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Contract Law by Mind Map: Contract Law
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Contract Law

  Contract Definition: A legallly enforaceable agreement that is legally binding in a court of law  


Simple Contracts

Simple Contracts

7 Requisites for Contracts


Intention to be legally bound requires a meeting of the minds (Brain meet Brain). There must be evidence that parties INTENDED to be legally bound. Clarke V Earl of Dunraven and Mount Earl- both signed an agreement concerning the rules of the yacht race.


Agreement consists in two capacities: Offer and Acceptance


Consideration is the concept of legal value in connection with contracts. It is anything of value promised to another when making a contract. It can take the form of money, physical objects, services, promised actions, abstinence from a future action, and much more. Consideration to create a legally enforceable contract entails a detriment to the promisor OR a benefit to the promisee. Under the notion of "pre-existing duties", if either the promisor or the promisee already had a legal obligation to render such payment, it cannot be seen as consideration in the legal sense. In common law it is a prerequisite that both parties offer consideration before a contract can be thought of as binding. The doctrine of consideration is irrelevant in many jurisdictions, although contemporary commercial litigant relations have held the relationship between a promise and a deed is a reflection of the nature of contractual considerations. If there is no element of consideration found, there is thus no contract formed. However, even if a court decides there is no contract, there might be a possible recovery under quantum meruit or promissory estoppel. If A signs a contract to buy a car from B for $5,000, A's consideration is the $5,000, and B's consideration is the car.

Legal Capacity

The capacity of both natural and legal persons determines whether they may make binding amendments to their rights, duties and obligations, such as getting married or merging, entering into contracts, making gifts, or writing a valid will. Capacity is an aspect of status and both are defined by a person's personal law: ⁕for natural persons, the law of domicile or lex domicilii in common law jurisdictions, and either the law of nationality or lex patriae, or of habitual residence in civil law states; ⁕for legal persons, the law of the place of incorporation, the lex incorporationis for companies while other forms of business entity derive their capacity either from the law of the place in which they were formed or the laws of the states in which they establish a presence for trading purposes depending on the nature of the entity and the transactions entered into. When the law limits or bars a person from engaging in specified activities, any agreements or contracts to do so are either voidable or void for incapacity. Sometimes such legal incapacity is referred to as incompetence.

Genuine Consent

What have the parties agreed to?There must be genuine agreement between the parties to a contract as to its nature and scope

Legality of Purposes

The purpose of the contract must be within the parameters of the law, otherwise rendering a contract null.

Procedural Requirement Satisfaction.

Statements That are Not Offers

Invitation To Treat

It is an invitation to consider an offer.Consider the intention of the party.Pharmaceutical Society of Great Britain V Boots Cash Chemists (South) Ltd.Held that, the offer occurred at the counter where cashier accepted cash, rather than the invitation to treat where the item was shelved.

Request for Information

Not a firm promise and is not an offer, it does not destroy the offer, it is only an attempt to gain information.


A rejection of the original offer and instead is an offer with differentiating terms.


Unless tender states exact needs, not considered an offer. Therefore unless tender calls for supply of goods or services in specific terms over a specific period of time and acceptance of the tender is in direct response to those specific requirements.Case: Spencer V harding

Contents of a Contract


A non-contractual statement.Made pre-contract during negotiations. Not intended to be legally binding.If false, it is a misrepresentation.


Contractual statement.Intended to be legally binding.Breach of term, gives rise to action for breach of contract.

Parol Evidence

Parol = oral.If a contract is in writing and if the writing appears to contain the whole contract, it is presumed that all terms are within the contract.

Exclusion Clause

To exclude or limit the liability of the person inserting them; effectiveness will depend on the construction of the contract as a whole, taking into account the bargaining position of the parties. A signature is generally intention to be bound. Statutory modifications may render the exclusion clause ineffective, especially in consumer and insurance industries.

Vitiating Elements

Means to corrupt, damage, reduction in value. The vitiating element, if proven, makes the contract void (as if never existed) or voidable (will continue until the party wishes to rescind the legislation). Restraint of trade clauses are generally illegal unless reasonable. This is decided by geography, time period, nature of the business and in the interests of the general public.

Void Vs Voidable

Voidable: Contract will continue on food unless the injured party elects to rescind or avoid the contract.Void: Void back to the moment of formation, as if it never existed.


Void from the beginning as it places the parties in the same position as if there had never been a contract. Common mistake – both parties make the same mistake. Mutual – each party has made a different mistake. Unilateral mistake – only one party has made a mistake.


In contract – can be minor (not too bad) or major (actionable and allows to rescind.)In tort:Fraudulent – intention to wrongly induce.Innocent – misstatement of material fact, with lack of intentional deceit.Negligent – innocent but careless statement.


The Competition and Consumer Act 2010. Illegal contracts involve an unlawful act like a crime or fraud.Immoral contracts.Can be void by statute or common law.

Inequality between the parties

Duress and undue influence. Duress is the use of violence or aggression to make something happen. It lacks the voluntary agreement necessary. It can be to the person, the goods (seizing or damaging) or economic duress which is pressure above basic competitive value. Undue influence is the improper use of position or power to gain benefit. There is, again, a lack of genuine consent.Unconscionable: Abuse of the superior bargaining power available. This is seen in Commercial Bank Aus v Amadio The plaintiff has to establish a special disadvantage that substantially affected their ability to protect themselves. The defendant ought to have known this.


When one-side of the party fails in their obligation or does not intend to fulfil their side of the bargain.A breach can be total-no performance- or only partial performance.


Performance – near enough is not good enough. If they do not perform, there is a breach. Sumpter v Hedges shows a man who only partially built a stable and as such could not recover the work done as the contract was abandoned.


Discharged by both parties

Operation of Law

Bankruptcy, death or the alteration of a document without consent of the parties would all make the contract terminated on the basis of law.

Lapse of Time

If the contract stipulates a time period and it runs out. “Time is of the essence” notice can be given if the business has not specified a time period so long that it is reasonable.


Something unexpected happens that makes performance impossible. Codelfa v State Rail was a case where the unforeseen injunction slowing work and making it more expensive was not comprehensively covered in the contract and as such was unable to be carried out.

Statute of Limitation

The statute of limitation is doctrine to protect a person from having to defend cases many years ago. The statutory limitation period is 6 years (12 for formal contracts).


Every breach of contract allows damage collection. Damages are used to work out what position the injured party would have been if the breach had not occurred-return the parties to the most equitable result. Recoverable for: Distress Anxiety Discomfort Mental Distress


There must be a causal link between the breach and damages suffered. If an additional factor breaks the causal chain there is plaintiff can't recover.


Compensation will not be awarded if the damages are not relatable; only those damages that flow naturally from the breach and the defendant is made aware at the time of the breach.


Vic Laundry v Newman shows how the “extraordinary profitable” venture was not sufficient to gain sales. However, Vic Laundry was allowed normal daily profits in damages. Hadley v Baxendale shows how negligence in transportation of a crank shaft had ensued. However, Hadley could not sue for damages of lost profits as he did not tell the defendant that he did not have a spare.


The mitigation of damages is where the non-breaching party took steps to mitigate loss. Failure to do so will result in reduction of damages. Payzu v Saunders shows how an individual who, instead of making payment upfront once they found the business was struggling to make payments. They refused to have month by month payments and their loss was greater. They were not entitled to any greater loss.


o General – compensation for loss as a result of the breach. o Nominal – defendant breached contract but to no loss. o Exemplary – awarded for no-economic loss. o Liquidated – genuine estimate of the loss that will flow from an impending breach. o Unliquidated – leaving the court to decide how much. Penalties – must not be extravagant and reasonable and if the amount if a pre-estimate of loss.

Equitable Remedies