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Questions and Answers
What is a primary characteristic of a contract?
What is a primary characteristic of a contract?
Which of the following describes a breach of contract?
Which of the following describes a breach of contract?
What is often the result for a party who breaches a contract?
What is often the result for a party who breaches a contract?
What does it mean for a contract to be executory?
What does it mean for a contract to be executory?
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In contract law, what is meant by 'privity of contract'?
In contract law, what is meant by 'privity of contract'?
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Which formation requirement involves ensuring that the parties intend to create a legal obligation?
Which formation requirement involves ensuring that the parties intend to create a legal obligation?
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Why are contracts considered important?
Why are contracts considered important?
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What is an example of 'voluntary performance' in contractual obligations?
What is an example of 'voluntary performance' in contractual obligations?
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What is the primary benefit of T-shirts R Us Pty Ltd entering contracts before accepting an order?
What is the primary benefit of T-shirts R Us Pty Ltd entering contracts before accepting an order?
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What defines whether a contract has been formed according to the objective approach?
What defines whether a contract has been formed according to the objective approach?
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In an executory or bilateral contract, what happens after the promises are exchanged?
In an executory or bilateral contract, what happens after the promises are exchanged?
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How is a unilateral contract formed?
How is a unilateral contract formed?
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Which of the following is NOT an aspect of an executory contract?
Which of the following is NOT an aspect of an executory contract?
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What indicates a party may be bound by a contract even without subjective intent?
What indicates a party may be bound by a contract even without subjective intent?
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In the case of Thomas v Thomas, what were the parties bound to do?
In the case of Thomas v Thomas, what were the parties bound to do?
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What distinguishes bilateral contracts from unilateral contracts?
What distinguishes bilateral contracts from unilateral contracts?
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A contract can only be formed between individuals, not corporate entities.
A contract can only be formed between individuals, not corporate entities.
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When a breach of contract occurs, the affected party can seek specific performance in all cases.
When a breach of contract occurs, the affected party can seek specific performance in all cases.
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T-shirts R Us Pty Ltd can enter contracts to secure supplies before committing to an order, reducing the risk of supply failure.
T-shirts R Us Pty Ltd can enter contracts to secure supplies before committing to an order, reducing the risk of supply failure.
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In an executory contract, both parties have completed their obligations immediately after acceptance.
In an executory contract, both parties have completed their obligations immediately after acceptance.
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The capacity to contract ensures that all parties involved understand the agreement.
The capacity to contract ensures that all parties involved understand the agreement.
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The determination of whether a contract exists relies on both subjective intent and objective behavior.
The determination of whether a contract exists relies on both subjective intent and objective behavior.
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Contracts are not considered legally enforceable unless they are written.
Contracts are not considered legally enforceable unless they are written.
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The objective approach to contract formation focuses on the intentions of the parties involved.
The objective approach to contract formation focuses on the intentions of the parties involved.
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A unilateral contract is formed when one party performs a requested act in exchange for a promise from another.
A unilateral contract is formed when one party performs a requested act in exchange for a promise from another.
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Consideration is a necessary element for the formation of a contract.
Consideration is a necessary element for the formation of a contract.
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In the case of Carlill v Carbolic Smoke Ball Co, the contract was established before the act of using the product was performed.
In the case of Carlill v Carbolic Smoke Ball Co, the contract was established before the act of using the product was performed.
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In a bilateral contract, only one party has an outstanding obligation after the promises are exchanged.
In a bilateral contract, only one party has an outstanding obligation after the promises are exchanged.
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A party that agrees to a contract cannot withdraw their agreement once the contract is formed.
A party that agrees to a contract cannot withdraw their agreement once the contract is formed.
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Damages are compensation for loss caused by a breach of contract.
Damages are compensation for loss caused by a breach of contract.
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The objective approach in contract law focuses on determining if parties clearly intended to create enforceable obligations.
The objective approach in contract law focuses on determining if parties clearly intended to create enforceable obligations.
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A contract can be considered valid even if one party did not consciously intend to enter into it, based solely on their actions.
A contract can be considered valid even if one party did not consciously intend to enter into it, based solely on their actions.
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What defines a legally enforceable contract?
What defines a legally enforceable contract?
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Explain the concept of capacity to contract.
Explain the concept of capacity to contract.
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What is the objective approach in contract law?
What is the objective approach in contract law?
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Describe the significance of consideration in contract formation.
Describe the significance of consideration in contract formation.
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How do unilateral and bilateral contracts differ in terms of obligations?
How do unilateral and bilateral contracts differ in terms of obligations?
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What are the potential remedies for breach of contract?
What are the potential remedies for breach of contract?
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What role does intention play in the formation of contracts?
What role does intention play in the formation of contracts?
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Identify and explain one common vitiating factor in contract law.
Identify and explain one common vitiating factor in contract law.
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What is the main risk that T-shirts R Us Pty Ltd aims to minimize by entering contracts for supplies before accepting an order?
What is the main risk that T-shirts R Us Pty Ltd aims to minimize by entering contracts for supplies before accepting an order?
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According to the objective approach, how is the intention of the parties to a contract assessed?
According to the objective approach, how is the intention of the parties to a contract assessed?
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In what situation would a unilateral contract become enforceable?
In what situation would a unilateral contract become enforceable?
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What distinguishes an executory or bilateral contract from other types of contracts?
What distinguishes an executory or bilateral contract from other types of contracts?
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How did the relationship between the executor of Mr. T's estate and Mrs. T illustrate a bilateral contract?
How did the relationship between the executor of Mr. T's estate and Mrs. T illustrate a bilateral contract?
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What type of contract was established in Carlill v Carbolic Smoke Ball Co, and what was its significance?
What type of contract was established in Carlill v Carbolic Smoke Ball Co, and what was its significance?
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What does the behavior of one party need to indicate for a contract to potentially exist under the objective approach?
What does the behavior of one party need to indicate for a contract to potentially exist under the objective approach?
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What obligation remains for parties involved in an executory contract after promises are exchanged?
What obligation remains for parties involved in an executory contract after promises are exchanged?
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This allows businesses to plan: T-shirts R Us Pty Ltd can enter contracts to ensure it is able to obtain needed supplies such as ______ or labour.
This allows businesses to plan: T-shirts R Us Pty Ltd can enter contracts to ensure it is able to obtain needed supplies such as ______ or labour.
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A contract is formed when B performs the requested act in a ______ contract.
A contract is formed when B performs the requested act in a ______ contract.
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The objective approach assesses whether a party's behavior indicates to a reasonable person that they intended to assume legally ______ obligations.
The objective approach assesses whether a party's behavior indicates to a reasonable person that they intended to assume legally ______ obligations.
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In an executory contract, both parties have outstanding ______ after the promises are exchanged.
In an executory contract, both parties have outstanding ______ after the promises are exchanged.
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The case of Thomas v Thomas involved an agreement where the executor promised to allow Mrs T to occupy the ______.
The case of Thomas v Thomas involved an agreement where the executor promised to allow Mrs T to occupy the ______.
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In Carlill v Carbolic Smoke Ball Co, the contract was formed when C used the ______ as directed.
In Carlill v Carbolic Smoke Ball Co, the contract was formed when C used the ______ as directed.
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T-shirts R Us Pty Ltd minimizes risks by entering contracts to secure supplies before committing to the ______.
T-shirts R Us Pty Ltd minimizes risks by entering contracts to secure supplies before committing to the ______.
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A makes a promise to B in exchange for B making a promise to A in a ______/bilateral contract.
A makes a promise to B in exchange for B making a promise to A in a ______/bilateral contract.
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A contract is a legally enforceable agreement between two or more ______.
A contract is a legally enforceable agreement between two or more ______.
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When a party fails to perform the contract, they are in ______.
When a party fails to perform the contract, they are in ______.
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Contractual obligations are typically discharged by voluntary ______.
Contractual obligations are typically discharged by voluntary ______.
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Consideration is a necessary ______ for the formation of a contract.
Consideration is a necessary ______ for the formation of a contract.
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Under the objective approach, the intention of the parties is assessed based on their ______.
Under the objective approach, the intention of the parties is assessed based on their ______.
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A party who breaches a contract may be ordered to pay ______ for losses incurred.
A party who breaches a contract may be ordered to pay ______ for losses incurred.
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The capacity to contract ensures that all parties understand the ______.
The capacity to contract ensures that all parties understand the ______.
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In the context of contract law, estoppel prevents a party from denying a ______ that they have previously established.
In the context of contract law, estoppel prevents a party from denying a ______ that they have previously established.
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Study Notes
Contracts: Overview
- A legally binding agreement between two or more parties, known as "parties to the contract."
- Both parties are obliged to honour promises made within the contract.
- Performance is how parties typically fulfill their obligations.
- Failure to fulfill a contract is known as "breach" and can lead to court action.
- Penalties for breach may include paying "damages" (compensation for loss) or forced performance of a promise known as "specific performance."
Why are Contracts Important?
- Provide legally enforceable commitments.
- Allow businesses to plan and avoid risk.
- Example scenario: T-shirts R Us Pty Ltd enters contracts to secure supplies for a t-shirt order before committing to fulfilling the order. This helps them avoid being unable to fulfill the order after accepting it.
The Objective Approach
- The goal of a contract is to determine if the parties intended to be legally bound.
- The focus is on the objective approach.
- The approach asks whether each party's behavior would indicate, to a reasonable person, an intention to be legally bound.
- A party may be bound to a contract by words and actions, even if they didn't subjectively intend to be bound.
Executory/Bilateral v Unilateral Contracts
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Executory/Bilateral Contracts: Require performance from both parties after acceptance.
- Example: Thomas v Thomas - Mr T's executor promises Mrs T a home and she promises to pay £1 per year and maintain the house.
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Unilateral Contracts: Only one party needs to perform after acceptance.
- Example: Carlill v Carbolic Smoke Ball Co. - CSBC promises a reward if someone uses the ball as instructed. The contract forms when someone uses the ball per instructions.
Contract Overview
- A contract is a legally binding agreement between two or more parties
- Parties are legally obligated to uphold promises made in the contract
- Contractual obligations are typically discharged through voluntary performance
- Failure to perform a contract is a breach and can lead to legal consequences
- A party found in breach can be ordered to pay damages or fulfill their promise (specific performance)
Why Are Contracts Important?
- Contracts allow businesses to make legally enforceable commitments and plan accordingly
- Minimizes risks by ensuring all parties have the resources to fulfill their obligations
- Example: T-shirts R Us Pty Ltd secures contracts for supplies before accepting an order for 1,000 t-shirts
The Objective Approach
- Contract formation is determined objectively, not based on subjective intentions
- Focuses on whether a party's behavior would indicate to a reasonable person that they intended to be bound
- A party may be bound even if they did not subjectively intend to commit to the contract
Executory/Bilateral v Unilateral Contracts
- Executory/Bilateral Contract: Performance is yet to be completed by both parties after acceptance of the offer
- Both parties have outstanding obligations after formation
- Example: Thomas v Thomas - Executor promised to allow Mrs T to occupy a house in exchange for her payment and maintenance of the property
- Unilateral Contract: Only one party's performance remains to be completed after acceptance
- Contract is formed when the requested act is performed
- Example: Carlill v Carbolic Smoke Ball Co - CSBC promised a reward to anyone who used their product as directed, forming a contract with those who followed the instructions
Capacity to Contract
- Individuals with legal capacity can enter into contracts
- Minors, people with mental incapacity, and intoxicated individuals may lack capacity to form binding contracts
Contracts: Overview
- A contract is a legally binding agreement, typically between two or more people or entities (called "parties").
- Parties are legally obliged to fulfill promises within the contract.
- Obligations are usually met through voluntary performance.
- Failure to perform results in breach of contract.
- Compensation for loss is awarded to those who have suffered as a result of the breach (damages).
- Specific performance (fulfilling promises) is available in certain circumstances.
Why are contracts important?
- Contracts allow parties to make legally enforceable commitments.
- Businesses can plan and prepare for the future.
- Example: T-shirts R Us Pty Ltd can secure needed supplies (materials, labor) through contracts before accepting an order for 1,000 t-shirts.
- This minimizes the risk of T-shirts R Us Pty Ltd being unable to fulfill the order.
Objective Approach
- Determining if a contract exists is based on objective evidence.
- It focuses on what a reasonable person would conclude, considering the words and actions involved, rather than the subjective intent of the parties.
- Example: Intention - Whether a contract is legally binding is judged by whether a party's actions would lead a reasonable person to believe that they intended to be legally obligated.
Executory/Bilateral v Unilateral Contracts
- Executory/Bilateral: Both parties have remaining obligations after the contract is formed by exchanging promises.
- Example: Thomas v Thomas: Executor promises Mrs. T the house. Mrs. T promises to pay £1/year and maintain the house.
- Unilateral: Only one party has obligations after the contract is formed by performing an action.
- Example: Carlill v Carbolic Smoke Ball Co: Carbolic Smoke Ball Co. promises a reward. Carlill performs the action (using the ball) and the contract is formed.
Contract Overview
- A contract is a legally binding agreement between two or more parties, such as individuals or companies.
- When a contract is formed, parties are obligated to fulfill their promises within the agreement.
- These obligations are typically fulfilled through voluntary performance.
- If a party fails to fulfill their contractual promises, they are in breach.
- A party in breach can be taken to court and ordered to pay damages for losses caused by the breach, or in some cases, ordered to perform their promise (specific performance).
Importance of Contracts
- Contracts enable parties to make legally enforceable commitments.
- This allows businesses to plan and make informed decisions regarding their commitments.
- For example, a T-shirt company receiving a large order can enter into contracts to ensure it has the necessary resources, like materials and labor, to fulfill the order.
- Contracts minimize the risk of a company committing to an order they can't fulfill.
Objective Approach
- Whether a contract exists is determined objectively, not subjectively.
- This means the focus is on what a reasonable person would believe based on the parties' words and actions, not on their intentions or beliefs.
- For example, even if a party didn't intend to be legally bound, if their actions would lead a reasonable person to believe they were bound, they may be considered legally obligated.
Executory/Bilateral vs. Unilateral Contracts
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Executory/Bilateral Contracts: Both parties have outstanding obligations, meaning they must perform their promised actions after the contract is formed.
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Example: A promises to pay B for a service, and B promises to provide that service. The contract is formed once promises are exchanged, and both parties have outstanding obligations (to pay and perform service, respectively).
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Unilateral Contracts: Only one party has an outstanding obligation after the contract is formed.
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Example: A promises to pay B a reward if B performs a specific action, like using a product. The contract is formed when B completes the action, and A becomes obligated to pay the reward.
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Description
This quiz covers the fundamentals of contracts, including binding agreements, obligations of parties, and implications of breach. Understand the importance of contracts and how they help businesses manage risks effectively. Test your knowledge on the objective approach to contracts and their legal enforceability.
