Contract Law Flashcards

Vocabulary flashcards for contract law exam review.

Offer

A necessary element for a legally enforceable contract.

Acceptance of the Offer

A necessary element for a legally enforceable contract; unqualified assent to the terms of the offer.

Intention to create legal relations

A necessary element for a legally enforceable contract; the parties' willingness to be bound by legal obligations.

Consideration

A necessary element for a legally enforceable contract; something of value exchanged by each party.

Smith v Hughes (1871)

Case establishing that the external projection of an offer to a reasonable person is what matters (Objective Approach).

OT Africa Lines v Vickers (1996)

Law that Objective approach applies. Offeree reasonably believed that there was no mistake and accepted the offer on this basis.If a offeree accepts an offer knowing or ought to have known that the offer was a mistake, a contract is not formed.

Harvey v Facey (1893)

Law stating that the mere statement of a lowest price at which a vendor would sell does not constitute an offer, but rather an invitation to treat.

Grainger v Gough (1896)

Law stating the transmission of a price list does not amount to an offer, but rather an invitation to treat.

Pharmaceutical Society of Great Britain v Boots Cash Chemists (1952)

Law stating that goods on a shelf listed at a price do not amount to an offer, but rather an invitation to treat.

Revocation of Offer

The cancellation of an offer by the offeror.

Payne v Cave (1789)

Law stating that a bid in an auction is an offer, the acceptance of the offer is the “fall of the hammer”; an offeror can revoke their offer at any time prior to acceptance.

Sommerville v Rice (1912)

Law stating that a revocation of an offer is only effective if it has been communicated to the offeree. Contract formed as acceptance was made before revocation communicated.

Kean v Dunfoy [1952]

Law stating that an offer lapses after a reasonable time; No contract form here, offer lapsed before acceptance.

Dysart Timbers v Nielson [2009]

Law stating than an offer may terminate after a fundamental change of circumstances on which it was based; Contract not formed

Death of an Offeror

An offer will probably terminate when the death is known by the offeree.

Death of Offeree

The offer will probably terminate on the offeree’s death.

Acceptance

Unqualified assent to the terms of the offer; To accept one must agree to all of the offer, it cannot be qualified in any way.

Robinson v Hemachandra Holdings (2006)

Law that objective approach applies to acceptances. (Could the conduct of the offeree be regarded by a reasonable person in the shoes of the offeror to be an acceptance?)

Acceptance by Conduct

Performance of certain conduct a part of the contract can amount to acceptance

Brogden v Metropolitan Railway (1877)

Law stating that acceptance of an offer can be made in the form of conduct that is consistent with the terms of agreement that both parties enter into.

Airways Corp v Geyserland (1996)

Law stating that While conduct of a party may amount to acceptance, if the offeror knows the Offeree’s true intention to not be bound, a contract is not formed.

Lee v Sawyer (1909)

Law stating that acceptance must be made by those to whom the offer was made to.

Counteroffer

Includes any change to the original offer.

Hyde v Wrench (1840)

Law stating that a counteroffer is a final rejection of the original offer.

Reporoa Stores v Treloar (1958)

Law stating that a change in terms and/or expectation of acknowledgement is a counteroffer not acceptance.

Requests for Information

Inquires or requests for information are not counteroffers.

Stevenson v Mclean (1880)

Law stating that Inquires or requests for information are not counteroffers; Offer valid, contract formed

Powierza v Daley (1985)

Law stating that the line between rejecting an offer and merely inquiring as to a possible variation is a “fine-one”; Inquiry rather than counter-offer, contract formed.

Cross Offers

Two parties involved made exactly the same offer, on the same terms and cross in the post; Cross offers do not constitute a contract. 2 offers but no acceptance.

Communication of Acceptance

An acceptance is complete upon communication

Waiver of Communication

Its possible to waive your right of communication of acceptance

CC v Telecom Mobile [2004]

Law stating that an offeror can waive their right to receive communication of acceptance; Contract formed

Allbrite Industries v P&C Gill Contractors [2002]

Law stating that stipulation of a specific manner does mean acceptance via other means is not effective;If Mear indication of a particular mean and acceptance given in different way, it must not be by any other not less advantageous mode.

Corrick v Silich [2018]

Law stating that if a form is stipulated in a offer then acceptance has to be made in this manner to be valid.

Adams v Lindsell (1818)

Law stating that acceptance by post is complete upon posting; Contract had been formed as acceptance was effective upon posting.

Henthorn v Fraser (1892)

Law stating that use of the postal rule in Lindsell must be within the “contemplation” of both parties for it to be effective; The postal rule applies only to acceptance and not to revocation; Contract formed.

Holwell Securities v Hughes [1974]

Law stating that the postal rule does not apply if in the circumstances the negotiating parties cannot have intended that there should be a binding agreement until acceptance was communicated; ontract not formed.

Contract and Commercial Law Act 2017 Section 214

Law stating that an electronic communication is taken to be received;Relevant to the time the acceptance is effective, not it’s validity.

Petterson v Gothard [2011]

Law stating that Greater use of electronic communication suggests that the threshold for a sender to prove designation “will not be high”.

Process Contract

Where the parties are in the process of moving towards the main contract, but in so doing they enter into a process contract

Pratt Contractors Ltd v Palmerston North City Council (1995)

Law stating that tender contracts with confirming principles are process contracts; Process contract formed

Unilaterial Contracts

Contracts formed when performance of an action stipulated in the offer is completed; The doing of the act is the acceptance.

Carlill v Carbolic Smoke Ball Co (1893)

Law stating that contract can be made to “all in the world”. Acceptance is made when the performance stipulated in the offer is performed.

Acts of acceptance not in reliance on offer

Acts of acceptance that are made in ignorance of the offer will not generally result in contract being formed

R v Clarke (1927)

Law stating that acts of acceptance that are made in ignorance of the offer will not generally result in contract being formed

Interim Agreements

An agreement made during the process of contract formation; Some agreement to terms negotiated but with an intention of making a full written contract in the future. Concerns an intention to be bound rather than the presence of offer and acceptance.

Carruthers v Whitaker (1975)

Law stating that for parties to be bound to the agreement, their must be a clear intention that this is the case; Contract not formed as both parties only had the intention of a binding agreement made after formal signing.

France v Hight (1990)

Law stating that intention of both parties can be inferred through the terms terms of agreement if they show a clear intention to be binding; Interim agreement binding

Fletcher Challenge Energy v ECNZ (2002)

Law stating that for a binding contract to be formed, 2 elements required: 1. An intention to be immediately bound 2. An agreement, express or found by implication, or by means of achieving an agreement on every term which was: i: legally essential to the formation of the contract ii: Was regarded by the parties themselves as essential to their particular bargain;NO CONTRACT FORMED

Butler Machine Tolls Co v Ex-Cell-O Corporation (1979)

To determine offer, counter-offer, rejection and acceptance all documents passing between parties must be considered; No contract formed

Agent

Someone who acts on behalf of their principal as to affect legal relations with third parties

Actual Authority

Actual authority maybe expressed or implied.

Hely-Hutchinson v Brayhead (1968)

Law stating that actual authority maybe expressed or implied; Agent was acting within implied actual authority and therefore the principal was bound in the indemnification.

Disclosed Principal

Where the agent discloses that they are acting on someone else’s behalf.

Southwell v Bowditch (1876)

Law stating where there is a disclosed principal, the agent is not going to be party to that contract unless there is a particular intention expressed that the agent will be liable; Agent not liable.

Undisclosed Principal

Where an agent doesn’t disclose that they are acting on someone else’s behalf.

Siu Yen Kwan v Eastern Industries (1994)

Law stating that; An undisclosed principal may sue and be sued on a contract by an agent acting on his behalf within the scope of his actual authority; No circumstances where agent was intended to be the only principal, therefore principal also liable.

Apparent Authority

Apparent authority is based upon a representation made by the principal to the third party

Freeman v Buckhurst Park Properties (1964)

Law stating that apparent authority is based upon a representation made by the principal to the third party; Apparent authority was imputed so principal liable. Contract formed.

Pascoe Properties LTD v Attorney-General (2014)

Law stating that Actual authority is related only to the representation made between Principal and agent while Apparent authority is related to the relationship between Principal and Third Party; Agent had apparent authority and had authority to bind principal. Contract formed.

Necessity

A valid contract may be formed, even when the agent has no authority due to the idea of agency of necessity

China Pacific SA v Food Corporation of India (1982)

Law stating that a valid contract may be formed, even when the agent has no authority due to the idea of agency of necessity; Contract formed.

Ratification by Principal

In order for there to be ratification, the agreement must be made on behalf of the principal

Keighley, Maxted & Co v Durant (1901)

Law stating that in order for there to be ratification, the agreement must be made on behalf of the principal.

Boston Deep Sea Fishing v Farnham (1957)

Law stating that in order for there to be ratification the principal must have been able to enter into the contract at the time it was made.

Warranty of Authority

Agent Is promising to have the authority that they claim = Warranty of Authority

Collen v Wright (1857)

Law stating that agent Is promising to have the authority that they claim = Warranty of Authority; Contract formed between third party and agent; can sue for breach

Intention to Create Legal Relations

Parties must intend to create a contract e.g. a legally enforceable obligation

Fleming v Beevers (1994)

Law stating that what would a reasonable person think the parties intended given all relevant facts;There is no presumption that there will be no intention to create legal relations.

Parker v Clark (1960)

Law stating that a large financial circumstance because of relying on the promise will support that it was intended to be legally binding.

Mabon v Conference of the Methodist Church of NZ (1998)

Law stating that statements that explicitly illustrate the lack of legal intentions are sufficient for contract to not exist.

Commercial Transactions

Almost always are intended to create legal relations

Rose and Frank v Compton (1925)

Law stating that honour clauses are effective at indicating that there is no intention to create legal relations.

Esso Petroleum v Customs and Excise Comrs (1976)

Law stating that free gifts that give sellers a commercial advantage as they are designed to attract customers do attract legal relations.

Carlill v Carbolic Smoke Ball Co. (1893)

Law stating that evidence of an ability to follow through indicate it is not a ‘mere puffery’ but an intention to create legal relations.

WCC v Body Corporate (2002)

Terms in a contract are determined by consensus; Consensus on essential terms or objective measures by which they can be determined e.g. “Reasonable Price”

Fletcher Challenge Energy v ECNZ (2002) (Blanchard J)

The prerequisites to formation of a contract are 1. An intention to be immediately bound ; and 2. An agreement, express or found by implication, or the means of achieving an agreement on every term which: was legally essential to the formation of such a bargain.

Vagueness and Uncertainty

If a term is too vague that its meaning cannot be ascertained by any objective means than a contract is not formed.

Scammell and Nephew Ltd v Ouston (1941)

Law stating that if a term is too vague that its meaning cannot be ascertained by any objective means than a contract is not formed.

White v RR Ventures (2018) Ltd (2022)

If a term in a contract is not sufficiently essential, then it may be able to be “severed” from the contract.

Fletcher Challenge Energy v ECNZ (2002)

Law stating that If the first prerequisite was present (intention to be bound) Courts would do all they could to give effect to that intention; If a contract can operate without terms that are not agreed upon or the court can objectively determine a term then they will give effect to the intention to be bound.

A-G Barker Bros (1976)

ertainty can be achieved through contractual machinery – When there is an intention to be bound, indicated in an uncertain clause.

Money v Ven-Lu-Ree Ltd (1998)

Law stating that in an agreement for sale by valuation, Objective standard applies. Court would enforce a sale by valuation, and if necessary, could determine what the price is.

Fletcher Challenge v ECNZ (2002)

An agreement to agree is difficult to enforce because of a lack of certainty

WCC v Body Corporate 51702 (2002)

The promise to negotiate in good faith is too uncertain to be enforceable

Consideration

Requirement that there is some mutual exchange between parties; A gift is not enough. A one-sided transaction cannot be enforceable as a contract.

Thomas v Thomas (1842)

Law stating consideration must be present, does not need to be adequate

Forbearance

A promise to not do something

Hamer v Sidway (1891)

Law stating that a promise to forbear is good consideration as the promisee suffers a detriment.

Forbearance to Sue

Forbearance to sue is sufficient consideration if there is good cause to suspect that action would succeed.

Couch v Branch Investments (1980)

Law stating that forbearance to sue is sufficient consideration if there is good cause to suspect that action would succeed.

Collateral Contract

A promise to enter into a colleterial contract is valid consideration

Shanklin Pier v Detel Products (1951)

Law stating that a promise to enter into a colleterial contract is valid consideration

Discretionary Promises

A discretionary promise is not good consideration

Clyne v Final Touch (2001)

Law stating that while normally, a discretionary promise is not good consideration, there is a fine line for what is good consideration

Past Consideration

Not good consideration, consideration has already occurred before the agreement has been reached

Re McArdle

Law stating that past consideration is not good consideration; When an act has been completed there is nothing to promise

Existing Public Duty

Existing Public Duty is not good consideration

Black White and Grey Cabs v Reid (1980)

Law stating that existing Public Duty is not good consideration

Williams v Roffey Bros & Nicholls (1991)

Obtaining a practical benefit is sufficient for consideration