Contract Flashcards
1
Q
What does a contract consist of?
A
An agreement with an intention to be legally bound supported by consideration.
2
Q
x
A
x
3
Q
What form can a contract be made in?
A
Can be made in any form; written, oral or through the conduct of the parties
4
Q
What are contracts that require writing?
A
Guarantees - where someone promises another they will perform their obligations
Interests in land - a contract for sale or other disposition
Consumer Credit Agreements
5
Q
What form do contracts that require writing need to be?
A
They can be hardcopy or electronic.
6
Q
What elements must a contract by deed have?
A
It must be clear that it is a deed and it must be executed by the parties to it in the presence of a witness.
7
Q
What contracts must be made in a Deed to be enforceable?
A
Promises where there is no consideration
Conveyance of land
8
Q
What is the claim period for a normal contract?
A
Any claim must be brought within 6 years of the breach.
9
Q
What is the claim period for a contract by deed?
A
Any claim must be brought within 12 years.
10
Q
What standard must communication of the offer to the offeree be in order to be valid?
A
It must create a reasonable expectation for the offeree that the offeror is willing to enter into a contract on the basis of all material items contained in the offer.
11
Q
What are the 3 elements to an offer?
A
- Promise, Undertaking or Commitment
- Definite and Certain Terms
- Communication to the Offeree
12
Q
What is the offer element of Promise, Undertaking or Commitment?
A
The offer must contain an expression of a promise, undertaking or commitment to enter into a contract, rather than a mere invitation to begin negotiations.
13
Q
What is the offer element of Definite and Certain Terms?
A
Have enough of the essential terms so that a contract including them would be capable of being enforced.
14
Q
What is the offer element of Communication to the Offeree?
A
The offeree must have knowledge of the offer and therefore the proposal must be communicated to them. An offer an be made a specified individual or the world at large.
15
Q
Would a response to requests for information be an offer?
A
No, a statement made in response to a request for information will not be sufficient to constitute an offer.
16
Q
Would an invitation to treat constitute an offer?
A
No, this is usually an invitation to the other party to make an offer.
17
Q
What is an example of an invitation to treat?
A
An advertisement or displaying goods in a shop window.
18
Q
Would an advertisement constitute an offer? Why?
A
No, these are invitations to treat. On offer is made when anyone contacts the seller in response to the advert, the seller is then free to accept the offer.
19
Q
Would shop window display constitute an offer? Why?
A
No, goods displayed in shop windows are invitations to treat. The offer is made when the customer takes the goods to the till point. Acceptance is when the shop keeper rings up the sale.
20
Q
Would a price list constitute an offer? Why?
A
No, generally treated the same as advertisements.
21
Q
Would tenders constitute an offer? Why?
A
No, this is an invitation to interested parties to submit bids setting out the terms on which they are prepared to carry out a piece of work. The submissions are classed as offers and the requesting party will then choose one to accept.
22
Q
Would an auction constitute an offer? Why?
A
No, this is an invitation to treat. When the hammer falls, the auctioneer accepts the final bid as long as any reserve price is met.
23
Q
Are price quotations an offer? Why?
A
Sometimes, whether a price quotation constitutes an offer or merely an invitation to treat is a question of fact based on the intention of the parties.
24
Q
What is a unilateral contract?
A
A contract made between one party and an unknown third party. Arises when the person making the offer promises to do something if the person receiving the offer does something in return.
25
What is an example of a unilateral contract?
A poster to find a lost dog with a reward for the person who finds him.
26
What are the effects of the termination of an offer?
An offer cannot be accepted after it has been terminated.
27
What are the 3 ways to terminate an offer?
1. Termination by Offeror - revocation
2. Termination by Offeree
3. Termination by Operation of Law
28
What is revocation of an offer?
This is the retraction of the offer by the offeror. This may be done by directly communicating the revocation to the offeree any time before acceptance.
29
Can an offer be revoked by the offeror indirectly?
Yes, if the offeree receives correct information from a reliable source of acts of the offeror which would indicate to a reasonable person that the offeror no longer wishes to make the offer.
30
What are the limitations to the revocation of an offer by offeror?
Once the offer is accepted, it can no longer be revoked.
31
When can an offer not be revoked even though the offer has not been accepted?
Collateral contracts - where the offeree gives consideration for a promise
Beginning performance under a Unilateral contract - an offer on a unilateral contract becomes irrevocable once performance has begun. There is still no contract until offeree has completed performance so the offeree can withdraw at any time.
32
What are the 4 ways an offer can be terminated by the offeree?
1. Express Rejection
2. Counteroffer as Rejection
3. Rejection of a Collateral Contract
4. Lapse of Time
33
What is the process of termination by an offeree through express rejection?
A statement made by the offeree that they do not intend to accept the offer. This is effective when received by the offeror.
34
What is the process of termination by an offeree through counteroffer as rejection?
An offer made by the offeree to the offeror which relates to the same subject matter as the original offer by differs its terms. A counter offer is both a rejection and an offer.
35
What is the process of termination by an offeree through rejection of a collateral contract?
Because an agreement to keep the original
35
What is the process of termination by an offeree through rejection of a collateral contract?
Because an agreement to keep the original offer open is often a collateral contract, a rejection or, or counter offer does not terminate the original offer.
36
What is the process of termination by an offeree through lapse of time?
An offer may be terminated by the offeree's failure to accept within the time specified within the offer, or if no time specified within a reasonable period. What constitutes a reasonable period will be determined by the courts, taking into account the subject matter of the contracts.
37
What is termination of an offer by operation of law?
This can be through:
- Death of offeree or offeror
- Destruction of subject matter
- Supervening illegality
- Failure of any condition contained in the offer
38
What is an acceptance?
The unqualified acceptance of the previous offer. This must be unqualified otherwise this would be a counteroffer.
39
Who can accept an offer?
Only the person to who the offer was addressed. However sometimes it will be accepted for an agent to accept on the offerees behalf.
40
x
x
41
x
x
42
What is the method of acceptance stipulated by the offeror?
If a particular method of acceptance is required by the offeror and the offeree does not use that method then there has been no valid acceptance.
43
What is an exception to the method of acceptance as stipulated by the offeror?
Where the method of acceptance used is different but no less advantageous to the offeror.
44
Can silence be seen as acceptance to an offer?
An offeree cannot be forced to speak or have silence treated as acceptance. The law requires positive steps to be taken before they can be bound by the contract.
45
How is a unilateral contract accepted?
Once performance is completed by the offeree.
46
Does the offeree have an obligation to complete performance under a unilateral contract?
No. An offeree is not required to complete performance even if this might have begun.
47
Is the offeree required to give notice the he has begun the requested performance?
No, but they are required to notify the offeror within a reasonable time after performance has been completed.
48
Does an acceptance need to be communicated?
Yes, unless the offer provides that acceptance need not be communicated.
49
Can an offer be accepted through conduct?
Yes, the offeror must aware of the offeree's conduct so as to satisfy the requirement of communication.
50
What is the postal rule regarding acceptance?
Acceptance creates a contract at the time of posting. This only applies to acceptance and not rejection or revocation.
51
When would the postal rule not lead to acceptance?
- If the letter was not properly stamped
- It was not reasonable for the acceptance to be communicated in the post
- The offer stipulates, expressly or by implication that acceptance is not effective until received.
52
Are emails and other instantaneous communication subject to the postal rule?
No, a contract accepted by one of these methods will be formed at the time the offeror receives the acceptance.
53
What is the 'Battle of the Forms'?
Difficulties arise if parties wish to conclude the contract on their own standard form terms, which are likely to differ. The courts have confirmed the battle is won by the party who makes the last shot.
54
What is a 'prevail clause'?
It is common for the offeror to include a term in their draft contract stating their terms will prevail over any terms which the offeree seeks to introduce.
55
Are 'prevail clauses' usually successful?
No.
56
Would an intention to create legal relationships be found in domestic situations?
No, the presumption is not. If either party has knowledge that the other does not intend to be bound by the agreement it will not be legally binding even if objective evidence is produced to the contrary.
57
Can the presumption regarding the intention to create legal relations in domestic situations be rebutted?
Yes, by providing objective evidence to the contrary.
58
Would an intention to create legal creations be presumed in a social situation?
The courts would presume there was no intention unless there is evidence to find to the contrary.
59
Would the intention to create legal relations be presumed in a commercial situation?
Yes.
60
Can the presumption regarding intention to create legal relations in a commercial setting be rebutted?
Yes but it is not easy. To do this, the parties may state in their agreement that it is binding in honour only or subject to contract.
61
If a person enters into a contract with lack of capacity, what effect does this have on the contract?
It will become unenforceable - VOID
62
What are minors?
Individuals aged less than 18 years old.
63
If a minor enters into the contract, what effect does this have on the contract?
The contract becomes voidable.
64
Can a minor be bound by a contract after they turn 18?
The terms are not binding whilst they are under 18 however when they turn 18 they are able to 'ratify' the terms.
65
What are the exceptions as to when a minor will be bound by a contract?
- Contract for necessary goods or services at a reasonable price
- Contracts of employment provided the terms benefit them
- Acquisition of property, e.g. shares, unless the minor expressly repudiates them
66
What does the Minor's Contract Act 1987 do?
The fact minors are not bound by the terms of the contract can be unfair to the other party. This Act provides if the other arty transferred property to the minor, they will require them to transfer it back if it is equitable to do so.
67
What is the effect if someone who lacks mental capacity enters into a contract?
The contract is voidable.
68
What does the Mental Capacity Act 2005 do?
Individuals who lack mental capacity cannot enter into a contract if they are unable to make a decision for themselves on the subject matter.
69
If a person with mental incapacity enters into a contract, can they ever be bound by it?
Yes, if they later recover, they can ratify the agreement.
70
If someone becomes intoxicated and entered into a contract, what is the effect on the contract?
They are not bound so long as the other party was aware of their condition.
71
Is there an exception to an intoxicated person entering into a contract?
Yes, they will be bound by a contract for necessities.
72
Which side of the contract is required to give consideration?
Both.
73
What is consideration?
An act or forbearance of one party or the promise thereof. This is the price for which the promise or action of the other is bought. It can be either positive or negative obligation.
74
What is executed consideration?
When the act of forbearance is performed the act becomes executed.
75
What is executory consideration?
If the act or forbearance is promised in the future.
76
Where must consideration come from?
The parties themselves. This cannot come from a third party.
77
What are a parties rights if they provide no consideration?
They will be unable to enforce the contract.
78
When can a party enforce a contract without consideration?
When this is entered into by Deed.
79
What is the requirement of consideration?
It must be sufficient.
80
What would the courts consider 'sufficient' consideration?
It must have some value but it does not need to be adequate. The courts are not concerned whether this is a good deal for the parties.
81
What is illusory consideration?
The consideration must have some value and not be wholly illusionary.
82
Is performance of an existing duty sufficient consideration?
No. The performance must go beyond the original obligation and then the parties are effectively entering into a new contract.
83
When will a performance of an existing duty be sufficient consideration?
Promising to perform an existing contractual duty owed to a third party other than the promisor is sufficient consideration for a promise to be given.
84
Is performance of an existing statutory duty good consideration?
No. E.g. you cannot pay a police offer to protect the place you live.
85
When would performance of an existing statutory duty be classed as good consideration?
If you go above the statutory duty e.g. you can pay a police officer to police a football match or strike.
86
In general, can acts performed prior to the contract be classed as good consideration?
No.
87
When would an existing act form good consideration?
When there is an implied understanding of payment = if the earlier act or promise is given at the promisor's request then there was an implied understanding that payment would follow.
88
What are the conditions for when an existing act can form good consideration?
1. The act must have been done at the promisor's request
2. The parties must have understood that the act was to be enumerated either by payment or other form of benefit.
3. The payment or benefit must be legally enforceable had the promise been made in advance.
89
Can part payment of debt be seen as good consideration?
No. If A owes B £500 but they agree he will only pay £450. B can enforce the remaining £50 as no further consideration was given by B for the new agreement.
90
What are the exceptions as to when the part payment of a debt will be classed as good consideration?
- Where the debt is disputed in good faith (debt was uncertain amount to start with)
- Unliquidated claims - amount uncertain
- Payment at a different place or earlier
- A third party makes a payment - on the basis it was made in good faith to discharge the debt
- Payment is made by different means at the request of the party accepting the lesser amount
- A composition with creditors
91
What is promissory estoppel?
An equitable principle that gives legal effect to an agreement unsupported by consideration. It stops a party going back on their promise to do something on the basis they are 'estopped' from doing so.
92
Can promissory estoppel be used in a claim?
No, only a defence.
93
What elements must be present for promissory estoppel?
- There must be a clear and unequivocal promise by the promisor not to rely on existing legal rights
- The promisee must have altered their position in reliance of the promise
- It must be inequitable for the promisor to go back on their promise.
94
What is privity of contract?
Only the parties to a contract can sue and be sued under it.
95
Can a third party acquire rights in a contract?
No.
96
What does the Contracts (Rights of Third Parties) Act 1999 allow?
Third parties to enforce the term of a contract subject to conditions.
97
What are the conditions noted within the Contract (Rights of Third Parties) Act which allow a third party to enforce a term of a contract?
- The contract must expressly provide that the third party may enforce
- A term of the contract purports to confer a benefit on the third party and it must appear the parties intended the term to be enforceable by the third party.
98
Can terms be imposed on third parties?
No, only enforce certain terms subject to conditions.
99
What are exclusions to when a third party can enforce a term of a contract under the Contract (Rights of Third Parties) Act?
Does not apply to employment contracts, articles of association or if it states in the contract it will not apply.
100
Can parties vary or rescind a contract to the detriment of a third party without their consent?
Yes if one of the following is true:
- Third party has communicated his agreement to the term benefitting him
- Third party has relied on the term in the contract and the promisor is aware of that reliance
- The promisor can reasonably be expected to have foreseen that the third party should rely on the term and they have in fact relied upon it
101
What are the 5 common law exceptions to privity of contract?
1. Agency
2. Assignment
3. Subrogation
4. Collateral contracts
5. Trusts
102
What is the common law exception of Agency to Privity of Contract?
Arises when a person authorises another person to negotiate and enter into a contract on their behalf with third parties.
103
When can an agent be sued under a contract?
If the agent acts for an undisclosed principle.
104
What is the common law exception of assignment of Privity of Contract?
A contractual right can be transferred to a third person outside the terms of the original contract.
105
What part of a contract can be assigned to third party?
Only the benefit of the contract and not the burden
106
What must happen for an assignment of contract to be fully effective?
Notice of the assignment must be given to the party liable to perform the obligation which has been transferred.
107
What is a novation agreement?
A new agreement where the former parties are released from the arrangement and the new parties become party to it.
108
What is the common law exception of subrogation in privity of contract?
In an insurance contract, the insurer has to pay a claim to the policyholder, the insurer is 'surrogated' to the rights of the policy holder. E.g. the insurer stands in the shoes of the policy holder and has all the same rights they would against the person for the loss.
109
What is the common law exception of collateral contracts to privity of contract?
Where there is a collateral contract running alongside the main contract. The contract purports to confer a benefit on a non-party.
110
What is the common law exception of trust to privity of contract?
If A makes a promise to B for the benefit of C, the courts might find the B holds A promise on trust for C. This allows C to enforce the promise directly against A.
111
What are the terms of the contract?
Its contents.
112
What are the types of terms of contract?
Conditions and warranties
113
What are conditions and warranties?
Both can either be expressly agreed or implied through statute, courts or custom and usage.
114
What is the difference between terms and representation?
Statements of facts made during the course of negotiations will either be incorporated into the contract itself as terms or not incorporated (these are representations)
115
What factors do the court take into account when deciding whether a statement is a term or representation?
- The importance of the statement
- At what stage in the negotiations the statement was made
- Whether the party making the statement had any special knowledge or information or particular skill.
116
How will it be determined whether a statement is a term or representation?
By the intention of the parties viewed from the perspective of a reasonable person having regarding to the conduct of the parties.
117
What if the importance of the distinction between a term and a representation?
If the statement turns out not to be true then it will depend on whether this was a term or a representation as to what remedy is available.
118
What are the classifications of a term?
Conditions or warranties
119
What is a condition?
A term that is so fundamental that it is said to be root of the contract.
120
What is the consequence of a breach of a condition?
The contract does not work without it and a breach of a condition is a repudiatory breach.
121
What is a repudiatory breach?
The contract is rejected altogether.
122
What are the remedies for a breach of condition?
The innocent party can either terminate the contract or affirm the contract. If they affirm the contract they lose their right to terminate but can still sue for damages.
123
What are warranties?
A term that is incidental or collateral to the contract
124
How will a breach of a warranty be viewed by the courts?
Because it does not form the root of the contract, any breach is regarded as less serious.
125
What are innominate terms?
A term which it is unclear at the outset whether it is a condition or a warranty and when the contract is concluded it is not clear how severe the consequence of a breach would be.
126
How would the court deal with a breach of innominate terms?
If the term is breached the courts would look at the effect of the breach of the term to determine what remedy would be appropriate.
127
What is the concept of 'time of the essence' regarding terms?
If time is of the essence in respect of an obligation, that obligation is a condition and late performance entitles the innocent party to terminate the contract.
If time is not of the essence, it is a warranty the innocent's party only remedy is damages.
128
What is the general presumption of time of the essence in a commercial contract?
Time will be of the essence for delivery if a time for delivery has been agreed.
129
What are express terms?
Whether the contract is oral or written, a term will form part of the contract only if the party have reasonable notice of it.
130
How can terms be incorporated into a contract?
They can be oral or written.
131
What is the parol evidence rule?
If a contract is written, this rule exists to help deuce whether evidence of terms outside the contract can be taken into account.
132
What is the general presumption regarding the parol evidence rule?
That external evidence cannot add to, subtract from, contradict or vary the terms of a written contract.
133
What are the exceptions to the parol evidence rule?
Implied terms, a secondary (collateral) contract, or if the contract was always intended to be partly written and partly oral.
134
What is the entire agreement clause?
A common term in a written contract which provides that the written agreement constitutes the entire agreement between the parties.
135
What is the purpose of the entire agreement clause?
To prevent any further evidence being disputed as being a term into the contract.
136
How do the courts view the entire agreement clause?
The courts are willing to uphold this provision unless they are seen as an attempt by a party to avoid liability for misrepresentation.
137
What are implied terms?
A term that is implied into a contract will be equally as binding on the parties as if it has been expressly agreed.
138
How can contract terms be implied?
Statute
The courts
Custom or usage
A course of dealing between the parties
139
What are the 3 main Acts that govern contract law?
Sale of Goods Act 1979
Consumer Rights Act 2015
Supply of Goods and Services Act 1982
140
To what does the Sale of Goods 1979 apply?
Mainly to contracts for the sale and supply of goods.
141
To what does the Consumer Rights Act 2015 apply?
Implies terms into contracts between businesses and consumers
142
To what does the Supply of Goods and Services Act 1982 apply?
Mainly to contracts for the sale of goods and the supply of goods.
143
What is the overall purpose of the SGA, CRA and SGSA?
Give wide-ranging rights to buyers of goods and services as they ensure all contracts contain terms that make sure the seller has the right to sell the goods and the goods sold are fit for purpose and are of satisfactory quality.
144
What terms are implied by SGA?
The goods must match any description applied to them by the seller
The goods must be of satisfactory quality
The goods must be fit for purpose made known to the seller by the buyer.
145
What is the definition of satisfactory quality under SGA?
The goods must be fit for purpose for which such goods are generally used and free from minor defects. They must also be safe and durable.
146
What is the exception to satisfactory quality under SGA?
Where any defects have been brought to the buyers attention prior to purchase.
147
How are the implied terms under SGA incorporated into the contract?
There are classed as conditions therefore if breached the buyer can terminate the contract.
148
What is the exception as to where the buyer cannot terminate the contract if there has been a breach of an implied term under SGA?
Where the breach is so slight it would be unreasonable for the buyer to reject the goods, the breach is treated as a breach of warranty rather than a breach of condition.
149
Is a seller able to exclude liability for breach of the SGA implied terms?
It is difficult for a seller to do so and will only be valid only if reasonable.
150
What effect does the SGSA have on a contract?
Implied terms into contracts for the hire of goods and contract for services.
151
To what does the SGSA apply?
Business-to-business transactions and private agreements.
152
What terms does the SGSA imply into contracts?
A supplier will carry out the service with reasonable care and skill.
153
What effect do the implied terms under SGSA have on a contract?
There are innominate terms rather than conditions so if they are breached, the court will determine the remedy on the basis of the seriousness of the breach.
154
What does the Unfair Contract Terms Act 1977 impose?
A test for reasonableness on any attempt to exclude liability or limit liability for breach of these implied terms.
155
To what does the CRA not apply?
Sales between businesses or sales between consumers.
156
What terms do the CRA impose?
That all goods supplied under a consumer contract should match their description and be of satisfactory quality and fit for purpose.
157
Can liability for breach of the implied terms under the CRA be excluded or limited?
No.
158
What are the implied terms under the CRA?
Must be carried out with reasonable care and skill
Completed in accordance with any information which the consumer relies on
Completed for a reasonable price
Completed within a reasonable time
159
When will courts imply terms into a contract?
Courts are reluctant to interfere with presumed intentions of the parties but are prepared to imply terms into contracts if necessary to give them business efficacy.
160
What is business efficacy?
To make the terms work in a way that reflects the parties' intentions and expectations.
161
What are terms that are implied by custom and usage?
If there is an industry or market standard in a particular area, this may be enough to imply terms not the contract that are normal for that particular industry or market.
162
When will a term not be implied by custom or usage?
If it contradicts an express term in the contract.
163
What are implied terms from a course of dealings between the parties?
If parties have contracted on the same terms on several occasions, enough to show a regular and consistent course of dealings, then the courts will imply the same terms into a contract between the parties if the usual terms and conditions were not supplied in error.
164
What would the courts do in the case of an incomplete agreement?
The courts would be reluctant to get involved to make the contract between the parties work. Without reasonable certainty, the contract is unlikely to be enforced as it would be impossible to conclude the parties had the same intention.
165
How would a court make a decision as to whether they are going to interfere with an incomplete agreement?
Made on a case-by-case basis but the test is generally whether the contract as it stands has sufficient certainty.
166
When will the courts not get involved in implying terms and incomplete agreements?
If the court is unable to conclude that the parties intended to be bound without intervention, it is unlikely to get involved, and thus the contract would not be binding on the parties.
167
What are agreements to agree?
The use of words 'to be agreed' in relation to an essential term is likely to prevent any contract coming into existence because it is uncertain.
168
What are the 3 circumstances courts will get involved in incomplete agreements?
Resolving uncertainty
Statutory assistance
Severing uncertain terms
169
When would the courts get involved to resolve uncertainty in an incomplete agreement?
If the courts are satisfied that the parties intended to be bound by the terms of the contract as they stand, they are likely to give effect to this intention.
170
What are examples of where the court is likely to find the agreement is binding despite uncertainty?
Cases where there is a mechanism agreed between the parties to resolve uncertainties
Commercial cases where the parties are familiar with the trade
Cases of contracts for future performance over a period of time un which the parties leave matters to be adjusted in the working of their contract
Cases in which there has been partial performance or in which one of the parties has made an investment on the basis of the agreement.
171
When will the courts get involved with statutory assistance?
SGA, SGSA and CRA may provide assistance if the contract is incomplete with its terms.
172
What would happen when the courts get involved in severing uncertain terms in an incomplete agreement?
If the courts are unable to find sufficient certainty to enforce a term, they may be able to sever the uncertain term from the agreement and allow enforcement of the remainder.
173
What is the test the courts will use when deciding whether they will severe uncertain terms from a contract?
Whether a term can be severed without affecting the substance of the bargain between the parties.
174
What is the general rule when deciding whether the courts will severe a term?
The more essential the term, the harder it will be for the courts to hold that it is meaningless and capable of being severed.
175
If an uncertain term cannot be severed, what will the courts do?
The whole contract will be void.
176
What is an exclusion clause?
A term of a contract that attempts to exclude the liability of one of the contracting parties.
177
What are the 3 legal issues that need to be considered for an exclusion clause?
- Clause must have been incorporated into the relevant contract
- Clause must have been properly drafted so it is construed as included liability effectively
- Clause must not be prohibited by statute.
178
What are the 3 ways a clause can be validly incorporated into a contract?
1. Signature
2. Notice
3. Custom or previous dealings
179
What is the method of incorporating a clause into a contract by signature?
A party who signs a contractual document is bound by its terms. It is no defence not to have read or understood the terms.
180
What are the 2 defences to the incorporation of a clause into a contract by signature?
1. Where a party is induced to enter into the contract by some form of oral misrepresentation which will operate to override the written contractual terms
2. Non Est Factum - means a party has no understanding of the document they have signed and there is a fundamental difference between what they signed and what they thought they had signed.
181
What is the method of incorporating a clause into a contract by notice?
The party seeking to rely on it must have taken reasonable steps to bring it to the attention of the other party. What constitutes reasonable steps will depend on the nature of the clause
182
What is the requirement for giving notice when incorporating a term into a contract?
The more unusual the clause the greater the onus on the party seeking to rely on it to take steps to being the clause to the other parties attention.
183
What is the contractual document requirement of notice for incorporation of terms?
To be valid the clause must have incorporated or referred to in a document intended to have contractual effect. A receipt would be insufficient as it provided after the contract is concluded.
184
What is the timing requirement regarding the notice of the incorporation of the clause into a contract?
Any exclusion clause must have been brought to the attention of the other party before or at the time the contract was concluded.
185
What is the requirement for the incorporation of a term into a contract through custom or previous dealings?
Industry custom may be enough to incorporate a term into a contract. If it can be shown that the parties have established record of contracting with each other on standard terms and conditions, the courts are likely to find that the terms and conditions that had previously been brought to their attention would still apply.
186
What must a party attempting to incorporate a term into a contract through custom or previous dealings?
Must be able to show a regular and consistent course of dealing is unclear but three to four dealings between the parties over a 5-year period as been found to be insufficient.
187
What is the contra proferentem rule?
Applies to construction of exclusion clauses. If there is any ambiguity when interpreting an exclusion clause, the courts will interpret the ambiguity against the party seeking to rely on that clause.
188
What are the requirements when drafting an exclusion clause?
Wording must be clear and unambiguous and cover the loss suffered.
189
How would the clause view it if an exclusion clause was drafted with uncertainty?
It will be interpreted against the party who drafted it.
190
What does UCTA provide for a clause that attempts to exclude liability for death or personal injury caused by negligence?
The contract will be automatically void.
191
What does UCTA provide for a clause that attempts to exclude liability for any other loss caused by negligence?
Will be void unless reasonable.
192
What does UCTA provide regarding the liability for breach of an implied condition under SGA and SGSA?
Cannot be excluded or restricted by contract.
193
What does UCTA provide for the liability for breach of obligations as to compliance with description, quality or fitness for purpose under SGA or SGSA?
Cannot be excluded or restricted by contract unless reasonable.
194
What does UCTA provide for if one party contracts on standards terms and condition?
It cannot rely on a term that (1) excludes or restricts its liability for breach of contract.
(2) reserves the right to render contractual performance substantially different from what was expected and (3) renders no contractual performance at all, in each case unless reasonable.
195
What is the unreasonable requirement?
Requires the term in question to have been fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been known to or in contemplation of the parties when the contract was made.
196
What factors will a court consider when determining whether a term is 'fair and reasonable'?
- The strength of the bargaining positions of the parties are relative to each other
- Whether there was any inducement received by the customer to agree to the term in question, or whether the customer had the opportunity to enter into a similar contract but without having to accept a similar term
- Whether the customer knew or ought reasonably to have known about the existence and extent of the term in question
- When the term in question excludes or restricts liability if a condition was not complied with, whether it was reasonable at the time of the contract to conclude that compliance with such a condition was practicable
- Whether the goods were manufactured, processed or adapted to the special order of the customer.
197
What are limitations to the reasonable test under UCTA?
It is common for commercial contracts to limit liability rather than seek to exclude it altogether. UCTA specifically provides that, when deciding whether a limitation clause is reasonable, the courts must also consider the resources available to the party relying on the clause to meet the liability and whether it was open to them to protect themselves using insurance.
198
What is the reasonableness of incorporation as provided by UCTA?
The test under UCTA is whether it was reasonable to include the clause in the contract, not whether it was reasonable to rely on it.
199
Who is the burden of proof on for proving the clause is reasonable under UCTA?
It is on the party relying on the clause.
200
What does the CRA apply to?
Solely to contracts between traders and consumers and prohibits certain terms in consumer contracts.
201
Who is a consumer?
An individual.
202
What effect does the CRA have on unfair terms?
Makes them enforceable.
203
Who is a trader under CRA?
A person acting for purposes relating to that person's trade, business, craft or profession whether acting personally or through another person acting in the traders name or trader behalf.
204
Who is a consumer under the CRA?
An individual acting for purposes that are wholly or mainly outside the individual's trade, business, craft or profession.
205
What are the prohibited terms under UCTA?
A trader cannot exclude or limit the statutory implied term under which a service must be provided with reasonable care and skill.
206
What are the effects of prohibited terms on UCTA?
Not binding on the customer.
207
What are the unfair terms under UCTA?
An unfair term is contrary to the requirements of good faith, it causes significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer.
208
What are the requirements under UCTA regarding transparency and legibility?
Requires the term to be 'transparent' meaning they will be drafted in 'plain and intelligible language' and that they must be legible.
209
What is the effect of a clause does not meet the UCTA transparency and legibility test?
It is unlikely the term will be unfair.
210
What is the effect of an unfair term?
It will not be binding on the consumer therefore fining a term is unfair does not render the entire contract unenforceable. The contract will continue to bind parties with the exception of the unfair term.
211
To which terms does fairness not apply?
A term will not be assessed for fairness if it specifies the 'main subject matter of the contract or is related to the price payable under the contract, provided that the relevant term is transparent and prominent.
212
What are the 5 vitiating factors?
- Mistake
- Duress
- Undue influence
- Illegality
- Misrepresentation
213
What is a void contract?
A void contract is one that is totally without any legal effect from beginning as it lacks contractual force. It cannot be enforced by either party so no remedy will be available for breach of contract.
214
What is a voidable contract?
Operates as a valid contract until a party elects to avoid (rescind) it. Until rescinded the contract remains in full force. The innocent party can choose to rescind or affirm the contract.
215
What effect does rescission have on a contract?
Of putting the parties back in the position they would have been in had the contracts not been entered into.
216
What are the requirements for mistake to be found in a contact?
The mistake must be so fundamental that:
- It operates to prevent formation of the contract in the first place
- It makes what has been agreed between the parties fundamentally different from what was intended.
217
What are the 5 types of mistake?
1. Common or Identical Mistake
2. Mutual Mistake
3. Unilateral Mistake
4. Mistake as to Identity
5. Non Est Factum
218
What is Common or Identical Mistake?
Occurs when the parties are in agreement but both have made the same mistake.
219
What is the effect of a common or identical mistake in a contract?
Usually render the contract void at common law.
220
What is a mutual mistake?
Occurs where the parties are mutually mistaken but about different things they are at cross purposes.
221
What will the courts consider when determining whether a mutual mistake has occurred?
The courts will consider whether a reasonable person would take the agreement to mean what each party did.
222
What is the effect of a mutual mistake on a contract?
There is no agreement between the parties and the courts will consider the contract void.
223
What is a unilateral mistake?
Occurs where one party is mistaken as to the terms of the contract and the other party is aware of the mistake, or should be aware of it.
224
What is the effect of a unilateral mistake on a contract?
There is no agreement between the parties and therefore the contract is void.
225
What is a mistake as to identity?
Occurs when one party believes they are contracting with a person that the other party is pretending to be.
226
What is the effect of a mistake as to identity on a contract?
The contract is void.
227
What is Non Est Factum regarding mistake in a contract?
Operates to protect those who sign a document on the mistaken belief that it represents something completely different from what it actually does represent.
228
What are the restrictions on Non Est Factum?
There must be a fundamental and radical difference between what was signed and what the signatory thought they were signing.
The signatory must not be careless in signing the document.
229
Can a court rectify a mistake?
Yes, it is open to the courts to rectify a mistake provided the written document failed to express the common intention of the parties accurately.
230
What is duress?
Deals with the situation whereby some form of pressure has been exerted over one of the parties by the other so it cannot be said the contract was entered into freely.
231
What is illegitimate pressure?
An allegation of duress will succeed only if there has been illegitimate pressure. It must be a factor in the innocent party's decision to enter into the contract.
232
What is duress of the person?
This is physically duress. The innocent party must show that the duress suffered was one of the reasons they entered into the contract.
233
Does duress have to be the only reason a person entered into a contract?
No.
234
What is duress of goods?
Generally means that one party unlawfully keeps goods belonging to another to exert some form of influence over them to enter into the contract.
235
What is economic duress?
Occurs where one party is in a stronger economic position than the other and they use this stronger position in an illegitimate manner to fore the other party into entering into the contract.
236
What are the factors considered when deciding whether economic duress is present?
- Does the thread deprive the innocent party of a practical choice?
- Is the threat unlawful?
- Is the threat made in bad faith?
- Did the innocent party seek to rely on the contract?
- Did the innocent party protest?
237
What is undue influence?
An equitable doctrine which has been developed to ensure that one person's influence over another is not open to abuse. It is concerned with fairness and its use is at the discretion of the courts.
238
What is the effect of undue influence on a contract?
The contract is voidable and the innocent party may make steps to rescind.
239
What is the difference between duress and undue influence?
Duress is most concerned with illegitimate pressure whereas undue influence is concerned less with improper conduct and more with whether the innocent party arrived at their own decision freely and therefore gave true consent.
240
What are the requirements of undue influence?
No settled legal definition however case law has categorised it as requiring coercion from an external source, which the influencer has exploited for some degree of personal pain.
241
What are the 2 types of undue influence?
Actual Undue Influence
| Presumed Undue Influence
242
What is actual undue influence?
Requires the innocent party to prove that the other party overtly influenced them into entering into contract by improper pressure.
243
What is presumed undue influence?
Requires a relationship of trust and confidence between the parties and it will usually be a fiduciary relationship.
244
What are the consequences of a relationship of trust and confidence for undue influence?
If there is a relationship for trust and confidence calls out for an explanation then there is a presumption of undue influence.
245
What is the effect of illegality on a contract?
The contract is void and unenforceable.
246
What are the courts view on contracts which are illegal as formed?.
The court will not enforce the term of the a contract which is illegal as formed and the parties to an illegal contract will not be able to recover anything under it.
247
What are the courts view on the contracts performed in an illegal manner?
Rights are withheld from the party that committed the legal act but this does not preclude remedies being available to the innocent party.
248
What are the 5 types of illegality?
1. Contracts illegal by statute
2. Contract illegal by common law
3. Contracts contrary to morality of the institution of marriage
4. Contracts damaging the government
5. Contracts that interfere with justice.
249
What is a contract illegal by statute?
Any contract that provides for performance of an act that is forbidden by virtue of a statutory provision will be illegal and therefore void.
250
What is a contract illegal by common law?
Any agreement to commit a crime is also illegal under common law as is an agreement to commit a civil wrong.
251
What is a contract contrary or morality of the institution of marriage?
Most often relates to sexual morality.
252
What are contracts damaging to the government?
Contracts damaging the government may be void for illegality.
253
What are contracts that interfere with justice?
Any agreement that attempts to undermine the court's jurisdiction will be void.
254
What is restraint of trade?
Parties are free to contract as they see fit and any term restricting this freedom will be void unless the restriction is reasonable.
255
What will be considered reasonable regarding illegality in contracts?
Will depend on matters such as whether the parties could be viewed as acting in a normal commercial relationship and whether the terms of the contract were negotiated with the benefit of legal advice.
256
What is a legitimate interest with regards to illegality of trade?
The party seeking to rely on restraint of trade clause must be able to show that it is reasonably necessary for the protection of its legitimate interest.
257
Are anti-competitive agreements legal?
No, likely to be void as breaches of competition law.
258
What is required for a misrepresentation claim?
An actionable misrepresentation claim requires a fast statement of fact or law to be made by one party to another to induce them to enter into a contract.
259
What are the requirements of false statement being made?
False required - not substantially correct
260
Does silence class as misrepresentation?
No - there needs to be a false statement
261
What is uberrimae fidei?
In utmost faith. There are contracts of utmost faith where it is incumbent on the parties to make full disclosure.
262
What are the 3 types of misrepresentation?
1. Fraudulent
2. Negligent
3. Innocent
263
What is fraudulent misrepresentation?
Requires an element of fraud.
264
What are the requirements for fraudulent misrepresentation?
The statement was made (1) knowingly, (2) recklessly and (3) without belief in its truth
265
What is negligent misrepresentation?
A cause of action for damages created by the Misrepresentation Act 1967.
266
What is innocent misrepresentation?
The maker of the statement must have reasonable grounds for believing that it is true.
267
What are the 4 remedies available for misrepresentation?
1. Contract is voidable
2. Rescission
3. Bars to rescission
4. Damages
268
What is remedy of contract is voidable in misrepresentation?
Whatever the type of misrepresentation, it hast be effect of making the contract voidable not void.
269
What is the remedy of rescission in misrepresentation?
That the parties are put back in the original position they would have been had the misrepresentation not taken place.
270
What are the notification requirements regarding rescission?
The innocent party must notify the other party of their intention to rescind the contract or obtain a court order to that effect.
271
What is the effect of no notification to rescind the contract regarding misrepresentation?
The contract is still ongoing.
272
What might the court order if the party rescinds the contract for mispresentation and what are the effects?
The court may order an indemnity from the party who has made the misrepresentation. The purpose of the immunity is to assist the parties in their pre-contractual position and it is paid to cover any expenses or obligations necessarily incurred as a result of entering into the contract.
273
What are the 4 bars to rescission?
1. Affirmation
2. Lapse of Time
3. Impossibility of Restitution
4. Third Party Rights
274
What is affirmation regarding rescission?
If upon discovering the misrepresentation the innocent party decides to continue with the contract, they are said to affirm it.
275
What is the lapse of time regarding rescission?
If the innocent party delays rescinding they may lose the right altogether through the lapse of time.
276
What is the bar to rescission of impossibility of restitution?
If it is impossible to restore the parties to their pre-contractual position because the goods in question have declined in value or the nature of the subject matter has substantially changed.
277
What is the effect of third party rights on rescission of a contract?
If a third party has acquired any rights under the contract, rescission will not be possible. A buyer in good faith and for value of goods that were the subject of misrepresentation will not be required to allow the goods to be recovered.
278
What damages are available for fraudulent misrepresentation?
Any claim for damages would be made on a tortious basis. Such damages are intended to put the innocent party back into the position they would have been in had the representation have not been made.
279
What damages are available for negligent misrepresentation?
MA creates right to damages in this instance and the availability is the same for fraudulent misrepresentation.
280
What damages are available for innocent misrepresentation?
Damages are not available for innocent misrepresentation.
281
What damages are available in lieu of rescission for misrepresentation?
The court has discretion to award damages instead of ordering rescission for negligent or innocent misrepresentation.
282
What is the measure of damages for misrepresentation?
They will usually cover losses incurred as a result of entering into the contract and also any incidental expenditure. The innocent party can claim damages even though the contract has been rescinded.
283
Are exclusions clauses allowed to exclude liability slitty under misrepresentation?
Usually void unless reasonable.
284
What is discharge of a contract?
Bringing the contract to an end.
285
What is agreement to end a contract?
A contract can be discharged if all parties agree, perhaps if there is a breach by one of the parties or if a party gives notice.
Effectively the parties are creating a new agreement to end the old one so all parties must agree and there must be consideration for the new agreement.
286
What is the effect of ending a contract where both parties have unperformed obligations?
If all parties still have unperformed obligation under the contract and they enter a new agreement to end the contract, then each party will be suffering detriment by giving up rights under the original contract.
287
What is the effect of ending a contract where one party has fully performed their obligations?
If any party has performed their obligations in full, any release of the other parties from their obligations allow them to walk away from their debt. An agreement to accept part debt is not binding as no consideration for the promise has been agreed and a deed will need to be entered into.
288
What is variation to a contract?
If the parties wish to vary an existing contract, the legal position is the same as for discharge, all parties must agree and the agreement must be supported by consideration.
289
What is a waiver regarding the termination of an agreement?
If a party promises not to enforce another party's obligations under the contract, the courts may conclude that the first party waived their rights in respect of non-performance.
290
What is discharge through performance?
The entire obligation rule confirms that only full performance will discharge the contract.
291
What is substantial performance?
Substantial but imprecise performance has been held insufficient to discharge obligations under contract.
292
What are divisible contracts?
The court may subdivide the obligation to perform the contract into components.
293
What is partial performance accepted by the other party?
If partial agreement has been agreed voluntarily, a court will normally conclude that the parties have agreed a new contract on revised terms. This will only be binding if there is consideration.
294
What is performance that is prevented?
If a party is prevented by the other party from performing their obligations under a contract that is otherwise capable of being performed, the other party's conduct preventing performance might be a breach of condition.
295
What is an anticipatory breach?
Occurs if before the performance is due, one party indicates that they are not going to fulfil their obligations.
296
When can a contract be rescinded for an anticipatory breach?
As soon as is it apparent. The party does not have to wait until performance is due however to continue with the contract until this point might be seen as affirmation.
297
What is frustration?
A frustrating event occurs after formation of the contract however before it has happen in full meaning the contract can no longer be performed.
298
What is the effect of a frustrated contract?
It will be automatically discharged.
299
What are the requirements of frustration?
Requires performance under the contract to be impossible or radically different from what has envisaged under the contract.
300
What is the element of impossibility regarding frustration?
Could be because the subject matter no longer exists because it has been destroyed or has otherwise become unavailable through no fault of the parties.
301
Can effect can an intervening illegal act have on a contract?
Can render the contract frustrated. E.g. a change in the law after the contract has been formed
302
What is the element of radically different regarding frustration?
If a supervening event makes performance radically different from what was envisaged, even though performance is technically impossible.
303
What would not constitute frustration?
1. More difficult or expensive to perform
2. Self-induced frustration
3. Events that could be foreseen
304
What is the effect of frustration?
Release the parties from any further liability to each other. No breach is committed and therefore no damages are recoverable.
305
What is the scope of the Law Reform (Frustrated Contracts) Act 1943?
A frustrated contract can be unfair on one or two of the parties so this has been mitigated by statute. All sums paid in respect of the contract before discharge will be recoverable, and all sums payable before discharge cease to be payable.
306
When does LRFCA not apply?
Can be overridden by express terms in the contract agreed between the parties.
- Charterparties for the carriage of goods by the sea
- Contracts of insurance
- Contracts of the sale of goods where the contract is frustrated by reason of the fact the goods have perished.
307
What are force majeure clauses?
Allows for the termination of the contract on the occurrence of an event outside the contract of the parties which prevents performance of the contract, such as outbreak of war or an Act of God.
308
What a punitive damages?
Damages which cover more than just actual loss.
309
What are the 5 types of damages?
1. Expectation damages
2. Reliance interest
3. Non-monetary losses
4. Punitive damages
5. Nominal damages
310
What is expectation interest?
Designed to put the innocent party back in the position they would have been in had the contract been performed.
The expectation interest can be determined by either (1) how much it would take to cure the defects, (2) the difference in value between what was actually provided and what should have been provided under the terms of the contract.
311
What is reliance interest?
The innocent party may elect to recover damages based on a 'reliance measure' rather than an expectation measure.
312
What are non-monetary losses?
Damages can be awarded for physical injury, so long as the loss is not too remove from the breach of contract.
313
What are punitive damages?
Generally not awarded in contract cases.
314
What are nominal damages?
Maybe awarded if a breach is established but no actual loss is proven.
315
When are damages assessed?
Take place at the date the contract was breached. There are exceptions such as if the innocent party was not aware of the breach for some time or there is difficulty finding alternative performance.
316
What is the effect of remoteness on how damages should be awarded?
If the loss is too remote, the court will not allow recovery.
317
What is causation in damages?
A party will only be liable for damages caused by their breach.
318
What is the test for causation?
Whether the breach of contract was an effective cause of the loss.
319
What is contributory negligence?
If the innocent party has also been negligent, and this negligence has contributed towards their loss.
320
How are damages measured?
Can either be through diminution of value, the cost of remedying the defect, or more usually the value of loss of amenity.
321
What is the effect of mitigation on damages?
The innocent party must take reasonable steps to mitigate their loss. An innocent party cannot recover losses that are a direct consequence of failure to mitigate their loss.
322
What are liquidated damages clauses?
A valid liquidated damages clause is based on a genuine pre-estimate of the innocent's party's loss. It will be enforceable by the courts, who will generally be willing to allow the innocent party to recover this amount without actually having to prove it.
323
What are penalty clauses?
The courts will strike out clauses which they view as a penalty. If the clause is struck out, the party relying on it instead will have to rely on normal unliquidated damages. The clause must not be extravagant, exorbitant or unconscionable in relation to the interest it is protecting.
324
What are indemnities?
A contract will sometimes provide that one party will 'indemnify' the other against losses arising from the breach. The exact effect of an indemnity will depend how it is drafted, but it may be possible to word it so that the innocent party can recover losses free from the limitations under the rules of remoteness, mitigation or even causation.
325
What is a guarantee?
A promise by A to ensure that the other person B who is party to the contract will perform their obligations.
326
What are the equitable remedies that can be granted?
1. Specific Performance
2. Injunction
3. Rescission
327
What is the remedy of specific performance?
An order requiring the party in breach to carry out their contractual obligations in full. It will be granted if damages are not an adequate remedy.
328
What is the remedy of an injunction?
Requires the party in breach not to breach the contract. It is usually granted to prevent breach of a negative term and restricts certain behaviour by the party.
329
What is the remedy of rescission?
Cancellation of a voidable contract and the parties are left as though the contract had never been made.
