10 Questions
What is the purpose of a seal in a contract?
To authenticate the signature of the party
Which of the following is not a way to discharge a contract?
By invitation to treat
What is the main purpose of consideration in a contract?
To provide a basis for the contract's enforceability
Which of the following is a type of contract that is imposed by a court order?
Contract of record
What happens when a contract is frustrated?
The contract is deemed impossible to perform or deprived of its commercial purpose
What is the effect of a party's death on a contract?
The contract is terminated immediately
What is the main difference between an offer and an invitation to treat?
An offer is a definite promise to act, while an invitation to treat is a mere statement of intention
Which of the following is a type of contract that is formed by the performance of the parties' obligations?
Implied contract
What is the effect of a party's bankruptcy on a contract?
The contract is terminated immediately
What is the purpose of a deed in a contract?
To transfer ownership of property
Study Notes
Acceptance
- Acceptance by post is effective when the letter is stamped and posted
- Acceptance by telephone, fax, or modern means of communication is effective only when received by the offeror, not when sent
Consideration
- A fundamental element of a contract
- A promise or action made by one party in exchange for the promise or action made by another party
- Must be real (has value and can be converted into cash)
- Must be lawful
- Can be executed (when both parties have completed their part as required by the contract) or executory (a promise to be completed in the future)
- Must be possible
- Need not be adequate but sufficient
- Must not be past (an act performed before a promise of payment or consideration is made)
Capacity
- Both parties must be eligible to enter into a contract
- Must be 18 years or over
- Not drunk
- Not insane
- No aliens or prisoners can enter into contracts
Legality
- Terms and conditions must conform to the laws of the land
Possibility
- Each party must be able to carry out their obligation
Genuineness and Good Faith
- Both parties must enter a contract freely, willingly, and not by force
Types of Contracts
- Simple contracts: require no special form, may be oral, in writing, or implied by conduct
- Examples: traveling, purchase of personal needs, assignments of copyright, insurance contracts, hire purchase or credit sales, lease of land or property for three years
- Specialty contracts: contracts dealing with mortgages and the sale of land, also known as contracts by deed
Characteristics of a Contract
- Agreement: offer and acceptance
- Offer: a proposal or bid by a party or their agent to another party
- Counteroffer: rejecting the original offer and replacing it with a new offer
- Invitation to treat: an advertisement to make an offer
- Acceptance: exists when the offeree agrees to all the terms and conduct of the offer
Discharging and Terminating Contracts
- By performance: both parties do their part
- By agreement: both parties agree to cancel
- By breach: one party decides to complete their obligation, but the other does not
- By renunciation: one party carries out a portion and fails to go any further
- By lapse of time: one party fails to carry out their obligation within a reasonable time
- By frustration: a change in circumstances after the contract was made, which is not the fault of either party, rendering the contract impossible to perform or depriving it of its commercial purpose
- By death
- By bankruptcy
This quiz covers the basics of contract law, including the rules of acceptance and the importance of consideration in forming a valid contract.
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