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Business Law
Contract I
- Elements of Contract
1
Contract
What is a Contract?
A contract is an agreement which binds()
the parties concerned.
In other words, a contract is an agreement
which is enforceable by law.
To have an agreement, there must be an offer and
an acceptance of that offer or;
Offer + Acceptance = Agreement
2
Contract
3
Offer - What criteria?
An offer must
contain definite terms
be communicated to the offeree
the offeree can be a specific person,
or some specific class of persons or the world at
large;
be promissory ()
the offeror must intend to be bound by
the offer immediately upon valid acceptance by the
offeree. 4
Offer - What are not?
Invitation to Treat :
Statements to others inviting THEM to make
offers; as the person inviting a response reserves
his position;
Advertisement in general, Display of goods on
shelf, Auction, Tender, etc.
Puff:
Claims made to encourage people to enter into
contracts but which a reasonable person will find
exaggerating. 5
INVITATION
TO OFFER
ACCEPTANCE
TREAT
6
OFFER
ACCEPTANCE
7
Offer - an interesting case
8
Offer - an interesting case
Offer
must be communicated to the offeree to be
valid;
can be revoked anytime before acceptance,
provided that revocation is also effectively
communicated.
10
Offer - Revocation
Revocation
must have actually been communicated to and
reached the offeree;
but need not be made by the offeror;
sufficient for the offeree to learn of the
revocation from a reliable source.
11
Offer - Revocation
12
Offer - Lapse of time
Revocation
Lapse of time
Rejection or Counter-offer by the offeree
Invalidation by conditions
condition precedent;
condition subsequent.
Death of offeror
14
Acceptance
17
Rules of Acceptance
18
Rules of Acceptance
22
Forms of Acceptance
24
Forms of Acceptance
31
Past Consideration
Re McArdle (1951)
Re McArdle (1951)
In consideration of your carrying out certain alterations and
improvements to the house, we the beneficiaries under the will
(of their father) hereby agree that the executors shall repay you
from the said estate the sum of 488 in settlement of the
amount spent on such improvements. In 1945, the tenant for
life died and Mrs M claimed payment of 488.
Held: by the Court of Appeal that, as the work had been done
and paid for before the beneficiaries made their promise to
repay Mrs M, the consideration was past and the promise
contained in the document was not binding.
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What is not Consideration?
34
Pre-existing Obligation
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Consideration and Rights
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Consideration and Rights
38
Waiver of Rights
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Suspension of Rights
41
Suspension of Rights
42
Promise under duress
44
Promissory Estoppel - Requirements
Inequitable to revert
It must be inequitable to the promisee if the promisor to go
back on his promise and revert to his strict legal rights.
Legal effect
- The effect of promissory estoppel is generally suspensory;
it does not extinguish the promisors rights. It is
suspended and can be resurrected by giving reasonable
notice.
45
Promissory Estoppel - Requirements
Promissory estoppel is a shield (to defend a legal action) but
not a sword (to bring a legal action).
46
Intention to Create Legal
Relations
Intention - Social agreements
For domestic and social agreements there is a
rebuttable presumption that there is no
intention to create legal relations - this is
because the agreements are considered to be
based on mutual trust and affection.
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Intention - Social agreements
48
Intention - Social agreements
53
Intention How to Decide?
Objective Test
What would a reasonable person who considers all the
circumstances decide what the parties intended
Factors to be considered:
what was said by the parties?
how was it said?
what were the surrounding circumstances?
was there an agreement?
what would be the effect of the agreement on the parties
(especially the effect of a breach of the agreement)?
how did the parties behave after the agreement (did they
act as if they were bound)?
54
Capacity
56
Capacity - Minors
57
Capacity - Minors
58
Capacity - Minors
59
Capacity - Mentally
incapacitated persons
If a mentally incapacitated person, either by
disability or drunkenness, wishes to avoid or
repudiate a contract, he has the burden to
prove that:
he did not know the nature of his act when the
contract was made; and
the other contracting party knew him to be
incapable of understanding his act (or to be
insane).
60