1) Contract Formation

What is a valid contract?
It's a legally binding agreement (offer and acceptance) - enforceable by law. The agreement must be supported by valid consideration, between two parties who intended to create legal relations.
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Does a valid contract need to be formally completed or in writing?
No requirement for simple contracts to be written or formally completed.
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What is a standard form contract?
usually the two parties to a contract bring with them different levels of bargaining power. In such cases, the agreement is likely to be in the form of a standard form contract, prepared by the dominant party on a take it leave it basis.
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What is the principle of freedom of contract?
It's the principle that the law will not generally interfere with the ability of contractual parties to decide whether or not to enter into a contract, and if so, upon what terms.
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When may the law intervene with contracting parties?
The law may intervene where one party seeks unfair advantage as a result of superior bargaining power. Such intervention may be made by the courts or by legislation.
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What is the Sale of Goods Act?
The Sale of Goods Act implies terms into a contract which impose obligations on a business seller as to the quality and fitness for purpose of goods they sell.
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What is the Consumer Credit Act?
The Consumer Credit Act affords the consumer protection where they enter into credit agreements.
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What is the Unfair Contract Terms Act?
An act which prevents the dominant party from relying on a clause excluding or limiting liability unfairly. The clause may be void outright or void if the the court considers it unreasonable.
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What is a void contract?
Its not a contract at all. The contract is not binding on either party & if a party has transferred property under it they can recover goods even from a third party. A contract is void if its illegal, offend public policy & if it has no consideration
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What is a voidable contract?
A contract which one party may set aside. An application must be made to a court, it is then at the judges discretion to set the contract aside. Property transferred before the avoidance is usually irrecoverable from a third party.
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When is a contract voidable?
If someone has lack of capacity (individuals must be of sound mind and over 18) and if the contract was entered into under duress or undue influence (the absence of freewill) and if misrepresentation has occurred.
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What is an unenforceable contract?
If either party fails to perform their part of the contract, the other party cannot compel (enforce in a court of law) them to do so.
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When is a contract unenforceable?
When its not in the correct form required by law, for example agreements for the transfer of land and consumer credit agreements must be in writing.
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What form does a guarantee need to be in?
A guarantee need not be in writing but the terms must be evidenced in writing before any action is bought. The written evidence should be signed by the guarantor.
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What is a guarantee?
A guarantee is when a guarantor promises to pay a creditor the sum of a debtors debt in the event that the debtor fails to pay
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What is an electric signature?
Electronic signatures can be used as evidence of the validity of a contract in the same way as a written signature (electronic communications 2000)
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What is an offer?
A definite promise to be bound on specific terms
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A statement which sets out possible terms is not an offer unless?
Clearly indicated, but if in the course of negotiations a vendor states a price they will sell at this may be an offer which can be accepted.
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Who is made by?
The offeror to an offeree
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What must an offer be more than?
a supply of information or statement of intention (eg advertising that an auction will take place).
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Can an offer be made to the world at large?
Yes
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What is a not an offer?
A vague statement that cannot be rendered certain by reference to customs or previous dealings.
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What is an invitation to treat?
Acts an inducement to encourage another person to make an offer. It's an indication that a person is prepared to receive offers with a view of entering into a binding contract.
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Is an invitation to treat capable of acceptance?
No
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Examples of an invitation to treat?
Adverts, goods displayed in shop windows, price lists, auctions
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Can an advert ever be considered an offer?
Yes, if it's worded precisely
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When can an offer be terminated?
In the absence of acceptance an offer may be terminated. An offer is only capable of acceptance if it is deemed to be open.
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How is an offer terminated?
Revocation by the offeror prior to acceptance (effective when communicated to offeree), rejection, a counter offer, lapse in time and failure of a pre condition.
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What is a counter offer?
New amended terms not just a mere request for information.
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Can an offer be accepted if its not known about at the point of acceptance (reward cases)?
No
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When does an agreement not need offer and acceptance?
An agreement may be deduced from circumstances e.g members being bound by club rule.
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What is acceptance?
The offers response must amount to an unqualified agreement to all terms in order to consolidate valued acceptance.
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How may acceptance be made?
May be made by express words (orally or written) or can be inferred by conduct. There must be some act, can't be via silence.
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How must acceptance be communicated if a mode is prescribed?
Must be communicated in the prescribed mode or by a method which is no less expeditious or effective.
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How must acceptance be communicated if no mode is prescribed?
The offeree can choose any reasonable method.
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When is usually acceptance effective?
When received by the offeror.
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When does postal rule apply?
When post is the contemplation of both parties and acceptance is not delayed due to the offeree's negligence.
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When postal rule applies when is acceptance effective?
As soon as its been posted.
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Can the offeror waive the requirement for acceptance to be communicated either expressly or by implication?
Yes
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In social, domestic or family arrangements what are the presumed legal intentions?
It is presumed legal intentions are not intended to be legally binding.
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In social, domestic or family arrangements are the presumed intention rebutable?
Yes
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When are the intentions in social, domestic or family arrangements rebutable?
If its a husband and wife living apart or if the contract relates to property
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In commercial arrangements what are the presumed legal intentions?
Presumed that there is intention to create legal relations.
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In commercial arrangements are the presumed intention rebutable?
Yes
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When are the intentions in commercial arrangements rebutable?
The words subject to contract amounts to a strong presumption that no immediately binding contract is intended. Ex Gratia is not enough to show no intention.
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What is consideration?
Is the act or forbearance of one party, or the promise there of by one party in the return for a promise of one party. It is the element of value in an agreement and must be supplied by both parties in order to form a binding contract.
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What is valid consideration?
Executed or executory consideration, not past consideration.
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What is executed consideration?
A performed or executed act in return for a promise e.g a payment of goods on delivery.
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What isexecutory consideration?
A promise in return for a promise e.g a promise to deliver goods that are paid for at a later date
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What is past consideration?
Something which has already been done at the time the promise has been made. Consideration must not be supplied after the agreement has been formed.
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When can past be valid?
Deemed valid if it can be proved that there was an earlier implied promise by the party requesting the act would be paid at a later date.
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Does consideration need to be adequate and sufficient?
No, it must only be sufficient so must have some identifiable value.
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When is performance of a contractual duty owed to the promiser sufficient consideration?
When it can be show the promiseee is doing over and above the scope of their contractual obligations.
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When is performance of a existing statutory obligation sufficient consideration?
When it can be show the promiseee is doing over and above the scope of their statutory obligations.
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Can performance of a contractual duty owed to a third party amount to sufficient consideration?
It can
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Can forbearance or waiver of waiver of existing rights or the promise of it be sufficient consideration?
Yes if it has some value or amounts to giving up something of value e.g a might forgo their rights to take action against b in return for B's promise to A
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When can existing debts be waived?
Alternative consideration supplied, a third party party offers part payment, if debt is paid in advance and if it is agreed with the creditors that they will accept part payment in full entitlement (bargaining between creditors)
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What is the purpose of a term in a contract?
They determine the rights and obligations of the parties bound by the contract.
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What is an express term?
Is a clearly stated term that has been agreed by the parties between them either orally or in writing during formation of the contract.
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What happens if the contract is wholly oral?
The court must ascertain as a question of fact what was expressly agreed by the parties.
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In a written contract must terms be completed?
Terms must be substantially complete or capable of being clarified. Parties are entitled to leave a term to be determined at a later date but if a term if left outstanding and there is no provision for clarification there will be no contract.
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If a term is vague but also meaningless in a written contract what happens to it?
It can be disregarded (e.g usual conditions apply)
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When is oral evidence admitted as a term in a written contract?
oral evidence is not usually admitted to add to, vary or contradict written terms unless it can be shown the claimant was not indenting to comprise all terms.
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When will a statement of fact before contract become a term in a written contract?
If it induces the party to enter into a contract. If the person making the statement had special knowledge of the subject it is more likely the statement will be treated as a term. The courts will assess the time between making of statement & contrac
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What is an implied term?
Terms that deemed to form part of the contract even though they are not expressly mentioned. In some cases they will add to the express terms, in others they may override express terms.
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How can a term be implied?
By reference to customs, by statute or by courts.
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When is a term not implied by reference to custom?
If it would produce inconstancy with the express terms.
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Example of when a term is implied by reference to custom?
Nothing mentioned in an employment contract about being entitled to a car parking space. However been using one for 5 years so implied through custom.
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Example of when a term is implied by statute?
Supply of Goods & Services Act 1982 implies terms that work & materials should be of satisfactory quality (free from defects, fit for purpose, durable & safe). Such implied terms override express terms that do not offer as much protection to weaker.
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Why is a term implied by the courts?
When its necessary to give business efficacy and when its implicit in the nature of the contract itself.
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Example of when a term is implied as a necessity to give business efficacy?
Owners of a wharf agreed cargo ship could moor and unlaod. It was know the ship would ground to do this. It got damaged in the process. It was assumed safe so was the wharf owners fault
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Example of when a term is implied as its implicit in the nature of the contract itself?
Flat had a broken lift so can't use flat thus doesn't pay rent. It's an implied obligation that the owner should maintain the building.
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What is the doctrine of privity?
Only a person who is party to a contract has enforceable rights and obligations under it. No one may be entitled or bound by the terms of a contract to which they are not a party.
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Privity of contract when an agency relationship exists?
Where an agent enters into a contract with a third party on behalf of their principal, the resulting contract is actually enforceable between the principal and the third party. The agent cannot enforce it.
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Privity of contract a person is injured in a road traffic accident and a motor insurance claim is made?
A person injured in a road traffic accident may claim against the motorist's insurer under The Road Traffic Act 1972 (updated 1988). The insurer has an obligation to you even though you do not have a contract.
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What is The Contracts (Rights of Third Parties) Act 1999?
Provides that a third party may enforce a term of a contract provided the contract expressly provides they may or the confers a benefit on them unless it appears that the contracting parties did not intend them to have the right to enforce it.
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How must a third party be identified in regard to The Contracts (Rights of Third Parties) Act 1999?
The third party must be expressly identified in the contract but need not be existence at the time the contract was made.
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What does The Contracts (Rights of Third Parties) Act 1999 enable a third party to do?
The act enables a third party to take advantage of exclusion clauses as well as enforce positive rights.
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What does The Contracts (Rights of Third Parties) Act 1999 not apply to?
Employment contracts. a customer of an employer cannot use the Act to enforce a term of an employment contract against an employee.
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Card 2

Front

Does a valid contract need to be formally completed or in writing?

Back

No requirement for simple contracts to be written or formally completed.

Card 3

Front

What is a standard form contract?

Back

Preview of the front of card 3

Card 4

Front

What is the principle of freedom of contract?

Back

Preview of the front of card 4

Card 5

Front

When may the law intervene with contracting parties?

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