Contracts: Formation, Terms, Vitiating Factors and Remedies
Formation
A contract requires offer, acceptance, consideration, intention to create legal relations, and certainty. Distinguish an offer from an invitation to treat (advertisements, displays, auctions). Acceptance must be communicated; the postal rule is an exception. Consideration must be sufficient but need not be adequate, and past consideration is generally not good consideration. Part-payment of a debt is not consideration unless fresh consideration or a practical benefit applies.
Terms and vitiating factors
Identify express and implied terms, conditions, warranties and intermediate terms, and the effect of entire agreement and exclusion clauses (construed strictly, subject to statutory unconscionability regimes). Vitiating factors include misrepresentation, mistake, duress, undue influence, and unconscionable dealing. Remedies include damages (expectation or reliance), specific performance, and injunction.
Traps
- Treating a display of goods as an offer rather than an invitation to treat.
- Confusing termination for breach with rescission for vitiating factors.
- Missing that an exclusion clause must be incorporated before or at the time of contracting.
- Overlooking the requirement that damages be mitigated.
Worked example
A builder agrees to renovate a kitchen for a fixed price, then demands more money mid-job. The owner promises extra payment. The promise is generally unenforceable for want of consideration unless the builder provides fresh consideration or the owner obtains a practical benefit. If the builder then stops work, the owner may terminate for breach and claim damages measured by the cost of completing the work, subject to mitigation.