Contract Law Overview

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Questions and Answers

What is the general rule regarding consideration in a contract?

Consideration can be in any form without limitations.

Consideration does not need to move from either party.

Consideration must come from the promisee. (correct)

Consideration can be provided by third parties.

Which of the following is NOT considered good consideration?

A promise to perform services.

A promise to deliver goods.

Acceptance of new obligations.

Part payment of a debt. (correct)

According to the principle established in Hartley v Ponsonby, what can happen if one party waives their right to consideration?

The terms of the contract become void.

The waiver can be enforced without consideration. (correct)

The waiver is unenforceable.

Consideration becomes irrelevant.

Which case confirmed that part payment of a debt is not adequate consideration for discharging the entire amount owed?

Foakes v Beer Signup and view all the answers

What is the significance of the case Rock Advertising Ltd v MWB Business Exchange Centres Ltd regarding contract variations?

Written agreements are required for valid contract variations. Signup and view all the answers

Which option describes promissory estoppel?

An equitable remedy to enforce a gratuitous promise without consideration. Signup and view all the answers

What must happen for a variation of a contract to be valid if it requires a written agreement?

It must include both parties' signatures. Signup and view all the answers

Under what conditions does part performance of an agreement become relevant according to the Rule in Pinnel’s Case?

When a creditor agrees to take alternative forms of payment. Signup and view all the answers

What is the definition of consideration in a contract?

An exchange where one party's act is the price for the other's promise. Signup and view all the answers

Which type of consideration occurs when parties exchange promises for future performance?

Executory consideration Signup and view all the answers

Which of the following is NOT a rule governing consideration?

Consideration must be adequate and equal in value. Signup and view all the answers

In which case was it established that exceeding a public duty can constitute sufficient consideration?

Glasbrook Bros v Glamorgan County Council Signup and view all the answers

Which of the following describes executed consideration?

It occurs when an act has already been performed in exchange for a promise. Signup and view all the answers

Past consideration is typically regarded as:

Invalid and not a basis for a contractual agreement. Signup and view all the answers

Which of the following cases illustrates that performance of an existing duty may become part of a new contract under changing circumstances?

Hartley v Ponsonby Signup and view all the answers

In which situation is performance of a pre-existing duty owed to a third party considered sufficient consideration?

As demonstrated in Shadwell v Shadwell. Signup and view all the answers

What is the ultra vires rule regarding corporate contracts?

It renders acts beyond a company's conferred powers void. Signup and view all the answers

Which statement best defines total failure of consideration in contract law?

A situation where a party did not receive any benefits from the contract. Signup and view all the answers

Under the Minors' Contracts Act 1987, what can the court enforce against a minor?

Restitution if it is just and equitable to do so. Signup and view all the answers

What is required for a contract entered into by a mentally incapacitated person to be voidable?

The incapacitated person must not understand the contract's nature and the other party must be aware of the impairment. Signup and view all the answers

What does ratification imply in relation to contracts made by intoxicated persons?

It renders the contract enforceable upon sobering up or anytime thereafter. Signup and view all the answers

Which of the following is a key characteristic of the ultra vires doctrine?

It does not affect third parties who deal in good faith with a company. Signup and view all the answers

What is a primary consideration requirement in contract law?

Each party must provide something of value for the contract to be valid. Signup and view all the answers

What legal assumption is made about a contract entered into by an incapacitated person?

It is valid unless the incapacitated person proves otherwise. Signup and view all the answers

Study Notes

Contract Law Summary Notes

A contract is a legally binding agreement, a promise enforceable by law
Essential elements of a contract include agreement (offer and acceptance), intention (parties intended legal consequences), and consideration (each party promises something for the other).
Capacity refers to the parties' legal ability to enter a contract. Minors or those mentally incapacitated have limited capacity.
Legality necessitates the contract's purpose and terms being lawful and not violating public policy.
Certainty of terms is crucial for enforceability; terms must be clear and definite.

Offer and Acceptance

An offer is a proposal made by one party to another, intending to be legally bound.
Acceptance occurs when the offeree agrees to the terms of the offer.
Clear communication of acceptance is essential, unless a unilateral contract or postal rule applies.
An invitation to treat is not an offer, it is an invitation to make an offer. Examples include advertisements, displays of goods in shops, and auctioneers' requests for bids.
An offer can be terminated by rejection, counter-offer, revocation (withdrawal by the offeror before acceptance), lapse of time, or death/insanity of either party.

Consideration

Consideration is the price paid for a promise. It must be something of value in the eyes of the law, and it must not be something the promisee is already obligated to do.
An existing legal duty does not qualify as consideration. Promising to do something you are already obligated to do is not sufficient.
Past consideration is not valid consideration for a current promise.

Intention to Create Legal Relations

The parties must have intended to create a legally binding agreement.
In commercial contexts, there's a presumption of intention to create legal relations; however, it is rebuttable.
In social or domestic agreements, there's a presumption against.

Capacity

Minors generally lack capacity to contract; however, certain contracts are enforceable against them if they are beneficial or relate to necessities. Mentally incapacitated persons may enter into voidable contracts.
Corporations are treated differently, with ultra vires contracts potentially being unenforceable.

Contents of the Contract

Terms of a contract classify as conditions, warranties, or innominate terms, contingent on the effect of their breach.
An important term is one that substantially affects the contract; a minor breach will affect the contract, whereas a serious or fundamental breach invalidates it.
Pre-contractual statements can be classified as representations or terms of a contract depending on the circumstances surrounding their utterance.
Exclusion clauses/terms are incorporated into contracts; if the document is signed, the terms within will be binding, regardless of whether they have been read, but if unsigned, incorporation depends on the reasonableness of drawing attention to the clause.

Vitiating Elements

Several issues can render an otherwise valid contract void or voidable:
Misrepresentation - A false statement of material fact that induces the other party to enter the contract. Can be fraudulent, negligent, or innocent.
Duress - Coercion, where one party is forced into the contract due to threats or improper pressure.
Undue Influence - A party exploiting a position of trust or power over the other party to get them into the contract.
Mistake - A shared or unilateral misunderstanding concerning the terms or subject matter of the contract, may render a contract void.

Discharge of Contracts

Discharge by performance – fulfilling all contractual obligations
Discharge by agreement– mutually agreeing on termination
Discharge by breach – breaking a contract by failing to perform obligations
Discharge by frustration – contract becoming impossible to perform due to circumstances outside the control of either party.

Remedies

Damages – compensation for loss arising from breach of contract
Specific performance – court order enforcing a party to comply with contractual obligations
Injunction – court order preventing a party from carrying out a threatened action

Privity of Contract

Only parties to the contract have rights and responsibilities. There's an exception with the Contracts (Rights of Third Parties) Act 1999.

Illegality

Contracts with illegal purposes or that are against public policy.
If a contract is illegal, it cannot be enforced.

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Description

This quiz covers essential concepts of contract law, including the elements of a contract, the processes of offer and acceptance, and key terms such as capacity and legality. Test your understanding of how binding agreements are formed and enforced within the legal system.