Contract Law Basics: Offer and Acceptance

Questions and Answers

What type of contract involves performance remaining to be completed by both parties after acceptance of the offer?

Executory/Bilateral Contract (correct)

Lease Contract

Void Contract

Unilateral Contract

Which of the following best describes a unilateral contract?

Involves multiple parties negotiating

Is not enforceable at law

Binds one party only when the other completes a task (correct)

Requires promises from both parties

Who has full capacity to enter contracts as per the stated guidelines?

Minors under age 18

Cognitively impaired individuals

Bankrupt persons

Adults of sound mind (correct)

What does Section 124 of the Corporations Act 2001 (Cth) provide regarding corporations?

They have the same legal capacity as adult persons Signup and view all the answers

Under what condition are people with cognitive disabilities bound by agreements?

Unless cognitively impaired at the time of agreement Signup and view all the answers

What is the capacity to contract?

The recognized power to enter legally binding agreements Signup and view all the answers

Which of the following statements about minors and contracts is true?

Minors only have a limited power to bind themselves Signup and view all the answers

What is true regarding a person who is insolvent?

They have a restricted capacity to enter contracts Signup and view all the answers

What is a key requirement for a contract to come into existence?

The parties intended to be legally bound by their agreement. Signup and view all the answers

In what situation would a contract not be considered legally binding?

When formal documents are not prepared and signed. Signup and view all the answers

What does 'consideration' in a contract refer to?

Something of value exchanged between the parties. Signup and view all the answers

What is required for an acceptance of an offer to be valid?

The person must agree to all the terms exactly as proposed. Signup and view all the answers

What is one of the necessary components of agreement in contract formation?

A meeting of the minds. Signup and view all the answers

Which of the following is NOT an element of contract formation?

Promotional guarantees. Signup and view all the answers

Which aspect is considered a separate formation requirement in contracts?

Certainty. Signup and view all the answers

Which statement best describes a contractual offer?

It is an expression of willingness to enter into a bargain. Signup and view all the answers

What factors did the court consider to determine if a statement was intended to be a legally binding promise?

The statement itself and the context in which it was made Signup and view all the answers

Under what condition is a signer bound by the terms of a document they've signed?

In the absence of fraud or misrepresentation Signup and view all the answers

In the case of L’Estrange v F Graucob Ltd (1934), what was the outcome for L’Estrange?

She was bound by the terms she signed, regardless of her prior reading Signup and view all the answers

What are the two requirements for an unsigned document to form part of a contract?

Knowledge/notice requirement and timing requirement Signup and view all the answers

How can express terms in non-contractual documents affect a person?

The person is bound if they have actual knowledge or reasonable notice Signup and view all the answers

When may reasonable notice of express terms be regarded as incorporated into a contract?

When reasonable notice is given, even if the terms are not immediately available Signup and view all the answers

What must be true regarding the timing of terms for them to be included in a contract?

Terms must be communicated before the contract is formed Signup and view all the answers

Which of the following is a condition under which a signer of a contractual document can claim ignorance of its terms?

If they were misled by the other party Signup and view all the answers

What must a person demonstrate to enforce a restraint under contract law?

The restraint is reasonable between the parties. Signup and view all the answers

In the case of Linder v Murdock’s Garage, why was the restraint clause deemed unenforceable?

It applied to a location Linder never worked. Signup and view all the answers

What determines the reasonableness of a restraint's enforceability?

The geographical and temporal reach of the restraint. Signup and view all the answers

If a person can demonstrate that a restraint is unreasonable considering public interest, what is the outcome?

The person will be released from the restraint. Signup and view all the answers

What is a common reason courts strike down broad restraint clauses?

They are not necessary to protect legitimate business interests. Signup and view all the answers

What would likely make a geographical limitation of an employment restraint enforceable?

It being limited to areas where the employee worked. Signup and view all the answers

Which of the following would not likely contribute to the enforceability of a restraint of trade clause?

A long duration without a specific context. Signup and view all the answers

What aspect of the restraint did Boonie's case demonstrate when striking out a certain word?

The necessity for precise geographic limits. Signup and view all the answers

Under what circumstance would specific performance typically not be ordered?

When the contract involves the sale of a widely available item Signup and view all the answers

What is a mandatory injunction intended to do?

Require a person to perform a specific act Signup and view all the answers

In which case was specific performance deemed appropriate due to the unique nature of the item involved?

Dougan v Ley (1946) Signup and view all the answers

What factors may lead a court to deny an injunction?

If damages are considered an adequate remedy Signup and view all the answers

Why might specific performance require ongoing court supervision?

To ensure both parties adhere to the contract terms Signup and view all the answers

What is a prohibitory injunction designed to do?

Prevent a person from engaging in a specific action Signup and view all the answers

Which of the following statements about injunctions is true?

Injunctions cannot be issued when damages are adequate Signup and view all the answers

In the context of specific performance, why might a court consider the parties' relationships?

To determine the likelihood of compliance without supervision Signup and view all the answers

Study Notes

Commemorative Coins and Contracts

Esso’s offer of commemorative coins was a commercial promotion aimed at gaining benefit.
Described as a ‘gift’, the offer implied legal binding intentions based on commercial circumstances.
Executory/Bilateral Contract: Requires completion of performance by both parties after acceptance of the offer.
Contracts arise from the exchange of promises, such as employment agreements where both parties have obligations.

Unilateral Contracts

In a unilateral contract, only one party's performance is needed after the offer's acceptance, contingent upon a specific action by the other party.
One party commits to perform only if the other fulfills a specific task, creating a binding obligation for that lone party.

Capacity to Contract

Individuals of sound mind over the age of 18 have full capacity to enter into contracts.
Corporations have equivalent legal power to natural persons under Section 124 of the Corporations Act 2001.
Government bodies can enter contracts similarly to individuals.
Persons with cognitive disabilities are bound by contracts unless incapacitation prevented understanding at the time of agreement.
Insolvent individuals and those under intoxication may have restricted capacity to enter contracts.
Minors possess limited power to bind themselves by contract.

Intent to Create a Legally Binding Agreement

Parties must show intention to be legally bound, often established through formal documentation signatures.
Masters v Cameron: Established that intent to be legally bound until formal documents are signed must be evident.

Pre-Contractual Phase

Occurs before a binding contract is established; involves negotiation and information exchange.
The critical question is whether a contract was formed and its terms.

Formation of a Contract

Contracts exist when there is intention to be legally bound, an executed document or mutual exchange of value, and sufficient term agreement.
Four key formation requirements for contracts include Agreement, Certainty, Consideration/Deed, and Intention.

Agreement

A valid contract requires a meeting of minds with an identifiable offer and acceptance.
An offer must be clear, promising, and sufficiently certain for acceptance to be valid.
Acceptance needs to align perfectly with the terms of the offer.

Signing Documents

Signing a document binds a person to the terms contained, even if not read prior to signing.
L’Estrange v F Graucob Ltd (1934): Established that a party is bound by contractual terms when signing a document without fraud or misrepresentation.

Unsigned Documents

Can form part of a contract if knowledge of terms is established and prior notice was given before contract formation.
Reasonable notice can incorporate terms referenced in tickets or notices associated with a transaction.

Performance and Specific Performance

Specific performance may be ordered when monetary damages are insufficient, though generally, it is used when ongoing court supervision is unnecessary.
JC Williamson v Lukey (1931): Specific performance deemed suitable due to the unique nature of the item involved.
Dougan v Ley (1946): Awarded specific performance for a unique car purchase tied to limited taxi licenses.

Injunctions

Injunctions compel actions (mandatory) or prevent actions (prohibitory) and can address breaches of contract.
Not granted if damages suffice or if enforcing a contractual promise that cannot be upheld through specific performance.

Restraint of Trade Clauses

Must be reasonable in geographic and temporal scope for enforcement.
Linder v Murdock’s Garage (1950): Found restraints overly restrictive, limiting the individual's work opportunities beyond necessary means.

Express Statutory Illegality

Certain agreements are directly prohibited by law, establishing clear boundaries for enforceable contracts.

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Explore the fundamental concepts of contract law, focusing on executory and bilateral contracts. Understand how offers, gifts, and legal binding intentions interact in commercial promotions. Test your knowledge through this engaging quiz.