Last edited 19 Dec 2017

Contract Law

To help develop this article, click 'Edit this article' above.

[edit] What is a contract?

Bilateral contract: contains a set of promises that each party has made to the other (X promises to build Y a house and Y promises to pay X for doing it)
Unilateral contract: only one party will make a promise to do something if the other party actually does something stipulated by the former (X promises to pay Y $100 if Y completes and returns a questionnaire)

A promise made by the offer or which matures into a contract when accepted by the other party
An 'invitation to treat' does not turn into a contract - it is merely a stage in negotiations, inviting the other party to make an offer

The effect depends on the wording.
Does not usually give rise to any contractual rights or obligations.
It states that there will or may be a contract in the future, and hence is treated as indicating that there is no such contract at present.
Where a court is prepared to interpret a letter of intent as creating a contract, it will then have to decide on its precise scope.

Must be certain and unambiguous: can be by word (written or oral) or by conduct, which must be made known to the offeror.
A counter-offer is not an acceptance as it varies the terms and destroys the original offer, which it rejects.
The counter-offer itself will have to be accepted by the initial offeror.

Where a formal contract is not signed until after work has commenced, does the contract govern work which is done in the interim period?
If the contract does not apply, the work will be paid for on a quantum meruit basis.
Other rights and duties of the parties will be governed by whatever terms the court implies into the circumstance.
A court may imply a term for retroactive effect of the contract.

With written contracts, read the documents evidencing the contract to ascertain the express terms.

Terms implied by statute (Sale of goods and Services Act 1982: carry out the service with reasonable skill and care, within a reasonable time, if not fixed by contract, and for a reasonable charge, if not fixed by contract).
Terms implied by custom.
Terms implied by court.

A party must perform was they are contracted to do.
Non-performance of some part will disentitle the partial performer to payment.
Except when the party has 'substantially performed' their obligations whereby they are entitled to the contract sum subject only to a counter-claim for those parts remaining un-performed.

Either incomplete performance gives the other party, who has so far performed their obligations as they fall due, a right to damages to put them in the position they would have been in had the contract been performed.
Or they can hold themself absolved from any further performance of their obligations, when there is:

For there to be a contract, consideration must have been provided.
Those who are privy to the consideration are said to be in privity of contract.
A person who is not party to a contract cannot gain any benefit by suing on it, nor can they suffer any detriment by being sued on it.

Has radically affected the doctrine of privity of contract.
It grants a third party the right to enforce a term of a contract which has been made for their benefit.
Not only positive rights but also defensive rights.
The third party must be expressly identified in the contract.
It does not grant the right to enforce the whole contract.
Enforcement by the third party is subject to all other terms of the contract, therefore terms can be inserted to exclude any intention to create enforceable third party rights.