1. MCQs Flashcards
A client wanted a skip to take away rubbish and so contacted a skip hire company. The company posted a quotation for £90 and said that if the client wanted to accept the company needed to know by Friday 19 April.
On Tuesday 16 April the client posted a letter accepting the quotation and asking when would be the earliest the company could supply a skip. By 22 April the client had not heard back from the company. The client rang the company. It said it had not received the letter and had no skips available for hire now or in the near future.
If the client sued the company for breach of contract, which of the following best describes the most likely outcome?
A. The company would be liable for breach because a contract was formed when the client posted the letter on 16 April.
B. The company would not be liable for breach of contract because the client’s letter on 16 April amounted to a counter-offer.
C. The company would not be liable for breach of contract as it had no more skips available.
D. The company would be liable for breach of contract as the client accepted its offer when the client rang on 22 April.
E. The company would not be liable for breach of contract as the postal rule would not apply.
The correct answer is E.
An offer was made by the company to hire out the skip for £90. The client purported to accept on Tuesday 16 April. The letter was not a counter-offer as the client was only asking a question and not imposing a condition, so B is wrong. Acceptance must be communicated. On that basis the client has no contract with the company, because by the time the client actually contacted the company (ie on 22 April) its offer had lapsed (19 April), so D is wrong.
There will only be a contract if the postal rule applied. Under the postal rule a letter of acceptance is binding as soon as it is posted. For the rule to apply the post must have been a reasonable means of communication. On the facts it may have been reasonable to reply by post on 16 April as the offer did not lapse until 19 April and also the quote had been sent by post. Query though whether the letter was sent first or second class and at what time (eg was it posted after the last postal collection on 16 April?).
In any event the postal rule will only apply where a letter was properly addressed and posted etc. Query here why the client’s letter was lost in the post, eg had it been properly addressed? Also the postal rule may have been impliedly excluded as the company said it needed to ‘know’ by 19 April. Only in the unlikely event of the postal rule applying would there be a contract. This is why A is wrong.
C is wrong because even if the company had no more skips it could be in breach and liable to pay damages.
A client attended an auction. When it came to the lot comprising Victorian garden ornaments, the auctioneer said they had been valued at £300 and would be sold that day whatever price they fetched. He invited bids of £100, then £80. When nobody responded, the auctioneer asked how much anyone would be prepared to pay for the ornaments and the client bid £20. No further bids were made but the auctioneer withdrew the ornaments from the sale. He later sold them privately for £150.
Which of the following statements best sums up the legal position of the client?
A. The client could sue the owner of the ornaments for breach of a contract.
B. The client could sue the auctioneer for breach of contract and the measure of damages would be £130.
C. The client could sue the auctioneer for breach of a unilateral contract.
D. The client would not have an action for breach of contract as the bid was far too low.
E. The client could sue the auctioneer for breach of a bilateral contract and the measure of damages would be £280.
The correct statement is C.
Normally at an auction the bids are the offers and the fall of the auctioneer’s hammer is the acceptance (SGA 1979, s 57). Therefore, the client had no contract to buy the ornaments from the seller as the auctioneer did not accept the bid. Hence A is wrong.
Here the auctioneer made an offer of a unilateral contract when he said that the ornaments would ‘be sold that day whatever price they fetched’. This is why E is wrong. He was promising to sell to whoever made the highest bid (Barry v Davies) but he did not then sell to the highest bidder so he was in breach of contract.
The amount of the bid is irrelevant and that is why D is wrong.
The auctioneer will be liable in damages to the client for £280, ie the difference between the value of the ornaments (£300) and the amount of the client’s bid (£20), so B is wrong.
At 9am a car dealer emailed a client offering to sell her a vintage car for £60,000. The client received the email shortly afterwards and emailed an acceptance of the offer at 12.55pm. The client knew that the car dealership closes for lunch each day between 1pm and 2pm. After lunch the car dealer did not check his email account. At 2.30pm the car dealer received an offer for £62,000 for the vintage car, which he accepted. At 4pm the client phoned the car dealer to enquire about the car and was told the car was no longer for sale. The client has been reliably informed it will cost £65,000 to buy a similar car elsewhere.
Which of the following statements best sums up the legal position of the client?
A. The client has a contract with the dealer to buy the car and can sue the dealer for £2,000 representing the profit the dealer made on selling the car elsewhere.
B. The dealer revoked his offer before acceptance was communicated and so there would be no contract of sale with the client.
C. The client’s acceptance would be deemed communicated before 2.30pm and so the dealer would be liable to pay the client damages of £5,000.
D. By virtue of the postal rule, acceptance was communicated at 12.55pm and so the dealer would be liable to the client for breach.
E. When the dealer sold the car elsewhere he effectively revoked the offer to the client and so would not be liable for breach.
The correct answer is C. Acceptance would be deemed communicated when it would be reasonable for the client to expect it to be read. With businesses it is reasonable to expect communications to be read during normal office hours (so here not between 1pm and 2pm but certainly before 2.30pm). Also the aim of contractual damages is to compensate the innocent party for loss of bargain.
Here it will cost the client an extra £5,000 to buy a similar car elsewhere. This is why A is wrong.
B is wrong as it is likely acceptance would be deemed communicated before the offer was revoked at 4pm.
D is wrong as the postal rule only applies to letters of acceptance.
E is wrong as revocation must be communicated (by the offeror or a reliable third party).
Which of the following statements best sums up legal principles that govern intentions to create legal relations?
A. With commercial agreements there is a non-rebuttable presumption of intention to create legal relations; whereas with domestic agreements there is no intention to create legal relations.
B. With domestic agreements there is a strong presumption of no intention to create legal relations that is difficult to rebut unless very clear words are used.
C. With all agreements involving individuals the presumption is that they did not intend to create legal relations; whereas in business-to-business contracts there is a very strong presumption the parties intended legal relations.
D. In a commercial context there is a strong presumption that the parties intended legal relations but it may be rebutted if the agreement is stated to be ‘binding in honour only’.
E. With domestic agreements it is irrebuttably presumed the parties did not intend legal consequences.
The correct statement is D.
Commercial agreements do not just cover business-to-business contracts; they cover all agreements that are not made between family and friends. This is why C is wrong.
Both presumptions are rebuttable hence why A and E are wrong. The commercial presumption is very strong and difficult to rebut unless clear words are used. The presumption in relation to domestic agreements may be rebutted by a number of factors including how close is the parties’ relationship and the amount of money at stake – hence why B is wrong.
A client decided to set up his own wine bar. He employed a builder to fit out the kitchen for £10,000.
The builder did most of the work, but then told the client he had seriously underestimated the cost of materials and could not afford to complete the job. The client told him not to worry and offered an extra £700 if it would help. The builder said it would, and went on to complete the work. As a result the client was able to open the wine bar on schedule.
Which of the following statements best describes the client’s legal position in relation to the builder?
A. The client is obliged to pay the builder £10,700 as the promise to pay more conferred a practical benefit.
B. The client is not obliged to pay the builder the extra £700 as the builder gave no consideration for it.
C. The client is not obliged to honour the alteration promise to pay more as it was the builder’s responsibility to properly cost the work in the first place.
D. The client is obliged to pay the builder £10,700 as all contractual variations are binding in the absence of extortion.
E. The client is obliged to pay the builder only £10,000 because as a matter of public policy the builder should not be allowed to demand extra money for what he contracted to do.
The correct statement is A.
The problem lies with the attempted variation. For a variation the general rule is that there must be the same elements present as for making a contract. So D is wrong. C is wrong too because if all essential elements are present the variation will be binding.
Question here is what consideration has the builder provided?
Here the builder has just performed his existing contractual duty, which generally is not regarded as sufficient. If he had done something extra that would have been consideration. Performance of an existing duty may be sufficient if it confers a practical/commercial benefit and there was no duress.
The client offered the money and arguably got a practical benefit by getting work finished so that the wine bar could open on time (Williams v Roffey Bros.). There was no evidence of duress (which you will look at in Chapter 12). Hence B is wrong.
No duress and so the client would most likely have to pay the extra £700. E is wrong as it is not a public policy issue.
A client has been running a business for a while but it has been making a steady loss.
Two months ago with a view to making financial savings the client approached his landlord and asked if he would reduce the rent ‘until things picked up’.
As a gesture of goodwill, the landlord agreed to reduce the rent by 25% (ie to £1,500 per month). So when the last two rent payments fell due the client only paid £1,500. Then yesterday the landlord told the client he had changed his mind and would be expecting the client to pay full rent in the future plus the arrears.
Which of the following statements best describes the legal position of the client with his landlord?
A. The client will have to pay £1,000 in arrears of rent and full rent in the future as he gave no consideration for the landlord’s promise to reduce the rent.
B. The landlord suspended his right to full rent but can now demand full rent going forward even if things have not ‘picked up’.
C. The client may raise promissory estoppel as a defence to any action brought by the landlord and the landlord will have to give reasonable notice to resume his legal right to receive full rent in the future.
D. At common law the client is not obliged to pay the arrears but must pay full rent in future.
E. As the landlord’s promise was simply ‘a gesture of goodwill’ it would not be binding and he can now demand all outstanding monies.
The correct statement is C.
The question is whether or not the variation is binding. To be binding there must be agreement, consideration and contractual intention. Here the only issue is with consideration.
Part payment of a debt is not good consideration for a promise to forgo the balance (Pinnel’s Case). On that basis the client has not given consideration for the landlord’s promise to reduce the rent by 25% and so is bound to pay the arrears and full rent going forward. This explains why D is wrong.
There are common law exceptions, such as different consideration, but there is nothing on the facts to suggest that any of them apply. The landlord agreed to reduce the rent as a gesture of goodwill, which reinforces the conclusion that no consideration was given for the promise to accept less.
Consequently the client will have to try and rely on the equitable doctrine of promissory estoppel as a defence if he is sued for the full rent.
There must have been a promise by the landlord to waive a strict legal right intending the client to act on it. Here the landlord promised to waive his right to full rent and the client altered his position by paying the reduced rent.
Looking at High Trees the doctrine operates to suspend legal rights as to the future provided reasonable notice is given. In relation to the reduced rental payments made over the last two months it would seem that the landlord’s right to the extra 25% will have been extinguished.
To use promissory estoppel the client would need to have ‘clean hands’. On the facts there is nothing to suggest otherwise.
As the client may well be able to use promissory estoppel as a defence statements A, B and E are all wrong.
A client decided to set up his own cafe. He took a lease of premises and asked his sister, owner of ‘1st Choice Blinds’, to supply and fit a large awning at the back of the premises to provide extra covered seating for customers. His sister agreed and made and fitted the awning. The client was delighted with what she had done and said he would give her £1,000 for her trouble.
Which of the following statements best describes the legal position of the client in relation to his sister?
A. The client is not obliged to pay his sister £1,000 as she gave no consideration for the promise.
B. The client is not obliged to pay his sister £1,000 as there was no intention to create legal relations.
C. Your client is legally obliged to pay his sister £1,000 because it was a business-to- business arrangement.
D. The client’s sister may have given sufficient consideration for the promise of £1,000 but it is unclear on the facts.
E. The client’s sister is entitled to £1,000 as she was asked to do the work and it was mutually understood she would get paid for it.
D is correct.
On the face of it what the sister did looks like past consideration (which is not good consideration) but the exception may apply (Re Casey’s Patents). The act was done at the client’s request. Query whether it was mutually understood that she would get something for what she did. It looks like a large job. Had the promise been made in advance would it have been legally enforceable? This will hinge on contractual intention. With family arrangements (eg between brother and sister) there is a rebuttable presumption the parties did not intend to create legal relations; whereas in a commercial context (business-to-business), which it looks like here, there is a very strong presumption the parties intended legal relations.
This explains why D is correct and why the other statements, which categorically say the sister is or is not entitled to £1,000, are inaccurate.
A man has lost his dog. He puts up signs around the local neighbourhood with his address and a picture of his dog, reading “£50 reward for anyone who returns this dog to me”. Has the man made an offer capable of acceptance?
A. The man has not made an offer to contract because it is possible that the dog will never be found.
B. The man has made an offer which is accepted by someone finding the dog.
C. The man has made an offer which is accepted by someone returning the dog to the man.
D. The man has made an offer which is accepted by someone looking for the dog.
E. The man has not made an offer to contract because a very large number of people might read the notice and search for the dog.
C. The man has made an offer which is accepted by someone returning the dog to the man.
This is what the case of Carlill v Carbolic Smoke Ball Company suggests. This is a unilateral contract. Only returning the dog will constitute acceptance – simply finding the dog would be insufficient.
On 1 February, a Council places a notice on public display which reads: “For sale, (used) printers, £85 each, contact Council Estates Division”. On 5 February, a woman writes to the Council Estates Division ‘I am happy to pay £85 for one of your printers identified in your notice dated 1 February’. On 11 February, the Council writes back ‘thank you for your letter dated 5 February. We are happy to go ahead. Please contact us by telephone to arrange delivery’.
Which one of the following best explains the legal position?
A. The notice constitutes an offer which was rejected by the woman’s counter-offer in her letter dated 5 February. The Council’s letter of 11 February is a request for further information.
B. The notice constitutes an invitation to treat which was rejected by the woman’s counter-offer in her letter dated 5 February. The Council’s letter of 11 February is an acceptance.
C. The notice constitutes an offer which was rejected by the woman’s counter-offer in her letter dated 5 February. The Council’s letter of 11 February is an acceptance.
D. The notice constitutes an invitation to treat. The woman’s letter dated 5 February is an offer. The Council’s letter of 11 February is an acceptance.
E. The notice constitutes an offer which was accepted by the woman’s letter dated 5 February. The council’s letter of 11 February is a request for further information.
D. The notice constitutes an invitation to treat. The woman’s letter dated 5 February is an offer. The Council’s letter of 11 February is an acceptance.
To promote a new sports club, the venue owner puts an advert in a newspaper advertising an open day for potential members. The advert includes the following statement, ‘Shoot ten netball goals in a row at our open day and you will receive a £50 club token to spend on fitness classes’. A woman sees the advert and immediately phones the club to state that she accepts the challenge and will be attending the fun day. The woman is the first person to shoot ten goals. A man sees the advert and is the second person to shoot ten goals.
Which one of the following statements best explains the legal position?
A. The advert is a unilateral offer. Consequently, it will be construed to entitle the first person to shoot ten goals to be entitled a token. Only the woman is entitled to a token.
B. The advert is a unilateral offer. The woman and the man are both entitled to a token as they have completed the act prescribed by the advert.
C. The advert is an invitation to treat. By contacting the club, the woman has formed a bilateral contract with the sports club and is entitled to a token.
D. The advert is an invitation to treat. Consequently, none of the participants are entitled to a token.
E. The woman is the only participant who is entitled to a token as she was the only participant who communicated her intention to accept prior to completion of the prescribed act.
B. The advert is a unilateral offer. The woman and the man are both entitled to a token as they have completed the act prescribed by the advert.
The owner of a campervan sends an email to an interested buyer. Her email states, ‘I will sell my campervan to you for £15,000.’ The interested buyer responds, ‘I want to go ahead if your campervan has a full-service history.’
Which one of the following statements best describes the legal position?
A. The interested buyer’s response is a conditional acceptance. The parties will have a contract for the sale of the campervan provided it has a full-service history.
B. The campervan owner’s email is an invitation to treat. The interested buyer’s response is an offer.
C. The interested buyer’s response is a counter offer. The campervan owner’s offer is extinguished.
D. The interested buyer’s response is a request for further information. The campervan owner’s offer is extinguished.
E. The interested buyer’s response is a request for further information. The campervan owner’s offer remains open for acceptance.
E. The interested buyer’s response is a request for further information. The campervan owner’s offer remains open for acceptance.
The statement is a request for further information as the interested buyer is making an enquiry about an ancillary matter. The answer correctly states the legal effect of a request for further information (see Stevenson Jacques v McLean [1880] 5 QBD 346). The other answers seem plausible, but they are not correct. A request for further information does not terminate the offer (see Stevenson Jacques v McLean [1880] 5 QBD 346) A valid acceptance must be unconditional (see Hyde v Wrench 49 ER 132) A counter offer must propose alternative terms for acceptance (see Hyde v Wrench 49 ER 132).
An antique collector visits a local auction house. The auction includes a rare antique table like the one the antique collector is looking for and the auction is stated to be ‘without reserve’. The auctioneer invites bids. The antique collector bids £500. Although the antique collector is the only person in the room to bid, the auctioneer refuses to accept his bid, stating that it is too low.
What advice would you give the antique collector?
A. The auctioneer is in breach of a bilateral contract and the antique collector is entitled to damages.
B. There is no contract between the parties and the antique collector is entitled to nothing.
C. The auctioneer is in breach of a unilateral contract and the antique collector is entitled to damages.
D. The auctioneer is in breach of a bilateral contract and the antique collector is entitled to buy the table for £500.
E. The auctioneer is in breach of a unilateral contract and the antique collector is entitled to nominal damages.
C. The auctioneer is in breach of a unilateral contract and the antique collector is entitled to damages.
Although a request for bids at an auction is usually no more than an invitation to treat, a statement that an item will be auctioned ‘without reserve’ constitutes a unilateral offer which is accepted by the act of a bona fide bidder making the highest bid (Warlow v Harrison, confirmed in Barry v Davies). No contract for sale of the table has been concluded between the parties, as the auctioneer’s hammer has not fallen (which would otherwise constitute acceptance of the antique collector’s offer – Payne v Cave). As a result, the antique collector is not entitled to the table. However, the antique collector has accepted the auctioneer’s unilateral offer by making the highest (albeit the only) bid at the auction and is therefore entitled to damages for breach of that separate collateral contract (Barry v Davies).
A gardener has carried out gardening works in return for payment for a client over a period of five years. The client asks the gardener to cut his hedge when she is carrying out other works in the local area. The gardener and client do not discuss payment before the work is carried out. When the hedge is cut the client refuses to pay the gardener’s invoice for £40.
Which of the following statements best explains the gardener’s legal position?
A. The gardener is entitled to payment. The client requested the work was carried out, the client and gardener must have understood that the act was to be rewarded and the payment would be legally enforceable if promised in advance.
B. The gardener is entitled to payment. The gardener has exceeded previous obligations owed to the client and so has provided fresh consideration to support payment.
C. The gardener is entitled to payment. Consideration must be sufficient. As the gardener has carried out a commercial service, the client must pay sufficient consideration.
D. The gardener is not entitled to payment. The court will not determine the adequacy of consideration, and so cannot decide the amount to be paid in return for services if it was not agreed by the parties in advance of the service being carried out.
E. The gardener is not entitled to payment as payment was not discussed prior to the service being carried and so the act of cutting the hedge is past consideration.
A. The gardener is entitled to payment. The client requested the work was carried out, the client and gardener must have understood that the act was to be rewarded and the payment would be legally enforceable if promised in advance.
The exception to the past consideration under Pao On v Lau Yiu Long [1979] UKPC 17 is particularly relevant to this scenario.
A tenant rents a warehouse from which to operate its business. The rent is £12,000 per month. The tenant is struggling financially. It is considering (lawfully) terminating the lease. It asks the landlord to accept £7,500 per month instead. The landlord agrees. This allows the tenant to carry on trading and to not terminate the lease. After 6 months, the tenant recovers from its financial difficulties. The landlord indicates that in 3 months’ time he will put the rent back up to £12,000. After the 3 months’ notice expires (so after 9 months of reduced rent), the tenant continues to pay only £7,500 per month.
Which one of the following statements best describes the legal position?
A. The landlord is likely to be entitled to £12,000 going forward, and to recover £4,500 for each of the 9 months when the tenant only paid £7,500.
B. The landlord is likely to be entitled to £12,000 going forward, but not to recover £4,500 for each of the 9 months when the tenant only paid £7,500.
C. The landlord is likely to be entitled to £12,000 going forward, and to recover £4,500 for each of the 9 months when the tenant only paid £7,500, and to recover interest on each instalment of £4,500.
D. The landlord is now bound to accept £7,500 per month for as long as the lease continues, and cannot recover £4,500 for each of the 9 months when the tenant only paid £7,500.
E. The landlord is now bound to accept £7,500 per month for as long as the lease continues, but he can recover £4,500 for each of the 9 months when the tenant only paid £7,500.
B. The landlord is likely to be entitled to £12,000 going forward, but not to recover £4,500 for each of the 9 months when the tenant only paid £7,500.
This is the likely result of applying the principles of promissory estoppel to this situation. Promissory estoppel suspends the right to full payment (of £12,000), but that right is brought back to life by reasonable notice in this scenario.
The owner of a holiday park agrees to pay a contractor £20,000 to cover the ground and trees in the holiday village with fake snow. When the contractor is half way through laying the snow, he realises he has made an error in his calculations and he will need double the amount of snow than he allowed for under the terms of the fixed price contract. The holiday park owner agrees to pay the £10,000 extra requested by the contractor as he has promised hundreds of guests a ‘snow covered magical village’. The contractor also recognises that the original contract had been under-priced.
Which one of the following statements best explains the legal position?
A. The contractor will be able to rely on promissory estoppel as a defence if the holiday park owner sues him for the additional £10,000.
B. The contractor is entitled to the extra £10,000 as it has provided consideration by going over and above its existing contractual obligations by laying the additional snow.
C. The contractor will not be entitled to the extra £10,000 as he has simply performed his existing contractual obligations.
D. The contractor will be entitled to the extra £10,000 if the contractor’s ability to honour his promise to his guests amounts to factual consideration.
E. The contractor will not be entitled to the extra £10,000 as the £20,000 in the original contract is adequate consideration.
D. The contractor will be entitled to the extra £10,000 if the contractor’s ability to honour his promise to his guests amounts to factual consideration.
This is the likely result of applying the case of Williams v Roffey Bros & Nicholls Contractors Ltd [1989] EWCA Civ 5 to this situation.
