Contract Law

Consideration 😃

  • Benefit given by the promisee in exchange for the promise

✏Intention to create legal relations

  • Intention of parties to be bound to a binding contract

🖊Agreement

Offer

Acceptance

Offeror #

Offeree

Rules ⚠

1. Must be unqualified

  • no conditions attached

2. If method of acceptance is specified, acceptance can only be made in method specified

3. Acceptance must be communicated to offeror

Postal Rule:
If acceptance is to be made by post, acceptance takes place at time of posting

If acceptance is intended to be communicated to third-party (e.g. agent)

Definition:
Intimation of willingness to enter into a legally binding contract

Versus: Invitation to treat

  • Advertisement
  • Items display for sale
  • Notice of tender
  • Auction

Rules ⚠

1. Communicated to one or more parties

2. Clear and certain

  • Price
  • Item for sale

3. Termination

a) Withdrawal

  • Communicate to all parties - before acceptance

b) Rejection

  • Offer automatically terminated

c) Lapse / Expiry

d) Death of Offeror

  • Personal service
  • Does not involve personal service, but offeree knew of death of offeror

Promisor Promise

Promisee

Rules ⚠

1. Has to have some value

  • Capable of monetary value

2. Must be fresh

  • Something the promisor was not originally entitled to receive

3. Must be made in exchange for the promise

Scenarios

1. D&C Builder vs. Rees

  • A lends $482 to B
  • A promises that B only needs to pay $300
  • B paid $300
  • However, A sues B

Is this something the Promisor was originally entitled to receive?

c) Pay $300 + provided extra benefit:

  • No
  • Fresh consideration
  • Contract

d) Pay $300 + avoid penalty:

  • No
  • Fresh consideration
  • Contract

b) Pay $300 at an earlier date:

  • No
  • Fresh consideration
  • Contract

a) Pay $300 only:

  • Yes
  • No fresh consideration
  • No contract

2. Williams vs. Roffey

  • Main contractor (A) is responsible of a project given by Developer
  • A pays $20,000 to Sub-contractor (B) to do carpenting work
  • B faces financial problem and need time extension
  • A promises B to pay bonus if B completes the project on time
  • B completed the carpenting work of the project on time
  • A refuses to pay the bonus A avoids penalty from Developer

3. Driving Lessons Promisory Estoppel

  • A teaches driving with a rate of $45
  • B would like to cancel as he has financial trouble
  • A promises B that he only needs to pay $15
  • B agrees and takes the driving lessons, pays $15
  • A sues B

Promisory Estoppel (PE) must prove:

  • Promise
  • Reliance on promise
  • Suffered detriment / change of position

Note:
If there is PE, promisor cannot go back on promise
(*can only be used as a defence)

Yes, there is PE because:

  • There were promise made by A to B
  • B relied on the promise because he took the lesson
  • B suffered detriment because he paid $15

Court held that completing existing obligation + avoiding a penalty/disbenefit is a Fresh Consideration

If an agreement is made in a domestic OR social context

  • It is presumed that parties do not intend to create legal relation

Note: Unless there is an MOU (Memorandum of Understanding)

If an agreement is made in a business OR commercial context

  • It is presumed that parties do intend to create legal relations

4. Acceptance requires a positive act

  • verbal, writing, conduct
  • silence is insufficient