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Contract Law:
An agreement with specific terms, between 2 or more persons…
Contract Law:
An agreement with specific terms, between 2 or more persons that is legally enforceable. There is a promise to do something in return for a valuable benefit known as consideration
Voluntarily enter
Elements of a Contract:
- Offer
- Acceptance
- Intention to Create Legal Relations
- Consideration
OFFER: 1 person communicates willingness to another person to enter a contract and be legally bound by it.
- Oral / Writing
- Made to: 1 person, a group, the world at large.
- Offer must be communicated to the offeree before it can be accepted. (don't know exist, cannot accept)
NOT AN OFFER:
- Invitations to treat (eg. Advertisements and display of goods for sale)
- Supply of Information - simply providing the information when asked (stating of SP)
- Declaration of intent - Express its intention, not obliged to conduct. (not capable of being accepted at all)
Termination Offers: offer is valid until it is terminated (i.e. capable of being accepted)
- Revocation of the offer
- Offer CAN be revoked before it is accepted
- Communicated to offeree, received and acknowledged (actually know)
- Rejection of offer
- Reject
- Counter Offer (Once offer is rejected, it is extinguished and cannot be revived, unless offeror agrees)
- Lapse of Offer (Death, Prescribed time expired)
Acceptance: Unconditional consent by the offeree to all the terms of the offer.Rules:
- Absolute, Unconditional of terms, without modification (Counter Offer is NOT acceptance)
- By prescribed method (mail, phone, fax) REASONABLE
- Oral, Writing, Conduct
- Must be communicated (no silence)
Exceptions: Postal Rule and Waiver. Pink
- moment of sending out. Waived - the offeror say so.
Consideration: The price of competition for the promise given by one party to the other (given in exchange for another thing)
- Exchange of benefits / promises
Rule: In order to be valid, a contact must be supported by consideration.Promisor: The party who makes the promise
Promisee: The party receiving the benefit of the promiseIf no consideration, contract is not binding.
EXCEPT: contract under seal (a deed) - signed, sealed and delivered
Rules of Consideration:
- Consideration must be real (must have value, however small)
- Acts of love and affection
- Moral / Social Duty
- Consideration need not be adequate
-Parties are free to decide on the terms
-Need NOT be proportionate in value to the thing given in return
- MUST be sufficient: Must be of some value in the eyes of the law and Must be over and above what one is already obliged to do.
- Consideration must move from the promisee (Privity of Contract - only the direct parties involved in the contract)
- Consideration must be legal
- Considerations must not be past
- Act performed before the promise (no value)
Intention to Create Legal Relations:
- Contract is only enforceable if the parties intended the contract to be legally binding
- The court will look at the facts of the case at the time of contract (What was the intention?)
- TWO types of agreements:
- Commercial and Business Agreements (Presumption: There IS intention to create legal relations)
- Domestic and Social Agreements
(Presumption: NO Intention for agreement to be legally binding)
- Promise must come BEFORE Consideration
- Often Consideration is $$$. Promise is an ACT.
- In reward scenario, Consideration is ACT. Promise is $$$
Terms and Representative
Terms: Are statements which form part of the agreement which set out the duties and rights of each party. These can be oral or written or both.
Representatives: are statements which are usually made BEFORE the agreement is entered into and which DO NOT form part of the final contract.
Puffs: DO NOT become part of the contract (sales talk)
Terms:
- Express terms: actually discussed by parties
-Black and White
- Implied terms: NOT discussed by parties
- implied by law (courts, statutes and trade practice)
Reason: the terms are so obviously necessary to the contract itself that they must have intended such a term
Sources of implied terms:
- The courts (The Moorock 1889 - implied term that the jetty should be safe)
- Statues (Section 14(2) of the Sale of Goods Act 1979-
satisfactory quality)
- Customs and practices of a particular trade which have become so well known in the trade that it does NOT need to be expressed
Conditions, Warranties and Innominate Terms:
Condition: VERY important term, root of contract
- Important, essential / fundamental
- If breached, can be discharged and claim for damages.
- Without this term, there is no purpose in the contract *
Warranties: LESS important term, secondary obligations
- NOT root of contract
- If breached, can sue and claim for damages. (contract still intact, must perform his part, remedy: sue for damages)
Innominate terms: Grey area
- dependent on the severity of the breach.
Exemption Clauses: Type of contractual term which is inserted into contracts for the purpose of excluding or limiting the liability of one of the parties to the contract
- Incorporated into the contract at the time of entering the contract
"Has the exemption clause been made part of the contract itself?'
- Void - UCTA
"Is the exemption clause void by law?"
- Void by law (cannot escape from wrongful acts)
- Section 2(1): death and personal injury DUE TO NEGLIGENCE
- Section 2(2): Reasonable limited liability stated
- Clear and Unambiguious
"Is the exemption clause clear and unambiguous?"
- Clear: Courts will construe the words STRICTLY.
- Unclear: More than 1 interpretation , choose LESS advantageous
Contra Proferentum Rule (EC interpreted AGAINST the creator)
In the event of breach,
- Exclude liability (EXCLUSION CLAUSE)
- Limit liability (LIMITATION CLAUSE)
Void and Voidable Contracts:
1.Void - Illegal activities cannot be legally binding
- Deemed by the law (void ab intio)
- Voidable - Valid contract. One party entered into contract WITHOUT full knowledge or consent to the terms
- Innocent party take steps to apply for void, decide to terminate or affirm
- Duress (Threatened)
When contract is breached, the person can discharge the contract (condition) or sue for damages (warranty)
Discharge of Contract: (parties are no longer required to carry out their obligations under the contract)
- Performance (Done)
- Agreement (3)
- Acceptance of breach
- Frustration
By Performance: A contract is performed when all parties have carried out their respective promises and obligations under the contract
- Performance must be strictly in accordance with the terms f the contract
- Within specified time frame. Otherwise, reasonable
- contract is discharge when performance is complete
By Agreement: The contract itself contains a term which sets out the method by which the contract is to be discharged.
- Happening of an event
- Expiry of Time
- Prescribed Procedure (Termination by Notice)
-
By Frustration: A contract becomes frustrated when it is impossible to perform due to circumstances beyond the control of the parties. Effects of Frustration:
- Under the Common Law
- Parties do NOT have to perform anything AFTER the date of frustration
- Frustration does NOT affect anything that takes place BEFORE the date of frustration. ($ paid, cannot be recovered)
- Under Frustrated Contracts Act (FCA)
- Section 2
- $ paid CAN be recovered
- Due to be paid, not payable
- Expense incurred can be revocerable
- Compensation for value received.
FCA applies to all contracts EXCEPT:
- Charterparties (contracts for the hire of ships)
- Contract of insurance
- Contracts for the sale of goods where goods have perished
CL applies