BPP Manual Ch 4: ICLR & Capacity

Question 1

Is the test for ICLR objective or subjective?

Answer 1

objective

Question 2

What case governs ICLR?

Answer 2

Rose and Frank Co v Crompton Bros

Question 3

What two situations are generally distinguished between in judging ICLR? How?From what case?

Answer 3

• Rose and Frank Co v Crompton Bros
• domestic and business matters
• domestic matters generally do not give rise to ICLR
• business matters generally do give rise to ICLR

Question 4

How strong must be the evidence for ICLR in business relations? What case evidences this?

Answer 4

• not strong at all
• Well Barn Farming v Backhouse
• a temporary arrangement of slight importance was seen as evidence of ICLR

Question 5

In order to deny ICLR in a business agreement, where does the burden of proof lie? What case evidences this?

Answer 5

• Bunn & Bunn v Rees & Parker
• burden of proof on the person attempting to rebut ICLR
• extremely hard to do

Question 6

What case demonstrates the use of an ‘honourable pledge’ clause? What is this?

Answer 6

• Rose and Frank Co v Crompton Bros
• a clause that states that an agreement has not been written as formal or legal agreement and is not binding
• allows the rebutal of ICLR and instant break

Question 7

When asserting that the language of a contract rebuts the concept of ICLR how ambiguous can the language be? From what case?

Answer 7

• rebuttal may fail if language is even somewhat ambiguous

- Edwards v Skyways

Question 8

Give an example of how the objectivity of the ICLR test has an impact.

Answer 8

• Licenses Insurance Corporation v Lawson
• at an angry meeting D made a statement which a reasonable man would not have believed should be interpreted as creating a contract.

Question 9

What is the rule in relations to adverts in ICLR?

Answer 9

generally do not amount to ICLR

Question 10

Why was the general rule about adverts not followed with Carlill in relation to ICLR?

Answer 10

Carbolic Smoke Ball Co lodged £1000 at a bank which demonstrated their intention to be bound ie ICLR

Question 11

How does ICLR relate to “comfort letters”?

Answer 11

• no ICLR
• comfort letters are a statement of current policy
• they are not promises as to future conduct

Question 12

How does ICLR relate to agreements “subject to contract”? What two cases show this?

Answer 12

• strong inference that parties do no intend to be bound until the execution of a formal contract
• Eccles v Bryant and Pollock
• Chillingworth v Esche

Question 13

From what case does the presumption against ICLR in social, family or domestic situations arise?

Answer 13

• Balfour v Balfour

Question 14

When would the presumption against ICLR between a husband an wife apply? What case?

Answer 14

• Merritt v Merritt

- When they are not living in amity but have separated or about to separate

Question 15

Give an example of when ICLR was found in social relations.

Answer 15

• Peck v Lateau
• two women regularly played bingo together, agreed to split any winnings and did so until one won £11,000
• she was obliged to share because the previous conduct of both parties was sufficient to rebut the presumed ICLR

Question 16

What is the general rule relating to a minor’s capactiy to have ICLR?

Answer 16

• generally cannot be bound by a contract because lack ICLR, even if the other party does not know their age or they have lied.

Question 17

What kind of contracts are minors bound by?

Answer 17

1) might be bound by a contract o supply necessaries to them if the contract is for their benefit
2) minors are bound by contracts of employment, but only if they are for their benefit

Question 18

What is the test for what “necessaries” are in relation to minors being bound by contracts? What case is it applied in?

Answer 18

• Nash v Inman
• claimant must show the goods are suitable to the infants condition in life
• claimant must show the goods are suitable to his actual requirements at time of sale and delivery

Question 19

Where was the rule that minors are bound by contracts of employment for their benefit used?

Answer 19

Doyle v White City Stadium

Question 20

When might a person of age lack capacity to enter into a contract?

Answer 20

• if the person is unable to make the decision for themself at that time
• whether the impairment is temporary or permanent

Question 21

What statute sets out the mental capacity required to enter a contract?

Answer 21

Mental Capacity Act 2005

Question 22

How is an impairment described in the Mental Capacity Act 2005?

Answer 22

if he is unable to 
- understand the information
- retain the information
- use or weight the information
- communicate his decision in any way
(ERUC)

Question 23

What is the incapacity rule in cases not governed by the 2005 Act? What case demonstrates this?

Answer 23

• Imperial Loan Co v Stone
• contract is binding unless the person claiming incapacity can prove
  1) he did not understand what he was doing
  and
  2) that the other person knew this

Question 24

If someone is intoxicated, are contracts they make binding? Give an example.

Answer 24

No - Gore v Gibson

Question 25

How can a company act without capacity? Explain the law here.

Answer 25

• Ashbury Railway Carriage and Iron co v Riche
• if it fails to act within the limits of its memorandum of association
• third parties are now protected by the Companies Act 2006
• this rule now only applies to the internal workings of a company.