Contract Law: Formation, Enforceability, and Capacity

Comprehensive vocabulary flashcards covering the core principles of contract law across five lecture modules: offer formation, termination of offers, intention to create legal relations, certainty of terms, and contractual capacity.

Agreement

The first requirement of contract formation, which generally occurs when one party makes an offer and the other party accepts that offer.

Offer

A proposal made on certain terms indicating a willingness to be bound if accepted by the person or persons to whom it is addressed.

Offeror

The person who makes an offer.

Offeree

The person to whom an offer is addressed.

Objective Approach

The legal standard established in Storer v Manchester City Council [1974] holding that courts evaluate what a person said and did outward appearances rather than subjective, unexpressed intentions in the mind.

Bilateral Contract

A contract in which both parties exchange promises, such as Party A promising to pay Party B $£100$ if Party B promises to fix her car.

Unilateral Contract

A contract where only one party makes a promise to do an act or forbearance in exchange for performance by another party, such as reward cases.

Carlill v Carbolic Smoke Ball Co [1892]

A landmark case establishing that an offer can be made not only to a single person or group, but also to the entire world.

Spencer v Harding (1870)

A case demonstrating that everyday use of the word 'offer' does not automatically create a legal offer, and a statement containing reservations does not amount to a binding offer.

Revocation

The withdrawal of an offer by the offeror before it is accepted, as illustrated in Routledge v Grant [1828].

Payne v Cave (1789)

The case establishing the common law rule that an offer becomes irrevocable once it has been accepted.

Counter-Offer

A response to an offer proposing new terms that operates as a rejection of the original offer, terminating it completely (Hyde v Wrench (1840)).

Mere Enquiry

A request for further information or clarification about terms that does not reject or destroy the original offer (Stevenson Jacques & Co v McLean (1880); Harvey v Facey [1893]).

Byrne v Leon Van Tien Hoven

A ruling establishing that an offer cannot be withdrawn merely by posting a letter of revocation that does not arrive until after the original offer has been received and accepted.

Postal Rules in Revocation

The legal doctrine specifying that postal acceptance rules do not apply to the withdrawal of an offer; revocation is only effective upon actual receipt.

Lapse of Offer

The termination of an offer through the passing of time (Ramsgate Victoria Hotel Co v Montefiore [1866]), failure of an underlying condition, or the death of either party.

Revocation of Unilateral Offers

A rule established in Errington v Errington [1952] stating that an offeror cannot revoke a unilateral offer once the offeree has commenced performance of the requested act.

Intention to Create Legal Relations

A vital element of contract formation assessed objectively by the court based on the context and relationship of the parties.

Presumption in Domestic and Social Agreements

The rebuttable legal presumption that agreements between family members or social acquaintances are not intended to be legally binding.

Balfour v Balfour [1919]

The leading case establishing that domestic arrangements between spouses living together in amity are presumed not to intend legal relations.

Merritt v Merritt [1970]

The case establishing that the domestic presumption is rebutted when spouses are separated or about to separate, as they bargain keenly rather than relying on honourable understandings.

Jones v Padavatton [1969]

A case confirming the domestic presumption between parent and child, where a mother's agreement to pay maintenance and provide housing while her daughter studied was not a binding contract.

Simpkins v Pays [1955]

A case where the social presumption was rebutted due to mutuality in a syndicate agreement among a lodger, grandmother, and granddaughter to share competition winnings equally.

Presumption in Commercial Agreements

The rebuttable legal presumption that business or commercial transactions are intended to create legally binding agreements (Esso Petroleum Ltd v Customs Excise Comms [1976]).

Honour Clause

An explicit statement in a commercial transaction declaring that the parties do not intend to enter into legal relations, successfully rebutting the commercial presumption (Rose & Frank Co v JR Crompton & Bros Ltd [1925]).

Letter of Comfort

A document from a third party offering encouragement or reassurance to advance credit without creating a legally binding financial guarantee (Kleinwort Benson v Malaysian Mining Corp [1989]).

Contractual Certainty

The requirement that an agreement must be sufficiently definite and complete to be enforceable by a court.

Vagueness (Contract Law)

A defect where terms are too indistinct or indefinite to establish a binding agreement, as seen in Scammell v Ouston [1941].

Custom (Resolution of Uncertainty)

A method of resolving ambiguity by interpreting the contract in light of established trade or industry custom (Shamrock SS Co v Storey & Co (1899)).

Previous Dealings and Trade Practice

A mechanism used by courts to resolve vague terms by looking at the established prior course of dealing between the parties (Hillas v Arcos (1932)).

Meaningless Phrases (Severance)

A doctrine from Nicolene Ltd v Simmonds [1953] allowing a court to sever an empty, inapplicable, or self-contradictory clause while keeping the remainder of the contract valid.

Agreement to Agree

An unenforceable arrangement where vital terms, such as price, are left to be decided 'from time to time' without a complete agreement (May & Butcher v The King [1934]).

Arbitration Clause in Price Uncertainty

A contractual mechanism illustrated in Foley v Classique Coaches [1934] that prevents uncertainty by referring future price disagreements to arbitration.

Sale of Goods Act 1979, Section 8(2)

A statutory provision establishing that if the price of goods is not determined, the buyer must pay a reasonable price.

Contractual Capacity

A person's legal competence to enter into a legally binding contract, balancing protection against exploitation with personal autonomy and commercial reliability.

Age of Majority

The legal age of adulthood in England and Wales, which is $18$ years of age.

Necessaries (Minors)

Goods suitable to the condition in life of a minor and to their actual requirements at the time of sale and delivery under Sale of Goods Act 1979, Section 3, for which a minor must pay a reasonable price.

Nash v Inman [1908]

A case where a tailor failed to recover the price of $11$ fancy waistcoats supplied to a minor undergraduate because the student already had sufficient clothing, failing the test of actual need.

Beneficial Contracts of Service

Contracts of employment, apprenticeship, or training that are binding on a minor provided the overall effect of the agreement benefits the minor (Roberts v Gray [1913]).

De Francesco v Barnum (1890)

A case where a dancing apprenticeship was held unenforceable against a minor because it imposed oppressive restrictions without adequate reciprocal obligations.

Minors' Contracts Act 1987, Section 3

A statutory provision empowering a court to order the transfer of property acquired under an unenforceable contract, or property representing it, if it is just and equitable.

Minors' Contracts Act 1987, Section 2

A statutory provision stating that a guarantor is not released from liability solely because the principal debtor's obligation is unenforceable due to minority.

Mental Capacity Test (MCA 2005)

A decision-specific statutory evaluation under Mental Capacity Act 2005, ss 1–3 assessing whether an impairment or disturbance of mind or brain prevents a person from understanding, retaining, weighing information, or communicating a choice.

Imperial Loan Co v Stone [1892]

The case confirming that a contract made by a person lacking mental capacity is voidable only if the other contracting party knew or ought to have known of the incapacity.

Matthews v Baxter (1873)

A case establishing that a contract entered into while intoxicated is voidable, but can be affirmed and made fully binding once sobriety is regained.