Contract formation

Question 1

What are the 2 classifications of a contract?

Answer 1

1. Deeds
2. simple contracth

Question 2

What is the difference between a deed and a simple contract?

Answer 2

1. Deed
   - special rules to be valid
   - must be signed, dated, delivered and stated as a deed
   - used when no consideration is being exchanged
2. Simple contract
   - any contract that isnt a deed
   - can be made orally, by conduct or in writing
   - always requires an exchange of consideration

Question 3

What is the difference between bilateral and unilateral contracts?

Answer 3

Both types of simple contracts.

1. Bilateral
   - agreement between 2 parties
   - each side agrees to fulfil their side of the bargain
   - e.g. X promises to clean Y’s bike in exchange for payment.
2. Unilateral
   - promise to do something in return for an act; acceptance at the time where the act is being performed
   - only the party who makes the promise is bound
   - consideration is the promise to pay for the act
   - e.g: X puts up a sign that he will pay £5 to the first person to return his dog and Y does this -> only X is bound to pay; Y does not have to carry out this task

Question 4

What are the 3 elements of a contract?

Answer 4

1. Offer + acceptance
2. ICLR
3. Consideration

+ must have capacity and be legal

Question 5

In order for there to be a valid offer, this must be made clearly and certainly. What is the test applied to establish whether the offeror intended to be bound by the offer?

Answer 5

Objective ‘reasonable man’ test:

would a reasonable man, seeing the offeror give their offer judge that the offeror intended to be bound by it?

Question 6

Is an invitation to treat an offer?

Answer 6

no -> it is an invitation for the other party to make an offer

Question 7

Give 5 examples of an invitation to treat

Answer 7

1. Auction
2. Display of goods for sale
3. advert
4. Statements of price
5. invitation to tender

Question 8

When will an advert be an invitation to treat?

Answer 8

i. clear set of actions a customer has to do which is set out in the advert,

ii. in return the customer gets a reward,

iii. and that reward has been set aside -> displays an intention to be bound

Question 9

When will an invitation to tender not be considered an invitation to treat?

Answer 9

Unilateral offere arises where:

1. undertaking to accept highest bidder
2. tender made to a specific number of parties and contains clear conditions setting out how bids should be submitted = unilateral offer to consider the bid.

Question 10

What is an action without reserve?

Answer 10

auction where item is sold to the highest bidder = unilateral offer to accept highest bid

Question 11

What is an action with reserve?

Answer 11

a minimum price that a seller would be willing to accept from a buyer. In an auction, the seller is not typically required to disclose the reserve price to potential buyers. If the reserve price is not met, the seller is not required to sell the item, even to the highest bidder.

Question 12

X asks Y what the lowest price they would be willing to sell their lion for is.

Y says £400.

X accepts.

Is there a contract?

Answer 12

no -> Y is inviting X to make an offer at £400 which Y may then accept/ reject

(statement of price)

Question 13

What are 4 ways in which an offer may be terminated?

Answer 13

1. acceptance
2. Lapse
3. rejection
4. revocation

Question 14

How must rejection of an offer be made?

Answer 14

communicated to offeror

express rejection

Question 15

Can you accept an offer on new terms?

Answer 15

no, this would be a counter-offer which ends the original offer -> new terms become the new offer

Question 16

What is meant by ‘battle of the forms’?

Answer 16

‘last shot wins’

X makes offer (1)
Y rejects via counteroffer (2)
X rejects via counter to counteroffer (3)
Y rejects with another counter offer (4)
X accepts offer (4)

Question 17

What distinguishes a counter offer form a request for further information?

Answer 17

counter offer = proposal of new terms

request for further information = questions about aspects of the offer/ clarifications on the offer; inquiry about ancillary terms

Question 18

If there is no stipulated time limit by which an offer must be accepted, when would the offer ‘lapse’?

Answer 18

1. acceptance not made within a “reasonable time”
2. death of a party
3. conditions of acceptance are not satisfied

Question 19

When can an offeror revoke an offer?

Answer 19

any time before acceptance

Question 20

What is an ‘option contract’

Answer 20

where offeree pays offeror to keep offer open -> separate option contract is formed

Question 21

When is revocation of an offer effective? What if it is sent by post?

Answer 21

Once it is communicated.

If sent by post -> effective from the point that it reaches the offeree

Question 22

1st Oct -> X posts offer to Y
8th Oct -> X posts revocation of the offer to Y
11th Oct -> Y accepts offer via telegram
20th Oct -> Y receives revocation

Has the offer been successfully revoked?

Answer 22

no

Question 23

The general rule follows that a unilateral offer can be revoked prior to the completion of the act which constitutes acceptance.

What is an exception to this where revocation is not possible?

Answer 23

Where there has been part-performance of prescribed act and offeree is willing and able to complete it.h

Question 24

Who is a unilateral offer made to ?

Answer 24

the world

Question 25

Who can accept an offer

Answer 25

offeree or authorised third party

Question 26

Can acceptance be qualified?

Answer 26

no must be on the exact same terms as the offer. Attempts to accept new terms or add conditions constitutes a counter offer

Question 27

Can silence amount to acceptance?

Answer 27

no

Question 28

When does acceptance of an offer take place if it is being communicated via email?

Answer 28

When it reaches offeror's server. If received during office hours (9-5) = same day acceptance If received outside of office hours = acceptance on next business day

Question 29

When does acceptance of an offer take place if it is being communicated via phone

Answer 29

as soon as the offeror hears the offer

Question 30

What are the 3 exceptions to the general rule that acceptance must be communicated to the offeror?

Answer 30

1. Unilateral contracts (binding when the act is complete as this constitutes acceptance) 2. Acceptance by conduct (e.g. delivery of goods) 3. Postal rule

Question 31

What is the postal rule?

Answer 31

exceptions to the general rule that acceptance must be communicated to the offeror. Acceptance of the offer takes place once the letter is properly posted, not when it reaches the offeror.

Question 32

Does the postal rule apply to offer or acceptance?

Answer 32

acceptance

Question 33

When can the postal rule not be used?

Answer 33

1. Explicitly excluded by offeror 2. Unreasonable means of accepting the offer (e.g. offer made via instantaneous method such as email and offeree responds by slow postal method)

Question 34

In commercial agreements, is there a presumption of intention to create legal relations?

Answer 34

yes

Question 35

How can parties to a commercial agreement rebut the presumption that there is an intention to create legal relations?

Answer 35

1. parties to make it explicitly clear that there was no ITCLR 2. Stating that agreement is 'subject to contract'

Question 36

In social and domestic agreements, is there a presumption of intention to create legal relations?

Answer 36

no ICLR

Question 37

How can parties to social and domestic agreements rebut the presumption that there is no intention to create legal relations?

Answer 37

1. money has changed hands between parties 2. express agreement that a contract is being entered into 3. formal written agreement 4. parties dealing at arms' length 5. solicitors involved

Question 38

In advertisment agreements, is there a presumption of intention to create legal relations?

Answer 38

no ICLR as they are usually invitations to treat

Question 39

What is the rule in Carlill v Carbolic Smoke Ball Company [1892]

Answer 39

an advertisement containing certain terms to get a reward constituted a binding unilateral offer that could be accepted by anyone who performed its terms.

Question 40

Can minors be bound by contract?

Answer 40

no

Question 41

Can minors be bound by contract if counterparty did not know about their age/ minor lied about it?

Answer 41

no

Question 42

What are the 2 exceptions to the general rule that minors cannot be bound by contract?

Answer 42

1. To purchase 'necessaries' - necessaries are for the minor's benefit - minor must pay a 'reasonable price' 2. Contract of employment for their benefit

Question 43

Generally, individuals lacking capacity are not bound by contract. What is an exception to the rule?

Answer 43

bound by contract to purchase 'necessaries' at a reasonable price

Question 44

Does intoxication make a contract void?

Answer 44

no -> but may be voidable

Question 45

When can intoxication make a contract voidable?

Answer 45

Where the person is so intoxication they do not understand what they are doing -> not bound by contract IF the other party knows they are intoxicated when entering into the contract

Question 46

Are contracts which arise from illegal or immoral conduct void or voidable?

Answer 46

void

Question 47

What are 2 exceptions to the principle that contracts which arise from illegal or immoral conduct are void?

Answer 47

1. illegal/ immoral act is not a fundamental part of the contract 2. only 1 party intends illegality -> innocent party may be able to enforce

Question 48

What is a restraint of trade clause? Are they enforceable?

Answer 48

e.g. employment contracts which prevent the employees from having another job after they leave their previous job. Illegal unless: 1. Legitimate business interest (e.g.trade secrets), and; 2. restraint is reasonable (geographical area, duration, scope)

Question 49

Can courts enforce an uncertain/ ambiguous contract? What is the test for certainty of terms

Answer 49

no Reasonable businessman test

Question 50

What is meant by the rule 'past consideration is not good consideration'?

Answer 50

the promise to pay and promise to give the benefit must be made before the benefit is actually given. e.g. X is away. Y cleans X's house and invoices X. No consideration as there was no promise to pay; X didn't even know.

Question 51

What is the exception to the rule 'past consideration is not good consideration'?

Answer 51

all must apply: i. act done at the request of the party ii. parties must have understood throughout that act was to be rewarded by payment iii. intention to create legal relations

Question 52

What must you do if you want to get paid more under a contract?

Answer 52

provide fresh consideration e.g. gone above and beyond the original contract's obligations doing more could be offering an additional service or doing what was originally promised but with much more effort than originally envisaged.

Question 53

If a person does more than what was originally in the contract (thus providing fresh consideration), what must the other party have also done in order for a claim for extra payment to be permissible?

Answer 53

Other party must have offered to pay more for the additional service. Must be an offer to do more and acceptance. Can't just do more and then claim payment.

Question 54

When does the Wiliams V Roffey rule apply?

Answer 54

Practical benefit rule where one party: i. provides a practical benefit to another; ii. by completing a pre-existing obligation on time; iii. at the other party's promise to pay more in return; iv. resulting in the other party gaining a benefit/ avoiding a penalty this practical benefit amounts to consideration and must be paid for in addition to any payment owed under contract.