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Practice questions 69

Essential points

n A contract is a legally binding agreement.

n A contract is formed when an offer is accepted.

n An invitation to treat is not an offer, but an invitation to negotiate or an invitation to
make an offer.

n As soon as an acceptance of an offer is received, a contract is created.

n If the postal rule applies, an acceptance made by posting a letter is effective when it is
posted.

n An offer of a unilateral contract can be accepted only by performing the act requested.

n A counter offer is not an acceptance and revokes the original offer.

n A contract can be created only if the reasonable person could state with certainty
exactly what it is that has been agreed.

n An offer which has been revoked cannot be accepted.

n Revocation of an offer is effective when it is received. (The postal rule never applies
to revocations.)

n A contract will only be created if the parties appeared to intend to create a legal
relationship.

n Consideration consists of a right given to one party, or a loss or detriment suffered by
another.

n A past act cannot be given as consideration.

n Most contracts do not need to be made in writing.

n Minors (persons under 18) are bound by contracts to buy necessary goods or services.

n Minors must pay a reasonable price for necessary goods or services which they have
contracted to buy, if the goods or services are supplied to them.

n If minors make contracts to buy goods or services which were not necessary, the con-
tract will be void.

Practice questions

1 On 10 July Ace Ltd posted an offer to sell a consignment of 1,000 widgets to Brian, a retailer.
The offer said that the price was £10,000 and that the offer would remain open until 31 July.
On 12 July Brian telephoned Ace Ltd and asked whether he would be allowed three months’
credit. Ace Ltd’s manager replied that payment would have to be made in cash, upon delivery.
On 29 July Ace Ltd sold the consignment of widgets to a third party, Charles. On 30 July
Brian posted a letter accepting Ace Ltd’s offer. This letter arrived on 1 August. Upon opening
the letter, Ace Ltd’s manager telephoned Brian and told him that the consignment of
widgets had been sold and that further similar widgets were not available. Advise the parties
as to whether or not a contract has been created.

2 Acme Supastore advertised its ‘price promise’ heavily in the Nottown Evening News. This
promise stated that Acme was the cheapest retailer in the city of Nottown and that it would