Contract Model Answers
Formation
For a contract to be complete there needs to be an offer, acceptance and
consideration. A contract is usually between 2 parties (offeror and offeree) if it a
bilateral contract, if its open to the world it is a unilateral contract (Carlill v Carbolic
Smoke). Formation begins with an offer.
An offer must be clear, definite and capable of being accepted (Gibson v
Manchester). If it is not an offer, it is more likely to be an invitation to treat. This is an
invitation to make an offer, which is not binding. There are 3 examples:
advertisements (Partridge v Crittenden), goods on a shop window/shelf (Fisher v
Bell), or things at auction.
Another type of formation is a request for information (Harvey v Facey). This is not
binding and doesn’t alter the offer.
An offer can end in 5 ways. Through revocation (Routledge v Grant), this is when the
offeror withdraws the offer. Through rejection, including a counteroffer (Hyde v
Wrench). Through a lapse of time (Ramsgate Victoria Hotel v Montefiore), this is
when it passes a reasonable amount of time, or a time-limit – if it is stated in the
contract. Through death, only if the offeree dies, if the offeror dies and the offeree is
unaware, the contract doesn’t end. Finally, through acceptance.
The next part of formation is acceptance. Acceptance must be definite, unequivocal
and communicated to the offeror. Acceptance cannot be silence (Felthouse v
Bindley). There are 3 ways acceptance can be carried out: through conduct (Reveille
v Anotech), through the postal rule (Adams v Lindsell), and new methods of
technology (Thomas Gander v BPE Solicitor). The postal rule states acceptance is
carried out when the offeree sends the letter, for it to be valid it needs to be the
normal way of communication, addressed and stamped properly, and the offeree
needs evidence of post.
The final part of formation is consideration. This is also known as the act of
forbearance, which is the burden and benefit provided by each party. There are 5
rules for consideration. Consideration need not be adequate but sufficient (Chappell
v Nestle). Past consideration is not good consideration (Re McArdle). Part-payment
of debt is not sufficient consideration (Pinnell’s case). The performance of a pre-
existing duty is not consideration (Stilk v Myrick and Hartley v Ponsonbly). The
consideration must move from the promise (Tweddle v Atkinson).
A party cannot sue under a contract if they are privy to it (Dunlop v Selfridge). There
are 2 exceptions to this rule: if agent creates a contract on behalf of someone else,
they can claim, or if it is a collateral contract (Shaklin Pier v Detel Products). The
Contracts (Right of Third Parties) Act 1999 states a party that is privy can claim if:
they are directly mentioned in the contract, if the contract states they can enforce it,
or if they receive benefits (Beswick v Beswick).
, There are two types of arrangements: social (Jones v Vernon Pools) and business
(Merrit v Merrit and Belfour v Belfour). In sometimes a hybrid arrangement can exist.
If gifts (Esso Petroleum v Commissioner of Customs and Excise) and prizes
(McGowan v Buxton Radio) are present, there is an intention to create legal
relations.
Terms
There are 2 types of terms: express (stated in the contract) and implied (not stated
but inferred). There are 3 types of terms: conditions (terms that are vital to the
contract), warranties (terms that are not vital but still important – Bettini v Gye) and
innominate terms (terms that can be either conditions or warranties – Hong Kong Fir
v Kawasaki Kisen). If a condition is breached, it will end in repudiation, and if a
warranty is breached, the party will be able to claim damages.
Consumer Rights
The Consumer Rights Act 2015 provides the consumer with rights to bring a claim
against the trader in respect to goods and services.
When a consumer buys a good, 3 standards are expected. S9 states the good must
be of satisfactory quality (Rogers v Parish). The price of the good is considered as it
is an objective test. S10 states the good must fit its purpose (Baldry v Marshall). S11
states it must fit the description (Re Moore and Co).
If these are not met, the party can claim remedies. S20 states the short-term right to
rejection within 30 days. S23 states the right to repair and replace. S24 states the
right to a price reduction (up to 100%) and the final right to reject within 6 months.
S19 states if a fault is discovered within the first 6 months, it is presumed to be there
from the purchase, if it is after 6 months, the consumer has to prove it.
When a consumer buys a service, 2 standards are expected. S49 states the service
must be completed with reasonable time and care (Thake v Maurice). S52 states the
service must be completed within reasonable time, unless a time-limit is stated in the
contract.
If these are not met, the party can claim remedies. S55 states the right to a repeat
performance. S56 states the right to a price reduction.
Exclusion Clauses
Exclusion clauses are used to exclude or limit liability. They are often used by
powerful parties to enforce their rights on to weaker parties and restrict their liability.
There are 3 common law controls which allow an exclusion clause to be applied. If
the clause is signed (L’Estrange v Graucob). If notice has been given about the
