its treated as a warranty)

What does time for performance be treated as?

It can be either a warranty or a condition

How do you treat a “time is of the essense” term in a contract?

This is a condition

If a “time is of the essense” term is breached - what can be done?

Terminate the contract

When is “time is of the essense” term presumed?

In commercial contracts

Can terms be incorporated into a contract?

Yes - if the parties have notice of them

what happens under the parole evidence rule?

External evidence cannot add up to, subtract from, contradict, or vary the terms of a written contract

What is the rationale behind the Parol Evidence Rule?

The written contract is presumed to contain the entire agreement between the parties.

A party argues that an oral statement made before signing should alter a written contract. What is the starting point?

The Parol Evidence Rule applies, so the oral statement is generally inadmissible to change the written terms.

What is a key exception to the Parol Evidence Rule involving implied terms?

Evidence may be admitted to establish terms implied by law, custom, trade usage, or the parties' dealings.

What is a collateral contract?

A separate contract, usually oral, made alongside the main written contract.

How does a collateral contract operate as an exception to the Parol Evidence Rule?

The court may find two contracts exist: the written contract and a separate oral collateral contract, allowing the oral promise to be enforced.

What must a court find before enforcing an oral promise as a collateral contract?

That the oral promise was intended to be contractually binding and forms a separate agreement from the main written contract.