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NCA Contracts practice questions

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Question 1Nature and Formation of Contracts

Which element is required for a valid offer under contract law?

  1. A written signature witnessed by a third party
  2. Payment of a deposit by the offeree
  3. Approval of the terms by a court or tribunal
  4. A clear statement of the terms on which the offeror is willing to be bound Correct answer.

Explanation

An offer must express the terms with sufficient certainty and show an intention to be bound immediately upon acceptance. Formalities such as writing or witnesses are not generally required, and no deposit or court approval is needed for an offer to exist.

Question 2Nature and Formation of Contracts

A shop displays goods on a shelf with price tags. In general, how is this display characterized in contract law?

  1. An invitation to treat rather than an offer Correct answer.
  2. A unilateral offer to the whole world
  3. An enforceable option contract
  4. A binding offer that customers accept by picking up goods

Explanation

A display of goods with a price tag is generally treated as an invitation to treat, inviting the customer to make an offer. The contract forms when the shop accepts that offer at the till, which allows the shop to decline a sale in limited situations.

Question 3Nature and Formation of Contracts

Which of the following best describes acceptance of an offer?

  1. A request for further information about the terms
  2. Unqualified agreement to all terms communicated to the offeror Correct answer.
  3. Silence maintained for a reasonable period
  4. A counter-proposal that changes a minor term

Explanation

Acceptance must be unqualified and must be communicated to the offeror, producing a binding agreement on the stated terms. Any variation of terms amounts to a counter-offer, and silence cannot generally constitute acceptance.

Question 4Nature and Formation of Contracts

What is the standard definition of consideration in contract law?

  1. Something of value given by each party in exchange for the other's promise Correct answer.
  2. A moral obligation owed to a family member
  3. The subjective belief that a bargain is fair
  4. A statement of intention made before contracting

Explanation

Consideration is the price of the promise, meaning something of value exchanged between the parties. It must be given in exchange for the promise rather than being a moral duty or a unilateral statement of intent.

Question 5Nature and Formation of Contracts

Which phrase describes an intention to create legal relations in a commercial context?

  1. There is a rebuttable presumption that the parties intend legal relations Correct answer.
  2. Legal relations depend solely on the parties' subjective motives
  3. Legal relations arise only where a notary is present
  4. There is an irrebuttable rule that no legal relations are intended

Explanation

In commercial agreements there is a rebuttable presumption that the parties intend to create legal relations. The presumption can be displaced by clear words showing the arrangement is binding in honour only, but it is not irrebuttable.

Question 6Nature and Formation of Contracts

Which of these agreements is generally presumed to lack an intention to create legal relations?

  1. An employment contract with a stated salary
  2. A lease of commercial premises
  3. A social arrangement between friends to share a holiday cost Correct answer.
  4. A supply agreement between two companies

Explanation

Social and domestic arrangements are presumed not to create legal relations, though the presumption can be rebutted by evidence. Commercial agreements such as supply, lease and employment contracts carry the opposite presumption.

Question 7Nature and Formation of Contracts

What does the doctrine of privity of contract generally provide?

  1. Only a party to the contract may enforce rights under it Correct answer.
  2. Rights under a contract pass automatically to the public
  3. A contract binds all persons aware of its terms
  4. Any third party who benefits may always sue to enforce it

Explanation

Privity means that only the parties to a contract can enforce its terms, while third parties generally cannot sue upon it. Statutory exceptions in some jurisdictions allow a third party to enforce a benefit, but the general rule remains party-only enforcement.

Question 8Nature and Formation of Contracts

Which of the following is a valid form of consideration?

  1. A promise extracted by duress
  2. A promise to forgo a claim known to be fraudulent
  3. A promise to pay a sum of money in exchange for goods Correct answer.
  4. A promise to perform an existing public duty

Explanation

A promise to pay money in exchange for goods is a classic example of executory consideration with clear value. Performance of an existing public duty, promises obtained by duress, and fraudulent claims do not constitute good consideration.

Question 9Nature and Formation of Contracts

An offeror posts an offer stating that acceptance must be by email. The offeree instead sends acceptance by ordinary post, which arrives later. What is the legal position?

  1. The postal acceptance is effective only if it arrives before the deadline
  2. The postal acceptance is effective because any mode of acceptance suffices
  3. The offer lapses automatically when the offeree chooses a different mode
  4. The postal acceptance is ineffective because the offeror prescribed the mode of acceptance Correct answer.

Explanation

Where the offeror prescribes a specific mode of acceptance, acceptance must generally follow that mode unless the prescribed mode is merely a suggestion. A different mode may be effective only if it is no less advantageous to the offeror, which is not assumed here.

Question 10Nature and Formation of Contracts

A company advertises that it will pay a reward to anyone who returns its lost documents. A stranger returns them without knowing of the advertisement. Can the stranger claim the reward?

  1. No, because only employees can accept a unilateral offer
  2. Yes, because the act of return itself constitutes acceptance regardless of knowledge
  3. Yes, because reward offers bind the whole world automatically
  4. No, because the stranger did not know of the offer when performing the act Correct answer.

Explanation

Acceptance requires knowledge of the offer, so a person who performs the requested act without awareness of the reward cannot accept it. The unilateral offer is open to the world, but acceptance still depends on conscious communication or performance with knowledge.

Question 11Nature and Formation of Contracts

A tenant receives a letter offering to reduce rent for one year. Before the tenant replies, the landlord withdraws the offer by telephone and the tenant hears the message. What is the effect of the withdrawal?

  1. The withdrawal is ineffective because it was made by telephone
  2. The offer remains open because withdrawal must be in writing
  3. The offer remains open because the tenant had not yet replied
  4. The offer is terminated because withdrawal was communicated before acceptance Correct answer.

Explanation

An offer may be revoked at any time before acceptance, provided the revocation is communicated to the offeree. Once the offeree learns of the withdrawal before accepting, the offer is terminated and cannot later be accepted.

Question 12Nature and Formation of Contracts

A seller promises to sell a car to a buyer and states that the offer will stay open for seven days in exchange for the buyer paying one dollar. The buyer pays the dollar. What has been created?

  1. An option, because consideration was given to keep the offer open Correct answer.
  2. A conditional gift, because the dollar is nominal
  3. A counter-offer that replaces the original offer
  4. A mere promise to keep the offer open, which is unenforceable

Explanation

A promise to keep an offer open is generally unenforceable unless supported by consideration, in which case it forms an option. The buyer's payment of one dollar supplies consideration, so the seller cannot revoke during the stated period.

Question 13Nature and Formation of Contracts

A party agrees to perform an existing contractual duty owed to the same counterparty and receives a promise of extra payment. Under the traditional rule, what is the usual outcome?

  1. The promise of extra payment is generally unenforceable for lack of fresh consideration Correct answer.
  2. The extra payment is treated as a penalty
  3. The promise of extra payment is always enforceable because the parties agreed
  4. The original contract is automatically void

Explanation

Performing an existing duty owed to the same party generally supplies no fresh consideration, so a promise of extra payment is traditionally unenforceable. Exceptions may apply where a practical benefit is conferred or a third party's duty is involved.

Question 14Nature and Formation of Contracts

A minor signs a contract to purchase a bicycle for personal use. Which statement best reflects the general position on enforceability?

  1. The contract is void and cannot be ratified on reaching majority
  2. The contract is generally voidable by the minor, though necessaries may bind Correct answer.
  3. The contract is fully binding on the minor in all circumstances
  4. The minor is liable only if a parent co-signs

Explanation

Contracts with minors are generally voidable at the minor's option, except for necessaries such as food and shelter. On reaching majority, the minor may ratify the contract, which then becomes fully binding.

Question 15Nature and Formation of Contracts

A person suffering from a mental disorder enters a contract during a lucid interval. What is the likely effect on the contract?

  1. The contract is unenforceable because mental illness always negates capacity
  2. The contract is voidable only if the other party knew of the disorder
  3. The contract is binding because the person understood the nature of the transaction at the time Correct answer.
  4. The contract is automatically void regardless of understanding

Explanation

Capacity depends on whether the party understood the nature and effect of the transaction at the time of contracting. A contract made during a lucid interval can therefore be binding even though the person has a mental disorder.

Question 16Nature and Formation of Contracts

A contract is performed illegally by one party without the other's knowledge. Which approach best reflects the general treatment of illegality?

  1. Illegality only matters if a criminal charge is brought
  2. Courts may refuse enforcement where the contract is tainted by illegality, weighing the parties' conduct Correct answer.
  3. Courts always enforce illegal contracts to protect expectations
  4. Illegality renders the contract voidable at the innocent party's option in all cases

Explanation

Illegality can render a contract unenforceable, and courts weigh factors such as the parties' knowledge, the purpose of the prohibition and the consequences of denial. Enforcement is not automatic, and the outcome depends on the nature of the illegality.

Question 17Nature and Formation of Contracts

Which of the following best distinguishes a misrepresentation from a breach of contract?

  1. Misrepresentation occurs only after formation, while breach occurs before
  2. Misrepresentation concerns only written statements, while breach concerns oral terms
  3. Misrepresentation is a false statement inducing the contract, while breach concerns failure to perform a term Correct answer.
  4. Misrepresentation requires intent to deceive, while breach requires negligence

Explanation

Misrepresentation is a false statement of fact made before or at formation that induces the other party to contract. Breach of contract concerns a party's failure to perform a term of the contract after it has been formed.

Question 18Nature and Formation of Contracts

A party signs a contract after being told that a key clause does not exist, when in fact it does. The party does not read the document. Which claim is most appropriate?

  1. Duress, because the party was pressured into signing
  2. Misrepresentation, because a false statement induced the signature Correct answer.
  3. Frustration, because the contract became impossible to perform
  4. Undue influence, because a relationship of trust existed

Explanation

A false statement of fact that induces a party to enter a contract can ground a claim in misrepresentation, even if the party did not read the document. Duress requires illegitimate pressure, undue influence requires a relationship of influence, and frustration concerns supervening events after formation.

Question 19Nature and Formation of Contracts

Which statement about a counter-offer is correct?

  1. A counter-offer is merely a request for information
  2. A counter-offer rejects the original offer and creates a new offer Correct answer.
  3. A counter-offer leaves the original offer open for later acceptance
  4. A counter-offer accepts the original offer while adding terms

Explanation

A counter-offer operates as a rejection of the original offer and substitutes a new offer, which the original offeror may accept or reject. Once rejected, the original offer cannot later be accepted unless it is renewed.

Question 20Nature and Formation of Contracts

What is the effect of a condition precedent on a contract?

  1. The condition converts the contract into an option
  2. The contract is immediately enforceable regardless of the condition
  3. The contract is void from the outset in all cases
  4. The contract becomes effective only when the specified condition is satisfied Correct answer.

Explanation

A condition precedent suspends the operation of the contract until the specified event occurs. Until the condition is met, the parties' obligations do not become fully enforceable, though duties of good faith may still apply.

Question 21Nature and Formation of Contracts

A contract contains a clause stating that it is binding in honour only. What is the likely effect on enforceability?

  1. The clause is automatically void as contrary to public policy
  2. The clause rebuts the presumption of intention to create legal relations Correct answer.
  3. The clause is ignored because commercial parties always intend legal relations
  4. The clause converts the agreement into a unilateral offer

Explanation

Clear language showing that an agreement is binding in honour only can rebut the presumption that commercial parties intend legal relations. If the presumption is rebutted, the arrangement is generally not enforceable as a contract.

Question 22Nature and Formation of Contracts

A party threatens to report a genuine past crime unless the other party signs a contract. Which ground for vitiating the contract is most directly engaged?

  1. Duress, because illegitimate pressure induced the agreement Correct answer.
  2. Frustration, because performance became impossible
  3. Misrepresentation, because a false statement was made
  4. Mistake, because both parties misunderstood the terms

Explanation

Threatening to report a past crime to obtain a contractual advantage can amount to illegitimate pressure and thus duress. The victim may seek to rescind the contract, provided the pressure was a significant cause of entering it.

Question 23Nature and Formation of Contracts

A stronger party in a relationship of trust enters a contract on terms markedly favorable to itself and cannot show the weaker party received independent advice. What doctrine is most relevant?

  1. Frustration, discharging the contract due to changed circumstances
  2. Privity, limiting enforcement to the contracting parties
  3. Undue influence, shifting the burden to the stronger party to justify the transaction Correct answer.
  4. Consideration, requiring a fresh exchange of value

Explanation

Where a relationship of trust and influence exists and the transaction is manifestly disadvantageous, a presumption of undue influence may arise. The burden then shifts to the stronger party to show the transaction was fair and the weaker party had independent advice.

Question 24Nature and Formation of Contracts

Both parties contract on the basis of a shared fundamental error about the existence of the subject matter. Which doctrine is most relevant to the validity of the contract?

  1. Counter-offer, because the terms were renegotiated
  2. Misrepresentation, because one party made a false statement
  3. Duress, because pressure was applied to consent
  4. Common mistake, which may render the contract void in limited circumstances Correct answer.

Explanation

A shared fundamental mistake about a matter essential to the contract may render it void at common law in limited circumstances. The doctrine is narrow and requires the error to go to the very existence or identity of the subject matter.

Question 25Nature and Formation of Contracts

A contract includes a clause requiring disputes to be resolved by mediation before litigation. How is such a clause generally treated?

  1. It automatically converts the contract into a unilateral offer
  2. It is treated as a condition precedent that voids the entire agreement
  3. It may be enforceable as an agreement to attempt alternative dispute resolution in good faith Correct answer.
  4. It is always void because it ousts the jurisdiction of the courts

Explanation

Agreements to attempt mediation or other alternative dispute resolution in good faith are generally enforceable, provided they are sufficiently certain. They do not oust the court's jurisdiction entirely, since litigation remains available if mediation fails.

Question 26Nature and Formation of Contracts

Which of the following best describes the legal effect of an invitation to treat?

  1. It is an offer that becomes binding once the other party acknowledges it
  2. It expresses willingness to negotiate rather than a definite promise capable of acceptance Correct answer.
  3. It automatically lapses after seven days by operation of law
  4. It is a binding promise to keep terms open for a stated period

Explanation

An invitation to treat is a preliminary communication inviting the other party to make an offer; it does not itself create a power of acceptance. Because no definite promise is made, a response to it is generally an offer that the original party may accept or reject.

Question 27Nature and Formation of Contracts

Which statement correctly describes the postal rule of acceptance?

  1. Acceptance is effective when the letter is properly posted, even if later lost Correct answer.
  2. Acceptance is effective only when the offeror actually reads the letter
  3. Acceptance is effective when the letter is received at the offeror's address
  4. Acceptance is effective only when the offeror acknowledges the letter in writing

Explanation

Under the postal rule, acceptance is complete as soon as a properly addressed and stamped letter is posted, provided the rule has not been excluded. The offeror is bound even if the letter never arrives, which is why parties often exclude the rule expressly.

Question 28Nature and Formation of Contracts

A shop displays goods on its shelves with price tags attached. A customer takes an item to the till and the cashier refuses to sell at the marked price. What is the customer's legal position?

  1. The customer can enforce the marked price because the display was an offer
  2. The customer and cashier have formed a contract that the cashier has breached
  3. The customer has accepted an offer by taking the item from the shelf
  4. The display is an invitation to treat, so the cashier may decline the customer's offer Correct answer.

Explanation

A display of goods with a price is generally an invitation to treat, not an offer. The customer makes the offer at the till and the cashier is free to accept or reject it, so no contract arises unless the sale is agreed.

Question 29Nature and Formation of Contracts

An offeror states that acceptance must reach the offeror by 5 pm on Friday. The offeree posts a letter at 3 pm on Friday that arrives on Monday. Which statement best reflects the position?

  1. No contract exists because the letter was posted too late
  2. Acceptance is effective on Friday because the postal rule applies
  3. Acceptance is effective on Monday because the offeror prescribed receipt Correct answer.
  4. Acceptance is effective only if the offeror chooses to waive the deadline

Explanation

Where the offeror expressly requires acceptance to reach them, that prescribed mode displaces the postal rule. Acceptance is therefore complete only on actual receipt, which here is Monday, after the deadline.

Question 30Nature and Formation of Contracts

A garage owner displays a car with a ticket price of £10,000. A customer offers £9,500 and the owner replies, 'I could not accept less than £9,800.' The customer then says, 'I accept your £9,800.' Which analysis best reflects the legal position?

  1. A contract exists at £10,000 because the display was an offer
  2. No contract exists because the owner's reply was a mere request for information that the customer's acceptance could not convert into an agreement Correct answer.
  3. A contract exists at £9,800 because the owner made a counter-offer
  4. No contract exists because the customer's original offer of £9,500 was never withdrawn

Explanation

A statement of the minimum price the owner would consider is generally a mere supply of information rather than a counter-offer, so the customer's offer remains open. Saying 'I accept your £9,800' does not create a contract because the owner never made an offer at that figure. The parties are still negotiating and no agreement has crystallised.

Question 31Offer and Acceptance

Which element completes a binding contract by unequivocally agreeing to every term of an offer?

  1. Invitation to treat
  2. Acceptance Correct answer.
  3. Counter-offer
  4. Consideration

Explanation

Acceptance is the unqualified assent to all the terms of an offer, communicated by the offeree to the offeror. Once a valid acceptance occurs, the offer is converted into a binding agreement. A counter-offer, by contrast, rejects the original offer and creates a new one.

Question 32Offer and Acceptance

An offeror states that an offer will remain open for ten days. Under traditional common law, this promise is generally unenforceable because the offeror has given nothing in exchange. What is this principle called?

  1. Lapse by effluxion of time
  2. Revocation of a firm offer
  3. The mailbox rule
  4. The doctrine of consideration for options Correct answer.

Explanation

A promise to keep an offer open is itself a promise that requires consideration to be enforceable. Without payment or some benefit given for the option, the offeror may revoke the offer at any time before acceptance. An option contract arises only when consideration is supplied for the promise to hold the offer open.

Question 33Offer and Acceptance

An offer is posted on Monday. The offeree mails an acceptance on Wednesday and the offeror receives it on Friday. When is the contract generally formed under the mailbox rule?

  1. Wednesday Correct answer.
  2. Never, because postal acceptance is ineffective
  3. Monday
  4. Friday

Explanation

Under the mailbox rule, acceptance by post takes effect when the letter of acceptance is dispatched, provided the post is a reasonable means of communication. The contract is therefore formed on Wednesday, when the letter is mailed. Receipt by the offeror on Friday is irrelevant to the timing of formation.

Question 34Offer and Acceptance

Which communication is treated as an invitation to treat rather than an offer?

  1. A signed purchase order specifying goods, quantity, and price
  2. A display of goods on a shop shelf with a price tag Correct answer.
  3. A written promise to sell a named car for a stated sum
  4. A bid submitted at an auction

Explanation

A display of goods in a shop window or on a shelf is generally an invitation to treat, inviting customers to make offers at the till. The shopkeeper retains the right to refuse a sale. Specific promises to sell at a stated price and bids at auction are treated as offers.

Question 35Offer and Acceptance

An offeree replies to an offer saying she will buy the goods but at a lower price. How is this reply best characterized in contract law?

  1. A valid acceptance
  2. A revocation by the offeree
  3. A request for information
  4. A counter-offer Correct answer.

Explanation

A response that varies the terms of the offer, such as changing the price, is a counter-offer rather than an acceptance. A counter-offer operates as a rejection of the original offer and destroys it. The original offeror may then accept or reject the new offer.

Question 36Offer and Acceptance

An offeror promises to keep an offer open for a week in exchange for the offeree paying one dollar. What has been created?

  1. A mere expression of intention
  2. An invitation to treat
  3. An option contract Correct answer.
  4. A conditional gift

Explanation

Where the offeree gives consideration for a promise to hold an offer open, an option contract is formed. The offeror cannot revoke during the stated period. Without such consideration, the promise would be unenforceable and the offer revocable.

Question 37Offer and Acceptance

An offeror sends an offer by email and states that acceptance must be communicated by post. The offeree emails acceptance instead. What is the legal position?

  1. Acceptance is valid only if the offeror reads the email
  2. Acceptance is valid because the mailbox rule always applies
  3. Acceptance is invalid because the prescribed method was not used Correct answer.
  4. Acceptance is valid because email is faster

Explanation

Where an offeror prescribes a specific mode of acceptance, a different method is generally ineffective unless the prescribed method was merely suggested. Here the offeror made postal acceptance mandatory, so the emailed acceptance does not conclude the contract. The offeror may waive the requirement, but has not done so.

Question 38Offer and Acceptance

An offeree learns of an offer from a third party and begins performing, but the offeror has not communicated the offer directly. Can the offeree validly accept?

  1. No, because an offer must be communicated by the offeror Correct answer.
  2. No, unless the third party confirms in writing
  3. Yes, because performance shows intent
  4. Yes, if the performance benefits the offeror

Explanation

An offer must be communicated to the offeree by the offeror or someone authorized by the offeror before it can be accepted. Knowledge acquired from an unauthorized source does not create a power of acceptance. The offeree's performance therefore cannot constitute acceptance of an offer she was not validly given.

Question 39Offer and Acceptance

An offeror mails an offer on 1 May, stating it will expire on 10 May. The offeree mails acceptance on 12 May. What is the effect?

  1. A contract is formed on 12 May
  2. A contract is formed on 10 May
  3. The acceptance revives the expired offer
  4. The offer lapsed before acceptance Correct answer.

Explanation

An offer lapses automatically if it is not accepted within the time specified by the offeror. Acceptance dispatched after the stated deadline is too late and operates as a new offer at most. No contract arises unless the original offeror accepts that new proposal.

Question 40Offer and Acceptance

An offeror revokes an offer by letter. The offeree posts acceptance before receiving the revocation but reads the revocation afterwards. What is the position?

  1. The offer remains open indefinitely
  2. Revocation is ineffective because acceptance was dispatched before receipt Correct answer.
  3. Revocation is effective because it was posted first
  4. Revocation is effective upon the offeree's reading only

Explanation

A revocation is effective only when it is actually communicated to and received by the offeree. If the offeree dispatches acceptance before learning of the revocation, a contract is formed under the mailbox rule. The timing of dispatch of the revocation is irrelevant.

Question 41Offer and Acceptance

Which of the following is generally required for an acceptance to be effective?

  1. Silence by the offeree
  2. Approval by a third party
  3. Notarization of the acceptance
  4. Communication to the offeror, unless waived Correct answer.

Explanation

Acceptance must generally be communicated to the offeror, although the offeror may waive communication, for example by indicating that performance is sufficient. Silence alone does not constitute acceptance. Third-party approval and notarization are not general requirements.

Question 42Offer and Acceptance

An offeror says to the offeree, 'If you do not hear from me by Friday, the offer stands.' The offeree performs before Friday without notifying the offeror. Is there a contract?

  1. No, because silence is not acceptance unless the offeror has waived communication Correct answer.
  2. Yes, because silence can constitute acceptance here
  3. Yes, because performance always equals acceptance
  4. No, because the offer was revoked

Explanation

Silence alone is not acceptance, and the offeror's statement does not waive communication of acceptance. However, where the offeror indicates that performance is sufficient, performance can constitute acceptance. The key issue is whether communication was waived, which this statement does not achieve.

Question 43Offer and Acceptance

An offer is addressed to a specific named person. Who may accept it?

  1. Only the named offeree Correct answer.
  2. Any person who performs first
  3. Anyone who learns of it
  4. Any member of the public

Explanation

An offer made to a specific person can generally be accepted only by that person, because the offeror has chosen the offeree. Offers to the world at large are the exception and may be accepted by anyone who performs the specified act. The named offeree's identity is therefore decisive.

Question 44Offer and Acceptance

A reward notice offers payment to anyone who returns a lost dog. A person who did not know of the notice finds and returns the dog. Can she claim the reward?

  1. No, because only the police may claim
  2. Yes, because the offer was to the world
  3. No, because she did not know of the offer when performing Correct answer.
  4. Yes, because she performed the requested act

Explanation

An offer to the world at large may be accepted by anyone who performs the specified act, but the offeree must know of the offer when performing. Without knowledge, there is no acceptance of the offer, even though the act was done. The performer therefore cannot claim the reward.

Question 45Offer and Acceptance

An offeree accepts an offer by beginning performance of the requested act. Which type of offer does this most likely involve?

  1. A unilateral offer Correct answer.
  2. A bilateral offer requiring a promise
  3. An invitation to treat
  4. A firm offer

Explanation

A unilateral offer invites acceptance by performance of a specified act rather than by a promise. The contract is formed when the act is completed, and communication of acceptance is generally unnecessary. Bilateral offers, by contrast, are accepted by a promise.

Question 46Offer and Acceptance

An offeree sends an acceptance that is lost in the post and never reaches the offeror. The offeror had expressly stated that postal acceptance was permitted. What is the position?

  1. No contract, because the acceptance was not received
  2. A contract, because postal acceptance is effective on dispatch Correct answer.
  3. No contract, because postal acceptance is never effective
  4. A contract only if the offeror later learns of the acceptance

Explanation

Where postal acceptance is permitted or contemplated, acceptance takes effect when the letter is properly dispatched, even if it is later lost. The risk of loss in the post generally lies with the offeror. The offeree's acceptance is therefore effective on posting.

Question 47Offer and Acceptance

An offeror includes a term stating that acceptance may be made only by returning a signed form. The offeree instead telephones to accept. What is the effect?

  1. Invalid acceptance, because telephone calls are never valid
  2. Valid acceptance, because telephoning is quicker
  3. Invalid acceptance, because the prescribed method was not followed Correct answer.
  4. Valid acceptance, because the offeror heard the call

Explanation

Where the offeror prescribes a mandatory method of acceptance, a different method is generally ineffective. The requirement of a signed form indicates that the method is mandatory rather than merely suggested. The telephone call therefore does not conclude the contract.

Question 48Offer and Acceptance

An offeree responds to an offer by saying, 'I accept your offer but I intend to pay by cheque rather than bank transfer.' The offer did not specify a payment method. What is the effect?

  1. A counter-offer rejecting the offer
  2. A valid acceptance, because the variation is insignificant and not a condition Correct answer.
  3. A request for information only
  4. No contract, because payment terms must always be agreed

Explanation

A purported acceptance that merely suggests a non-essential variation, without making it a condition of acceptance, may still operate as an acceptance. The key test is whether the offeree's response introduces a new term as a condition. A minor, non-conditional change does not necessarily destroy the acceptance.

Question 49Offer and Acceptance

An offer states that it will remain open until 31 December. The offeror dies on 1 December, and the offeree learns of the death on 2 December. What is the general position regarding acceptance after the offeree learns of the death?

  1. Acceptance is generally ineffective once the offeree knows of the offeror's death Correct answer.
  2. Acceptance is valid only if the estate consents
  3. Acceptance is valid because death does not affect offers
  4. Acceptance is valid because the offer had a fixed deadline

Explanation

Death of the offeror generally terminates an offer once the offeree knows of the death, particularly where the offer involves personal performance. Acceptance after that knowledge is generally ineffective. A fixed deadline does not preserve the offer against the offeree's knowledge of death.

Question 50Offer and Acceptance

An offeror makes an offer to sell goods and states, 'This offer will be deemed accepted unless you object within seven days.' The offeree remains silent. What is the effect?

  1. A contract is formed because the offeror imposed a deemed acceptance term
  2. A contract is formed only if the offeree performs
  3. A contract is formed after seven days by operation of law
  4. No contract is formed because silence is not acceptance Correct answer.

Explanation

An offeror cannot impose a contract on an offeree by stating that silence will be treated as acceptance. Silence is not acceptance unless the parties have previously agreed to that arrangement. The offeree's silence therefore leaves the offer unaccepted.