Contract mistakes 1-5

Question 1

What are the four requirements for a legally binding contract?

Answer 1

Offer, acceptance, consideration, and intention to create legal relations.

Question 2

Must a contract be in writing to be valid?

Answer 2

No, verbal contracts are valid.

Question 3

What is an offer?

Answer 3

A clear statement of willingness to be bound on acceptance.

Question 4

Who is the offeror?

Answer 4

The person who makes the offer.

Question 5

Who is the offeree?

Answer 5

The person to whom the offer is made.

Question 6

What is the effect of a counter-offer?

Answer 6

It destroys the original offer.

Question 7

Can silence amount to acceptance?

Answer 7

No.

Question 8

What is an invitation to treat?

Answer 8

An invitation to others to make an offer.

Question 9

Are advertisements generally offers?

Answer 9

No, they are invitations to treat.

Question 10

When is an advertisement an offer?

Answer 10

When it is a reward advertisement (unilateral contract).

Question 11

Are goods on shop shelves offers?

Answer 11

No, they are invitations to treat.

Question 12

When does the customer make the offer in a shop?

Answer 12

When presenting goods at the checkout.

Question 13

What is the legal status of a bid at an auction?

Answer 13

An offer.

Question 14

When does a contract form at an auction?

Answer 14

When the hammer falls.

Question 15

What is a reserve price?

Answer 15

The minimum price below which the item will not be sold.

Question 16

What is a “without reserve” auction?

Answer 16

An auction where the auctioneer promises to accept the highest bid.

Question 17

What type of contract arises in a “without reserve” auction?

Answer 17

A unilateral contract.

Question 18

Who can be sued if a highest bid is rejected in a without-reserve auction?

Answer 18

The auctioneer, for breach of a unilateral contract.

Question 19

What is an invitation to tender?

Answer 19

An invitation to treat.

Question 20

What is a submitted tender?

Answer 20

An offer.

Question 21

When does a unilateral contract arise in tendering?

Answer 21

When the organiser promises to accept the lowest tender.

Question 22

What is the remedy for failure to consider a valid tender?

Answer 22

Lost chance damages.

Question 23

Must acceptance be communicated?

Answer 23

Yes, unless waived.

Question 24

Must acceptance follow the prescribed mode?

Answer 24

Yes, if clearly stated by the offeror.

Question 25

Is vague wording such as “on industry terms” sufficient?

Answer 25

No, it is too uncertain.

Question 26

Is there a universal rule for acceptance by email?

Answer 26

No.

Question 27

What is the Brimnes principle?

Answer 27

Communication is effective when it would reasonably come to the recipient’s attention.

Question 28

When is acceptance effective under the postal rule?

Answer 28

When the letter is posted.

Question 29

What conditions must be met for the postal rule to apply?

Answer 29

Post is reasonable, Letter correctly addressed and stamped, Rule not excluded.

Question 30

Does the postal rule apply to revocation?

Answer 30

No.

Question 31

How can the postal rule be excluded?

Answer 31

By requiring actual receipt (e.g. “must receive confirmation”).

Question 32

When can an offer be revoked?

Answer 32

Any time before acceptance.

Question 33

Must revocation be communicated?

Answer 33

Yes.

Question 34

Can an option contract be revoked?

Answer 34

No, if consideration was given.

Question 35

How can a public offer be revoked?

Answer 35

By equally public notice.

Question 36

What is a bilateral contract?

Answer 36

A promise exchanged for a promise.

Question 37

What is a unilateral contract?

Answer 37

A promise accepted by performance.

Question 38

What is the presumption in commercial agreements?

Answer 38

Intention to create legal relations.

Question 39

Does inequality of bargaining power affect intention?

Answer 39

No.

Question 40

Can intention exist where goods are free?

Answer 40

Yes.

Question 41

What case shows intention despite trivial value?

Answer 41

Esso v Commissioners of Customs.

Question 42

How can the presumption of intention be rebutted?

Answer 42

By clear express wording (e.g. “binding in honour only”).

Question 43

What is the presumption in domestic agreements?

Answer 43

No intention to create legal relations.

Question 44

How can this presumption be rebutted?

Answer 44

By formality, express intention, or financial significance.

Question 45

Is work done as a favour legally binding?

Answer 45

No.

Question 46

What is consideration?

Answer 46

A benefit to the promisor or detriment to the promisee.

Question 47

Must consideration be adequate?

Answer 47

No, only sufficient.

Question 48

Is past consideration valid?

Answer 48

No.

Question 49

Can passing an exam be consideration?

Answer 49

Yes.

Question 50

Is part payment of a debt good consideration?

Answer 50

No (Pinnel’s Case).

Question 51

What are the exceptions to Pinnel’s Case?

Answer 51

Early payment, Different form of payment, Promissory estoppel.

Question 52

What phrase illustrates alternative consideration in Pinnel’s Case?

Answer 52

“A horse, hawk or robe.”

Question 53

What is required for a binding variation?

Answer 53

Agreement, consideration, and intention.

Question 54

What case allows practical benefit as consideration?

Answer 54

Williams v Roffey Bros.

Question 55

When will practical benefit not be valid consideration?

Answer 55

Where there is economic duress.

Question 56

Must consideration induce the promise?

Answer 56

Yes.

Question 57

Is a post-contract assurance binding?

Answer 57

No.

Question 58

What is the rule of privity?

Answer 58

Only parties to a contract can sue or be sued.

Question 59

When can a third party enforce a contract?

Answer 59

When the contract expressly allows it or confers a benefit.

Question 60

How must a third party be identified?

Answer 60

By name, class, or description.

Question 61

Can a third party enforce an exemption clause?

Answer 61

Yes.

Question 62

What is actual authority?

Answer 62

Authority expressly or impliedly given to an agent.

Question 63

Who is bound by a contract made by an authorised agent?

Answer 63

The principal.

Question 64

Does the agent have rights or liabilities?

Answer 64

No.

Question 65

What creates apparent authority?

Answer 65

A representation by the principal.

Question 66

What must be shown for apparent authority?

Answer 66

1. Representation by principal 2. Reliance by third party 3. Alteration of position.

Question 67

Is the agent bound under apparent authority?

Answer 67

No, the principal is bound.

Question 68

Are minors generally bound by contracts?

Answer 68

No, but the other party is bound.

Question 69

What contracts bind minors?

Answer 69

Contracts for necessaries and beneficial contracts of service.

Question 70

What are necessaries?

Answer 70

Goods suitable to the minor’s condition in life and actual requirements.

Question 71

Can a mobile phone contract be a necessary?

Answer 71

Yes.

Question 72

What did the Wayne Rooney case decide?

Answer 72

His agent contract was valid; not a necessary.

Question 73

What is the effect of contracting with someone lacking mental capacity?

Answer 73

The contract is voidable if the other party knew.