CONTRACT Flashcards
1
Q
Which rule of consideration does promissory estoppel provide an exception to?
Part payment of a debt without fresh consideration does not discharge the debt obligation.
Consideration must be sufficient but need not be adequate
Consideration must move from the promisee.
Consideration must not be past.
A
Part payment of a debt without fresh consideration does not discharge the debt obligation
Correct. Promissory estoppel provides an equitable exception to this rule.
2
Q
Which of the following is not an essential element of promissory estoppel?
Promissory estoppel acts as a shield and not a sword
There must be a clear and unequivocal promise that strict legal rights will not be enforced.
The promisee must have changed their position in reliance on the promise
The promisee must act to his detriment
A
The promisee must act to his detriment
Correct
Whilst is is necessary that the promise has influenced the promisee’s conduct, it appears that it is not essential that the promisee has acted to their detriment.
3
Q
A restaurant owner owes a vegetable supplier £2500. The restaurant owner knows that the supplier is experiencing financial problems. The restaurant owner gives the supplier a cheque for £1000 in full and final satisfaction of the debt owed. The supplier accepts the cheque but later sues the restaurant owner for the balance of £1500. Which of the following statements is correct?
The supplier cannot recover the balance of £1500 as their acceptance of the cheque for £1000 discharged the debt.
The supplier cannot recover the balance of £1500 because their acceptance of the cheque for £1000 is binding.
The supplier cannot recover the balance of £1500 as it would be inequitable for them to go back on their word.
The supplier can recover the balance of £1500 as it is not inequitable for them to go back on their promise.
A
The supplier can recover the balance of £1500 as it is not inequitable for them to go back on their promise.
Correct
The supplier’s promise to accept less was obtained as a result of pressure on the supplier, therefore the restaurant owner is unlikely to successfully rely on the equitable doctrine of promissory estoppel as it is unlikely that it would be considered inequitable for the supplier to go back on his promise.
4
Q
A tenant has lost her job and she is struggling to pay her rent. Keen to help, the landlord informs the tenant that he is willing to accept half the rent due each month until she finds a new job. The tenant pays half rent for two months and uses some of the money she saved to buy new shoes to wear at interviews. The landlord is now having second thoughts. Under what circumstances can the landlord demand full rent?
The landlord can demand full rent after the expiry of reasonable notice.
The landlord cannot demand full rent as the tenant has accepted his offer therefore he is bound.
The landlord can demand that full rent is paid immediately.
The landlord cannot demand full rent before the tenant has found a new job.
A
The landlord can demand full rent after the expiry of reasonable notice.
A promisor may resume his full legal rights after giving reasonable notice - Tool Metal v Tungsten.
5
Q
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”. Which one of the following is CORRECT in relation to offer and acceptance as applied to this scenario?
The man has made an offer which is accepted by someone finding the dog.
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.
The man has made an offer which is accepted by someone looking for the dog.
The man has not made an offer to contract because it is possible the dog does not exist or is unfortunately dead at the time of the offer.
The man has made an offer which is accepted by someone returning the dog to the man.
A
The man has made an offer which is accepted by someone returning the dog to the man.
Correct
Correct: 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.
6
Q
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?
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.
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.
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.
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.
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.
A
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.
Correct: you have correctly identified the invitation to treat, offer and acceptance
7
Q
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’. Person A sees the advert and immediately phones the club to state that she accepts the challenge and will be attending the fun day. Person A is the first person to shoot ten goals. Person B sees the advert and is the second person to shoot ten goals.
Which ONE of the following statements BEST EXPLAINS the legal position?
Person A 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.
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 person A is entitled to a token.
The advert is a unilateral offer. Person A and Person B are both entitled to a token as they have completed the act prescribed by the advert.
The advert is an invitation to treat. Consequently, none of the participants are entitled to a token.
The advert is an invitation to treat. By contacting the club, Person A has formed a bilateral contract with the sports club and is entitled to a token.
A
The advert is a unilateral offer. Person A and Person B are both entitled to a token as they have completed the act prescribed by the advert.
Correct. This answer correctly applies the principles relating to unilateral offers.
8
Q
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?
The interested buyer’s response is a request for further information. The campervan owner’s offer remains open for acceptance.
The campervan owner’s email is an invitation to treat. The interested buyer’s response is an offer.
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.
The interested buyer’s response is a counter offer. The campervan owner’s offer is extinguished.
The interested buyer’s response is a request for further information. The campervan owner’s offer is extinguished.
A
The interested buyer’s response is a request for further information. The campervan owner’s offer remains open for acceptance.
correct
9
Q
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?
The auctioneer is in breach of a unilateral contract and the antique collector is entitled to damages.
The auctioneer is in breach of a bilateral contract and the antique collector is entitled to damages.
The auctioneer is in breach of a bilateral contract and the antique collector is entitled to buy the table for £500.
There is no contract between the parties and the antique collector is entitled to nothing.
The auctioneer is in breach of a unilateral contract and the antique collector is entitled to nominal damages.
A
The auctioneer is in breach of a unilateral contract and the antique collector is entitled to damages.
Correct
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).
10
Q
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?
The gardener is not entitled to payment as payment was not discussed prior to the service being carried and so the act of painting the shed is past consideration.
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.
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.
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 gardener is entitled to payment. The gardener has exceeded previous obligations owed to the client and so has provided fresh consideration to support payment.
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.
Correct. The exception to the past consideration under Pao On v Lau Yiu Long [1979] UKPC 17 is particularly relevant to this scenario.
11
Q
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?
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.
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.
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.
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.
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.
A
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.
correct
12
Q
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?
The contractor will not be entitled to the extra £10,000 as the £20,000 in the original contract is adequate consideration.
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.
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.
The contractor will not be entitled to the extra £10,000 as he has simply performed his existing contractual obligations.
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.
A
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.
Correct. This is the likely result of applying the case of Williams v Roffey Bros & Nicholls Contractors Ltd [1989] EWCA Civ 5 to this situation.
13
Q
A 16-year-old girl agrees to hire some gardening equipment, with a view to providing gardening services to local residents over the summer holidays. She later refuses to pay for the equipment, despite having started to use it. Can the supplier of the equipment enforce the contract against the girl?
No, the contract is not enforceable because contracts are never enforceable against minors.
Yes, the contract is enforceable against the girl as the gardening equipment can be regarded as a ‘necessary’.
Yes, because the contract is for her benefit.
No, the contract is not enforceable against the girl as it is in her best interests not to be bound by the agreement.
No, the contract is not enforceable against the girl as she is a minor and none of the exceptions to the general rule apply
A
No, the contract is not enforceable against the girl as she is a minor and none of the exceptions to the general rule apply.
Well done. This is the correct answer for the reasons stated.
14
Q
A man is approached by a ticket seller outside a concert who offers to sell him a ticket. The man likes the band, but saw them recently so hesitates. The seller holds a knife to the man and says “Buy the ticket now or I’ll cut you.” The man buys the ticket. Whilst queuing later, he sees the seller being arrested. He goes over and asks for his money back.
Was the contract entered into under duress?
Yes. The physical threat was a significant cause of the man’s decision to contract.
Yes. The man had no practical alternative but to enter into the contract.
Yes, but only if the man can prove that the threat of force was more influential on his decision than his desire to see the band.
Yes. The physical threat was one of the reasons the man entered into the contract and duress will be found unless the seller can prove the threat contributed nothing.
No. The man had a reason other than the threat of force to enter into the contract (he liked the band), so there is no duress.
A
Yes. The physical threat was one of the reasons the man entered into the contract and duress will be found unless the seller can prove the threat contributed nothing.
Correct. This answer correctly applies the leading case on duress to the person, Barton v Armstrong. The other answers seem plausible but are not correct as they do not correctly outline the elements of duress to the person and/or the test of causation applied to duress to the person.
15
Q
A builder agrees to build a house for a landlady, due for completion on 1 February, for £100,000. The landlady agrees with a third party to rent the property from 2 February, at a premium rate. On 20 January a labour shortage occurs and the builder, knowing the landlady will not find another builder, threatens to stop work unless he is paid an extra £10,000. The landlady protests, but pays the extra £10,000. The house is completed on 1 February. The landlady waits until the third party begins renting the property and then seeks the return of the £10,000.
Which of the following statements best describes the legal position in relation to the landlady’s potential claim for economic duress?
The landlady affirmed the contract, so a claim of economic duress will likely fail.
The landlady was presented with no viable alternative but to agree to the builder’s demand, and that suffices for economic duress.
The builder was acting in bad faith and that suffices for economic duress.
The builder’s threat was a significant cause of the landlady paying the extra £10,000, and that suffices for economic duress.
The landlady’s claim for economic duress is likely to succeed. Although the landlady delayed taking action to set the contract aside this is unlikely to amount to an act of affirmation.
A
The landlady’s claim for economic duress is likely to succeed. Although the landlady delayed taking action to set the contract aside this is unlikely to amount to an act of affirmation.
Correct. The builder’s demand is likely to amount to economic duress applying the leading test set out by Dyson J in DSND Subsea v Petroleum Geo Services. Although delay in seeking to set aside the contract can prevent a claim in duress succeeding, the land lady’s short delay in setting the contract aside is unlikely to be sufficient to be regarded as an act of affirmation. The other answers seem plausible but they are not correct. All elements of Dyson J’s test for duress need to be considered. It is not correct to state that duress will succeed based on only one element of the test.
16
Q
A high end restaurant is being reviewed by an influential food critic and the head chef wants to make the critic’s favourite dish, requiring rare truffle oil. It contracts to buy some for £100 from the only UK supplier. The supplier later learns of the critic’s visit and says it will now only sell the oil for £1000. The restaurant agrees, but on receipt of the invoice refuses to pay more than £100.
Which of the following statements best describes the legal position in relation to the restaurant’s potential claim for economic duress?
The restaurant has no practical choice to source the truffle oil elsewhere, meaning there is duress. Expecting the restaurant to make an alternative meal is not a viable practical alternative.
This is not duress as the supplier’s demand of an additional £900 was not a threat made in bad faith.
By agreeing without protest to pay to the supplier’s demand of an additional £900 the restaurant has affirmed the amendment to the contract and will not be able to set the contract aside for duress.
This is not duress but a freely negotiated amendment to the contract by two commercial parties and the court will uphold it based on the freedom of contract.
As long as the restaurant can make another high quality meal for the critic, they have sufficient practical choice, such that there was no duress.
A
As long as the restaurant can make another high quality meal for the critic, they have sufficient practical choice, such that there was no duress.
Correct – for economic duress, there must be a lack of practical choice. The test is practical choice in relation to acquiescence to the demand. As long as the restaurant can make another dish which is equally likely to impress the critic then they had a practical choice, and did not have to agree to pay £1000. The sellers demand was a threat made in bad faith (but it did not present a lack of practical choice). There was no good consideration to support the amendment and in any event duress overrides the principle of freedom of contract.
17
Q
An adult daughter acts as her elderly mother’s carer. The daughter asks the mother for a loan to support a new business venture. The mother is reluctant as it is for a very large amount. The daughter is furious and asks her mother why she will not support her given how much she has done for her. The mother reluctantly agrees to the loan as she does not want to upset her daughter as she is so reliant upon her. The daughter’s business fails, and she does not repay the loan. The mother is now in residential care and wants to her money back. Identify the most appropriate cause of action for the mother.
Duress to goods
Lack of consideration
Economic duress
Undue influence
Duress to the person
A
Undue influence
Correct. Although there is some overlap between the doctrines of duress and undue influence, this is the most appropriate cause of action on the facts.
18
Q
A publisher contracts to sell 100 books to a shop, with a 14-day credit facility. The books are stored at a warehouse which floods, destroying the books. The publisher knows the books were still its responsibility, but falsely tells the shop it believes the books were their responsibility and unless the shop pays for them, threatens to revoke the credit facility. The shop knows it is not liable for the books, but decides that paying is better than losing the credit facility.
Was the publisher’s threat to remove the credit facility “illegitimate pressure”, for the purposes of establishing economic duress?
No. The shop took a commercial decision that it was better to pay for the 100 books and the court will uphold the principle of freedom of contract.
Possibly. It depends on whether the shop had access to another credit facility with a third party.
No. The shop should have had the courage of its convictions that the books were the publisher’s responsibility.
Yes. The publisher was using this as a means of extorting money it knew was not due to it.
No. Until a court decides that the books were still the publisher’s responsibility, it cannot be said the publisher’s threat was improper.
A
Yes. The publisher was using this as a means of extorting money it knew was not due to it.
Correct. This answer correctly applies the criterion of illegitimate pressure. The other answers seem plausible, but they are not correct. Duress trumps the principle of freedom of contract. The relevant test for illegitimate pressure looks at the intentions of the person making the threat. Access to another credit facility is not relevant to illegitimate pressure but to a different part of the test – lack of practical choice.
19
Q
The owner of a construction company (‘company owner’) purchases a forklift truck from an online retailer. After the forklift truck is delivered, he notices a dent at the front. The company owner decides to use the forklift truck anyway. One month later, the company owner decides that he wants to get a different forklift truck from a different shop. He telephones the online retailer and says that he wants to return the forklift truck and get a refund but the online retailer refuses. Which one of the following statements best explains the legal position?
The online retailer has not breached any terms implied by the Sale of Goods Act 1979 as the forklift truck was still usable for its intended purpose. Consequently, the company owner cannot return the forklift truck and get a refund.
Although the online retailer was in breach of the term implied by s 14(2) of the Sale of Goods Act 1979, the breach was so slight that returning the forklift truck would be unreasonable. Consequently, the term breached will be classed as a warranty.
The online retailer has breached the term implied by s 14(2) of the Sale of Goods Act 1979. The company owner may have been entitled to return the forklift truck; however, he affirmed the contract by using the forklift truck for a month. Consequently, he cannot return the forklift truck and get a refund.
The online retailer has breached the term implied by s 14(2) of the Sale of Goods Act 1979. The term implied by s 14(2) is a condition which means that Company owner can return the forklift truck and get a refund.
Since the company owner affirmed the contract by accepting delivery of the forklift truck, the online retailer has not breached any implied terms. Consequently, the company owner cannot return the forklift truck and get a refund.
A
The online retailer has breached the term implied by s 14(2) of the Sale of Goods Act 1979. The company owner may have been entitled to return the forklift truck; however, he affirmed the contract by using the forklift truck for a month. Consequently, he cannot return the forklift truck and get a refund.
Correct. This answer correctly identifies the breach, the available remedy and the effect of affirmation.
20
Q
A mother wants to buy a pony for her daughter. She visits the owner of a stable yard who is selling a pony. The mother says, ‘I only want the pony if she is happy to be petted.’ As she says this, she goes over to try and stroke the pony. The stable yard owner stands in her way and says ‘she’s happy to be petted. No need to check! You can have her for £500.’ The mother agrees to buy the pony the same day. When the pony arrives at her new home it is obvious that she is not happy to be petted. Which one of the following statements best explains the legal position?
The stable yard owner’s statement that the pony is happy to be petted is likely to be a term of the contract. This is because it was important to the mother, the stable yard owner had specialist knowledge, she prevented the mother from checking, and the statement was made on the same day the contract was entered into.
The stable yard owner’s statement that the pony is happy to be petted is likely to be a representation. It was unreasonable for the mother to rely on the expertise of the stable yard owner as she is best placed to know what pony would be suitable for daughter.
Despite The stable yard owner’s protestations, the mother should have checked whether the pony was happy to be petted. The failure to check will result in the stable yard owner’s statement being a representation.
Since the stable yard owner’s statement that the pony is happy to be petted was not written down, it will be a representation.
Since there was some delay between the statement that the pony is happy to be petted being made and the mother agreeing to buy the horse, it will be a representation. In order to be a term, a statement must be made immediately prior to contracting.
A
The stable yard owner’s statement that the pony is happy to be petted is likely to be a term of the contract. This is because it was important to the mother, the stable yard owner had specialist knowledge, she prevented the mother from checking, and the statement was made on the same day the contract was entered into.
Correct. This answer correctly applies the legal principles on distinguishing a representation from a term.
21
Q
A customer buys a rechargeable lawnmower online from a retailer which operates a website selling gardening equipment to consumers throughout the UK for £170. The website describes the lawnmower as capable of operating for 90 minutes without needing to be recharged. In fact, it only operates for 35 minutes before needing to be charged. The customer wishes to bring a claim on the basis that the contract has failed to comply with the implied term that the goods would comply with their description. Which ONE of the following statements best describes the situation in relation to remedies available / not available to John?
The customer will not have any remedy for this breach.
This breach entitles the customer to damages, but not to terminate the contract.
This breach entitles the customer to terminate the contact.
The remedies available to the customer as a result of this breach are as set out in the Consumer Rights Act 2015.
The remedies available to the customer as a result of this breach depend on the consequences of the breach in accordance with the case of Hong Kong Fir v Kawasaki.
A
The remedies available to the customer as a result of this breach are as set out in the Consumer Rights Act 2015.
Correct. The other answers seem plausible, but they are not correct as they fail to identify which legislation this implied term comes from.
22
Q
A road maintenance company hires a van from vehicle hire company, at a cost of £270. The van is wholly unreliable and causes the maintenance significant losses. Under the contract between the two parties, the maintenance company has to return the van in the same condition as at the start of the hire period. On returning the van to the hire company’s yard, the hire company inspects the van, and presents the maintenance company with a sheet of A4 paper, marked “Record of vehicle condition at end of hire period”. The paper has a diagrammatic representation of a car split into various areas. Next to each area is written “no damage”. The hire company signs this sheet, and asks the maintenance company’s representative to sign it, which he does. At the foot of the page are various terms and conditions, in small print, which the maintenance company’s representative does not read. One of these terms (the ‘Term’) provides that the hire company’s liability for losses during the hire period is limited to £300. The maintenance company seeks to recover its losses caused by the van being unreliable, which exceed this sum, and the hire company seeks to rely on the Term to limit any liability. Which ONE of the following statements is most likely to be correct?
The Term was not incorporated into the parties’ contract because an objective party would not consider the document to have contractual effect.
The Term was incorporated into the parties’ contract because this is a reasonable term to include in the contract.
Whether or not the Term was incorporated into the parties’ contract depends on the extent of the maintenance company’s losses.
The Term was incorporated into the parties’ contract because the maintenance company signed the document.
The Term was not incorporated into the parties’ contract because the maintenance company did not read it.
A
The Term was not incorporated into the parties’ contract because an objective party would not consider the document to have contractual effect.
This answer correctly applies the principles of incorporation of contractual terms.
23
Q
A student joins a kayaking course with an adventure company. Her instructor on the course negligently takes her into rapids far too dangerous for someone of her ability and experience. She capsizes and collides with several rocks, causing facial injuries. The contract she signed when she registered for the course included a clause (the ‘Clause’) which stated that the adventure company would not be liable for any facial injuries or disfigurements caused during the kayaking and would only be liable for broken limbs and fingers. Which one of the following is correct?
The Clause will be effective to exclude liability for the student’s injuries if it passes the test of reasonableness in s 11 of the Unfair Contract Terms Act 1977.
The Clause will be effective to exclude liability the student’s injuries depending on the severity of the personal injuries.
The Clause will be effective to exclude liability for the student’s injuries if it passes the test of fairness in s 62 of the Consumer Rights Act 2015.
The Clause will not be effective to exclude liability for the student’s injuries
The Clause will be effective to exclude liability for the student’s injuries.
A
The Clause will not be effective to exclude liability for the student’s injuries
Correct – this is the effect of s.65 of the Consumer Rights Act 2015.
24
Q
A carpenter contracts with a company to carry out plumbing services. At the time of contracting an agent of the company signs a form containing the following clause, ‘Liability for breach of any express or implied term of the contract is limited to £500’. The clause is written in very small print. The carpenter carries out the services with a lack of reasonable care and skill causing damage to company property. Which one of the following statements best explains the legal position?
The carpenter has breached s 13 of the Supply of Goods and Services Act 1982. The exemption has not been incorporated into the contract as insufficient notice was given of an onerous clause.
The carpenter has breached s 49 of the Consumer Rights Act 2015. The exemption clause limits liability for negligence at common law, however the company will not be taken to have voluntarily accepted any risk merely because he agreed to or knew about the exemption clause.
The carpenter has breached s 13 of the Supply of Goods and Services Act 1982. The exemption clause limits liability for negligence at common law, however the clause would be void under s 2(1) Unfair Contract Terms Act 1977 as it attempts to limit liability for personal injury caused by negligence.
The carpenter has breached s 13 of the Supply of Goods and Services Act 1982. The exemption clause limits liability for negligence at common law, however the clause will only be effective in accordance with s 2(2) of the Unfair Contract Terms Act 1977 if it satisfies the requirements of reasonableness.
The carpenter has breached s 49 of the Consumer Rights Act 2015. The exemption clause has been incorporated by signature but will not be construed to cover negligence at common law as it is too wide and limits liability for heads other than negligence liability.
A
The carpenter has breached s 13 of the Supply of Goods and Services Act 1982. The exemption clause limits liability for negligence at common law, however the clause will only be effective in accordance with s 2(2) of the Unfair Contract Terms Act 1977 if it satisfies the requirements of reasonableness.
Correct. This answer sets out the correct breach under s 13 SGSA and recognises that the clause is effective at common law (passing incorporation and construction) but would be subjected to the requirement of reasonableness under the Unfair Contract Terms Act 1977.
Although the other answer options sound plausible they are all incorrect. This contract does not fall under the Consumer Rights Act 2015. The clause has been validly incorporated through signature. The requirement for a greater notice for an onerous clause applies to incorporation through notice, not signature. The clause is not too wide to be construed to cover negligence as negligence is the only realistic head of damages on the facts. As there is no personal injury loss s2(1) Unfair Contract Terms Act 1977 is not engaged. The fact that this clause could relate to personal injury caused by negligence does not invalidate the clause vis a vis other heads of damage.
25
A homeowner engages a professional decorator to decorate her house. She signs a written contract provided by the decorator which includes terms that: [clause A] the decorator's liability for any injury caused by a failure to perform the service with reasonable care and skill will be limited to £5,000 [clause B] Nothing in clause restricts liability for death / personal injury resulting from negligence.
The decorator carries out the work careless, causing damage to the homeowner's house in excess of £10,000.
Which of the following best summarises the legal situation in relation to the clauses referred to above?
The clause will be ineffective because it has not been incorporated.
The extent to which the clause is effective is likely to depend on the price paid by the homeowner.
The clause will be effective only so far as it satisfies the requirements of reasonableness.
The clause will be effective because it is a limitation rather than exclusion of liability.
The clause will be ineffective because the decorator is not permitted to exclude or restrict liability for death or personal injury resulting from negligence.
The extent to which the clause is effective is likely to depend on the price paid by the homeowner.
Correct
Correct. The clause has been incorporated – it is contained within a signed contract. This is a consumer contract for services, and this situation is governed by the Consumer Rights Act 2015. The obligation which the decorator seeks to exclude is the obligation under s 49 of the Act to provide the service with reasonable care and skill. Any attempt to entirely exclude this term will not be binding on the consumer. Any attempt to restrict / limit liability under section 49 will not be binding to the extent that it would prevent the consumer from recovering the price paid – so effectively, liability cannot be limited to less than the price paid, but a restriction / limitation that does not have this effect is not necessarily problematic (although it could be if it falls under the broader regulation of 'unfair terms'). For this reason, the price paid is important.
26
A hairdressing salon (‘the salon’) purchases 10 hairdryers from a supplier. Before purchasing the hairdryers, the salon owner is asked to sign a fifteen-page document. Had the salon owner read the document, she would have seen the following clause at page fourteen: ‘The supplier accepts no liability for any loss to property or injury to persons.’ The salon owner signs the document without reading it. On the first day of use, one of the hairdryers catches fire causing damage to the property of the salon. Fortunately, no one was injured.
Which ONE of the following statements BEST EXPLAINS the legal position?
The supplier has breached the term implied by s 14(2) of the Sale of Goods Act 1979 as the hairdryer was not of satisfactory quality. The exemption clause was incorporated by signature. The exemption clause will be effective as the Unfair Contract Terms Act 1977 only prevents exclusion of liability for death or personal injury.
The supplier has breached the term implied by s 14(2) of the Sale of Goods Act 1979 as the hairdryer was not of satisfactory quality. Although, the exemption clause was incorporated by signature, the Unfair Contract Terms Act 1977 states that it would only be possible to limit liability for the property damage in so far as the exemption clause satisfies the requirement of reasonableness.
The supplier has breached the term implied by s 14(2) of the Sale of Goods Act 1979 as the hairdryer was not of satisfactory quality. The exemption clause has not been incorporated by signature as it was an onerous clause.
The supplier has breached the term implied by s 9 of the Consumer Rights Act 2015 as the hairdryer was not of satisfactory quality. Although, the exemption clause was incorporated by signature, the Consumer Rights Act 2015 states that this term will not bind the salon.
The supplier has breached the term implied by s 9 of the Consumer Rights Act 2015 as the hairdryer was not of satisfactory quality. The exemption clause has not been incorporated by signature as it was an onerous clause.
The supplier has breached the term implied by s 14(2) of the Sale of Goods Act 1979 as the hairdryer was not of satisfactory quality. Although, the exemption clause was incorporated by signature, the Unfair Contract Terms Act 1977 states that it would only be possible to limit liability for the property damage in so far as the exemption clause satisfies the requirement of reasonableness.
Correct
Correct. This answer sets out the correct breach under s s 14(2) Sale of Goods Act 1979 and recognises that the clause has been effectively incorporated but would be subjected to the requirement of reasonableness under the Unfair Contract Terms Act 1977. Although the other answer options sound plausible they are all incorrect. This contract does not fall under the Consumer Rights Act 2015. The clause has been validly incorporated through signature. The requirement for a greater notice for an onerous clauses applies to incorporation through notice, not signature. As there is no personal injury loss s2(1) Unfair Contract Terms Act 1977 is not engaged. The fact that this clause could relate to personal injury caused by negligence does not invalidate the clause vis a vis other heads of damage.
27
A customer orders a mountain bike from a bike shop. The bike is 'made to order' – the customer chooses various parts and the bike is assembled in accordance with that choice and later delivered. The customer agrees to pay £1,200 on delivery. The customer discovers that the combination of parts he has chosen is actually readily available as a pre-assembled bike with numerous retailers for only £800. The customer no longer wants to pay the sum of £1,200 for the bike. Which of the following correctly summarises the situation as to whether the bike shop can enforce the payment obligation?
The court would determine whether the clause causes a significant imbalance in the parties' rights and obligations to the detriment of the customer in order to determine whether it is enforceable.
The clause is unenforceable.
The court would determine whether the clause satisfies the test of reasonableness in order to determine whether it is enforceable.
This clause is enforceable.
The clause is enforceable only to the extent that the customer can be required to pay £800.
This clause is enforceable.
Correct. This is a consumer contract. The Consumer Rights Act 2015 includes a broad provision that makes terms generally not binding on the consumer if they are unfair. However, the court cannot assess terms specifying the main subject matter of the contract or assess the fairness of the price of goods. The payment obligation cannot be interfered with. If the court was able to assess this term for fairness, the test would be whether it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer.
28
A hotelier is selling his hotel. During pre-contractual discussions with the buyer the hotelier tells the buyer that the hotel has its own car park that is let out to a tenant. The buyer expresses a desire to terminate the tenancy and expand the hotel onto that land. The hotelier tells the buyer that the tenancy is on a contractual licence, terminable on a month’s notice. After the sale of the hotel is completed the buyer finds out that the car park is in fact occupied under a protected business tenancy pursuant to statute.
Which of the following most accurately applies the law of misrepresentation?
The seller’s statement about the contractual licence is an actionable misrepresentation; it is an unambiguous, false, statement of fact.
The seller’s statement about the contractual licence maybe an actionable misrepresentation as a statement of opinion elevated to a statement of fact.
The seller’s statement about the contractual license is advertising hyperbole and therefore is not an actionable misrepresentation.
The seller’s statement about the contractual licence is not an actionable misrepresentation as it is a statement of opinion.
The seller’s statement about the contractual licence is an actionable misrepresentation; it is an unambiguous, false, statement of law.
The seller’s statement about the contractual licence is an actionable misrepresentation; it is an unambiguous, false, statement of law.
Correct. All the elements of an actionable misrepresentation are present. The statement in question is a statement of law, not a statement of fact, but this does not prevent it being actionable. It is neither a statement of opinion nor 'advertising hyperbole'.
29
A caravan owner is selling his caravan. The caravan owner paints a stain stopping paint to cover up some damp in the bathroom. The buyer looks around the caravan but does not go into the bathroom. After the sale the buyer discovers the damp and wants to sue the caravan owner for misrepresentation.
Which ONE of the following statements BEST EXPLAINS the legal position?
The caravan owner’s conduct in hiding the damp will amount to a fraudulent misrepresentation and consequently the court will disregard inducement.
The caravan owner’s conduct in hiding the damp will amount to an actionable misrepresentation by conduct. It is likely to be a negligent misrepresentation.
The caravan owner’s conduct in hiding the damp will amount to an actionable misrepresentation by conduct. It is likely to be a fraudulent misrepresentation.
The Caravan owner’s conduct in hiding the damp will not amount to an actionable misrepresentation as the buyer did not inspect the bathroom prior to contracting, consequently, she was not induced to enter into the contract by this conduct.
The caravan owner’s conduct in hiding the damp will not amount to an actionable misrepresentation as the buyer did not inspect the bathroom prior to contracting, consequently, it is likely to be an innocent misrepresentation.
The Caravan owner’s conduct in hiding the damp will not amount to an actionable misrepresentation as the buyer did not inspect the bathroom prior to contracting, consequently, she was not induced to enter into the contract by this conduct.
Correct. This answer sets out the issues of inducement in relation to this potential misrepresentation correctly. The other answers appear plausible but are incorrect. As the bathroom was not inspected there is no inducement and consequently no misrepresentation. Had the buyer inspected the statement this would be a fraudulent misrepresentation.
30
A hairdresser wishes to purchase a salon. She visits a salon which is advertised for sale and asks the seller about their future plans. The seller responds, ‘don’t worry I won’t open a rival business close by, I am planning to move out of the area.’ The hairdresser is reassured by this and purchases the salon. In fact, the seller was already in discussions to purchase a new salon two streets away. One month after the hairdresser’s purchase is completed the seller opens their rival business and the hairdresser loses the vast majority of her clients as a result. Which of the following most accurately applies the law of misrepresentation?
The seller’s statement about future plans is unlikely to be actionable as it is a statement of intention and immaterial.
The seller’s statement about future plans is likely to be an actionable misrepresentation which is innocent.
The seller’s statement about future plans is unlikely to be material and is unlikely to induce the contract.
The seller’s statement about future plans is unlikely to be actionable as it is a statement of intention.
The seller’s statement about future plans is likely to be an actionable misrepresentation which would be categorised as fraudulent.
The seller’s statement about future plans is likely to be an actionable misrepresentation which would be categorised as fraudulent.
Correct. All the requisite elements of a claim in misrepresentation are present (statements of intention are actionable in limited circumstances), and as this statement was a knowingly false statement of fact (Edgington) it seems likely that it would fulfil the definition of fraud - Derry v Peek – knowingly, without honest belief in truth of statement, or recklessly – ‘total disregard for the truth’.
31
A cake shop owner is selling her shop. She tells the buyer what profit the cake shop makes each month. After this and before the sale the cake shop’s monthly profit halves. The cake shop owner knows that the buyer has relied on her earlier statement and would want this new information, but she does not know whether she needs to tell him. The sale completes without the cake shop owner advising the buyer of the changed circumstances.
Which of the following most accurately applies the law of misrepresentation?
The cake shop owner has made an actionable misrepresentation. This will be an innocent misrepresentation.
The cake shop owner has not made an actionable misrepresentation as the only statement she made was true and there is no duty of disclosure.
The cake shop owner has made an actionable misrepresentation. This will be a negligent misrepresentation.
The cake shop owner has made an actionable misrepresentation. This will be a fraudulent misrepresentation.
The cake shop owner will not be liable in misrepresentation as this is a commercial transaction and the buyer should have investigated the monthly takings himself.
The cake shop owner has made an actionable misrepresentation. This will be a negligent misrepresentation.
Correct. This answer correctly identifies that an actionable misrepresentation has been made by the seller. This is a continuing representation (With v O’Flanagan). This will be a negligent misrepresentation as she will not be able to discharge the burden proof upon her under s 2(1) to show actual belief and reasonable grounds to believe that her statement is true at the time the contract was made (as the circumstances changed before the sale). The other answers seem plausible but they are not correct. Whilst there is no general duty of disclosure under English law, a continuing representation (With v O’Flanagan) is an exception to this principle. It cannot be said that this will be a fraudulent misrepresentation. Fraud must be proved in relation to the failure to disclose the change in circumstances. As the cake shop owner does not know she is obligated to share this information it will not be fraudulent. This is not an innocent misrepresentation as the seller will not be able to discharge the burden upon her under s 2(1) to prove her statement was not negligent. Even if a court were to consider that the buyer should have investigated the profit levels himself prior to sale, this will not prevent the statement from being actionable, it will only have an impact on the seller’s defence of contributory negligence.
32
A representor makes a material fraudulent misrepresentation when selling her business to the representee. The representee carries out his own cursory investigation before buying the business. If the representee had carried out this investigation more thoroughly he would have discovered that the representor’s statement was false. When carrying out his own investigations the representee finds out further information about the business that he was not told by the representor. This new information influences the representee’s decision to purchase the business. A week later, the representee discovers that representor’s fraud. The representee wants to rescind the contract for misrepresentation.
Which of the following most accurately applies the law of misrepresentation?
The representee will not be able to set aside the contract for misrepresentation as a reasonable investigation would have revealed the representor’s statement to be untrue.
The representee will not be able to set the contract aside for misrepresentation as the week delay will act as a bar to rescission.
The representee will be able to set aside the contract for misrepresentation unless the representor is able to show that her statement did not influence him.
The representee will not be able to set aside the contract for misrepresentation as he will not be able to show he was induced by the representor as he made his own independent check.
The representee will be able to set aside the contract for misrepresentation but his damages will be reduced as a reasonable investigation would have revealed the representor’s statement to be untrue.
The representee will be able to set aside the contract for misrepresentation unless the representor is able to show that her statement did not influence him.
Correct. The representor has made a material representation. The representee will be able to set the contract aside unless the representor is able to show the statement did not influence the representee (Pan Atlantic v Pine Top). The other answers seem plausible, but they are not correct. If the representee does not rely on the representor because he exclusively relies on his own independent check then a claim in misrepresentation will fail. However, if the misrepresentation continues to play a real and substantial part (despite the independent check) then the claim can still succeed. A one week delay is unlikely to act as a bar to rescission. If the representee carries out a negligent check this will not impact on a claim or the remedy available for fraudulent misrepresentation. Note that damages may be reduced for contributory negligence if the misrepresentation was negligent (the statement in the scenario is fraudulent).
33
A (as buyer) enters into a contract with B for the manufacture of 100 personal computers. A had advised B that the microprocessors to be fitted into the computers should be sourced from C. C had previously assured A that its processors lasted on average 6 years, without any loss in speed. B duly contracts with C .The computers were built and within 2 years the speed of the machines is significantly slower and the processors are clearly not of the quality C had stated.
Which statement is the most accurate in assessing whether A can bring proceedings against C for breach of contract?
Only B can bring proceedings against C as there is no privity of contract as between A and C unless A can show a collateral contract exists between A and C, and thereby claim directly from C.
Only B can bring proceedings against C as there is no privity of contract as between A and C.
Only B can bring proceedings against C as there is no privity of contract as between A and C , but A could claim from C as agent for B.
Only B can bring proceedings against C as there is no privity of contract as between A and C, but A could claim from C under the Albazero principle
Only B can bring proceedings against C as there is no privity of contract as between A and C with all sums awarded being held in Trust for B
Only B can bring proceedings against C as there is no privity of contract as between A and C unless A can show a collateral contract exists between A and C, and thereby claim directly from C.
Correct
This answer is correct. Here a collatoral contract is likely to be found and so an exception to the privity rule is likely to be established. See Shanklin Pier and the element in relation to common law methods of circumventing the doctrine of privity. Therefore, A is likely to be able to bring proceedings against C.
The Albazero principle is not applicable, there is no agency / principal relationship and no reason why A would hold sums on trust for B.
34
A man goes into a shop pretending to be a well-known snooker player from the 1990’s. He looks a lot like the snooker player. He hands over a cheque for a new motorbike which is accepted by the seller. He rides off with the motorbike. When the seller tries to cash the cheque, it is returned by the bank uncashed because the man writing the cheque had insufficient funds in his account.
The shopkeeper wishes to set the contract aside through mistake. Which statement is the most accurate in relation to whether the contract is void / voidable / valid and why?
This is likely a mistake as to identity and the contract may be rendered void as a result.
This is likely a mistake as to identity and the contract may be rendered voidable as a result.
This is likely not a mistake as to identity but one as to attributes and the contract may be rendered void if shown.
This is likely not a mistake as to identity but one of attributes and therefore the contract will likely be rendered voidable.
This is likely not a mistake as to identity but one of attributes, and therefore there is no operative mistake, and the contract may be voidable but not void as a result.
This is likely not a mistake as to identity but one of attributes, and therefore there is no operative mistake, and the contract may be voidable but not void as a result.
Correct on both applications! There is not likely to be an operative mistake (if there was, the contract would be void, not voidable). There may be a misrepresentation, in which case the contract would be voidable, not void.
35
A telecommunications company is expanding its business overseas and needs to enter into lots of different contracts in all the different countries that it wishes to operate in. It wishes to be a named party in each contract and wants to get them signed as soon as possible.
What is the best solution for getting these contracts negotiated and signed quickly?
The telecommunications company can travel to the different countries to negotiate and sign the contracts.
The telecommunications company can authorise a principal to negotiate and sign the contracts on its behalf.
The telecommunications company can authorise a third party to sign the contract twice; once on behalf of the client and once on behalf of itself.
The telecommunications company can authorise a negotiator to act as an agent for them and then the telephony company can sign once the contract is agreed.
The telecommunications company can authorise a third party to act as its agent to negotiate and sign the contracts on its behalf.
The telecommunications company can authorise a third party to act as its agent to negotiate and sign the contracts on its behalf.
Correct. There is no need for the third party to sign on behalf of itself. It signs as an authorised agent on behalf of the telecommunications company. This is likely to be more efficient than either of the options which require representatives of the company itself to travel. 'Authorising a principal' is not a recognised concept.
36
A telecommunications company is expanding its business overseas and needs to enter into lots of different contracts in all the different countries that it wishes to operate in. It wishes to be a named party in each contract and wants to get them signed as soon as possible.
What is the best solution for getting these contracts negotiated and signed quickly?
The telecommunications company can travel to the different countries to negotiate and sign the contracts.
The telecommunications company can authorise a principal to negotiate and sign the contracts on its behalf.
The telecommunications company can authorise a third party to sign the contract twice; once on behalf of the client and once on behalf of itself.
The telecommunications company can authorise a negotiator to act as an agent for them and then the telephony company can sign once the contract is agreed.
The telecommunications company can authorise a third party to act as its agent to negotiate and sign the contracts on its behalf.
The telecommunications company can authorise a third party to act as its agent to negotiate and sign the contracts on its behalf.
Correct. There is no need for the third party to sign on behalf of itself. It signs as an authorised agent on behalf of the telecommunications company. This is likely to be more efficient than either of the options which require representatives of the company itself to travel. 'Authorising a principal' is not a recognised concept.
37
Stan, a retailer, sells high quality watches from his shop at 5 Beck High Street. On Monday morning, a man walked into the shop. He introduced himself to Stan as the famous singer, Vick Vegger. He said that he had heard that the shop was selling top quality watches and that he would like to buy some. Stan recommended two handmade watches, at a price of £10,000 each. Vick agreed to buy them and gave Stan a cheque. On Wednesday morning Stan tried to cash the cheque. The bank informed him that the cheque is a forgery and that it will not be honoured. On Wednesday afternoon Stan informed the police that he had been conned by a rogue impersonating Vick Vegger. The police have found the watches. The rogue had already sold them to a respectable retired man named Jacob, on Tuesday morning. Which of the following might be the most likely outcome based on the above facts?
The contract between Stan and the impersonator of Vick Vegger is voidable on the grounds of misrepresentation as to identity and Stan will be able to get his watches back.
The contract between Stan and the impersonator of Vick Vegger is voidable on the grounds of mistake as to identity and Stan will be able to get his watches back.
The contract between Stan and the impersonator of Vick Vegger is void on the grounds of misrepresentation as to identity and Stan will be able to get his watches back.
Sam will not be able to get the watches back on the grounds of either mistake or misrepresentation.
The contract between Stan and the impersonator of Vick Vegger is void on the grounds of mistake as to identity and Stan will be able to get his watches back.
Sam will not be able to get the watches back on the grounds of either mistake or misrepresentation.
Correct. There is no mistake that would render the contract void: Lewis v Avery. The contract is probably voidable for misrepresentation, but rescinding at this stage won’t get the watches back, because they have already been sold to Jacob, who has good title to them.
38
A buyer is shopping for a wedding dress when she sees a dress by a famous designer on sale for £100. The seller had made a mistake when writing the price tag and it should have been on sale for £1000. The buyer knows that the dress is under-priced and she quickly buys the dress.
Which of the following statements is correct as to whether or not the contract is valid / void / voidable, and why?
The contract of sale is void as there is no agreement.
The contract for sale is voidable because there is no agreement.
The contract for sale is valid because there was a valid offer and acceptance.
The contract for sale is void because the seller was mistaken about the value of the dress.
The contract for sale is voidable by the seller when he realises his mistake.
The contract of sale is void as there is no agreement.
There is no real agreement as the seller made a unilateral mistake in expressing his intention so the acceptance does not correspond to the offer. In cases of mistake, a contract is void, not voidable.
39
An advertising company sells advertising space. A retailer agrees to buy advertising space for three months from the advertising company for £1,000. It provides the advertising company with an advert to use for the three-month period. Before the advert is posted the retailer changes its mind and refuses to pay the £1,000.
Which ONE of the following statements BEST EXPLAINS the legal position?
The advertising company cannot affirm the contract as it is only in extreme cases that it would be reasonable for the innocent party to affirm the contract.
Unless the retailer can prove that the advertising company did not have a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
Provided the advertising company can prove that it had a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
The advertising company cannot affirm the contract and claim the contract price as they are required to take reasonable steps to mitigate their loss.
The advertising company cannot affirm the contract as the retailer’s cooperation is required to pay the contract price.
Unless the retailer can prove that the advertising company did not have a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
Correct. This answer correctly sets out the innocent party’s right to affirm the contract in response to a breach of condition. Although the other answer options sound plausible, they are all incorrect. The burden of proof is on the contract breaker to show that the innocent party did not have a legitimate interest in affirming. It is only in exceptional circumstances that the party in breach of condition will be able to discharge this burden and fetter the innocent party’s right to affirm.
40
A dental surgery contracted with a small company to install new lighting in the surgery. After the work was completed, the dental surgery explained to the company that it was in financial difficulties and asked if the company would accept a lesser sum than the amount due under the contract in exchange for a free dental check-up for the company’s employees. The company agreed.
Which statement best describes whether this agreement is binding?
The agreement is not binding because the entire obligations rule applies.
The agreement is binding because there has been voluntary acceptance of partial performance.
The agreement is binding because of accord and satisfaction.
The agreement is not binding as payment of a lesser sum cannot discharge a contractual obligation to pay a greater sum.
The agreement is binding as there was a mutual waiver of obligations.
The agreement is binding because of accord and satisfaction.
This is the correct answer. Under the general rule, performance of an existing obligation is not good consideration for a promise to accept less. However, as the company has agreed to accept a lesser sum plus dental services instead of the full sum, there has been accord and satisfaction here so this agreement will be binding. The original contractual obligation to pay the full sum has been discharged by agreement.
41
A builder contracts with a homeowner to build a swimming pool by the summer of the year. A nationwide shortage of skilled tilers means that the contract will not be completed by the summer and will now take until the winter of that year to complete at significantly greater cost to the builder, as tilers from Europe will need to be brought in. The builder argues the contract to be frustrated.
Which of the following statements as to whether the contract has been frustrated is the most accurate?
The contract is frustrated on the basis of impossibility.
On the basis that the contract is now significantly different in time and cost than first agreed, the contract is frustrated.
The contract now being substantially more difficult to perform will render the contract frustrated.
The contract now being substantially more difficult to perform will not render the contract frustrated.
The contract is frustrated on the basis of unforseeability.
The contract now being substantially more difficult to perform will not render the contract frustrated.
Correct. Just because a contract is harder / more expensive to perform does not allow for the defence of frustration. The builder could not argue this in order to get out of the contract.
42
A builder agrees to build a yoga studio for a hotel. The contract stipulates that £15,000 is payable once the foundations are built, £15,000 is payable once the roof is built and the final £15,000 is payable three months after completion. The builder walks away from the contract after the foundations have been built.
On what basis is it most likely that the builder can enforce payment under the contract?
The builder is entitled to £15,000 as partial performance has taken place.
The builder is entitled to £15,000 as the contract allows for sums to be payable by divisible amounts.
The builder is entitled to £15,000 as substantial performance of the contract has taken place.
The builder is entitled to £15,000 on a quantum meruit basis.
The builder is entitled to £15,000 as voluntary acceptance of partial performance has occurred.
The builder is entitled to £15,000 as the contract allows for sums to be payable by divisible amounts.
This is a contract where payment is payable in instalments (it is divisible). As works are completed at each stage the requisite payment of £15,000 will be due in respect of the works done, namely one of the three stages having been satisfied.
43
An electrician agreed to install light fittings in a hotel at a cost of £10,000. A deposit of £2,000 was paid at the time of contracting with the balance being payable upon completion. The hotel was destroyed by a typhoon two weeks prior to the work being fully completed.
Under the Law Reform (Frustrated Contracts) Act 1943 what is the most likely outcome should the electrician wish to enforce the contract?
The contract is not fulfilled, and the electrician is entitled to reasonable expenses incurred prior to the frustrating event not exceeding the initial deposit.
The contract, if substantially fulfilled, will entitle the electrician to payment upon a quantum meruit basis.
The contract if substantially fulfilled will entitle the electrician to the entire payment with an adjustment for the incomplete work.
The contract has been frustrated by impossibility and the electrician is therefore entitled to nothing.
The contract is not fulfilled, and the electrician is entitled to a minimum of £1,000 in relation to the expenses incurred prior to the frustrating event.
The contract is not fulfilled, and the electrician is entitled to reasonable expenses incurred prior to the frustrating event not exceeding the initial deposit.
Correct – this is the likely outcome in light of the Act and Appleby v Myers. The court will use its discretion to award such a sum as is reasonable prior to the frustrating event (see s 1(2), namely no more than such sums paid prior to the frustrating event).
??
44
A Garden Centre with a large supply of Christmas trees pays a local magazine to advertise their company in the November edition of the publication. A full-page colour advert is designed for the magazine. Shortly before the release date the magazine informs the Garden Centre that the advert will not go into the November edition as a rival Garden Centre has offered them twice the price to advertise their Company instead. Which of the following statements best describes the basis of the assessment of damages the Garden Centre is likely to obtain from the court for breach of contract by the magazine ?
The Garden Centre is unlikely to receive anything as they have been advised that the advert will not appear before the due date for its publication.
The Garden Centre is likely to obtain an award for the expectation interest, being the loss in profit suffered as a result of the shortfall in Christmas tree sales
The Garden Centre is likely to obtain an award on a restitutionary basis, because the magazine has contracted with a more lucrative customer
The Garden Centre is unlikely to receive anything as the Garden Centre has been advised that the advert will not appear before the due date for its publication and the Garden Centre has taken no steps to mitigate its loss.
The Garden Centre is likely to obtain an award for reliance interest, being the reasonable pre-contract costs incurred in designing the advert
The Garden Centre is likely to obtain an award for reliance interest, being the reasonable pre-contract costs incurred in designing the advert
Correct. It is likely that the pre-contract expenses will be awarded. These are relatively easily quantifiable. The court is unlikely to make an award on a restitutionary basis because there are no exceptional circumstances and the usual remedies appear adequate. The court is unlikely to make an award for the expectation interest because it would be hard to calculate and/or speculative.
45
Kate, who runs a printing press, decided to expand her business and ordered a large printer from Dave who owns PrintsRUs. Unfortunately when the printer arrived, it was faulty and Kate had to wait 3 months for a replacement. Kate would like to claim for (i) the loss of the extra printing business that she could have taken on with immediate use of the new printer; and (ii) the loss of a number of highly lucrative printing contracts which she could have obtained. Which of the following answers is the MOST ACCURATE one?
Kate can recover for the ordinary extra printing business that she would have taken on but the lucrative printing contracts would be too remote as PrintsRUs did not have actual knowledge of these.
Kate cannot recover for the ordinary printing business or the lucrative printing contracts as they are not losses which arise naturally.
Kate can recover for both the ordinary extra printing business that she would have taken on and the lucrative printing contracts as PrintsRUs have imputed knowledge of both.
Kate cannot recover for the lucrative printing contracts as it is not a loss which arises naturally.
Kate cannot recover for the ordinary extra printing business as PrintsRUs did not have actual knowledge of it.
Kate can recover for the ordinary extra printing business that she would have taken on but the lucrative printing contracts would be too remote as PrintsRUs did not have actual knowledge of these.
Correct. Well done! PrintsRUs have imputed knowledge in relation to the ordinary extra printing because it is a loss which arises naturally. This is not true in relation to the loss of the lucrative printing contracts, and nor does PrintsRUs have actual knowledge of those contracts.
46
A caterer contracts with a wholesale food supplier to supply and deliver the ingredients she requires to cater for an event. The caterer will make £800 profit from the event. The event organiser has told the caterer that if the event goes well, she would use the caterer for five future contracts which would generate £5,000 profit for the caterer. The caterer has not told this to anyone. In breach of contract the wholesale food retailer does not deliver any of the ingredients to the caterer on the day of the event as agreed. At such short notice the caterer does not have time to source alternative fresh ingredients and prepare the food. The event organiser refuses to go ahead with the event (this is justified in accordance with the terms of the contract) and awards the five future contracts to a different caterer. Which ONE of the following statements BEST EXPLAINS the likely position as to the damages the caterer can recover from the wholesale food supplier?
The caterer can claim the £800 in damages. She will not be able to claim the £5,000 as this is too remote.
The caterer can claim the £5,000. She will not be able to claim the £800 as this is too remote.
The caterer cannot claim either the £800 or the £5,000 in damages as both are too remote.
The caterer can claim both the £800 and the £5,000 in damages.
The caterer can claim the £800 in damages. She will not be able to claim the £5,000 as this is too speculative.
The caterer can claim the £800 in damages. She will not be able to claim the £5,000 as this is too remote.
47
A leisure company engages a construction company to build a swimming pool that is 50 metres in length for £100,000. When the pool is finished, it found to be 49 metres long – a breach of contract. The leisure company needs the swimming pool length to be rectified as the current length is unsuitable for swimming competitions. It will cost £110,000 to rectify the issue.
Which ONE of the following statements BEST EXPLAINS the legal position in relation to the measure of recoverable damages?
The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to nominal damages.
The leisure company will be able to claim the £110,000.
The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to damages for the diminution in value of the pool.
The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to damages for its reliance loss.
The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to damages for the loss of amenity.
The leisure company will be able to claim the £110,000.
Correct. This answer reflects the cost of cure which is the default mechanism for calculating expectation loss in a contract for defective works. Although the other answer options sound plausible, they are all incorrect. Cost of cure is reasonable on the facts as it not out of all proportion to the benefit to be obtained. Diminution of value is not a viable alternative to cost of cure as it is too difficult to calculate. Loss of amenity is not a viable alternative to cost of cure as it is not available for commercial contracts of this nature.
48
A dealer supplied a defective cooker to a café owner. The café owner discovered the defect but went on to use the cooker knowing that is was unsafe to do so. The cooker caught fire resulting in personal injury to the café owner and damage to his property. Which one of the following statements best describes the legal position in relation to the damages recoverable by the café owner in a claim against the dealer for breach of contract (assuming a breach of contract is established)?
The café owner will not be able to recover damages for his personal injury or property damage because the dealer’s breach was not the effective cause of the fire.
The café owner will not be able to recover damages for his personal injury or property damage because there is a break in the chain of causation.
The café owner will not be able to recover damages for his personal injury or property damage because the losses are too remote.
The café owner will be able to recover damages for his personal injury and property damage.
The café owner will not be able to recover damages for his property damage because there is a break in the chain of causation. However, the claimant will be able to recover damages for his personal injury.
The café owner will not be able to recover damages for his personal injury or property damage because there is a break in the chain of causation.
Correct. This statement correctly applies the law in relation to factual and legal causation. The defective cooker was the effective cause of the fire (so factual causation is established) but the café owner’s intervening act of using the cooker knowing it is unsafe to do so will break the legal chain of causation as this would not be deemed ‘likely to happen’ (see Lambert v Lewis [1982] AC 255).
49
A delivery company enters into an agreeement to hire six vans from a company which has a fleet of vans for a period of 3 months. In breach of contract, the company with the fleet of vans fails to make any vans available on the agreed date. What remedy is the court likely to grant the delivery company?
No remedy.
A mandatory injunction.
A prohibitory injunction.
Damages.
Specific performance.
Damages
Correct. Damages are likely to be awarded, because the delivery company is likely to be entitled to a remedy. There is no reason on these facts to think that a prohibitory injunction is justified – there is nothing relevant to prohibit the delivery company from doing, and damages would appear to be an adequate remedy. There is no reason on these facts to think that a mandatory injunction is justified, and if the intention is to compel the company with the fleet to make vans available, then an order for specific performance is more appropriate – but again, damages would appear to be an adequate remedy, so an order for specific performance will not be granted.
50
A recruitment company agrees with a web-design company that the web-design company will pay £4,500 to the recruitment company if it engages an IT developer introduced to it by the recruitment company. The terms agreed between the parties provide that the web-design company must tell the recruitment company before it engages the IT developer, and that if it fails to do so, it must pay a sum of £13,500 instead. The web-design company engages the IT developer without telling the recruitment company. How is the court likely to determine the sum to be paid by way of damages?
The court is likely to award damages of £13,500 on the basis that the clause providing for payment of that sum is a primary obligation rather than a secondary obligation.
The court is likely to award damages of £13,500 on the basis that the clause providing for payment of that sum is a lawful liquidated damages clause.
The court is likely to refuse to award damages on the basis that the clause providing for payment of £13,500 is a penalty clause.
The court is likely to refuse to award damages on the basis that the clause providing for payment of £13,500 is a penalty clause and it is not possible to predict what would have happened if the web-design company had told the recruitment company before engaging the IT developer.
The court is likely to make an award of £4,500 on the basis that the clause providing for payment of £13,500 is a penalty clause.
The court is likely to make an award of £4,500 on the basis that the clause providing for payment of £13,500 is a penalty clause.
Correct. In terms of the other answers, the clause is a secondary obligation (not a primary obligation) – it arises upon breach. It is penal, because the detriment it imposes is out of all proportion to any legitimate interest of the innocent party in the performance of the primary obligation – the interest in performance appears to be simply to recover the fee of £4,500, and so a penalty of £13,500 (three times that sum) appears disproportionate, on the facts presented. The effect of finding a clause to be penal is that the court will need to assess the damages itself – not that any award at all is refused.
51
Your client has built a ‘garden of tranquility’. There are currently building works next to the garden and your client has offered to pay the building contractor £100 a week if they do not use heavy machinery between the hours of 7-10am and 3-6pm. The building contractor agrees to this, and the arrangement works well for the first month but after that the heavy machinery is used during the prohibited times and your client is very upset about this. He tries to reason with the contractors but then gives up. Six months later, your client becomes aware of the possibility of seeking an injunction and he has now applied to the court for a prohibitory injunction. How likely is the court to grant this injunction?
The court is unlikely to grant the injunction because of the delay.
The court is likely to grant an injunction, despite the delay, as it will use its discretion to grant one where it appears to be just and convenient to do so.
The court is likely to grant the injunction because the client has acted in accordance with all the equitable maxims.
The court is unlikely to grant the injunction because the client's conduct has been poor (he has failed to come to court 'with clean hands').
The court is likely to grant the injunction because an award of financial compensation is not an adequate remedy.
The court is unlikely to grant the injunction because of the delay.
This is correct. Any delay in applying for an injunction can damage seriously the prospects of obtaining one. In terms of the other answers, an award of financial compensation would appear to be inadequate. The client has not 'taken matters into this own hands'. The client has not failed to come to court with clean hands.
52
A games manufacturer’s long awaited computer game is to be released on 10 September. The manufacturer agrees to sell 10,000 games to a retailer at a wholesale cost of £20 each. As the retailer is anticipating large queues and a high volume of sales on the day of advertised release, they have agreed that the games must be delivered on 9 September. Clause one of the contract between the parties (which both parties have signed) indicates in small print that, in the event of late delivery, the manufacturer must pay the retailer £500 every day until delivery is made. The manufacturer delivers the games 2 days late. Based on the above information, which of the following most accurately describes the remedy available to the retailer?
A valid liquidated damages clause has been incorporated into the contract and accordingly the retailer is likely to be awarded £1,000 in damages.
Clause one has been incorporated into the contract but it is likely to be an unenforceable penalty clause because it provides for a disproportionate sum to be paid. The retailer is likely to be awarded nominal damages.
Clause one has been incorporated into the contract but it is likely to be an unenforceable penalty clause because it does not protect a legitimate business interest. The retailer is likely to be awarded nominal damages.
Clause one has been incorporated into the contract but it is void in accordance with the Unfair Contract Terms Act 1977.
Clause one has not been incorporated into the contract. The retailer is likely to be awarded nominal damages.
A valid liquidated damages clause has been incorporated into the contract and accordingly the retailer is likely to be awarded £1,000 in damages.
Correct.
The manufacturer has breached by the contract by delivering the games 2 days late. The clause has been incorporated by signature – in those circumstances, the fact that it is in 'small print' is not relevant. The clause is likely to be a valid liquidated damages clause: there is likely to be a legitimate business interest in performance here as the games need to be ready for the sale to coincide with the day of advertised release. Many keen customers will be disappointed and the sales momentum from the release date will be lost. In addition, the detriment imposed by the clause is proportionate to protect the legitimate interest - the amount of £500 would be considered by reference to the value of future retail sales and the value of any loss of reputation. When you consider the loss of goodwill from fans and loss of sales momentum, this is unlikely to be seen as out of all proportion. UCTA does not apply.
53
A man rents out a room in his flat to a student. The man also lives in the flat. The man hosts loud parties in the flat every week from Thursday to Monday. On 31 March, the student pays the owner of the flat £500 in return for the owner’s promise not to have any parties in the flat on any day during April and May. On 25 May, the owner of the flat starts making preparations to host a party in their flat on 31 May. Which of the following statements best describes how the student might in principle enforce the owner of the flat’s promise?
The student can enforce the owner of the flat’s promise by seeking to recover the £500 paid in advance to the owner of the flat.
The student can ask the police to enforce the contract.
The student can ask the local authority to enforce the contract.
The student can enforce the owner of the flat’s promise through an order for a prohibitory injunction.
The student can enforce the owner of the flat’s promise through an order for damages for breach of contract.
The student can enforce the owner of the flat’s promise through an order for a prohibitory injunction.
Correct
Correct. An injunction is an order of the court restraining the defendant from breaching a term of a contract. This option has the advantage (compared to damages) of the fact it can be sought before the actual breach is committed ie before the party takes place. Neither the police nor the local authority are likely to assist in relation to a purely contractual matter. It is unlikely the student can seek to recover the £500 paid in advance to the owner of the flat because it is unlikely that the student will convince the court that the owner of the flat has been unjustly enriched at her expense. Further, there is no total failure of consideration so the money paid in advance will not be recoverable (in any event, recovering the £500 would not be 'enforcing the promise' so much as unwinding the transaction
54
Which ONE of the following statements is CORRECT in relation to prescribed mode of acceptance?
Acceptance must be communicated using the same mode as the offer.
If the offeror states that acceptance should be communicated in a certain mode, the offeree must comply with this.
If the offeror has stated that acceptance must be in a certain mode and no other mode will do, the offeree’s acceptance will still be valid if they respond in a different mode which is no less advantageous to the offeror.
Generally, acceptance may be communicated by the offeree in any manner.
Generally, acceptance may be communicated by the offeree in any manner.
Correct. This answer correctly sets out the general principle in relation to mode of acceptance.
55
A dress shop owner is reducing the price of one of his dresses. He places a notice in his shop window which states, ‘Designer dress, only £50.’ A woman calls into the shop and says, ‘I’ll give you £30 for the dress.’ The shop owner replies, ‘I’ll take £40.’ The woman replies, ‘That’s still too much’ and walks out of the shop. A few minutes later, the woman comes back into the shop and says, ‘On second thoughts, I will pay £40.’ The shop owner replies, ‘I’ve changed my mind and I don’t want to sell it to you anymore.’ Which ONE of the following statements BEST EXPLAINS the legal position?
The shop owner does have a contract to sell the dress. The notice in the shop window is an invitation to treat. The woman makes an offer to buy the dress for £30. The shop owner makes a counter offer to sell the dress for £40. The woman accepts the shop owner’s offer to sell for £40. The shop owner’s attempt to revoke his offer is too late.
The shop owner does not have a contract to sell the dress. The notice in the shop window is an offer. The woman makes a counter offer to buy the dress for £30. The shop owner makes a counter offer to sell the dress for £40. The woman’s response is a rejection, killing the shop owner’s offer to sell for £40. The woman’s attempt to accept the shop owner’s offer to sell at £40 is not an acceptance but an offer. The shop owner is free to reject the woman’s offer.
The shop owner does have a contract to sell the dress. The notice in the shop window is an offer. The woman makes a counter offer to buy the dress for £30. The shop owner makes a counter offer to sell the dress for £40. The woman accepts the shop owner’s offer to sell for £40. The shop owner’s attempt to revoke his offer is too late.
The shop owner does not have a contract to sell the dress. The notice in the shop window is an invitation to treat. The woman makes an offer to buy the dress for £30. The shop owner makes a counter offer to sell the dress for £40. The woman’s response is a rejection, killing the shop owner’s offer to sell for £40. The woman’s attempt to accept the shop owner’s offer to sell at £40 is not an acceptance but an offer. The shop owner is free to reject the woman’s offer.
The shop owner does not have a contract to sell the dress. The notice in the shop window is an invitation to treat. The woman makes an offer to buy the dress for £30. The shop owner makes a counter offer to sell the dress for £40. The woman’s response is a rejection, killing the shop owner’s offer to sell for £40. The woman’s attempt to accept the shop owner’s offer to sell at £40 is not an acceptance but an offer. The shop owner is free to reject the woman’s offer.
Correct. This answer correctly sets out applies the rules relating to invitation to treat, offers, counter offers and termination of an offer.
56
A man makes an offer to a woman to sell his piano. He tells her that she should accept by letter sent to his home address by Monday. She posts her letter of acceptance on Friday and sends an email on the same day confirming her acceptance. She misaddresses the letter and the letter never arrives. The man reads the email on Friday but, as it is not the letter he requested, sells the piano for a higher price to someone else. Which ONE of the following statements BEST EXPLAINS the legal position?]
The postal rule has been ousted so the letter is not a valid acceptance. However, the man was not explicitly mandatory when he attempted to prescribe a mode of acceptance (by letter) so will therefore be bound by the email message of acceptance if the court deems it to be equally advantageous.
The postal rule will apply to the letter meaning that it is valid upon being posted and there has therefore been valid acceptance in the prescribed mode. The man was explicitly mandatory when he prescribed a mode of acceptance (by letter) so the email message is also not a valid acceptance
The letter is not a valid acceptance as it is misaddressed so the postal rule will not apply. However, the man was not explicitly mandatory when he attempted to prescribe a mode of acceptance (by letter) so will therefore be bound by the email message of acceptance if the court deems it to be equally advantageous
The letter is not a valid acceptance as it is misaddressed so the postal rule will not apply and the man was explicitly mandatory when he prescribed a mode of acceptance (by letter) so the email message is also not a valid acceptance.
The letter is not a valid acceptance as it is misaddressed so the postal rule will not apply. However, the man was not explicitly mandatory when he attempted to prescribe a mode of acceptance (by letter) so will therefore be bound by the email message of acceptance if the court deems it to be equally advantageous
Correct. This answer correctly applies the relevant exception to the postal rule to the letter of acceptance and the rules of prescribed mode and communication of acceptance to the email.
57
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?
The auctioneer is in breach of a bilateral contract and the antique collector is entitled to damages.
The auctioneer is in breach of a unilateral contract and the antique collector is entitled to damages.
The auctioneer is in breach of a bilateral contract and the antique collector is entitled to buy the table for £500.
The auctioneer is in breach of a unilateral contract and the antique collector is entitled to nominal damages.
There is no contract between the parties and the antique collector is entitled to nothing.
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).
58
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?
The interested buyer’s response is a request for further information. The campervan owner’s offer is extinguished.
The campervan owner’s email is an invitation to treat. The interested buyer’s response is an offer.
The interested buyer’s response is a counter offer. The campervan owner’s offer is extinguished.
The interested buyer’s response is a request for further information. The campervan owner’s offer remains open for acceptance.
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.
Correct. The statement is a request for further information as the interested buyer is making an inquiry 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).
59
Which one of the following statements is most CORRECT in relation to unilateral offers?
A unilateral offer is an offer which is accepted by performance of the requirements set out in the offer.
A unilateral offer is an offer which is made to the whole world and is capable of acceptance by performance of the requirements set out in the offer.
A unilateral offer is an offer which is collateral to the main offer and where there is a promise to keep the offer open for a specified period of time, in return for valid consideration.
A unilateral offer is an offer which is accepted by the offeree communicating an unconditional acceptance of the requirements set out in the offer.
A unilateral offer is an offer which is accepted by performance of the requirements set out in the offer.
Correct. Well done!
60
Which one of the following statements is CORRECT in relation to the rules of postal acceptance?
Where post is deemed to be the proper means of communication, the acceptance takes effect from the moment the letter of acceptance is properly posted.
Where post is deemed to be the proper means of communication, the acceptance takes effect from the start of the business day that the letter was received by the offeror.
If a letter of acceptance is properly posted but never reaches the offeror then the postal rule is nullified.
If the original offer contains details of the postal address then it is always acceptable to reply by post.
Where post is deemed to be the proper means of communication, the acceptance takes effect from the moment the letter of acceptance is properly posted.
Correct. Well done!
61
Which one of the following statements is CORRECT in relation to intention to create legal relations (ICLR)?
ICLR is presumed to exist, unless one of the parties can show that there was no ICLR.
ICLR is presumed to exist between companies, but presumed not to exist between individuals.
ICLR is present in commercial situations, but not in domestic situations.
ICLR is presumed in commercial situations, but there will be no ICLR in domestic situations.
ICLR is presumed to exist in commercial situations, but presumed not to exist in domestic situations
ICLR is presumed to exist in commercial situations, but presumed not to exist in domestic situations
Correct. Well done. Note that presumptions can of course be ‘rebutted’ – overturned.
62
In January, a business owner takes a lease on a premises for £2,500 per month. The business owner is unable to keep up with the rent and asks his landlord if he can pay a reduced rent of £2,000 per month from March onwards. The landlord agrees. The business owner spends some of the money which he saves on rent, on advertising. As a result, by June, he is making a good profit from the business. Which one of the following statements best explains the legal position?
Although the general rule is that a promise to accept less is unenforceable due to a lack of consideration, the business owner may be able to rely on the defence of promissory estoppel to prevent the landlord from suing him for the full rent for the months of March, April and May.
The general rule is that a promise to accept less is unenforceable due to a lack of consideration, consequently, on this basis the landlord will be able to sue the business owner for the full £2,500 for March, April and May. The business owner will not be able to rely on promissory estoppel as it can only be used as a defence.
The landlord will not be able to sue the business owner for the full £2,500 for March, April and May as the business owner has provided fresh consideration by spending money on advertising.
The general rule is that a promise to accept less is unenforceable due to a lack of consideration, consequently the landlord will be able to sue the business owner for the full £2,500 for March, April and May. The business owner will not be able to rely on the defence of promissory estoppel as he has not relied on the promise to his detriment.
The general rule is that a promise to accept less is unenforceable due to a lack of consideration, consequently the landlord will be able to sue the business owner for the full £2,500 for March, April and May. The business owner will not be able to rely on the defence of promissory estoppel as the promise was insufficiently clear in its duration.
Although the general rule is that a promise to accept less is unenforceable due to a lack of consideration, the business owner may be able to rely on the defence of promissory estoppel to prevent the landlord from suing him for the full rent for the months of March, April and May.
Correct. This answer reflects the general rule that a promise to accept less is unenforceable due to a lack of consideration and the equitable exception of promissory estoppel. Although the other answer options sound plausible they are all incorrect. No fresh consideration has been provided under the authority of Pinnel’s Case (1602) 5 Co Rep 117. The building owner would be using promissory estoppel as a shield (defence). The promise is clear and unequivocal. Reliance on the promise need not be to the promisee’s detriment.
63
A customer pays a coach tour operator the full agreed price of £500 for a coach tour. Before the tour starts the tour operator explains that due to rising fuel costs, all customers must agree to pay a further £115 if they want to go ahead with the tour. The customer agrees to pay the extra £115, but when the tour operator sends an invoice for this sum (after the tour) the customer refuses to pay it. Which ONE of the following statements best explains the legal position?
The tour operator has not provided good consideration because consideration must move from the promisee, and the additional £115 will be spent on purchasing fuel from a third party.
The tour operator has provided good consideration for the agreement to provide £115 because carrying passengers by coach when fuel prices are high involves going above and beyond carrying them when fuel prices are low.
The tour operator has not provided good consideration because if the coach tour was adequate consideration for a payment of £500, it cannot also be adequate consideration for a payment of £615 (£500 + £115).
The tour operator has not provided good consideration for the additional £115 because in agreeing to take John on the tour, it is only agreeing to provide what it was already obliged to provide.
The tour operator has provided good consideration for the additional £115, because without that money, it would have suffered a significant loss of profits.
The tour operator has not provided good consideration for the additional £115 because in agreeing to take John on the tour, it is only agreeing to provide what it was already obliged to provide.
Correct
Correct.
64
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?
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.
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.
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.
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 gardener is not entitled to payment as payment was not discussed prior to the service being carried and so the act of painting the shed is past consideration.
Correct. The exception to the past consideration under Pao On v Lau Yiu Long [1979] UKPC 17 is particularly relevant to this scenario.
65
Which one of the following statements is CORRECT in relation to the rule of consideration concerning adequacy?
The courts will protect a party who freely agrees to provide a smaller value of consideration.
If an agreement is freely reached, the inadequacy of the price is material to the existence of a binding contract.
If an agreement is not freely reached, the inadequacy of the price is immaterial to the existence of a binding contract.
The courts will not interfere with a bargain freely reached by the parties.
It is the court’s duty to assess the relative value of each party’s contribution to the bargain.
The courts will not interfere with a bargain freely reached by the parties.
Correct. Well done. This relates to the doctrine of freedom of contract.
66
Which one of the following statements is CORRECT in relation to the rule of consideration concerning part payment of a debt?
Where a debtor pays a lesser sum to his creditor than that which was due, the general rule is that the debtor is not discharged from his obligation to pay the balance.
If a creditor accepts payment of a lesser sum from a third party, the creditor can then sue the debtor for the difference at a later stage.
Where a debtor pays a lesser sum to his creditor than that which was due, the creditor cannot then sue for the remaining amount.
With the development of the doctrine of Promissory Estoppel, where a debtor pays a lesser sum to his creditor than that which was due, the debtor will be discharged from his obligation to pay the balance.
Where a debtor pays a lesser sum but at the creditor’s request pays earlier than agreed, compliance with this request will not excuse the creditor from suing the debtor for the balance.
Where a debtor pays a lesser sum to his creditor than that which was due, the general rule is that the debtor is not discharged from his obligation to pay the balance.
Correct. Well done. At common law, the debtor remains liable (Foakes v Beer).
67
The owner of a house contracts with a painter to paint the walls and skirting boards of all rooms for £1,200. Part way through the job the owner’s mother visits the house to see how the work is progressing. The painter has not yet stared painting the skirting boards. The owner’s mother promises to pay the painter £300 to paint the skirting boards. The painter agrees. Which of the following statements best explains the legal position?
The painter will not be entitled to the extra £300 as the promise between the house owner’s mother and the painter is unenforceable as consideration is past.
The painter is not entitled to the extra £300 because performance of an existing obligation owed to the promisor is not good consideration for a promise to pay more.
The painter will be entitled to the £1,200 and £300 because the performance of a pre-existing duty owed to the house owner is regarded as sufficient consideration for the painter’s promise to the house owner’s mother.
The painter is entitled to the extra £300 because the house owner’s mother has obtained a practical benefit of ensuring the skirting boards are painted.
The painter will be entitled to the £1,200 and £300 because the defence of promissory estoppel will apply. It is inequitable for the house owner’s mother to renege on her promise.
Correct
Correct. This answer correctly applies the legal principle that the performance of a pre-existing duty owed to a third party will be regarded as sufficient consideration for a promise given by the promisor.
?
68
The current definition of economic duress was first set out by Mr Justice Dyson in DSND Subsea Ltd v Petroleum Geo Services ASA [2000] and appears, for the time being, to be the settled definition of economic duress. In this case, Dyson J stated that the ingredients of actionable duress are that:
There must be pressure the effect of which is that the victim fears for their physical or mental safety, which is illegitimate, and which is a significant cause inducing the claimant to enter into the contract.
There must be illegal pressure on a victim resulting in an absence of alternatives to entering into the contract.
There must be pressure on the victim by way of a threatened breach of contract, which is a contributing factor to the claimant entering into the contract.
There must be pressure whose effect is that there is a lack of practical choice for the victim, which is illegitimate, and which is a significant cause inducing the claimant to enter into the contract.
There must be illegitimate pressure on a victim resulting in a lack of practical choice for the victim which is the sole cause inducing the claimant to enter into the contract.
There must be pressure whose effect is that there is a lack of practical choice for the victim, which is illegitimate, and which is a significant cause inducing the claimant to enter into the contract.
Correct. Well done!
69
An entrepreneur hires a property for a large marketing event on 1 August. A fixed fee of £15,000 is agreed. Twenty potential investors are scheduled to attend the event. On 30 July, the property owner informs the entrepreneur that his costs have risen by ten percent and demands an additional £1,500. He states that unless she pays him the extra, he will not make the property available to her. The entrepreneur reluctantly agrees to pay the extra £1,500. On 2 August the entrepreneur tells the property owner that she will not be paying the additional £1,500, because she only agreed to pay it under economic duress. Which one of the following statements is INCORRECT?
The fact that the action threatened by the property owner would amount to a breach of contract makes it more likely that the entrepreneur can show economic duress.
The fact that not going ahead with the marketing even would have caused the entrepreneur significant financial loss makes it more likely that she can show economic duress.
The fact that the property owner’s costs have risen justifies the demand for an additional payment. This is unlikely to amount to illegitimate pressure amounting to economic duress.
The fact that the entrepreneur refused to pay the day after the marketing event makes it more likely that she can show economic duress.
The fact that the property owner demanded the extra payment to make the property available two days ahead of the marketing event makes it more likely that the entrepreneur can show economic duress.
The fact that the property owner’s costs have risen justifies the demand for an additional payment. This is unlikely to amount to illegitimate pressure amounting to economic duress.
Correct
Correct. This statement is the only one that is incorrect. As this is a fixed price contract the demand for extra payment is likely to be viewed as illegitimate pressure. See, for example, Atlas Express v Kafco Ltd [1989] 1 All ER 641
70
Which one of the following statements is CORRECT when dealing with duress to the person and the burden of proof?
The burden of proof is on the victim to show the threats and unlawful pressure contributed entirely to their decision to contract.
The burden of proof is on the party who exerted the pressure to show that the coercion was not a significant cause on the victim’s decision to contract.
The burden of proof is on the party who exerted the pressure to show the threats and unlawful pressure didn’t contribute in a large part to the victim’s decision to contract.
The burden of proof is on the party who exerted the pressure to show the threats and unlawful pressure contributed nothing to the victim’s decision to contract.
The burden of proof is on the victim to show the threats and unlawful pressure contributed to their decision to contract.
The burden of proof is on the party who exerted the pressure to show the threats and unlawful pressure contributed nothing to the victim’s decision to contract.
71
Which one of the following statements is CORRECT in relation to duress to goods?
A contract can only be avoided where there is a threat to seize an owner’s property.
A contract can be avoided where there is a threat to seize an owner’s property or to damage it.
A contract can only be avoided where there is a threat to damage an owner’s property.
A contract can always be avoided where there is duress to goods.
Duress to goods will not result in any ensuing contract being set aside.
A contract can be avoided where there is a threat to seize an owner’s property or to damage it.
Correct. Well done (Occidental Worldwide Investment v Skibs A/S Avanti 1976)
72
A homeowner enters into a contract with a tree surgery company (‘the company’), for it to cut down two trees in her garden. The contract is in writing, and records the work to be carried out, when it will be carried out, and a price. No other terms are agreed. The company fails to take any steps to control the way in which the trees fall when cut, and one tree crashes through the homeowner’s conservatory, causing significant loss and damage. Which of the following is the clearest legal argument for the homeowner to advance?
The company has breached s. 52 of the Consumer Rights Act 2015.
The company has breached s.13 of the Supply of Goods and Services Act 1982.
The company has breached s. 9(1) of the Consumer Rights Act 2015.
The company has breached s.14(2) of the Sale of Goods Act 1979.
The company has breached s. 49 of the Consumer Rights Act 2015.
The company has breached s. 49 of the Consumer Rights Act 2015.
Correct
Correct. This answer recognises the distinction between business-to-consumer contracts, and business-to-business contracts and applies the correct statute.
73
A road maintenance company hires a van from vehicle hire company, at a cost of £270. The van is wholly unreliable and causes the maintenance significant losses. Under the contract between the two parties, the maintenance company has to return the van in the same condition as at the start of the hire period. On returning the van to the hire company's yard, the hire company inspects the van, and presents the maintenance company with a sheet of A4 paper, marked “Record of vehicle condition at end of hire period”. The paper has a diagrammatic representation of a car split into various areas. Next to each area is written “no damage”. The hire company signs this sheet, and asks the maintenance company's representative to sign it, which he does. At the foot of the page are various terms and conditions, in small print, which the maintenance company's representative does not read. One of these terms (the ‘Term’) provides that the hire company's liability for losses during the hire period is limited to £300. The maintenance company seeks to recover its losses caused by the van being unreliable, which exceed this sum, and the hire company seeks to rely on the Term to limit any liability. Which ONE of the following statements is most likely to be correct?
The Term was incorporated into the parties’ contract because this is a reasonable term to include in the contract.
The Term was not incorporated into the parties’ contract because the maintenance company did not have notice of it.
The Term was incorporated into the parties’ contract because the maintenance company signed the document.
Whether or not the Term was incorporated into the parties’ contract depends on the extent of the maintenance company's losses.
The Term was not incorporated into the parties’ contract because an objective party would not consider the document to have contractual effect.
Incorrect
Incorrect. Please revisit your Adapt materials on Terms. In particular, consider the rules in relation to incorporation.
Whether or not the Term was incorporated into the parties’ contract depends on the extent of the maintenance company's losses.
74
If an innominate term is breached, the innocent party:
is entitled to claim damages, but not to terminate the contract.
may or may not be entitled to terminate the contract, depending on the consequences of the breach.
is entitled to terminate the contract and claim damages.
is entitled to whatever remedy is set out in the relevant legislation.
is not entitled to any remedy.
may or may not be entitled to terminate the contract, depending on the consequences of the breach.
Correct.
75
The general rule is that exclusion clauses (in particular) will be construed contra proferentem, ie they will be construed…
…so that any ambiguity is resolved by reference to the words of the clause.
…so that any ambiguity is resolved against the party seeking to claim damages.
…so that any ambiguity is resolved against the party seeking to rely on the clause.
…so that any ambiguity is resolved by reference to the wording and meaning of the contract as a whole.
…so that any ambiguity is resolved against the party seeking to rely on the clause.
Correct
Correct. This is how exclusion clauses are construed. It is wrong to say that the ambiguity is resolved against the party seeking damages ie the other party. If the ambiguity could be resolved by reference to the words of the clause, there would not be any ambiguity – this answer misunderstands what 'ambiguity' means. And whilst it is true that an exclusion clause will be construed in light of the wording and meaning of the contract as a whole, this is true of all contractual clauses, it is not a feature of the construction of exclusion clauses in particular.
76
A student joins a kayaking course with an adventure company. Her instructor on the course negligently takes her into rapids far too dangerous for someone of her ability and experience. She capsizes and collides with several rocks, causing facial injuries. The contract she signed when she registered for the course included a clause (the ‘Clause’) which stated that the adventure company would not be liable for any facial injuries or disfigurements caused during the kayaking and would only be liable for broken limbs and fingers. Which one of the following is correct?
The Clause will be effective to exclude liability for the student’s injuries if it passes the test of fairness in s 62 of the Consumer Rights Act 2015.
The Clause will not be effective to exclude liability for the student’s injuries
The Clause will be effective to exclude liability the student’s injuries depending on the severity of the personal injuries.
The Clause will be effective to exclude liability for the student’s injuries.
The Clause will be effective to exclude liability for the student’s injuries if it passes the test of reasonableness in s 11 of the Unfair Contract Terms Act 1977.
The Clause will not be effective to exclude liability for the student’s injuries
Correct – this is the effect of s.65 of the Consumer Rights Act 2015.
77
A carpenter contracts with a company to carry out plumbing services. At the time of contracting an agent of the company signs a form containing the following clause, ‘Liability for breach of any express or implied term of the contract is limited to £500’. The clause is written in very small print. The carpenter carries out the services with a lack of reasonable care and skill causing damage to company property. Which one of the following statements best explains the legal position?
The carpenter has breached s 13 of the Supply of Goods and Services Act 1982. The exemption clause limits liability for negligence at common law, however the clause will only be effective in accordance with s 2(2) of the Unfair Contract Terms Act 1977 if it satisfies the requirements of reasonableness.
The carpenter has breached s 13 of the Supply of Goods and Services Act 1982. The exemption clause limits liability for negligence at common law, however the clause would be void under s 2(1) Unfair Contract Terms Act 1977 as it attempts to limit liability for personal injury caused by negligence.
The carpenter has breached s 13 of the Supply of Goods and Services Act 1982. The exemption has not been incorporated into the contract as insufficient notice was given of an onerous clause.
The carpenter has breached s 49 of the Consumer Rights Act 2015. The exemption clause limits liability for negligence at common law, however the company will not be taken to have voluntarily accepted any risk merely because he agreed to or knew about the exemption clause.
The carpenter has breached s 49 of the Consumer Rights Act 2015. The exemption clause has been incorporated by signature but will not be construed to cover negligence at common law as it is too wide and limits liability for heads other than negligence liability.
The carpenter has breached s 13 of the Supply of Goods and Services Act 1982. The exemption clause limits liability for negligence at common law, however the clause will only be effective in accordance with s 2(2) of the Unfair Contract Terms Act 1977 if it satisfies the requirements of reasonableness.
Correct. This answer sets out the correct breach under s 13 SGSA and recognises that the clause is effective at common law (passing incorporation and construction) but would be subjected to the requirement of reasonableness under the Unfair Contract Terms Act 1977. Although the other answer options sound plausible they are all incorrect. This contract does not fall under the Consumer Rights Act 2015. The clause has been validly incorporated through signature. The requirement for a greater notice for an onerous clause applies to incorporation through notice, not signature. The clause is not too wide to be construed to cover negligence as negligence is the only realistic head of damages on the facts. As there is no personal injury loss s2(1) Unfair Contract Terms Act 1977 is not engaged. The fact that this clause could relate to personal injury caused by negligence does not invalidate the clause vis a vis other heads of damage.
78
What approach does UCTA take to a clause excluding liability for breach of the implied term that goods will be satisfactory quality?
The clause is void.
The clause is valid.
The clause is subject to the fairness test.
The clause is subject to the reasonableness test
The clause is subject to the reasonableness test
79
Mary owns an orchard and farm shop and is organising an apple festival on 2 August. On 1 June, Gerardo, who is interested in attending, goes to visit Mary in the shop to discuss purchasing a ticket. During the conversation, Mary tells Gerardo that she plans to make apple cupcakes for the festival attendees which will be covered in gold leaf (the “Statement”). However, on 20 June, she discovers that gold leaf is much more expensive than she had expected and decides to make plain apple cupcakes instead. On 13 July, Gerardo purchases a ticket to the festival. Which one of the following statements is CORRECT?
The Statement is actionable as it is a continuing representation
The Statement is not actionable because there is no duty to disclose a change in circumstances
The Statement is not actionable because it is a statement of future intention
The Statement is actionable as it amounts to a misrepresentation by conduct
The Statement is a mere puff
The Statement is not actionable because it is a statement of future intention
Correct. Well done!
80
Glorious Sunsets, a firm of travel agents, sell a holiday to the Jones family. In the course of doing so, they represent that the villa at which the family will stay is (at the time of the representation) next to a leisure complex open to the public from 8am to 8pm each day. Glorious Sunsets had ascertained this to be the case during research when putting their holiday brochure together 3 months earlier. However, unbeknownst to Glorious Sunsets, the leisure complex had shut six days before the travel agents made this statement to the Jones family, due to the unexpected insolvency of its owners. Which of the following statements is the BEST ADVICE to give to the Jones family based on the facts above?
Glorious Sunsets has made a negligent misrepresentation
Glorious Sunsets has made either a negligent or an innocent misrepresentation, depending on whether the research about the leisure complex 3 months earlier amounted to reasonable grounds to make the representation
Glorious Sunsets has made a fraudulent misrepresentation
Glorious Sunsets has not made any misrepresentations
Glorious Sunsets has made an innocent misrepresentation
Glorious Sunsets has made either a negligent or an innocent misrepresentation, depending on whether the research about the leisure complex 3 months earlier amounted to reasonable grounds to make the representation
Correct. Well done!
81
Which of the following gives us the definition that a misrepresentation is fraudulent if a false representation has been made (a) knowingly, or (b) without belief in its truth, or (c) recklessly, careless whether it be true or false?
Howard Marine and Dredging Co. Ltd. v A. Ogden & Sons (Excavations) Ltd
Pan Atlantic Co Ltd v Pine Top Insurance Co Ltd
Derry v Peek
Gordon v Selico
Esso v Marden
Derry v Peek
Correct. Well done!
82
A claim for misrepresentation is available in relation to certain unambiguous, false statements which are addressed to the party misled and which induce the contract. What kind of statements CANNOT amount to a statement on which a claim for misrepresentation can be based?
A statement by way of conduct (with nothing written / spoken)
A statement of opinion
A honest statement of future intention
A statement of law that the maker of the statement believes is correct
A statement of fact
A honest statement of future intention
week 6
A statement of opinion
Incorrect. Statements of opinion can give rise to a claim in misrepresentation in certain circumstances, such as when the person expressing the opinion is an expert in the matter concerned, and does not take reasonable care over statement. Please revisit the elements in relation to misrepresentation.
83
Which of the following IS NOT a bar to rescission of a contract on the grounds of misrepresentation?
Affirmation
Third party rights.
Impossibility
Lapse of time.
Damages
week 6
Third party rights.
Incorrect
Incorrect. Please revisit the elements in relation to misrepresentation.
84
FineFood Limited, a supermarket, instructs Night Light Limited, lighting engineers, to install bright lights throughout its large supermarket carpark. The contract sets out a specification for the lighting, a price and a deadline for the works. There are no other terms relevant to this scenario. Mark (a sole trader) owns and operates a small hardware store very nearby, and believes the better lighting in the nearby carpark will attract more customers to his shop. Night Light fails to carry out the work in accordance with its contract with FineFood. FineFood is pre-occupied with other aspects of its business, and does nothing about this. Mark wants to force Night Light to comply with its contract with FineFood. Which one of the following statements is CORRECT?
Mark can bring a claim against Night Light because Night Light has failed to comply with the terms of the contract, and this has caused Mark a loss.
Mark can bring a claim against Night Light pursuant to the Contract (Rights of Third Parties) Act 1999.
Mark can bring a claim against Night Light because FineFood entered into the contract as Mark’s agent.
Mark can bring a claim against Night Light because there will be a collateral contract between Night Light and Mark.
Mark cannot bring a claim against Night Light.
Mark cannot bring a claim against Night Light.
Correct. Well done!
85
A and B enter into a contract. A then enters into a deed of assignment by which A assigns her rights under the contract with B to C. Which of the following best explains the effect of this?
C can sue B in relation to the promises B made to A
C has a contract with B in the same terms as the contract between A and B..
C can sue A in relation to the promises made between A and B.
C can sue B and be sued by B in relation to the promises made between A and B.
week 7
C can sue A in relation to the promises made between A and B.
Incorrect. The deed of assignment does not give C any right to sue A in relation the contract between A and B. Revisit the element on common law methods of circumventing the privity rules.
86
Which one of the following is INCORRECT in relation to the Contract (Rights of Third Parties) Act 1999?
In some circumstances, it allows contracts to be enforced against third parties.
It provides that a party can use the same defences against a claim by a third party as it could if the claim were made by a party.
It can be excluded by the agreement of the parties.
In some circumstances, it allows contracts to be enforced by third parties.
It only provides a remedy where the third party is identified by name, class or description.
week 7
It can be excluded by the agreement of the parties.
Incorrect. This statement is correct. Revisit the element on the Contract (Rights of Third Parties) Act 1999.
87
What is a 'mutual mistake'?
where only one party is mistaken and the other party knows, or is deemed to know, of the mistake.
where one party makes a false statement that the other party relies on.
where both parties are mistaken but they are mistaken about different things.
where both parties to an agreement are suffering from the same misapprehension.
where both parties are mistaken but they are mistaken about different things. In other words, they have negotiated at cross‑purposes.
correct
Incorrect
where both parties to an agreement are suffering from the same misapprehension.
Incorrect. This is the definition of a common mistake. A mutual mistake is something different. Revisit the element in relation to mistake.
88
Which one of the following statements is CORRECT in relation to a repudiatory breach of contract?
The innocent party cannot affirm the contract when the other party has indicated an intention not to perform his obligations.
The innocent party can seek damages not only arising from the specific breach but also the loss of the contract caused by the termination of the contract as a whole.
The innocent party does not need to notify the other party if they decide to terminate the contract
The innocent party has the burden of proof to show that they have a legitimate interest in performing the contract rather than claiming damages.
The innocent party must co-operate with the breaching party if it wants to affirm the contract.
The innocent party can seek damages not only arising from the specific breach but also the loss of the contract caused by the termination of the contract as a whole.
Correct. Well done!
89
MEP has contracted with Bodgit Ltd to build a new film studio. After two thirds of the work is complete, Bodgit abandons the project. Which of the following answers is the MOST ACCURATE?
Bodgit is entitled to two thirds of the contract price as MEP has voluntarily accepted partial performance
Bodgit is entitled to two thirds of the contract price as the obligation is divisible
Bodgit is entitled to the full contract price minus a sum to complete the work as Bodgit has substantially performed
Bodgit is entitled to nothing
Bodgit is entitled to nothing
Correct
Correct. Bodgit is entitled to nothing as the entire obligations rule applies (Cutter v Powell). The exception of substantial performance does not apply as two thirds of the work would not count as substantial performance (Bolton v Mahadeva cf. Hoenig v Isaacs). This is not voluntary acceptance of partial performance as the work was done on MEPs land so they had no choice but to accept the work (Sumpter v Hedges).
90
Willem owns an old caravan. Jin contracts with Willem to hire the caravan for the week commencing 2 June. On 1 June, the caravan is destroyed in a fire. Consequently, Willem tells Jin that he is now unable to rent a caravan to him. Which ONE of the following statements BEST EXPLAINS the legal position??
The contract between Willem and Jin will be frustrated due to performance being rendered radically different
The contract between Willem and Jin will not be frustrated as fires are always foreseeable
The contract between Willem and Jin will not be frustrated as the ‘frustration’ is self-induced.
The contract between Willem and Jin will be frustrated due to illegality
The contract between Willem and Jin will be frustrated as the subject matter of the contract has been destroyed
The contract between Willem and Jin will be frustrated as the subject matter of the contract has been destroyed
Correct. Well done!
91
An advertising company sells advertising space. A retailer agrees to buy advertising space for three months from the advertising company for £1,000. It provides the advertising company with an advert to use for the three-month period. Before the advert is posted the retailer changes its mind and refuses to pay the £1,000. Which ONE of the following statements BEST EXPLAINS the legal position?
Unless the retailer can prove that the advertising company did not have a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
The advertising company cannot affirm the contract and claim the contract price as they are required to take reasonable steps to mitigate their loss.
Provided the advertising company can prove that it had a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
The advertising company cannot affirm the contract as the retailer’s cooperation is required to pay the contract price.
The advertising company cannot affirm the contract as it is only in extreme cases that it would be reasonable for the innocent party to affirm the contract.
Unless the retailer can prove that the advertising company did not have a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
Correct
Correct. This answer correctly sets out the innocent party’s right to affirm the contract in response to a breach of condition. Although the other answer options sound plausible, they are all incorrect. The burden of proof is on the contract breaker to show that the innocent party did not have a legitimate interest in affirming. It is only in exceptional circumstances that the party in breach of condition will be able to discharge this burden and fetter the innocent party’s right to affirm.
92
Which one of the following statements is CORRECT in relation to discharge of a contract by performance?
A contractual obligation can be discharged where one party performs part of the agreed obligation, and is then prevented from completing the rest by some fault of the other party.
A contractual obligation can be discharged by partial performance if the innocent party has no choice but to complete the work.
A contractual obligation can only be discharged by a complete performance of the obligation.
A contractual obligation can be discharged by substantial performance if the innocent party voluntarily accepts it.
A contractual obligation can be discharged if the contract is clearly divisible in two parts
A contractual obligation can be discharged where one party performs part of the agreed obligation, and is then prevented from completing the rest by some fault of the other party.
Correct. Well done!
93
Which one of the following statements is CORRECT in relation to payment of a partly performed contract?
Where a contract is held to be divisible, the divisions must be of equal value.
Where a contract has been partially performed and the innocent party has accepted this, the payment will be on a quantum meruit basis.
Where a contract is prevented from complete performance, the innocent party must sue for damages for breach of contract.
Where a contracted has been partially performed, the courts will only compensate for the value of materials which are left on site.
Where a contract has been partially performed and the innocent party has accepted this, the payment will be on a quantum meruit basis.
Where a contract has been partially performed and the innocent party has accepted this, the payment will be on a quantum meruit basis.
94
Esme, a book publisher, entered into a contract with Tommy (a supplier of ink) for the purchase of 3000 cartridges of ink, at £50 per cartridge. Tommy was due to deliver the ink on 22 June. Tommy failed to deliver the ink on 22 June and so Esme bought ink from Arthur at £60 per cartridge. Which of the following answers is the MOST ACCURATE one?
Esme can claim £30,000 in damages ((£60-£50)x3000) based on the expectation interest.
Esme can claim £30,000 in damages ((£60-£50)x3000) based on the reliance interest.
Esme is not entitled to any remedies because she should have waited for at least a week before purchasing ink from elsewhere.
Esme can claim whatever profit Tommy has made / will make selling the cartridges elsewhere, on the restitutionary basis.
Esme is not entitled to any remedy because this is a business-to-business contract.
Esme can claim £30,000 in damages ((£60-£50)x3000) based on the expectation interest.
Correct. Well done! In terms of the other answers, the reliance measure would not lead to a figure of £30,000. There is nothing to suggest that an award on the restitutionary basis would be justified. Remedies are available in business to business contracts, and there is no rule that Esme should have waited a week before purchasing elsewhere.
95
Which one of the following statements is CORRECT in relation to remoteness of damage in contract?
If the loss is deemed too unusual and far reaching, it will only be recoverable if it was in the reasonable contemplation of the parties as not unlikely to occur.
If the loss is deemed too unusual and far reaching it will not be recoverable.
If the loss is deemed a normal type of loss which would follow from the breach then it will only be recoverable if the defendant can prove it did not have actual knowledge of it.
If the loss is deemed too unusual and far reaching, the defendant will have to establish it did not have actual knowledge of the particular and special circumstances to be aware of the risk.
If the loss is deemed a normal type of loss which would follow from the breach then it will only be recoverable if the claimant can prove that the defendant had actual knowledge of it.
If the loss is deemed too unusual and far reaching, it will only be recoverable if it was in the reasonable contemplation of the parties as not unlikely to occur.
Correct. Well done! Hadley v Baxendale 1854. The other answers incorrectly state the rules in relation to remoteness.
96
Which one of the following statements is CORRECT in relation to primary and secondary obligations?
A clause will be secondary if it is not as important as a primary clause.
A clause will be primary if it is an obligation triggered by breach of contract to compensate the innocent party.
A clause will be primary if it is an obligation triggered by breach of contract to penalise the defaulting party.
A clause will be secondary if it is part of a re-drafting of a contract.
A clause will be primary if it is part of the primary obligations in the commercial context of the contract.
A clause will be primary if it is part of the primary obligations in the commercial context of the contract.
Correct. Well done!
97
What are the requirements of a valid offer?
The offer must be clear, certain and show an intention to be bound.
The offer must be clear, certain and binding.
The offer must be clear, certain and supported by consideration.
The offer must be clear, certain and accepted.
The offer must be clear, certain and show an intention to be bound.
98
In which case did the court find a valid offer?
Hyde v Wrench
Storer v Manchester City Council
Partridge v Crittenden
Gibson v Manchester City Council
Storer v Manchester City Council
The court held that the council’s statement was a valid offer as it was clear, certain and displayed an intention to be bound.
99
A man is showing off his rare first edition book to his neighbour when he says, ‘I might consider selling this book for a five-figure sum’. The next day, the neighbour tells the man that he accepts his offer and gives him a cheque for £10,000. Which of the following options best describes whether the man made a valid offer to his neighbour?
No, because he did not mention the title of the book in his statement.
No, because the statement was not clear about the price, nor did it show an intention to be bound.
Yes, because his statement was clear and certain about the book and price.
No, because his statement was not clear and certain about the book and price.
No, because the statement was not clear about the price, nor did it show an intention to be bound.
A valid offer must be clear and certain and display an intention to be bound. The man’s statement did not meet these requirements.
100
Which of the following is correct regarding a bilateral contract?
Each party makes an offer to the other party.
Each party assumes an obligation to the other party.
The offer is accepted by performance of the required act.
Only the party making the offer assumes an obligation.
Each party assumes an obligation to the other party.
101
Which of the following is correct in relation to an invitation to treat?
An invitation to treat displays an intention to be bound
An invitation to treat can be accepted to form a binding contract
An invitation to treat cannot be accepted to form a binding contract
An invitation to treat is the final step in forming a contract
An invitation to treat cannot be accepted to form a binding contract
An invitation to treat is a first step in negotiations and it is not capable of being accepted to form a binding contract.
102
Which of the following is not an invitation to treat?
A dress displayed for sale in a shop window
A car advertised for sale on a website
An auctioneer’s request for bids in an auction sale
A notice on a tree offering a reward for the return of a missing cat
A notice on a tree offering a reward for the return of a missing cat
This is a unilateral offer
103
In which case did the court find there was an invitation to treat?
Storer v Manchester City Council
Harvela Investments Ltd. v Royal Trust Company of Canada (CI) Ltd.
Fisher v Bell
Carlill v Carbolic Smoke Ball Co.
Fisher v Bell
The appeal court held that a display of goods with a price tag in a shop window was an invitation to treat.
104
The general rule that an advertisement is an invitation to treat does not apply where the advertisement amounts to a unilateral offer. What is a unilateral offer?
An offer which prescribes an act which, when performed, constitutes acceptance.
An offer that originates from a manufacturer of goods.
An offer to one party only.
An offer that is not sufficiently clear and certain.
An offer which prescribes an act which, when performed, constitutes acceptance.
This is illustrated in the case Carlill v Carbolic Smoke Ball Co.
105
Which of the following is not a valid means of an offer terminating?
Rejection
Breach
Lapse
Revocation
Breach
106
Which of the following is not an example of how an offer can come to an end?
Following revocation by the offeror
By making a counter-offer
Following the death of the offeree
A request for further information
A request for further information
A request for further information does not change or reject the offer. The original offer remains open and capable of acceptance.
107
Which statement is a correct description of the difference between a counter-offer and a request for further information?
A request for further information terminates the original offer but a counter-offer does not.
A counter-offer does not change the terms of the offer but a request for further information does.
A counter-offer prevents the offeree from changing their mind and accepting the original offer but a request for further information does not.
A request for further information can be made by the offeree but a counter-offer cannot
A counter-offer prevents the offeree from changing their mind and accepting the original offer but a request for further information does not.
A counter-offer has the effect of terminating the original offer and that offer cannot subsequently be accepted. A request for further information on the other hand has no effect on the original offer and that offer remains open. Revisit this element and consider the section ‘Rejection – distinguishing a counter-offer from a request for further information’
108
Who can accept an offer?
The person / people capable of performing the obligations under the contract.
Anyone.
The person / people who have notice of the offer.
The person / people to whom the offer was made?
The person / people to whom the offer was made
Correct. If an offer is made to particular people, only those people can accept the offer.
109
John offers by email to sell his snooker table to Michael for £3,500. Michael replies that he is happy to pay £3,500 for the snooker table but wants the cues, balls and framed O'Sullivan picture included for that price. John is happy to go ahead with that suggestion. What is the effect of Michael's reply?
It amounts to a counter offer.
It amounts to request for further information.
It amounts to an effective acceptance.
It amounts to a counter offer.
To be an effective acceptance, the acceptance must be unqualified. This is not an unqualified acceptance because Michael has introduced additional terms relating to the balls etc.
110
What is the meaning of the rule that acceptance must be unqualified?
The acceptance must correspond exactly with the offer.
The acceptance must be made by words.
Only the person/people to whom the offer was made can accept the offer.
The acceptance must follow the mode prescribed by the offeror.
The acceptance must correspond exactly with the offer.
The rule is also known as the ‘mirror image rule’.
111
A farmer telephones his neighbour on Monday and offers to sell him three ducks for £50. The neighbour responds that he will pay £40 for the ducks. Later that evening, the neighbour informs his brother of the farmer’s offer. The brother immediately telephones the farmer and informs him that he accepts the farmer’s offer. On Tuesday morning, the neighbour telephones the farmer and says he has changed his mind and he accepts the offer of £50. Is there a contract formed?
No, there is no contract between the farmer and the brother because the farmer did not accept the brother’s offer.
Yes, there is a contract formed on Tuesday between the farmer and his neighbour for £50.
Yes, there is a contract between the farmer and the brother because the brother accepted the farmer’s offer.
Yes, there is a contract between the farmer and his neighbour for £40.
No, there is no contract between the farmer and the brother because the farmer did not accept the brother’s offer.
The brother’s acceptance was not a valid acceptance as it was not made in response to the farmer’s offer. The brother’s statement was a valid offer which the farmer did not accept. Revisit this element and consider the section ‘Acceptance must be in response to the offer’.
112
What is the effect of a counter-offer?
The original offer can be subsequently accepted.
The original offer is terminated.
It mirrors the terms of the original offer.
The original offer remains open.
The original offer is terminated.
A counter-offer is a rejection of the original offer and it has the effect of ‘killing off’ the original offer.
113
Which case establishes the fact that an offeror can include terms which prescribe that a particular mode of acceptance is to be used for the acceptance to be binding?
Manchester Diocesan Council for Education v Commercial and General Investments
Tinn v Hoffman
Hyde v Wrench
Felthouse v Bindley
Manchester Diocesan Council for Education v Commercial and General Investments
114
Tinn v Hoffman
This case establishes that unless the prescribed mode of acceptance is made mandatory, another mode of acceptance which is no less advantageous to the offeror will bind him.
115
What is the postal rule?
Where acceptance is communicated by post, the contract is formed as soon as the offeror reads the letter of acceptance.
Where acceptance is communicated by post, the contract is formed as soon as the letter of acceptance is properly posted.
Where acceptance is communicated by post, the contract is formed as soon as the postman delivers the letter of acceptance to the offeror.
Where the revocation of an offer is communicated by post, the revocation takes effect as soon as the letter is properly posted.
Where acceptance is communicated by post, the contract is formed as soon as the letter of acceptance is properly posted.
This rule was laid down in Adams v Lindsell.
116
Which case was not concerned with communication by instantaneous means?
Mondial Shipping and Chatering BV v Astarte Shipping Ltd
Entores v Miles Far East Corporation
Carlill v Carbolic Smoke Ball Co.
The Brimnes
Carlill v Carbolic Smoke Ball Co.
This case concerned a unilateral offer.
117
In which situation will the postal rule apply?
Where the letter accepting an offer is posted by being placed in the hands of a postman who is only authorised to deliver letters.
Where the offeror states that he must receive the acceptance.
Where the offeror posts a letter revoking an offer.
Where the letter accepting an offer is lost in the post.
Where the letter accepting an offer is lost in the post.
118
Which statement correctly describes executory consideration?
Executory consideration is consideration that is clear and certain.
Executory consideration is consideration that has been promised but not yet provided.
Executory consideration is consideration that is adequate.
Executory consideration is consideration that has already been provided.
Executory consideration is consideration that has been promised but not yet provided.
Executory consideration is where contracting parties make promises to each other to perform something in the future after the contract has been formed.
119
Which of the following is not a rule governing consideration?
Consideration need not be adequate.
Consideration must not be past.
Consideration must move from the promisee.
Consideration must move from the promisor.
Consideration must move from the promisor.
This is not a rule governing consideration.
120
Which condition is not necessary for the exception to the rule that consideration must not be past to apply?
The payment or conferment of other benefit must have been legally enforceable had it been promised in advance.
The act must have been done at the promisor’s request.
The promisor must have acknowledged the value of the act to the promisor at the time of the act.
The parties must have understood that the act was to be rewarded either by a payment or the conferment of some other benefit.
The promisor must have acknowledged the value of the act to the promisor at the time of the act.
This is not a condition necessary for the exception to the rule that consideration must not be past to apply. Revisit the element and consider the section ‘Exception to the past consideration rule’.
121
What does the rule that consideration must move from the promisee mean?
A party who has not provided consideration may not bring an action to enforce the contract.
Consideration must move to the promisor.
Only a person who is party to a contract may sue or be sued on that contract.
Consideration must have some value in the eyes of the law.
A party who has not provided consideration may not bring an action to enforce the contract.
A person to whom a promise is made can only enforce the promise if they have provided consideration for the promise.
122
Polly pays Sammy £70 to feed Polly’s cat while Polly and her husband, Jack, are on holiday. Unknown to Polly, Jack had already paid Sammy £100 to feed the same cat. Polly is demanding that Sammy returns the £70 she paid him, but Sammy is refusing to return the money. Which of the following statements is most accurate?
Sammy is obliged to return the money to Polly as consideration must be sufficient.
Sammy is not obliged to return the money to Polly as past consideration is not good consideration.
Sammy is not obliged to return the money to Polly as performance of an existing obligation owed to a third party is good consideration.
Sammy is obliged to return the money to Polly as performance of an existing contractual obligation is not good consideration.
Sammy is not obliged to return the money to Polly as performance of an existing obligation owed to a third party is good consideration.
Performance of the existing duty owed to Jack is good consideration for the promise by Polly.
123
Which of the following was not a practical benefit in the case of Williams v Roffey?
The avoidance of late completion payment.
Publicity for the contractors involved.
Avoiding the need to find an alternative contractor to do the work.
A more efficient working arrangement.
Publicity for the contractors involved.
This was not a practical benefit in the case.
124
Which of the following is an example of good consideration?
Performance of an existing obligation in a contract between the parties.
Performance of an existing duty owed to a third party.
Part payment of a debt.
Performance of an existing duty owed to a third party.
125
Sibree v Tripp
This case establishes the point that if at the creditor’s request the debtor provides another item instead of money, then part payment of a debt will be good consideration. Revisit this element and consider the section ‘Part payment of a debt’.
126
Sibree v Tripp
This case establishes the point that if at the creditor’s request the debtor provides another item instead of money, then part payment of a debt will be good consideration. Revisit this element and consider the section ‘Part payment of a debt’.
127
Which rule of consideration does promissory estoppel provide an exception to?
Consideration must be sufficient but need not be adequate
Part payment of a debt without fresh consideration does not discharge the debt obligation.
Consideration must not be past.
Consideration must move from the promisee.
Part payment of a debt without fresh consideration does not discharge the debt obligation.
Correct. Promissory estoppel provides an equitable exception to this rule.
128
Which of the following is not an essential element of promissory estoppel?
Promissory estoppel acts as a shield and not a sword
The promisee must act to his detriment
The promisee must have changed their position in reliance on the promise
There must be a clear and unequivocal promise that strict legal rights will not be enforced.
The promisee must act to his detriment
Whilst is is necessary that the promise has influenced the promisee's conduct, it appears that it is not essential that the promisee has acted to their detriment.
129
A restaurant owner owes a vegetable supplier £2500. The restaurant owner knows that the supplier is experiencing financial problems. The restaurant owner gives the supplier a cheque for £1000 in full and final satisfaction of the debt owed. The supplier accepts the cheque but later sues the restaurant owner for the balance of £1500. Which of the following statements is correct?
The supplier cannot recover the balance of £1500 as it would be inequitable for them to go back on their word.
The supplier can recover the balance of £1500 as it is not inequitable for them to go back on their promise.
The supplier cannot recover the balance of £1500 as their acceptance of the cheque for £1000 discharged the debt.
The supplier cannot recover the balance of £1500 because their acceptance of the cheque for £1000 is binding.
The supplier can recover the balance of £1500 as it is not inequitable for them to go back on their promise.
The supplier’s promise to accept less was obtained as a result of pressure on the supplier, therefore the restaurant owner is unlikely to successfully rely on the equitable doctrine of promissory estoppel as it is unlikely that it would be considered inequitable for the supplier to go back on his promise.
130
A tenant has lost her job and she is struggling to pay her rent. Keen to help, the landlord informs the tenant that he is willing to accept half the rent due each month until she finds a new job. The tenant pays half rent for two months and uses some of the money she saved to buy new shoes to wear at interviews. The landlord is now having second thoughts. Under what circumstances can the landlord demand full rent?
The landlord can demand that full rent is paid immediately.
The landlord can demand full rent after the expiry of reasonable notice.
The landlord cannot demand full rent before the tenant has found a new job.
The landlord cannot demand full rent as the tenant has accepted his offer therefore he is bound.
The landlord can demand full rent after the expiry of reasonable notice.
A promisor may resume his full legal rights after giving reasonable notice - Tool Metal v Tungsten.
131
Which of the following statements is correct in relation to intention to create legal relations (ICLR)?
ICLR is presumed to exist in all situations unless one of the parties can show that there was no intention to be bound.
ICLR is presumed to exist in commercial situations but presumed not to exist in domestic or social situations.
ICLR is presumed to exist in commercial situations and it is impossible to rebut that presumption.
ICLR is determined by taking evidence from the parties as to what was in their minds when entering the contract.
ICLR is presumed to exist in commercial situations but presumed not to exist in domestic or social situations.
Note that presumptions can however be rebutted.
132
In which type of agreement is intention to create legal relations presumed to exist?
Commercial agreements
Domestic agreements
Unilateral agreements
Bilateral agreements
Commercial agreements
133
Two companies agree the sale of a house ‘subject to contract’. What does the phrase ‘subject to contract’ imply?
The companies have agreed a binding contract.
The companies do not intend to be bound until they sign a formal contract.
The companies are taking advice on the subject matter of the contract.
The companies have signed a contract and are bound.
The companies do not intend to be bound until they sign a formal contract.
The phrase creates a strong inference that the companies do not intend to be bound until the execution of a formal contract.
134
Which of the following statements is correct regarding the contractual capacity of a minor?
A minor who lies about their age is bound by a contract they entered into.
A minor is not bound by a contract which he enters into during his minority.
A minor can enter into a contract for necessaries and they must pay the actual cost of the necessaries supplied.
A minor is bound by a contract of employment but only if it is for their benefit.
A minor is bound by a contract of employment but only if it is for their benefit.
135
Which statute defines what necessaries are?
Minors’ Contracts Act 1987
The Sale of Goods Act 1979.
Law Reform (Frustrated Contracts) Act 1943
Consumer Credit Act 1974.
The Sale of Goods Act 1979.
136
What does capacity to contract mean?
A person’s ability to perform the requirements of a contract.
The number of contracts a person can enter at a given time.
A person’s ability to understand the terms of a contract.
The ability of a person to enter a binding contract.
The ability of a person to enter a binding contract.
Adults of sound mind have full contractual capacity. However, minors, the mentally incapacitated and those intoxicated have limited contractual capacity.
137
A 16 year old boy cycles to and from school every day. He no longer likes his bicycle as he thinks it is old. He tells his neighbour he is 19 years old and agrees to buy the neighbour’s motorbike for £199. After taking delivery of the motorbike, the boy refuses to pay for it. Which of the following statements is correct?
The contract is voidable because the boy lied about his age.
The neighbour can enforce the contract against the boy as the boy lied about his age.
The neighbour cannot enforce the contract against the boy as he is a minor.
The boy is bound by the contract as it is for necessaries and for his benefit.
The neighbour cannot enforce the contract against the boy as he is a minor.
The neighbour cannot enforce the contract against the boy as he is a minor and the motorbike is unlikely to fall under the exception of necessaries.
138
Which of the following is not a type of duress?
Duress to goods
Duress to the person
Duress to contracts
Economic duress
Duress to contracts
This is not a type of duress. There are three types of duress – duress to the person, duress to goods and economic duress.
139
What is the causation test for duress to the person?
The duress need be only one factor influencing the victim’s decision to enter the contract
The duress must be a serious factor influencing the victim’s decision to enter the contract
The duress must be a significant cause influencing the victim’s decision to enter the contract
The duress must be the only factor influencing the victim’s decision to enter the contract
The duress need be only one factor influencing the victim’s decision to enter the contract
The duress need be only one factor influencing the victim’s decision to enter the contract
140
In which case was the current definition of economic duress first set out?
Occidental Worldwide Investment Corporation v Skibs A/S Avanti (The Siboen and The Sibotre)
Barton v Armstrong
DSND Subsea Ltd v Petroleum Geo Services ASA
Carillion Construction Ltd v Felix (UK)
DSND Subsea Ltd v Petroleum Geo Services ASA
Correct. Mr Justice Dyson stated that: ‘The ingredients of an actionable duress are that there must be pressure, (a) whose practical effect is that there is compulsion on, or a lack of practical choice, for the victim, (b) which is illegitimate, and (c) which is a significant cause inducing the claimant to enter into the contract…’
141
What is the legal effect of duress on a contract?
The contract is affirmed
The contract is void
The contract is barred
The contract is voidable
The contract is voidable
The contract is formed and remains in force, but the victim of the duress may take action to have the contract set aside.
142
Which of the following is not a relevant factor in establishing economic duress?
The duress was a false representation which induced the victim to enter into the contract
There is an illegitimate pressure
The victim of the duress has no practical choice but to give in to the demands
But for the duress, the agreement would not have been entered into
The duress was a false representation which induced the victim to enter into the contract
Correct. There is no requirement that the duress is a false representation. The requirements of an actionable duress are that there is illegitimate pressure, whose practical effect is that there is a lack of practical choice for the victim, and but for the duress, the victim would not have entered into the agreement
143
What is the causation test for economic duress?
The illegitimate pressure contributed to the making of the agreement
The illegitimate pressure must have been decisive in the making of the agreement
The illegitimate pressure is one factor that caused the making of the agreement
The illegitimate pressure might have caused the making of the agreement
The illegitimate pressure must have been decisive in the making of the agreement
Correct. The illegitimate pressure must have been decisive in the making of the contract, in other words, ‘but for’ the pressure, the victim would not have entered into the contract
144
What key principle was established in the case of Huyton SA v Peter Cremer GmbH & Co?
That the victim of duress must take prompt action to set aside the contract once the pressure has ceased
That the causation test for economic duress is the ‘but for’ test
That a contract entered into as a result of duress is voidable
Fresh consideration is required for a valid variation agreement
That the causation test for economic duress is the ‘but for’ test
Correct. The duress must be a significant cause of the victim entering into the contract, in other words, ‘but for’ the illegitimate pressure, the victim would not have entered into the contract
145
A and B have a contract. A offers B more money to perform an existing contractual obligation. When does B provide legal consideration in return for the promise of extra payment?
B provides A with a practical benefit.
B exceeds their contractual obligation to A.
B exceeds their contractual obligation to A.
Correct. By exceeding their contractual obligation B has provided fresh, legal consideration.
146
In the case of Williams v Roffey did Williams exert duress to bring about Roffey's promise to pay more?
Yes
No
No
Correct. The absence of duress was an element of Glidewell LJ's test in Williams v Roffey which was satisfied in this case.
147
The modern trend is to take a more creative approach when assessing whether consideration for a variation is present and instead test the validity of the renegotiation through the doctrine of economic duress.
True
False
Correct. This summarises the current position.
148
What is the leading case on undue influence?
Allcard v Skinner
Royal Bank of Scotland PLC v Etridge (No. 2)
Barclays Bank PLC v O’Brien
Barton v Armstrong
Royal Bank of Scotland PLC v Etridge (No. 2)
Correct. The House of Lords heard 8 conjoined appeals and it took the opportunity to lay down guidelines on the law on undue influence
149
Which of the following is unlikely to be a relationship of influence or ascendancy?
A relationship where one party is vulnerable
A relationship of sufficiency
A relationship of dependence
A relationship of trust and confidence
A relationship of sufficiency
Correct. A relationship of sufficiency is unlikely to be one of influence or ascendancy. However, relationships of trust and confidence, or dependence or vulnerability are likely to be relationships of influence or ascendancy
150
In which of these relationships does the law presume irrebuttably that one person had influence over the other?
A business and its customers
Husband and wife
Guardian and ward
Employer and employee
Guardian and ward
Correct. The law presumes irrebuttably that in a relationship between a guardian and his ward, one party had influence over the other. This is irrespective of the true facts. However, the presumption that the transaction was procured by that influence may be rebutted
151
Which of the following prevents the granting of an order for rescission of contract for undue influence?
Specific performance
Restitution
Delay
Injunction
Delay
Correct. Rescission of a contract is an equitable remedy, therefore discretionary. The court may not grant the relief where the innocent party has delayed in making his claim because ‘delay defeats equity’
152
Why is the case Barclays Bank plc v O’Brien significant in regard to the doctrine of undue influence?
It clarified the law regarding the effect of undue influence
It provided guidance as to what bank managers should do if their employees did not follow instructions
It provided guidance for lenders concerning how they might avoid being fixed with notice of a contracting party’s undue influence
It clarified the law regarding the effect of undue influence
incorrect
It clarified the law regarding the effect of undue influence
It clarified the law regarding the effect of undue influence
153
When will a bank be put on inquiry that a surety transaction might be tainted by undue influence?
When the debtors default on the loan agreement
Whenever one party in a non-commercial setting is standing as surety for the other party
If the transaction is for a large sum of money
When the bank meets with the spouse and explains the nature of the loan agreement to that spouse
Whenever one party in a non-commercial setting is standing as surety for the other party
Correct. This was stated by Lord Nicholls in RBS v Etridge (No. 2)
154
What step should a bank take to satisfy itself that that a surety transaction is not affected by undue influence?
The bank should provide the solicitor advising the spouse with the bare minimum information about the transaction
The bank should see the spouse itself and discuss the surety transaction with them
The bank should ensure that the spouse has read all the documents pertaining to the transaction
If the bank is aware that the spouse may have been misled, the bank should tell the solicitor of this
If the bank is aware that the spouse may have been misled, the bank should tell the solicitor of this
Correct. This will enable the solicitor to advise the spouse appropriately regarding the transaction
155
What remedy will a spouse have if they are unhappy with the standard of service provided by a solicitor regarding a surety transaction?
The spouse can sue the bank for the solicitor’s negligence
The bank can sue the solicitor in negligence
The spouse can sue the solicitor in negligence
The spouse can bring a claim for the surety transaction to be set aside
The spouse can sue the solicitor in negligence
The spouse can sue the solicitor in negligence
156
What is a term of a contract?
Statements made by the parties in order to induce formation of the contract but which the parties do not intend to be binding
Statements made by one party to coerce another party into a contract
Statements made by the parties which have no legal effect
Statements of fact made by the parties which they intend to be binding
Statements of fact made by the parties which they intend to be binding
Correct. These statements are normally promissory in nature
157
Which factor is not generally relevant when deciding whether the parties to a contract intended a statement to be binding?
A. The timing of the statement
A. Special knowledge or skill of the person making the statement
A. The importance of the statement
A. The age of the person making the statement
A. The age of the person making the statement
Correct. The gender of the person making the statement is not relevant when deciding whether the parties intended the statement to be binding. The factors that are relevant include the timing and importance of the statement and whether the person making the statement had special knowledge or skills
158
What happens if a term of a contract is not fulfilled as required or at all?
The innocent party can sue for breach of contract
The innocent party can sue for rectification
The innocent party can sue for discharge
The innocent party can sue for misrepresentation
The innocent party can sue for breach of contract
Correct. The usual remedy for breach of contract is an award of damages
159
Which of the following is not a means by which we can ascertain the terms which the parties to a contract intend to be bound by?
Incorporation by notice
Incorporation by course of dealing
A signed written contract
Incorporation by agreement
Incorporation by agreement
Correct. This is not a means of ascertaining the terms of a contract. The terms can be ascertained where there is a signed written contract, where there is incorporation by notice, or where there is incorporation by course of dealing
160
Why was the clause not enforceable against the claimant in Thornton v Shoe Lane Parking?
The clause was contained in a document that did not have contractual effect
The claimant was not given reasonable notice of the clause either before or at the time of contracting
The parties previous dealings had not been regular and consistent
The defendants were prevented from relying on the clause because their employee orally misrepresented the meaning of the clause to the claimant
The claimant was not given reasonable notice of the clause either before or at the time of contracting
incorrect
The clause was contained in a document that did not have contractual effect
161
How can parties to a written contract reduce the possibility of a claim that there are binding oral terms alongside the written terms?
The parties can include a ‘complete agreement’ clause in their written contract
The parties can include an ‘entire agreement’ clause in their written contract
The parties can say that there are no binding oral terms alongside the written terms
The parties can include an exemption clause in their written contract
The parties can include an ‘entire agreement’ clause in their written contract
Correct. An entire agreement clause provides that a particular contract or set of contracts constitutes the entire agreement between the parties
incorrect
The parties can say that there are no binding oral terms alongside the written terms
Incorrect. Revisit this element and consider the section ‘Entire agreement clauses’
162
Which of the following is not a basis for implying terms in fact a contract?
Under the common law
To give business efficacy to a contract
Where the parties have dealt with each other consistently and regularly in the past
On the grounds of trade or professional customs
Under the common law
This is the correct answer.
Terms implied at common law are not implied in fact. The grounds for implying terms in fact are to give business efficacy to a contract, where the parties have dealt with each other consistently and regularly in the past and on the grounds of trade and professional customs.
163
Which of the following is correct regarding a term implied by statute?
The term is implied to give effect to the presumed but unexpressed intentions of the parties
A statutory implied term is binding to a less extent compared to an express term
The term is imposed in the contract by the courts
The term operates irrespective of the intention of the parties unless there is a valid exemption clause
The term operates irrespective of the intention of the parties unless there is a valid exemption clause
This is the correct answer. Statutory implied terms are imposed in contracts by statute and they operate irrespective of the intention of the parties unless there is a valid exemption clause
164
Which of the following statute does not contain implied terms?
Sale of Goods Act 1979
Consumer Rights Act 2015
Supply of Goods and Services Act 1982
Unfair Contract Terms Act 1977
Unfair Contract Terms Act 1977
This is the correct answer. The Unfair Contract Terms Act 1977 regulates exemption clauses. The Sale of Goods Act 1979, Supply of Goods and Services Act 1982 and Consumer Rights Act 2015 all contain implied terms
165
A restaurant purchases 30 round tables for its business. When the tables are delivered they are rectangular. Which section of the Sale of Goods Act 1979 implied into this contract is most likely to have been breached?
S 14(3)
S 15(3)
S 13
S 14(2)
S 13
166
A property development company purchases some radiators. The radiators do not heat up properly. Which section implied by the Sale of Goods Act 1979 is most likely to have been breached?
S 14(3)
S 15(3)
S 14(2)
S 13
S 14(2)
Correct. The goods are not of satisfactory quality as they are not fit for the purpose for which they are commonly supplied
167
Which of the following is correct about the Sale of Goods Act 1979?
The Sale of Goods Act 1979 implies a term that the seller of goods has a right to sell the goods
The terms implied by ss 13, 14 and 15 of the Sale of Goods Act 1979 cannot be excluded or restricted by agreement of the contracting parties
The Sale of Goods Act 1979 implies a term that the goods will be of satisfactory quality if they meet the standard that the buyer of the goods regards as satisfactory
The Sale of Goods Act 1979 implies terms to an agreement between a trader and a consumer
The Sale of Goods Act 1979 implies a term that the seller of goods has a right to sell the goods
This is the correct answer. The Act implies a term that the seller of goods has a right to sell the goods. This implied term is found in s.12(1) of that Act.
The SGA applies to business-to-business contracts only, and not to consumer contracts ie between a trader and a consumer. Satisfactory quality under the Act is judged on an objective basis (s14(2)), and contracting parties can agree to exclude or restrict ss13,14 and 15 of the SGA 1979, subject to the Unfair Contract Terms Act 1977.
168
Which of the following is not a valid means of an offer terminating?
Revocation
Breach
Lapse
Rejection
Breach
Breach normally relates to the non-performance or defective performance of a contractual obligation or promise. Revisit this element and consider the section ‘Termination of an offer’
169
Which case establishes the fact that an offeror can include terms which prescribe that a particular mode of acceptance is to be used for the acceptance to be binding?
Manchester Diocesan Council for Education v Commercial and General Investments
Hyde v Wrench
Tinn v Hoffman
Felthouse v Bindley
Manchester Diocesan Council for Education v Commercial and General Investments
170
Which case is not concerned with part payment of a debt?
Sibree v Tripp
Pinnel’s Case
Williams v Roffey
Foakes v Beer
Williams v Roffey
171
The Consumer Rights Act 2015 regulates contracts entered into by what people?
A business and a consumer
A business and a business
A company and a consumer
A trader and a consumer
A trader and a consumer
This is the correct answer. S1(1) of the 2015 Act states that the Act regulates agreements between a trader and a consumer. Sections 2(2) and 2(3) of the Act define a trader and a consumer.
172
A university student buys an e-book from an online bookshop for £29.99. The e-book is missing several pages and the writing is blurred. Which implied term is the student likely to rely upon against the bookshop?
S.14(2) of the Sale of Goods Act 1979
S. 9(1) of the Consumer Rights Act 2015
S.34(1) of the Consumer Rights Act 2015
S.49(1) of the Consumer Rights Act 2015
S.34(1) of the Consumer Rights Act 2015
This is the correct answer. The contract is between a bookshop (a trader) and a student (a consumer) therefore the Consumer Rights Act 2015 applies. An e-book is an example of digital content. S.34(1) of the 2015 Act states that ‘every contract to supply digital content is to be treated as including a term that the quality of the digital content is satisfactory.’
173
What remedy is available to a consumer under the Consumer Rights Act 2015 where a trader breaches the implied term that the trader must perform the services contract with reasonable care and skill?
The consumer has a right to receive a refund from the trader of all money paid by the consumer for the service
The consumer has a right to require the trader to perform the service again to the extent necessary to complete its performance in conformity with the contract
The consumer has a right to reject the service
The consumer has a right to treat the contract as at an end because of the breach
The consumer has a right to require the trader to perform the service again to the extent necessary to complete its performance in conformity with the contract
This is the correct answer. The right to repeat performance is governed by s.55 of the Consumer Rights Act 2015. Where a trader breaches the implied term that he must perform the services contract with reasonable care and skill, the consumer has only two remedies available to him under the 2015 Act. The first is the right to repeat performance already stated, and the second remedy is the right to a price reduction.
174
Which option is not available to an innocent party following breach of a condition by the other party to the contract?
The innocent party can terminate the contract and sue for damages
The innocent party can accept the repudiatory breach, affirm the contract and sue for damages
The innocent party has the right to treat the contract as repudiated and sue for damages
The innocent party can waive the right to repudiate, affirm the contract and sue for damages
The innocent party can accept the repudiatory breach, affirm the contract and sue for damages
This is the correct answer. The right to accept the repudiatory breach is mutually exclusive to the right to affirm the contract – the innocent party either accept the repudiatory breach or they can affirm the contract. They cannot do both. Please note that whichever option the innocent party takes, they will also have the right to sue for damages for the breach.
The other options given in the answers are all open to the innocent party.
175
Under the Sale of Goods Act 1979, what is the classification of the implied term that goods will correspond with their description?
The term is classified as a warranty
The term is classified as an intermediate term
The term is classified as an innominate term
The term is classified as a condition, but it may be treated as a warranty if the breach is so slight that it would be unreasonable for the buyer to reject the goods
The term is classified as a condition, but it may be treated as a warranty if the breach is so slight that it would be unreasonable for the buyer to reject the goods
This is the correct answer. The term is classified as a condition by s 13(1A). However, s 15A of the Act must be considered and the classification of the term may change depending on the severity of the breach.
176
What is the remedy for breach of an innominate term?
The innocent party has a statutory right to terminate the contract and sue for damages in all situations
The innocent party can rescind the contract and sue for damages where the consequences of the breach are serious
The innocent party can treat the contract as repudiated and sue for damages where the consequences of the breach are minor
The innocent party is limited to suing for damages where the consequence of the breach is minor
The innocent party is limited to suing for damages where the consequence of the breach is minor
This is the correct answer. The remedy for breach of an innominate term can be identified by applying the test in the case of Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha Ltd.
The test focuses on the consequences of the breach and asks the question whether the breach has deprived the innocent party of substantially the whole benefit of the contract. Where the question is answered in the affirmative, ie the consequences of the breach are serious, the term will be treated as a condition. Where the question is answered in the negative, ie the consequences of the breach are minor, the term will be treated as a warranty.
Regarding the other options, note that the remedy of rescission is not available for breach of contract.
177
What is the meaning of the word ‘construction’ when considering whether a party can rely on an exemption clause?
Construction means determining whether the exemption clause is part of the contract
Construction means modifying the liability of the party in breach of contract by excluding or limiting his liability
Construction means drafting the exemption clause to exclude or limit the party’s liability in the event of a breach
Construction means interpreting the exemption clause to determine whether the clause as drafted covers the breach and loss that has occurred
Construction means interpreting the exemption clause to determine whether the clause as drafted covers the breach and loss that has occurred
This is the correct answer. Construction of an exemption clause is simply interpreting the clause to see if it succeeds in protecting the party in breach from liability
178
When considering Lord Morton’s guidelines in the case of Canada Steamship Lines v R, what is the position if the exclusion clause could cover liability for both negligence and another ground?
The clause will be effective in excluding liability for both negligence and the alternative ground of liability
The clause will be struck out by the courts for being too wide
The clause will be ineffective in excluding liability for negligence and will only be effective as against the alternative ground of liability
The clause will be effective in excluding liability for negligence only
The clause will be ineffective in excluding liability for negligence and will only be effective as against the alternative ground of liability
This is the correct answer. This principle was illustrated in the case of White v John Warwick where the alternative head of liability was breach of a strict contractual duty. The court held that the party in breach was successful in excluding his liability for the breach of the strict contractual duty but not for the negligent breach.
179
In relation to exemption clauses and negligence, in what circumstances may the contra proferentum rule and the Canada Steamship test be less relevant?
When an exemption clause occurs in a commercial contract between parties of equal bargaining power
When an exemption clause occurs in a commercial contract where the parties are not of equal bargaining power.
When an exemption clause occurs in a consumer contract where the parties are not of equal bargaining power.
When an exemption clause occurs in a standard form contract where the parties are not of equal bargaining power.
When an exemption clause occurs in a commercial contract between parties of equal bargaining power
This is the correct answer. Following Persimmon Homes Ltd v Ove Arup & Partners Ltd [2017] when an exemption clause occurs in a commercial contract between parties of equal bargaining power, the contra proferentem rule and the Canada Steamship test might well be less useful than considering the normal meaning of the words construed in the light of the other provisions of the contract.
180
Which exemption clause will be void as a result of the Unfair Contract Terms Act 1977?
A clause excluding liability for death or personal injury resulting from negligence.
A clause excluding liability for damage to personal property
A clause excluding liability for breach of the statutory implied term about quality of goods
A clause excluding liability for breach of contract
A clause excluding liability for death or personal injury resulting from negligence.
This is the correct answer. This is by virtue of s2(1) of the 1977 Act.
The other options are incorrect as the exemption clauses can exclude liability if they satisfy the requirement of reasonableness
181
What is the purpose and scope of the Unfair Contract Terms Act 1977?
The Act regulates exemption clauses that seek to exclude or restrict liability where neither party is acting in the course of a business
The Act regulates exemption clauses that seek to exclude or restrict liability where both parties are acting in the course of a business
The Act regulates exemption clauses that seek to exclude or restrict liability where one party is acting in the course of a business and the other party is not
The Act regulates contracts between businesses and consumers ensuring that contractual terms are fair and reasonable
The Act regulates exemption clauses that seek to exclude or restrict liability where both parties are acting in the course of a business
The preamble to UCTA clearly sets out its purpose:
182
According to the Unfair Contract Terms Act 1977, when is the requirement of reasonableness judged?
At the time the parties seek legal advice
At the time the contract was made
At the time the term is considered by the Court
At the time of the relevant breach
At the time the contract was made
Correct
This is the correct answer. The reasonableness test is set out in s.11 of the Act and guidelines to be used in applying the test are found in schedule 2 of the Act.
S.11 states that the reasonableness of a contractual term is judged taking into account the circumstances which were or ought reasonably to have been known or in the contemplation of the parties when the contract was made.
183
Which of the following contracts is not regulated by the Consumer Rights Act 2015?
A contract for the supply of digital content to a consumer
A contract for the supply of a service to a consumer
A contract for the supply of goods to a consumer
A contract of employment
A contract of employment
Correct
This is the correct answer. S. 48(2) of the 2015 Act states that contracts of employment are not covered by the Act.
In contrast, the Act covers contracts for the supply of goods to consumers, contracts for the supply of digital content to consumers and contracts for the supply of services to consumers
184
The Consumer Rights Act 2015 regulates unfair terms in consumer contracts. How is unfairness assessed?
A term is unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the trader
A term is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer
A term is unfair if it does not expressly fix the time for the service to be performed
A term is unfair if it is expressed in plain and intelligible language
A term is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer
A term is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer
185
Which of the following is not correct regarding the Consumer Rights Act 2015?
A customer is not bound by a term that attempts to exclude or restrict the trader’s liability for breach of the requirement that goods are fit for their particular purpose
The Act makes unenforceable any term which restricts liability for breach of the requirement that services are performed with reasonable care and skill
The Act is concerned with contracts between businesses and consumers
The Act regulates unfair terms generally
The Act makes unenforceable any term which restricts liability for breach of the requirement that services are performed with reasonable care and skill
Correct
This is the correct answer because this proposition is not correct. S.57(1) provides that a customer is not bound by a term in a contract to supply services to the extent that it would totally exclude the trader’s liability to perform the service with reasonable care and skill, but a restriction of liability (to a specific sum) will not be binding to the extent that it would prevent the consumer from recovering the price paid, but otherwise could be binding.
The other three answers are all correct interpretations of the 2015 Act and its effects
186
What is a representation?
A statement that causes the recipient of the statement loss
An undertaking to do or not to do something
A statement asserting the truth of a given state of facts
A statement that has been incorporated into a contract
Correct
A statement asserting the truth of a given state of facts
Correct. This definition was given in the case of Kleinwort Benson Ltd v Malaysia Mining Corp
187
Which of the following is a statement of fact?
Silence
A statement of opinion
Conduct
A statement of future intention
Conduct
Correct
Correct. Statements can also be made by conduct. In the case of Gordon v Selico, the intentional concealment of dry rot was found to be a misrepresentation
188
Which of the following is not an ingredient for a successful action for misrepresentation?
A representation that is known to be untrue by the representee
A representation that causes the claimant to enter into the contract with the statement maker
A representation that is addressed to the claimant by the representor
A representation that unambiguously has the meaning put forward by the representee
A representation that is known to be untrue by the representee
Correct. There will be no actionable misrepresentation as the representation is unlikely to have induced the representee to enter into the contract
189
What is a material representation?
A statement that relates to an issue that would have influenced a reasonable person
A representation that is made to the claimant
A statement that is incorporated into a contract
A representation that relates to the subject matter of a contract
A statement that relates to an issue that would have influenced a reasonable person
Correct. This objective test for materiality was stated by Lord Mustill in Pan Atlantic Co Ltd v Pine Top Insurance Co Ltd
190
Which of the following is not an exception to the general rule that silence is not a statement of fact?
Continuing representations
Contracts uberrimae fidei
Contracts of service
Half-truths
Contracts of service
Correct. This is not an exception to the rule that silence is not a statement of fact. The exceptions to the rule include half-truths, contracts uberrimae fidei and continuing representations.
191
In what situation will a statement of opinion be elevated to a statement of fact?
Where the representor makes a promise regarding a future intention
Where the facts expressed by the representor are equally well known by the representee
Where the representee has expert knowledge of the subject matter compared to the representor
Where it is proved that the opinion expressed was not one which the representor believed
Where it is proved that the opinion expressed was not one which the representor believed
Where it is proved that the opinion expressed was not one which the representor believed
192
Why was the company’s statement of future intention in Edgington v Fitzmaurice found to be a misrepresentation?
The representors were under a duty to disclose material facts to the representees and they failed to do so
The representors made a continuing representation which became false and they did not disclose the change of circumstances to the representees
At the time the representors made the statement of future intention, they knew that they did not intend to do what they said they would do
The representors made statements that were technically true but misleading
At the time the representors made the statement of future intention, they knew that they did not intend to do what they said they would do
Correct. The statement of future intention was elevated to a statement of fact because of the deception
193
What is a half-truth?
An opinion that is held by the representor only
An incomplete statement
A statement that is marginally correct
A statement that is technically true but misleading
A statement that is technically true but misleading
Correct. This was illustrated in the case of Dimmock v Hallett where a property was described as fully let. The property was indeed fully let at that time, but the vendor did not disclose to the buyer that the tenants had given notice to quit.
194
Which of the following is not a category of misrepresentation?
Dishonest misrepresentation
Innocent misrepresentation
Fraudulent misrepresentation
Negligent misrepresentation
Dishonest misrepresentation
Correct. This is not a category of misrepresentation. The categories of misrepresentation are fraudulent, negligent and innocent misrepresentation
195
What is the definition of a fraudulent misrepresentation?
A false representation that was made knowingly or without belief in its truth or recklessly
A false representation that was made with an intention to cheat or injure
A false representation that was made for a criminal purpose
A representation that was false
A false representation that was made knowingly or without belief in its truth or recklessly
Correct. These requirements were stated by Lord Herschell in Derry v Peek
196
Why is negligent misrepresentation under the Misrepresentation Act 1967 an easier claim for a claimant to establish than a fraudulent misrepresentation claim?
The normal burden of proof is reversed and the defendant bears the burden of proving that they had reasonable grounds for believing their statement and that they did believe it
Negligent misrepresentation is an easier claim because it is based on statute
Fraudulent misrepresentation applies the criminal standard of beyond reasonable doubt
The claimant bears the burden of proof in a claim for negligent misrepresentation
The normal burden of proof is reversed and the defendant bears the burden of proving that they had reasonable grounds for believing their statement and that they did believe it
Correct
Correct. The claimant bears the burden of proof in a claim for fraudulent misrepresentation and it is a difficult burden to discharge. However, the 1967 Act reverses the standard of proof for negligent misrepresentation and places the burden on the defendant to prove that he had reasonable grounds to believe his statement and that he did believe it
197
Where is the definition of an innocent misrepresentation to be found?
Thomas Witter Ltd v TBP Industries Ltd
Section 2(1) Misrepresentation Act 1967
Howard Marine and Dredging Co v Ogden
Derry v Peek
Section 2(1) Misrepresentation Act 1967
Correct. The definition of an innocent misrepresentation is derived from the Misrepresentation Act 1967, s.2(1)
198
What remedies are potentially available for an innocent misrepresentation?
Rescission, damages in lieu of rescission and indemnity
Rescission, damages in lieu of rescission and damages
Damages in lieu of rescission, damages, indemnity
Rescission, damages, indemnity
Rescission, damages in lieu of rescission and indemnity
199
Which of the following is not a reason why an order for rescission will not be granted?
A. Contributory negligence
A. Third party rights
A. Restitution is impossible
A. Lapse of time
A. Contributory negligence
Correct. Contributory negligence is not a bar to rescission. The bars to rescission are lapse of time, affirmation, third party rights and restitution is impossible
200
For which category or categories of misrepresentation is contributory negligence available as a defence?
Negligent and Innocent misrepresentations
Fraudulent misrepresentation
Fraudulent and negligent misrepresentations
Negligent misrepresentation
Negligent misrepresentation
Correct. Contributory negligence is available as a defence to a claim for negligent misrepresentation only
201
Is it possible for a representor to exclude or restrict their liability for misrepresentation?
Yes, but only in respect of fraudulent misrepresentations
Yes, so long as they are not using written standard terms of business
No, it is not possible to exclude or restrict one’s liability for misrepresentation
Yes, as long as the clause satisfies the requirement of reasonableness as stated in s. 11(1) of the Unfair Contract Terms Act 1977
Yes, as long as the clause satisfies the requirement of reasonableness as stated in s. 11(1) of the Unfair Contract Terms Act 1977
Correct. This is stated in s. 3 of the Misrepresentation Act 1967
202
A representation which is false is incorporated into a contract as a term gives rise to which potential claim/s?
Misrepresentation and breach of contract
Negligent misstatement
Misrepresentation and negligent misstatement
Misrepresentation
Breach of contract
Misrepresentation and breach of contract
Correct. If all the elements of misrepresentation are satisfied and the term is breached then these two possible actions are available.
203
An accountancy firm provides negligent advice to a client. The advice induces the client to enter into a contract to purchase a business. The client suffers a significant loss as a consequence of entering into this contract. What claim/s may be brought against the accountancy firm by the client?
Negligent misstatement and negligent misrepresentation.
Negligent misstatement
Negligent misrepresentation
Correct
Correct. The correct claim is negligent misstatement. There is no claim in negligent misrepresentation as the accountancy firm's negligent advice did not induce the client to enter a loss making contract with them but with a third party. See s 2(1) MA 1967.
Negligent misstatement
Correct. The correct claim is negligent misstatement. There is no claim in negligent misrepresentation as the accountancy firm's negligent advice did not induce the client to enter a loss making contract with them but with a third party. See s 2(1) MA 1967.
204
A contract which is void (in contrast to voidable) is….
…liable to be set aside by the court
…of no legal effect from the outset.
…terminable by either party without notice
…able to lead to the transfer of property unless and until voided.
…of no legal effect from the outset.
A contract which is void, in contrast to voidable, is void from the outset. It has no legal effect from the outset.
The other answers are incorrect. A contract which is void does not need to be / cannot be terminated: it never has any legal effect in the first place. For a similar reason, it does not need to be / cannot be set aside by the court. Similarly, it cannot be effective to transfer property, because it has no legal effect.
205
Which of the following is not one of the three categories of mistake that can amount to an operative mistake?
Unilateral mistake.
Fundamental mistake.
Common mistake.
Mutual mistake.
Fundamental mistake.
This is not one of the three categories of mistake that can amount to an operative mistake. The three categories are common mistake, mutual mistake and unilateral mistake – each is explained in this element.
206
What is the legal status of the contract where there is a unilateral mistake as to identity in a face to face setting?
The contract will be void if the seller can show that they asked the buyer to verify their identify before the sale.
The contract will be voidable as the reasonable person would have made the same mistake.
The contract will be void as the seller's mistake will affect the nature and value of the contract.
The contract will be void if the seller can persuade the court that the identity of the buyer and not their attributes was of vital importance to the contract.
The contract will be void if the seller can persuade the court that the identity of the buyer and not their attributes was of vital importance to the contract.
Correct. The general rule is that where there is a unilateral mistake as to identity in a face to face setting, the contract formed is voidable as it is presumed that the seller intended to contract with the person in front of them identified by sight and hearing and that is what happened. However, the contract will be void if the seller can persuade the court that the identity of the buyer was fundamental to the contract.
207
In what type of transaction is a finding of unilateral mistake of identity more likely?
A distance selling transaction
A transaction conducted face to face
A distance selling transaction
208
In which of the following situations will title to the goods pass to an innocent third party?
In a face-to-face transaction where there is a fraudulent misrepresentation as to the attributes of the buyer.
In a distance selling transaction where there is a unilateral mistake as to the identity of the buyer.
In a face-to-face transaction where there is a fraudulent misrepresentation as to the attributes of the buyer.
Correct, the contract between the fraudster and the seller is voidable. Title will pass to the innocent third party.
209
The defence of illegality is also known as:
Ex turpi causa non oritur actio
Volenti non fit injuria
Ex turpi causa non oritur actio
Correct
Well done! This translates approximately to 'no action may be based on an illegal cause', as it is another way of referring to the defence of illegality.
Volenti non fit injuria is another way of referring to the defence of consent.
210
If the claimant has committed an illegal (or grossly immoral) act, the next part of the test is to consider the three considerations identified in Patel v Mirza in order to determine whether allowing the claim would harm the integrity of the legal system. Which of the following is not one of the three considerations as set out in that case?
The underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim.
Whether the claimant's claim is founded upon their own criminal or immoral act.
Whether denial of the claim would be a proportionate response to the illegality.
Any other relevant public policy on which the denial of the claim may have an impact.
Whether the claimant's claim is founded upon their own criminal or immoral act.
Correct
Well done. Prior to Patel v Mirza it was generally thought that the defence only arises if the facts which give rise to the claim are inextricably linked with the criminal activity. The court made clear that that was no longer the test, but this is still likely to be a relevant consideration when considering proportionality. The other three answers are the three considerations identified in Patel v Mirza.
211
What rule of consideration is closely related to the doctrine of privity of contract?
Consideration must be sufficient.
Consideration must not be past.
Consideration must move from the promisee
Performance of a pre-existing duty owed to a third party is sufficient consideration
Consideration must move from the promisee
There is a close relationship between the doctrines of privity and consideration as demonstrated by the cases of Tweddle v Atkinson and Dunlop v Selfridge.
212
Which statute introduced a limited exception to the doctrine of privity of contract?
Consumer Rights Act 2015
Unfair Contract Terms Act 1977
Human Rights Act 1998
Contracts (Rights of Third Parties) Act 1999
Correct
Contracts (Rights of Third Parties) Act 1999
Correct
The Act provides a statutory exception to the doctrine of privity by enabling a third party who is neither a party to the contract, nor has provided consideration to enforce a term of the contract in certain circumstances.
213
Which case below is concerned with the doctrine of privity of contract?
Dunlop Pneumatic Tyre Co. Ltd. v Selfridge & Co.
Chappell & Co. v Nestle
Williams v Roffey Bros & Nicholls (Contractors) Ltd.
Dunlop Pneumatic Tyre Co. Ltd. v New Garage & Motor Co. Ltd.
Dunlop Pneumatic Tyre Co. Ltd. v Selfridge & Co.
Correct
The House of Lords held that the claimant, a third party, had no right to enforce the contract between Dew & Co. and the defendant because of the operation of the doctrine of privity of contract.
214
Which of the following is not a common law method of circumventing privity of contract?
Restitution
Actions in tort
Agency
Assignment
Restitution
Correct
Restitution is not a method of circumventing the doctrine of privity of contract. Restitution is a remedy that seeks to restore a benefit conferred in circumstances in which it would be unfair for the recipient to retain that benefit.
215
A husband buys a car from a car dealer for his wife. The wife is involved in an accident because the car’s brakes were defectively installed by the manufacturer of the car. Can the wife sue the manufacturer of the car for breach of contract?
No. The wife should sue the car dealer in the tort of negligence
Yes. The wife can sue the car manufacturer for breach of contract
No. The wife should sue the car manufacturer in the tort of negligence
No. The wife should sue the car dealer for breach of contract
No. The wife should sue the car manufacturer in the tort of negligence
Correct
The doctrine of privity, which prevents the wife from suing the car manufacturer and car dealer in contract, does not apply in tort actions. The wife should therefore sue the car manufacturer in tort for breach of their duty of care.
216
The Albazero principle was successfully argued in St. Martins Property Corporation Ltd and another v McAlpine. What is the Albazero principle?
Where one party passes property to a second party and stipulates that the second party must hold the property for the benefit of a third party, that stipulation is enforceable by the third party.
Where a third party has a right to enforce promises under a separate contract with the promisor
Where a party is authorised by another to contract on his behalf with a third party, the contract is formed between the authorising party and the third party.
Where a contract was entered into and both parties knew that the end benefit of the contract was going to reside in a third party, then either party breaching the contract could be sued by the other party on behalf of the contemplated third party.
Where a contract was entered into and both parties knew that the end benefit of the contract was going to reside in a third party, then either party breaching the contract could be sued by the other party on behalf of the contemplated third party.
Correct
The Albazero principle is the reason St Martins Property Corporation Ltd v McAlpine was successful whereas Linden Gardens Trust v Lenesta Sludge Disposals Ltd failed.
217
In which case did the court find a collateral contract between the promisor and the third party to provide an exception to the doctrine of privity?
Linden Gardens Trust v Lenesta Sludge Disposals Ltd
Donoghue v Stevenson
Shanklin Pier v Detel Products
Woodar v Wimpey
Shanklin Pier v Detel Products
Correct.
218
Under what circumstances does the Contracts (Rights of Third Parties) Act 1999 enable a third party in his own right to enforce a term of a contract to which he is not a party?
Where the contract is to be of benefit to the third party
Where the contract expressly provides that they may
Where the third party is expressly identified as a member of a class
Where the third party is expressly identified in the contract by name
Where the contract expressly provides that they may
Correct. This is pursuant to s1(1)(a) of the 1999 Act
219
How do the remedies available to third parties under the Contracts (Rights of Third Parties) Act 1999 compare to the remedies available to parties to a contract?
The remedies available to a third party under the Act are at the discretion of the court
A third party has available to them more remedies under the Act compared to the parties to the contract
A third party has fewer remedies available to them compared to the parties to the contract
A third party has available to them the same remedies as the parties to the contract
A third party has available to them the same remedies as the parties to the contract
Correct. S1(5) of the 1999 Act makes available to a third party the same remedies for breach of contract which are available to a party to the contract
220
A contract contains the following clause: ‘In a contract between the insurer and the insured, on the death of the insured, the insurer guarantees to pay £10,000 to Mary Potts, the wife of the insured, or to the dependents of the insured if Mary Potts predeceases him.’ Under what section(s) of the Contracts (Rights of Third Parties) Act 1999 would a third party enforce the contract?
Mary Potts can enforce the contract under s1(1)(b) and s1(3)
Mary Potts’ children can enforce the contract under s1(2)
Mary Potts’ children can enforce the contract under s1(1)(a) and s1(3)
Mary Potts can enforce the contract under s1(1)(a) and s1(3)
Mary Potts can enforce the contract under s1(1)(b) and s1(3)
Correct. Mary Potts can enforce the contract as it purports to confer a benefit on her (s1(1)(b)) and she has been expressly named s1(3)
221
Which of the following is not a way in which a contract might be discharged?
Discharge by frustration
Discharge by performance
Discharge by agreement
Discharge by mistake
Discharge by mistake
Correct
This is the correct answer. A contract affected by mistake is either void or voidable depending on the type of mistake. A void contract has no legal effect from the very beginning, so it does not need to be discharged(terminated). A voidable contract can be rescinded by the innocent party and will then be treated as having no effect from the beginning.
222
What is the meaning of the entire obligations rule?
An obligation is discharged by complete performance of the obligation. Until the obligation is completely performed, the performing party is not entitled to payment
A contract must clearly state all the obligations that the parties have agreed to undertake in order for the contract to be enforceable
A valid contract is made up of several obligations that make up the complete agreement and these obligations are binding
By entering into a contract, the parties commit to performing all the obligations under the contract, and defective performance of an obligation is a breach of the entire contract
An obligation is discharged by complete performance of the obligation. Until the obligation is completely performed, the performing party is not entitled to payment
Correct
This is the correct answer. This rule was illustrated in the case of Cutter v Powell. Cutter died seven weeks into performance of the contract and nineteen days before its end. His widow sued Cutter’s employer for a proportion of the agreed price. Her action failed as the court found the contract to be entire, and Cutter was obliged to perform his obligations in full before he could be entitled to any payment.
223
Which of the following is an exception to the entire obligations rule?
Quantum meruit
Complete performance
Partial performance
Substantial performance
Substantial performance
Correct
This is the correct answer. A contractual obligation is discharged by a complete performance of the obligation. The effect of this is that a party is entitled to payment only after he has completed performance. However, an exception arises where a contract has been substantially performed. The party who rendered substantial performance may be awarded the contract price subject to a deduction to reflect the proportion of the obligation not performed.
The other exceptions to the entire obligations rule are acceptance of partial performance, divisible obligations and wrongful prevention of performance.
224
Which of the following is a way by which a contract can be discharged by agreement?
By performance of the contractual obligations
By repudiatory breach of contract
By a subsequent binding contract between the parties
By operation of statute
By a subsequent binding contract between the parties
This is the correct answer. The parties form a new contract by which they agree to bring the old contract to an end and release each other from their obligations under the old contract
225
Cathy agrees to sew a dress for Jenny. Jenny pays Cathy a deposit of half the contract price. Cathy starts sewing, but when she has sewn a third of the dress, she falls down the stairs and breaks both her arms. What is the best way to terminate the contract amicably?
There is no amicable way to end the contract. Jenny should sue Cathy for breach of contract
Jenny and Cathy can enter a new contract in which Jenny agrees to release Cathy from her obligation to complete sewing the dress
Jenny and Cathy can enter a new contract in which they waive their rights under the old contract in consideration for being released from their obligations under the old contract
Jenny and Cathy can bring their contract to an amicable end if Cathy refunds the deposit to Jenny
Jenny and Cathy can enter a new contract in which they waive their rights under the old contract in consideration for being released from their obligations under the old contract
Correct
This is the correct answer. This is known as mutual waiver.
The other options are problematic for various reasons: only one party is released from their obligation, no consideration has been provided in the new contract, and in the case of Jenny suing Cathy for breach of contract, litigation is normally not an amicable means of resolving a problem
226
What is the meaning of a condition precedent?
It is a term in the contract that sets out the order in which documents take precedence in the event of an inconsistency
It is a condition in a contract that must be fulfilled by the innocent party before he can sue the party who is in breach of contract
It is a term in the contract providing for the termination of the contract and the discharge of obligations outstanding under the contract
It is a condition in a contract that must be fulfilled before the contract itself or certain contractual rights or obligations become binding
It is a condition in a contract that must be fulfilled before the contract itself or certain contractual rights or obligations become binding
This is the correct answer. The condition precedent suspends the contract or specific right or obligation until the condition is satisfied
227
What is repudiatory breach?
This is the stipulation of a situation that will cause existing contractual obligations to terminate
This is where a party indicates that he will not perform his contractual obligations in advance of the date of performance
This is where one party breaches a term of the contract which is either a condition or an innominate term which is to be treated as a condition
This is where one party breaches a term of the contract which is a warranty
This is where one party breaches a term of the contract which is either a condition or an innominate term which is to be treated as a condition
Correct
This is the correct answer. The consequence of a repudiatory breach is that the innocent party has a right to damages plus either terminate or affirm the contract.
228
Which of the following statements is correct regarding termination following a repudiatory breach?
The innocent party can claim damages arising from the specific breach as well as the loss of the contract caused by the termination of the contract as a whole
The innocent party can sue for the loss of the contract caused by the termination of the contract as a whole and he is not required to mitigate the loss
Any rights and obligations which accrued before termination are brought to an end and are not enforceable
The primary obligations of both parties that have not been performed remain unchanged and enforceable
The innocent party can claim damages arising from the specific breach as well as the loss of the contract caused by the termination of the contract as a whole
This is the correct answer. The usual remedy for breach of contract is an award of compensatory damages. However, where the breach is repudiatory in nature, the innocent party can treat the contract as terminated and sue for damages for the loss of the contract as a whole
229
Which of the following is not a consequence of opting to affirm the contract following a repudiatory breach?
The innocent party can claim the whole contract price after performing their obligations
The innocent party is entitled to damages for the breach
The innocent party must mitigate their loss when deciding whether or not to affirm the contract
All the obligations of both contracting parties remain and must be performed
The innocent party must mitigate their loss when deciding whether or not to affirm the contract
Correct
This is the correct answer. A party who chooses to affirm the contract is not required to mitigate their loss. This was illustrated in the case of White & Carter (Councils) Ltd v McGregor
incorrect
The innocent party can claim the whole contract price after performing their obligations
- see benefits to affirmation in notes
230
Which of the following situations is unlikely to make performance of the contract radically different from that contracted for?
Performance of the contract is more expensive
Performance of the contract is impossible
The common purpose of the contract can no longer be carried out
Performance of the contract is illegal
Performance of the contract is more expensive
Correct
This answer is correct. Lord Simon in National Carriers Limited v Panalpina (Northern) Limited stated that a contract is not frustrated because it has become more expensive or onerous to perform.
The other three answers will make a contract radically different thus frustrating the contract.
231
Cathy makes custom-made dresses. Cathy agrees to sew a wedding dress for Jenny who is getting married in three months. Jenny pays Cathy the full contract price and Cathy starts sewing the dress. However, when Cathy has sewn, half the dress, she falls down the stairs and breaks both her arms. Cathy is unable to sew with broken arms and her arms will take at least six months to mend. Jenny sues Cathy for breach of contract. What is Cathy’s best response to the action?
Cathy should defend the action on the ground that the contract has been frustrated as performance of the contract is illegal
Cathy should defend the action on the ground that the contract has become frustrated as performance is impossible
Cathy should defend the action on the ground that the common purpose of the contract has been frustrated
Cathy should defend the action on the ground that the contract has been frustrated as it is more onerous to perform
Cathy should defend the action on the ground that the contract has become frustrated as performance is impossible
Correct
This is the correct answer. Frustration due to impossibility can extend to illness and other reasons. In Condor v Barron Knights, the contract was frustrated when the drummer in a pop group was taken ill and only capable of performing 3 or 4 nights a week. Cathy should therefore run frustration as a defence to the action
232
Which of the following is not a limitation on the doctrine of frustration?
An act which has been declared illegal
An event which was within the contemplation of the parties at the time they entered into the contract
An event whose occurrence the parties have made express provision for in their contract
An event which is brought about through a party’s own conduct
An act which has been declared illegal
Correct
This is the correct answer. An act which has been declared illegal will lead to a contract becoming frustrated
233
Which of the statements below regarding the consequences of frustration is correct?
The recovery of advance payments under s.1(2) Law Reform (Frustrated Contracts) Act 1943 requires that money that should have been paid before the frustrating event should still be paid.
The Law Reform (Frustrated Contracts) Act 1943 deals with obligations arising prior to the frustrating event.
Under s 1(2) Law Reform (Frustrated Contracts) Act 1943 if the supplier has expenses exceeding the amount of the advance payment it may still recover them.
The Law Reform (Frustrated Contracts) Act 1943 deals with the situations that will lead to a contract becoming frustrated
The Law Reform (Frustrated Contracts) Act 1943 deals with obligations arising prior to the frustrating event.
Correct
This is the correct answer.
Regarding the other options, it is important to note that the 1943 Act deals with the consequences of frustration only. It does not deal with the situations that will lead to a contract becoming frustrated – that is dealt with under the common law rules.
234
What is the leading case on s.1(3) of the Law Reform (Frustrated Contracts) Act 1943?
Taylor v Caldwell
Appleby v Myers
Gamerco SA v ICM/Fair Warning (Agency) Ltd
BP Exploration (Libya) Ltd v Hunt (No.2)
BP Exploration (Libya) Ltd v Hunt (No.2)
Correct
This is the correct answer. This is the correct answer. The case established that there are two steps involved in a s.1(3) claim: (i) identification and valuation of the benefit and (ii) the assessment of a ‘just sum’. The court examined these two steps in detail in the decision.
Regarding the other answers, Gamerco SA v ICM/Fair Warning (Agency) Ltd is the leading case on s.1(2) of the Act, and Appleby v Myers and Taylor v Caldwell are common law decisions that pre-date the Act.
235
Which of the following provides the best summary of the decision in Gamerco SA v ICM/Fair Warning (Agency) Ltd?
The decision clarified that the court has a broad discretion under s 1(2) Law Reform (Frustrated Contracts) Act 1943 to order such retention or recovery of money as it thinks just in all the circumstances to account for expenses incurred by the payee.
The decision clarified that when determining how much to allow the payee to retain or recover to account for his expenses under s 1(2) Law Reform (Frustrated Contracts) Act 1943, the amount will not be limited to the actual expenses incurred or the sums paid or payable under the contract
The decision clarified the meaning of 'benefit' under s 1(3) Law Reform (Frustrated Contracts) Act 1943 .
The decision clarified that the task of the court when applying s 1(2) is firstly to identify and value the benefit conferred and then secondly to assess the just sum that should be awarded.
The decision clarified that the court has a broad discretion under s 1(2) Law Reform (Frustrated Contracts) Act 1943 to order such retention or recovery of money as it thinks just in all the circumstances to account for expenses incurred by the payee.
This is the correct answer. The broad discretion of the court under s 1(2) Law Reform (Frustrated Contracts) Act 1943 allows justice to be done between both parties.
236
What is the leading case on reliance interest?
Robinson v Harman
Anglia Television Ltd v Reed
Ruxley Electronics and Construction Ltd v Forsyth
Regus (UK) Ltd v Epcot Solutions Ltd
Anglia Television Ltd v Reed
Correct
This is the correct answer. The court held that a party may recover his reliance loss where he has incurred expenses before the conclusion of the contract. The court further held that a party may recover pre-contract expenses as part of their reliance interest as long as the expenses were within the reasonable contemplation of the parties that it would be wasted as a result of the defendant’s breach
237
What is the compensatory aim of an award of damages in contract law?
An award of damages is aimed at depriving the party in breach of contract of a gain that they have made at the innocent party’s expense
An award of damages is aimed at putting the innocent party in the position they would have been in had the contract been properly performed
An award of damages is aimed at putting the innocent party in the position they would have been in had they not entered into a contract with the party in breach of contract
An award of damages is aimed at compelling actual performance of the primary obligations under the contract
An award of damages is aimed at putting the innocent party in the position they would have been in had the contract been properly performed
Correct
This is the correct answer. This is known as the expectation interest. It is the default approach to compensating the innocent party for the losses he has suffered as a result of the breach of contract
238
Which of the following is not a mechanism for calculating expectation interest?
Cost of cure
Loss of amenity
Loss of reputation
Diminution of value
Loss of reputation
Correct
This is the correct answer. Expectation interest can be calculated using one of the following mechanisms: cost of cure, diminution in value or loss of amenity
239
What is the aim of an award of damages for breach of contract?
An award of damages is aimed at avenging the innocent party for the other party’s breach of contract
An award of damages is aimed at correcting the party who is in breach of contract
An award of damages is aimed at compensating the innocent party for the damage or loss they have suffered as a result of the other party’s breach of contract
An award of damages is aimed at punishing the party who is in breach of contract
An award of damages is aimed at compensating the innocent party for the damage or loss they have suffered as a result of the other party’s breach of contract
This is the correct answer. Contract law aims at compensating the innocent party for the loss they have suffered, and not punishing the party who is in breach of contract
240
In what circumstances will damages for loss of chance be awarded?
Damages for loss of chance will be awarded where the likelihood of the opportunity being realised is greater than fifty percent
An award of damages is aimed at correcting the party who is in breach of contract
Damages for loss of chance will be awarded if the defendant has acted in an unreasonable and unconscionable manner
Damages will be awarded for loss of chance if the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition
Damages will be awarded for loss of chance if the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition
This is the correct answer. This was as a result of the decision in the case of Chaplin v Hicks
241
Why is the case of Farley v Skinner (No. 2) important?
The House of Lords confirmed the general rule that damages will not be awarded for loss of reputation
The House of Lords confirmed the general rule that damages will not be awarded for mental distress in any circumstances
The House of Lords reversed the decision in Addis v Gramophone Co Ltd regarding the unavailability of damages for mental distress
The House of Lords introduced a further exception to the general rule that damages will not be awarded for mental distress
The House of Lords introduced a further exception to the general rule that damages will not be awarded for mental distress
This is the correct answer. The House of Lords allowed damages for loss of amenity where a major object of the contract was to provide pleasure, relaxation and peace of mind. This was moving on from the position in Jarvis v Swann where damages were awarded only where the whole object of the contract was pleasure, relaxation and peace of mind
242
What is the test for factual causation in contract law?
The test is whether the defendant’s actions were foreseeable
The test is whether the defendant’s actions were the only reason for the loss
The test is whether the defendant’s actions were a dominant or effective cause of the loss
The test is whether the defendant’s actions were likely to happen
The test is whether the defendant’s actions were a dominant or effective cause of the loss
This is the correct answer. This was stated by the court in Galoo Ltd v Bright Grahame Murray
243
Which of the following is the most accurate summary of the description of damages which are not too remote, as per Hadley v Baxendale?
Those damages which were reasonably foreseeable.
The damages which the contract made clear would flow from a breach, or which were known to probably flow from a breach at the time the contract was entered into.
The damages which the party in breach should reasonably have contemplated as arising from a breach of contract, and those damages which both parties understood would flow from a breach at the time the contract was entered into.
The damages which arise naturally according to the usual course of things from the breach, or those which the parties contemplated at the time they made the contract would probably be caused by a breach of contract.
The damages which arise naturally according to the usual course of things from the breach, or those which the parties contemplated at the time they made the contract would probably be caused by a breach of contract.
This is the correct answer. This rule was established in the decision of the House of Lords in the case of Hadley v Baxendale (1854) 9 Ex 341.
244
What happens if a claimant fails to mitigate their losses following a breach of contract by the other party?
The claimant will not be able to recover the losses attributable to the failure to mitigate
The amount of damages that the claimant can recover for the breach of contract will be reduced on account of their failure to mitigate
By failing to mitigate their losses, the claimant will themselves be in breach of contract thus liable to pay damages to the defendant
The claimant will not be able to recover any of the losses they have suffered
The claimant will not be able to recover the losses attributable to the failure to mitigate
This is the correct answer. While there is no duty to mitigate one’s losses, the claimant will not be able to recover losses which are due, not to the breach itself, but their own failure to behave reasonably after the breach
245
What principle emerged from the court’s decision in C & P Haulage v Middleton regarding reliance interest?
Reliance interest is awarded to compensate an innocent party for losses resulting from having made a bad bargain
Reliance interest puts the innocent party in a better position than he would have been in had the contract been performed
An innocent party cannot recover expenses that would have been wasted whether or not the breach of contract occurred
Reliance losses are incurred as a result of the breach of contract
An innocent party cannot recover expenses that would have been wasted whether or not the breach of contract occurred
Correct
This is the correct answer. The claimant was unable to recover the money he spent improving the premises as he was unable to show that he would have been able to recoup that expenditure had the contract not been breached.
Regarding the other options, it should be noted that reliance losses are incurred prior to the breach of contract and they are intended to put the claimant in the position he would have been in had he not entered into the contract.
The decision in C & P Haulage v Middleton confirms that reliance interest is not recoverable where the claimant’s losses are as a result of having made a bad bargain
246
Under what circumstances will a remedy of an account of profits be awarded for a breach of contract?
In exceptional circumstances where traditional remedies are inadequate
Where the defendant breaches a duty of confidentiality
Where the breach puts the claimant in a worse financial position compared to if there had been no breach
Where the breach has enabled the defendant to enter into a contract elsewhere
In exceptional circumstances where traditional remedies are inadequate
Correct
This is the correct answer. Lord Nicholls’ decision in the Blake case shows that the inadequacy of other remedies is key to the award of an account of profits. A further requirement is that the claimant must show that he has a legitimate interest in depriving the defendant of his profit
247
Which of the following is not a remedy available to a consumer under the Consumer Rights Act 2015 where the goods supplied are non-conforming?
The right to repair or replacement
The right to repeat performance
The short-term right to reject
The right to a price reduction or the final right to reject
The right to repeat performance
This is the correct answer. The right to repeat performance is not available when goods supplied are non-conforming. The right to repeat performance is available when services standards are breached.
248
What remedy is available to a consumer under the Consumer Rights Act 2015 where the digital content supplied is non-conforming and it is impossible to replace it?
The consumer has a right to a price reduction
The consumer has a right to require repeat performance
The consumer has a right to repair of the digital content
The consumer has a right to reject the digital content
The consumer has a right to a price reduction
Correct
This is the correct answer. S.44(3)(a) of the 2015 Act provides that a consumer has a right to a price reduction because of S.43(3)(a) of that Act ie where the consumer cannot require the trader to repair or replace the digital content if that remedy is impossible
249
What is the time limit under the Consumer Rights Act 2015 for exercising the short-term right to reject goods that are non-conforming?
30 days
14 days
60 days
28 days
30 days
Correct
This is the correct answer. Section 22(3) of the 2015 Act states that the short-term right to reject non-conforming goods is available to a consumer for 30 days running from the time that: (i) ownership has passed (or, in the case of contracts for hire or the like, possession has been transferred) and (ii) the goods have been delivered and (iii) in cases where the trader is required to install the goods or to take other action to enable the consumer to use the goods, the trader has notified the consumer that the required steps have been taken
250
What is a liquidated damages clause?
A clause commonly used in the hospitality industry which sets out the amount of damages that a court should award an innocent party in the event of breach of contract
A clause that stipulates the payment of an exorbitant sum of money by a party who is in breach of contract
A clause which stipulates a certain sum of money which is payable in the event of a particular breach of contract
A clause which deprives an innocent party of compensation when the breach of contract is minor
A clause which stipulates a certain sum of money which is payable in the event of a particular breach of contract
Correct
This is the correct answer. The Supreme Court examined the law on liquidated damages clauses and penalty clauses in the joined cases of Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis
251
What happens if a court finds that a liquidated damages clause is a penalty?
The claimant will be entitled to enforce the penalty against the party that is in breach of contract
The liquidated damages clause will be struck down and the claimant will be entitled to unliquidated damages assessed by the court using the normal rules of contract law
The liquidated damages clause will be struck down and the court will substitute a valid liquidated damages clause in its place
The contract will be rescinded, and the parties will have to re-negotiate terms that meet the requirements of the law
The liquidated damages clause will be struck down and the claimant will be entitled to unliquidated damages assessed by the court using the normal rules of contract law
correct
This is the correct answer. The law on liquidated damages clauses and penalty clauses changed following the judgment of the Supreme Court in Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis
252
What is a secondary obligation in the context of the judgment in Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis?
It is an obligation triggered by breach of contract to compensate the innocent party
It is a contractual obligation that is unenforceable because it is extravagant or unconscionable
It is a contractual obligation that has minor significance
It is a contractual obligation that is agreed early in the negotiations between the parties
It is an obligation triggered by breach of contract to compensate the innocent party
Correct
This is the correct answer. The distinction between a primary and a secondary obligation is of paramount importance when establishing whether a liquidated damages clause is valid or whether it is a penalty. A primary obligation will not engage the penalty rule, whereas a secondary obligation could potentially be a penalty
253
What is an advantage of obtaining a court order for specific performance?
An order for specific performance can be used to enforce a promise that is unsupported by consideration
The respondent is prevented from doing things that were forbidden in the contract
Breaching the court order has severe consequences as it can be treated as contempt of court and lead to imprisonment.
An order for specific performance can be obtained in addition to an award of damages
Breaching the court order has severe consequences as it can be treated as contempt of court and lead to imprisonment.
This is the correct answer. The possibility of imprisonment makes it more likely that a respondent will comply with an order for specific performance
254
What is a prohibitory injunction?
It is an order restraining a party from breaching a term in a contract which requires him not to do something
It is an order restraining a party from entering into a contract with a certain other party
It is an order granted to stop a party from doing something in the future that will cause the applicant harm
It is an order compelling a party to perform a certain act
It is an order restraining a party from breaching a term in a contract which requires him not to do something
This is the correct answer. Another way of defining a prohibitory injunction is that it is an order that restrains a party from breaching a negative term of a contract
255
Which of the following statements is not correct regarding an order for specific performance?
It is available to a successful party as of right
It is granted at the discretion of the court
Breach of an order for specific performance can be treated as contempt of court and lead to imprisonment
It is granted in order to compel a party to do something
It is available to a successful party as of right
This is the correct answer. An order for specific performance is an equitable remedy so it is granted at the discretion of the court
256
What is the purpose and scope of the Unfair Contract Terms Act 1977?
The Act regulates exemption clauses that seek to exclude or restrict liability where neither party is acting in the course of a business
The Act regulates exemption clauses that seek to exclude or restrict liability where one party is acting in the course of a business and the other party is not
The Act regulates exemption clauses that seek to exclude or restrict liability where both parties are acting in the course of a business
The Act regulates contracts between businesses and consumers ensuring that contractual terms are fair and reasonable
The Act regulates exemption clauses that seek to exclude or restrict liability where both parties are acting in the course of a business
This is the correct answer. The purpose of the Act is set out in the preamble while its scope is set out in s1(3)
257
According to the Unfair Contract Terms Act 1977, when is the requirement of reasonableness judged?
At the time the parties seek legal advice
At the time of the relevant breach
At the time the contract was made
At the time the term is considered by the Court
At the time the contract was made
Correct
This is the correct answer. The reasonableness test is set out in s.11 of the Act and guidelines to be used in applying the test are found in schedule 2 of the Act.
S.11 states that the reasonableness of a contractual term is judged taking into account the circumstances which were or ought reasonably to have been known or in the contemplation of the parties when the contract was made.
