Chapter 3

Question 1

What is a unilateral vs Bilateral contract?

Answer 1

Unilateral - Primarily one sided, legally binding agreement. (one party agrees to pay for a specified act)
Bilateral - two or more parties

Question 2

What are the five essentials to form a contract?

Answer 2

1- There must be an agreement (offer and acceptance)
2-intention to create legal relations
3- consideration
4- in the form required by law
5- capacity to contract

Question 3

How can an offer be made?

Answer 3

In writing
Orally
by conduct
to one person
to a group of people
to the public as a whole

Question 4

What is an invitation to treat?

Answer 4

A statement made when negotiations are in progress, and not an offer. (an invitation to make an offer) - an example is advertisement!

Question 5

Example of communication of the offer?

Answer 5

You find a wallet and return it and after find out there was a reward on offer. You are not entitled to the reward as you were not aware of the offer in order to accept it.

Question 6

What is the duration of an offer?

Answer 6

An offer does not remain indefinitely. Once it comes to an end, it can no longer be accepted. It can end in the following way: A time limit or a ‘reasonable time’.

Question 7

When does a contract come into existance?

Answer 7

If an offer has been made and accepted

Question 8

What is the method for acceptance?

Answer 8

It can generally be made in any form. This could be through Words (written or spoken) or can be implied through conduct. Unless the Offeror states in a specific way.

Question 9

What is the ‘posting rule’ for acceptance?

Answer 9

A letter of acceptance is effective the moment it is posted. A contract can be made even if the letter is never received.

But, this rule only applies to acceptance and for an offer, revocation or rejection it only takes place when the letter is received.

It also applies to telegrams and telemessages but not instantaneous methods of communication.

Question 10

When is there intention to create legal relations?

Answer 10

In the case of non-consumer business, intent is presumed. But, there are a two exceptions:
1-Express term stating it is not legally binding
2- Social and domestic agreements - these are not intended to have legal consequences

Question 11

What is consideration defined as?

Answer 11

The price which supports the promise. (mutual exchange for promises and both gain something out of the contract).

In insurance this is promise of premium for coverage - the contract can start before the premium is received.

Question 12

When donating to charity, there is no return promise. So how can this be made enforceable under law?

Answer 12

If the contract is made under Seal

Question 13

What are the five main rules of consideration?

Answer 13

1- Real or genuine
2- Consideration need not be adequate
3- Consideration must not be past (two promises must be linked from the beginning)
4- Consideration must move from the promisee
5- It cannot be a pre existing duty.

Question 14

What is promissory estoppel?

Answer 14

A doctrine to hold a party who makes a promise to another accountable for the detriment suffered by the counterparty who relied on that promise.

Central London Property Trust v High Trees house (1947) Rental properties reduced rent over walk time and then claimed no consideration and demanded payment since 1941-45 at full price. The judge declined for the duration of war.

Question 15

Which contracts does the law require to be in a certain form?

Answer 15

Under Seal:
- A deed
- A lease for more than 3 years

Writing:
- Bills of exchange
- Cheques and promissory notes
- Transfer of shares
- Contracts of marine insurance
- Consumer credit transactions (hire purchase)

Evidenced in writing:
- employer contracts

Question 16

Who is subject to special rules that restricts their contractual capacity?

Answer 16

1- Minors, under 18s (the Family Law Reform Act 1969)

Contracts which are binding - necessaries

Binding unless repudiated - leases, partnerships and shareholder agreements

Not binding on a minor - contracts to buy goods which are not necessaries and contracts to borrow money.

2-Persons with mental health problems

3- Drunken person

Question 17

What is restitution law?

Answer 17

Concerned with where a person is liable to restore property.

EG minor buys a motorbike on credit but does not pay. Minor returns the bike, if the bike has been sold and something else bought, they get the something else.

Question 18

What is the Ultra Vires doctrine?

Answer 18

A contract may be invalid if beyond the powers of the corporation.

Question 19

Classification of terms in a contract.

Answer 19

Express terms:
- spoken or written down
Implied terms
-in fact
- by custom or usage
- by law - large example is the consumer rights act and also the Marine Insurance Act 1906 (vessel must be sea worthy)

Question 20

what are the two incorporations for common Law rules for exemptions

Answer 20

Signing of a written document OR Notice (displaying across a premise to limit liability)

EG Alley V Marlborough Court - property stollen at a hotel but sign for limited liability was after the contract was made at reception, so the hotel was deemed liable.

Question 21

Which acts provide the most important restrictions for the effectiveness of exemption clauses in contracts?

Answer 21

1- Unfair Contract Terms Act 1977 (Business to business)

EG negligence liability - no-one acting in business can exclude liability for death or bodily injury

Contractual Liability - cannot restrict liability dealing on another parties standard terms

Sale of goods and hire purchase - test or reasonableness is satisfied

2- Consumer Rights Act 2015 (consumer) now governs and Section 62 says an unfair term is not binding.

EG a significant imbalance in parties rights.

65 = liability over death or personal injury (not applying to insurance or transfer of land contracts)

Question 22

Warranty VS Condition

Answer 22

Warranty - a term which effects only a minor aspect of the agreement
A condition - a term which relates to an important aspect of the agreement

Question 23

What may create a defective contract?

Answer 23

• Illegality (contrary to law/ public policy/ in restraint of Trade/ restraints on contract of employment/ seller of a business)
• Improper Pressure (duress, undue influence)
• Mistake(subject matter, identity, in recording)
• Misrepresentation (fraudulant, innocent or negligent)
• Non-disclosure (limited scenarios such as insurance in business contracts)

Question 24

four situations where they may be illegality in an insurance contract?

Answer 24

• No insurable interest
• Purpose of contract is illegal
• Unlawful use of insured property
  -Close connection with a crime

Question 25

Example cases in different insurance where illegality meant void insurance policies?

Answer 25

Life - Beresford V Royal Insurance - committed suicide so that the policy paid of debts, suicide not covered.

Property - Geismar V Sun Alliance - smuggled jewellery into the UK without declaring it

Motor and Liability
-Hardy v motor insurance bureau Motor Insurance Bureau obliged to pay if driver is uninsured or untraced

Question 26

What are the remedies for misrepresentation?

Answer 26

• Rescission (avoid)
• Damages (tort of deceit)
• Refusal of further performance
• Affirmation

Question 27

Which act covers the duty of fair presentation in insurance?

Answer 27

Consumer Duty Act 2-12

Remedy is not for innocent misrepresentation but for deliberate, reckless or careless.

Question 28

How can one be discharged from a contract?

Answer 28

• Performance (carried out the bargain)
• Breach - effect of breach gives the injured a right to claim damages
• Frustration (impossible to perform or illegal)
• Agreement
• Operation of Law

Question 29

What are the main remedies in the law of contract?

Answer 29

• Termination
• Action for damages (consider mitigating the damage and remoteness of damage)
• Action for specific performance
• Action for an injunction

Question 30

What are the limitations of actions?

Answer 30

Libel or slander - 1 year
Personal Injury - 3 years
Other torts - 6 years

THEN
Simple contract - 6 years
Personal injury - 3 years
Specialty contract (deed) - 12 years

Question 31

In what occasions does privity of contract not apply?

Answer 31

Contract Act 1999
If the contract provides they may do so

The contract purports to confer a benefit on the 3rd party

Question 32

Where can assignment take place for a contract?

Answer 32

Marine insurance act (section 50) 1906

Life insurance - Policies of Assurance Act 1867

Question 33

Under the Law of Property Act 1925 when needs to happen for an assignment?

Answer 33

It must be
a) Absolute
b) in writing
c) Expressly made to a debtor or trustee

If the above are not satisfies it can happen under equitable assignment

Exclusions - many insurance contracts of a personal nature

Obligations cannot be transferred