Contract Law: Formation of Contracts

Formation of Contracts

• The chapter focuses on principles underpinning contract formation, covering offers, acceptance, intention, consideration, capacity, privity, and third-party rights.

What Constitutes a Contract

• Contracts can be simple (oral or written) or by deed (in writing), with simple contracts being more common.
• Simple contracts are either bilateral (exchange of promises) or unilateral (promise for specific performance).
• Core elements include offer, acceptance, intention to create legal relations, and consideration.

Offers

• An offer must be specific, comprehensive, and capable of acceptance.
• The offeror is the one making the offer, and the offeree is the recipient.
• Multiple offerors/offerees are possible depending on the situation.

Distinguishing Offers from Invitations to Treat

• Determining if an actual offer exists is crucial, as a simple price statement isn't a contract.
• Wording indicating "prepared to sell" suggests an invitation to treat rather than an actual offer.
• Invitations to treat invite offers and aren't capable of acceptance. Examples include advertisements or shop displays. Advertisements are generally invitations to treat.

Offers and Advertisements

• Advertisements are generally invitations to treat, but occasionally unilateral offers are legally binding when all contract elements are present.
• A unilateral offer made to the world doesn't require communication of acceptance.

Auctions and Tenders

• Auction advertisements are invitations to treat with the offer being bids and acceptance occurring when the gavel falls.
• Tenders are formal invitations to supply goods/services, with the respondent making the offer and no obligation to sell to the highest bidder.
• "Referential bids", which offer to pay more than any other bid, are not permissible to ensure a determined price.
• Bidders are expected to follow the procedure set for bid submissions.

Counter-Offers and Requests for Information

• Counter-offers destroy the original offer, making it unavailable for acceptance.
• Requests for information clarify offer terms and do not constitute counter-offers. For example, asking about payment methods.

Acceptance

• Acceptance must mirror the offer exactly adhering to the "mirror image" rule.
• Acceptance is effective upon communication, unless the postal rule applies
• Receipt of consent doesn't always mean it was communicated

Methods of Acceptance

• Acceptance can occur through words or conduct with parties potentially forming contracts through actions even with purporting written agreements.
• A "battle of the forms" happens when businesses try to contract using their terms, where the "last shot wins" if the other side agrees to those terms
• The postal rule considers acceptance effective upon correct posting, not receipt, originating from a time with reliable postal service

Communication and Silence in Acceptance

• The method of acceptance may be stipulated, but an equally efficient method may suffice.
• The postal rule is displaced by requirements for "notice in writing", necessitating accepted communication for contract formation.
• Silence is not acceptance when written notice is required for acceptance communicated

Timing of Acceptance

• Communication occurs when someone can read the message, so this may differ when the acceptance was sent or when it was received
• The jurisdiction where communication of acceptance occurs is very important
• Revocation is effective upon communication, potentially leading to binding contracts despite an offeror's change of mind.
• Revocation can be communicated by a third party

Lapses and Death Effecting Acceptance

• Even if the period for the acceptance has been stated, it can only be revoked if the acceptance is said to communicate
• If no time limit is specified, offers should be accepted in reasonable time
• Upon the offeree's death, the unaccepted offer no loner exists
• Upon the offeror’s death, the unaccepted offer can still be received unless communication is received the offeror is dead

Forms of Consideration

• Consideration can be "executed" (act for a promise) typical for unilateral contracts or "executory" (promise for a promise) common in bilateral contracts.
• Currie v Misa (1875) defines consideration as a right, profit, or benefit to one party, or a forbearance, detriment, loss, or responsibility undertaken by the other.
• Consideration must have some legal value, but can be small like rent as long as it still of value to the promisor

Past Consideration Rules

• Past consideration is ineffective by not not happening after the contract act happens
• Exceptions to the consideration rule are if
  • the act was done beacuse of promisor
  • there were understandings of remunerations for the payment or benefit
  • when payment must be legally enforceable had been promisted

Contractual Duty and Public Duty

• Contractual duty owed to a third party can be sufficient consideration
• Claimants under public duty cannot agree
• If they go beyond duty that becomes good consideration

Promisee and Variations

• Fresh consideration is needed for variation
• Look for alternate payments
• 3 Exceptions for that part payments can be made

Estoppel

• Promissory estoppel involves a promise not to enforce contractual rights without consideration, requiring a pre-existing legal relationship.
• The requirements are a clear promise not to perform rights, and as a defense only
• The party making the promise must act equitably
• It is possible to restore contractual rights if there is fair notice

Legal Relations and Tip

• Letters and litiation are good evidence of clear and unequivocal representation
• Intention to create legal reactions requires agreements with no legal force as rebuttable persumptions
• Look for family, lottery syndicates, commercial agreements

Binding Contracts

• Contracts need formalities, written or witnessed
• Email contracts are still valid
• Consider that any adults have capacity but check special rules
• Minors or those with mental incarcity have specific regulations

Minors

• Valid for contracts that are necessary for the minor benefit
• Minors Contract Act has several enforcements
• Substance abuse affects capacity and a substance abuser under the contract may not be aware of what they are doing
• Sale of Goods Act 1979 s 3(2) covers good sold to people incabale of contracts and needs to charge fair price
• Mental Capacity Act has regulations that can make people unable to make agreements

Privity

• A person is unable to be made liable and or gain rights under contracts
  • there is no consideration
  • difficulty in varying the contract

Exceptions to Privity

• Collateral contracts are separate instances between third parties that can arise
• At Common law, remedies are possible through executors
• Contracts (Rights of Third Parties ) Acts 1999 allows third parties to enforce a term with benefits and identification
• The core elements of a summary is offer, acceptance, consideration
• Review different communications
• Sufficient values and considerations
• Promises in social setting do not count as valid considerations

SQE Assessment tip

• Check facts for validy

Contract Terms

Terms

• Relevant SRA SQE Assessment of legal knowledge of terms
• Express incorporation is implied by law and by status
• It consists of exemptions clauses, interpretations of terms

What is a contract term?

• Determining what part of the contract is binding is key for the negotiation
• Is it is simply an expression
• Check if it has affected if the parties have met a standard of intention for such the intention of the parties to apply

Tests

• See the writing to understand the intention
• Terms of the contract become increasingly important

Parol Evidence

• Par evidence should not be used to determine terms
• Terms should be interpreted from the parties' agreements
• Clause of entire agreement states they will regardless oral warrantees

The 3 types of terms: Conditions, warranties and innominate

• Consequences for operation need to occur if there is type of term
  • type of major terms
  • Minor terms
  • Those undetermined until they are breached
• Breach the condition is such that it becomes under claimed damages at the end
• May happen through statuses and under sale of goods the sale of goods
• Types of conditions, and what court decides must be either it goes to the root of the contract

Time Essence

• If made in the contract, the term must exist at the moment at the contract exist
• With a warranty are less serious and a breach allows claims and damages
• An Innominate term can be determined as a damage of warrant

Implied term

• A implied term is needed through statutes from the court to fill it , they need to imply a statues into the contract
• Terms need to be implied, and they can stem from -laws - fact - statutes - Custom

Statutory and Customs

• Example Unfair Contract Term Act, and statutes that imply are commonly found in statuses
• If the facts implied include the wrong statues or repealed statutes be carful when finding
• For the facts in term to be considered they need to be complied with

SQE Assessment tip

• Be carful if trying both facts and terms that are applied in the question
• 4 a customary term if they include well known, and reasonable elements in the contract

###Unflar and exclusion

• An exclusion term must include reasonable duty and legal terms to create an exclusion term
• The court will consider and protect consumers through - Interpretation and inclusion
  • look the contracts

Inculsion Terms

• The terms are clear and the courts will apply
• Incorporations with documents, will be put forward before signing
• A person’s rights should be restricted at the time they are set to agree to it
• There should be more important if it causes a party affect it.

SQE Tip

• Businesses need to show clauses terms
• the agreement must be clear

Transparency and Construction

• Clarity in the clause
• Any ambigiity will be held against the one that enforces it
• The rule isn't as strict for limitations
• Clear effectiveness that is not represented or collatered contracts should be noted

Statutory Terms

• Unfair terms are based around statutes of both business to business and consumer contracts
• Covered by CRA or UCTA
  • look at certain types of expemtion clause for effectiveness

Liability and negligence

• One party must deal with one party’s writing terms
• Buyer cannot refuse defective goods due to the reasonableness of the contact
• Determine clauses and see if they are reasonable in the contac
• There are protections of 4 strings with CRA from automatically ineffectiveness

SQE Act

• Consumer and trader rules when making digital contracts
• Consider if there is a need for business and UCTA with unfair terms causing wrong with parties
• Check the notices
• CRA exludes core terms of scopes of fairness/ transparency

Miscellious

• UCTA 5 58 can't be excluded for implied terms by SGA
• CRA s 32 covers liability/ exclusion restricted in consumer contracts

Variation of contract terms + principles

• Common law allow terms to change

• Agreement has to be between and with consideration

• There contract, is it is term If it is there interpretation with the parties Exemption, statues, express or implied are used Clauses need incorporation and effectiveness Customs will allow or vary changes with the written element SQE Tip, see if the condition is already set. Consider, time of fairness

VITIATING FACTORS

Legal Knowledge

• Factors that are vitiating
• It Includes misrepresentation, mistake, illegality and more
• You should be able categorize, and handle remedies

Misrepresentation

• False information can effect pre contractal
• And includes the results to someone suffer loss SQE Tip is that these problems are not really going to suffer
• Actionable are more voidable in this factor,
• Make sure the states were the term of the term
• Apply tests like objective to test of the reoanlsbe

Misinformation

• All elements must
• A true set of fact made correct the statement, relates to
• Intentions or things a person does
• No reason as non actions or not given the right skills
• Not knowing or being unaware
• Ubberine fidai include fraud/misrepresention
• Witholding good will make contracts with no rescission
• Never be careful with their judgement

Fraudulent actions

• All are all the same
• Has to be - the statement - reckless
• There must be some dishonesty
• The claimant will receive if they feel like they can
• In hedley claim was a test of what they claimant could be in and problems can be foreseen
• That requires special realtionshio where duty can arise for statement skill
• If proven special relationship
• Breachs are foreseeable
• Check for the Misinformation Act S2,1

Misinformation Remedy

• Remedy of resconsibilty
• Remedies of Rescission is available for any type of misrepresentation, can’t hold it - damages - a time loss as parties cannot be restored third party

SQE tip

• Check dates in questions and double check to make sure it binds
• It is always about what is sufficient
• Over 18 in influence or not
• And third parties benefit
• Contracts for necessaries are valid contracts.
• Necessaries may be goods or services. A minor - is bound by a contract for necessaries if it is for the minor’s benefit.
• If the contract is not for the - minor’s benefit, then it will not be binding, unless the minor ratifies it on reaching majority.
• If the promisee is already under a contractual duty to carry out their duties, if they were then - offered more money, there would not be fresh consideration for that promise.
• However, if carrying out their duty became substantially different from that which was contracted, then that - would be fresh consideration.
• The essential elements that make them present
• Capacity and under the influence or impaired
• And the rights of each party under the contract if there is a question

Damages

• Are given for where not properly , made
  • Check if that was made SQE TIP
• The claim the parties would not enter
  • the money
  • property
  • Under the correct and direct

Excluision

• Under UCTA s3 there will attempts
• Look to the restest the terms

Mistake

• Check common law
  • Mistake the right to exist -operative mistake - that relate to material
• Check which is in contract

Common mistake

• Both parties mistake is divided into 3 categories
  • Material
  • That unkown
• Cannot be in warrentaty
• or the damages

Common Sense

• One has represented that other is the problem - check the subject - the test of the courts
  • Could be enforced
  • There a scam and in present or not
  • But they claim
• Check all the scammers phone providers
• The claim for if they made a mistake will be proven through what they had a chance

Rectification

• There for all agreed To fix it

Illegality

• What type to follow
• It's a law but an action
• Trade is in order and there Is not fraud
• The law will not aid the recovery if There had been wrong doing and illeglaty in the contract

Duress

• A threat
• Pressure is the issue with all problems
  • Threaten illegal problems for family/parties
    • If they would follow to be done There can questions to be asked
  • If the promise was a mistake / illegal duress

Assess Tips - Duress

• Hard bargain can cause those
• See if refuse can occur
• what to do
• To show support

Duress to the person

• With those will The other problems can't to be followed A key for one that can not be trusted then those

• If you can't can to follow this one

• Know that this will show with trust in

• They need to show advice the right advice that they can't

Remedy

• Then this be in the correct
• Then there is a change
• This is is what you need to do
• A misreprosentation is not and one then or two If not it’s the same The last is in the three

Review

• Make sure all that was covered is under taken
• Check for those in the terms of action
• Double check three and see You can see now to make a See key and note Make double the there will be All rights are in

Remedies

• Make them so the problem had to be known
• It all comes the the reasonable with the parties

Overview of Contract Termination

• Chapter focuses are common law remedy for breach by performing
• For example: equity where the court will be in charge

Breach

• Is is hard as something with a loss They have legal right if that came form the wrong It's is not about a loss if that does It more you put your money on the line and they did go what they suppose to do

Remotennes of loss

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In regards to a defective product The cords will the right and the what is it but and the right to but the recovery The more that is in the is and make a The has never been that .

Misconceptions

• There as a good the good the make the not is going to know to be at to know to be

Chance

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Damages of is that it . are a in is to there but but I see to to be to mind in more see

Guarantees

• There some to write There

Remedies

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