Chapter 1

Question 1

What do the abbreviations SOGA and UCTA stand for?

Answer 1

SOGA: Sales of Goods Act 1979
UCTA: Unfair Contract Terms Act 1977

Question 2

What two elements does an “agreement” contain?

Answer 2

Offer and acceptance.

Question 3

What are the three core elements required in the formation of a valid and enforceable contract?

Answer 3

1) Agreement
2) Intention to create legal relations
3) Valuable considerations

Question 4

What is an “offer”?

Answer 4

A promise by a party (“the offeror”) to do or refrain from doing something, provided the party to whom the offer is addressed (“the offeree”) accepts its terms.

Question 5

What is an “acceptance”?

Answer 5

An unconditional agreement by the offeree of all terms of the offer.

Question 6

What is meant with “meeting of minds”?

Answer 6

The term “meeting of minds” is commonly associated with the formation of a contract. It refers to the mutual agreement or consensus between two or more parties regarding the essential terms and intentions of the contract. It signifies that all parties involved in the contract have reached a shared understanding and have expressed their mutual assent to be bound by the terms of the agreement.

Question 7

How has the interpretation of contracts by courts changed in recent years?

Answer 7

In recent years, courts have moved away from trying to discover the subjective intention of the parties, preferring instead to make an objective determination. This is more commonly known as the “objective interpretation”. This interpretation, in other words, means what a reasonable person in the other party’s shoes would have understood the other party to have meant by his words or conduct.

Question 8

What is the element of “Intention to create legal relations”?

Answer 8

The parties must have made the agreement with the intention of creating legally enforceable relations rather than a domestic or social agreement. To establish intention is a question of fact for the court that is objectively assessed.

Question 9

What are social or domestic agreements?

Answer 9

In UK law, a social or domestic agreement refers to an agreement or arrangement made between individuals in a personal or non-commercial context. It typically involves agreements between family members, friends, or individuals in social settings where legal obligations are not usually intended or expected.

Question 10

What is the element of “consideration”?

Answer 10

The parties must promise to give or do something in exchange for the promise, such as offering to pay for goods and services received. In other words, it is the element of exchange for the promise in an agreement.

Question 11

What are the other 5 elements of a contract?

Answer 11

1) Capacity to contract
2) Consent
3) Legality
4) Certainty of terms
5) Form

Question 12

Capacity to contract - what is the basic rule?

Answer 12

Anyone can enter into a contract. Exceptions:

Minors: Individuals under the age of 18, known as minors, have limited capacity to enter into contracts. Contracts entered into by minors are generally voidable at their option, meaning they can choose to enforce or disaffirm the contract upon reaching the age of majority. However, there are exceptions for contracts for necessaries (essential goods or services) and contracts of employment, which may be binding on minors.

Persons of unsound mind: Individuals who are mentally incapacitated or have been declared mentally incompetent by a court are generally unable to enter into contracts. If a person lacks the mental capacity to understand the nature and consequences of the contract, their ability to enter into a legally binding agreement may be affected.

Intoxicated persons: Contracts entered into by individuals who are heavily intoxicated or under the influence of drugs may be voidable if their intoxication prevents them from understanding the terms and nature of the contract.

Companies in breach of statutory requirements: Companies that fail to comply with certain statutory requirements, such as proper incorporation procedures or the appointment of directors, may be deemed incapable of entering into certain contracts until the requirements are fulfilled.

Question 13

Consent - what is the rule?

Answer 13

The agreement must have been freely entered into by the parties. Consent may be vitiated by duress, or by undue influence.

In legal terms, the concept of “consent may be vitiated by duress” means that if a person’s consent to a contract or agreement is obtained through the use of force, coercion, threats, or undue influence, their consent is considered invalid or “vitiated.” Duress refers to a situation where a person is compelled to act against their will due to the threat or fear of harm or loss.

Undue influence, in the context of UK law, refers to a situation where one party exerts improper or unfair influence over another party, leading to their consent being compromised or overborne. It occurs when a person’s free will and independent judgment are significantly undermined, causing them to enter into a contract or agreement against their best interests.

Question 14

Legality - what is the rule?

Answer 14

The purpose of the agreement must not be illegal, or contrary to public policy.

In the context of UK law, “contrary to public policy” refers to an agreement or contract that goes against the principles and values deemed essential for the welfare and well-being of society as a whole. It signifies that certain types of agreements are considered inherently harmful, morally objectionable, or detrimental to the public interest.

The concept of public policy is not precisely defined and can evolve over time based on societal values, legislative developments, and court judgments. It serves as a safeguard to prevent agreements that would undermine the fundamental principles and interests of society from being enforced by law.

Question 15

Certainty of Terms - what is the rule?

Answer 15

To create a binding contract the terms of the agreement must be certain; if not there will be no contract. Terms may be express and implied. A term may be inserted into the contract to exclude or limit one party’s liability (the so-called “small print”). A term may also be regarded as unfair. Terms that are vague or uncertain can be severed by the courts.

Question 16

Form - what is the rule?

Answer 16

A contract can be created in various forms, such as by verbal agreement. A contract does not have to be in writing unless the contract falls into one of three categories:

(1) contracts by deed - these are formal contracts ‘under seal’, such as those involved in the conveyance of land;
(2) contracts in writing - such as those concerning transfer of shares, cheques, or consumer credit contracts; and
(3) contracts evidenced in writing - these are only enforceable if there is written evidence, e.g. contracts of guarantee.

Question 17

What two types of contracts exist?

Answer 17

1) Bilateral contracts
2) Unilateral contracts

Question 18

What is a unilateral contract?

Answer 18

Unilateral contracts are those in which only one party makes a promise to do something in return for an act by the other party. Acceptance of an offer by an offeree need not be communicated to the offeror in a unilateral contract; performance of the condition to fulfil the promise is taken as acceptance.

An example of a unilateral offer is where a reward is promised for the return of a missing item. Only the party making the promise is bound to do anything. There is no obligation to search for the missing item. A party who sees the offer, recovers the item and returns it to the offeror is in so doing entitled to the reward. If, however, one party promises to find the missing item, a bilateral contract is created. A condition precedent may be attached to the promise. This means that the agreement is subject to a specified action being carried out. For example, an offer that states that the information provided must lead to the return of the missing item’ should ensure that only a party who provides the requested information is entitled to the reward.

Question 19

In terms of enforceability, what contracts can be distinguished?

Answer 19

1) Void contracts
2) Voidable contracts
3) Unenforceable contracts

Question 20

What is the difference between a void contract and a voidable contract?

Answer 20

A “void contract” is one where the whole transaction is regarded as a nullity. It means that, at no time, has there been a contract between the parties. Any goods or money obtained under the agreement must be returned. Where items have been resold to a third party, they may be recovered by the original owner.

A contract which is voidable operates in every respect as a valid contract, unless and until one of the parties takes steps to void it. Anything obtained under the contract must be returned, insofar as this is possible. If goods have been resold before the contract was voided, the original owner will not be able to reclaim them.

Question 21

What is an unenforceable contract?

Answer 21

An unenforceable contract is a valid contract, but it cannot be enforced in the courts if one of the parties refuses to carry out its terms. Items received under the contract cannot, generally, be reclaimed.

Question 22

What is the difference between the law of property and the law of contract?

Answer 22

The main difference between the law of property and the law of contract is that the former is said to create rights “in rem” (rights in respect of a piece of land are enforceable against any person who acquires an estate or interest in that land), while the latter creates rights “in personam” (rights enforceable only against certain categories of person). Thus, contracts and conveyances have always been kept separate.

However, a contract can act as a conveyance of property (excluding for land), and this can lead to problems where a contract turns out to be defective, e.g. on grounds of mistake or illegality. Problems with property can, thus, arise in the guise of a contract.

Question 23

A contract can act as a conveyance of property (save for land) - what does save for land mean?

Answer 23

Excluding

Question 24

What is the difference between contract and equity?

Answer 24

Equity, as a branch of law, has expanded the scope of reasons for enforcing contracts beyond the narrow approach based solely on consideration, which is emphasized in common law. In contrast to common law, equity courts have shown a greater inclination to enforce promises rather than uphold mere bargains. This means that equity places importance on the concept of good faith on the part of the promisor.

One notable distinction between law and equity lies in the remedies available. Equity courts have the power to directly enforce the promise made in the contract through specific performance (Erbringung einer Obligation) or injunction (Aufforderung oder Unterlassung). Specific performance compels the party in breach to fulfill their contractual obligations as agreed upon. An injunction, on the other hand, is a court order that prohibits a party from engaging in certain actions or requires them to perform specific acts.

In cases where specific performance or injunction is not a viable remedy, equity courts may award damages as a form of compensation. However, the calculation of damages in equity differs from common law. Rather than being assessed at the date of the contract breach, equity calculates damages at the date when the court decides to take action against the defendant for their failure to fulfill their promise or undertaking.

The promisor refers to the party who makes a promise or undertakes an obligation within a contract.