Contract Flashcards
What 3 kinds of contracts need to be in writing?
a) Guarantees;
b) Dispositions in land; and
c) Consumer credit agreements.
What are the 3 requirements for a deed?
a) It must be executed by the parties;
b) In the presence of a witness; and
c) It must be delivered.
What are the 3 elements required for a contract to be formed?
a) Agreement;
b) Consideration; and
c) Intent.
What is required for a communication to count as an offer?
It must create a reasonable expectation in the offeree that the offeror is wiling to enter into a contract.
How is it decided if a contract is definite and certain?
Are there enough essential terms that the contract would be capable of being enforced?
What gives the offeree power to accept?
Knowledge of the offer.
What is an invitation to treat?
An invitation to the other party to make an offer.
What 5 things are invitations to treat?
a) Adverts;
b) Shop sales;
c) Price lists;
d) Tenders; and
e) Auctions.
Can an offeror revoke a contract by informing a third party?
Yes, if the offeree receives correct information from a reliable source of acts of the offeror which would indicate to a reasonable person that they have revoked the offer.
Until what point can offers be revoked?
Until acceptance.
At what point does a unilateral contract become irrevocable?
After performance has begun.
Can an offer be accepted by performance?
Yes, if the offeror has not stipulated a method of acceptance.
When is a rejection by the offeree effective?
When received.
What does a counteroffer do?
Rejects the original offer and counts as a new offer.
Can an acceptance be qualified?
No, as then it would constitute a counteroffer.
What method of acceptance is permitted if there is no method stipulated by the offeror?
Any reasonable manner and any reasonable medium.
What is the exception to the rule that a stipulated method of acceptance is the only way to accept a contract?
If the method used is no less advantageous to the offeror.
When is a unilateral contract formed?
On completion.
What is the postal rule?
Acceptance by post creates a contract at the moment of posting.
In what situations is there a presumption against intention to be legally bound?
Domestic.
What is the general rule regarding contracts with minors?
They are voidable.
What are the 3 exceptions to the rule that minors cannot enter contracts?
a) Necessaries;
b) Employment contracts; and
c) Contracts for acquisition of permanent interest in property.
When will contracts with people who lack capacity be considered voidable?
If the other party knew they lacked capacity.
When does someone lack capacity according to the Mental Capacity Act 2005?
When they are unable to make a decision for themselves in relation to the matter.
What is executory consideration?
An act of forbearance in the future.
What are the four requirements for consideration?
a) It must move from the promisee;
b) It must be sufficient but need not be adequate; and
c) It cannot be to fulfil an existing duty; and
d) It cannot be an act done in the past.
What does ‘consideration must move from the promisee’ mean?
Consideration must be provided by the parties to the contracts themselves, not third parties.
What does ‘consideration must be sufficient not adequate’ mean?
It must have some value, even if very small.
What is the exception to the rule that consideration cannot be to fulfil an existing duty?
When the existing contractual duty confers a practical benefit on the party offering additional consideration e.g. offered more money to work quicker.
What is the exception to the rule that an act done in the past cannot be good consideration? What are its three requirements?
When there was an implied understanding of payment. The three conditions are:
a) The act must have been done at the promisor’s request;
b) The parties must have understood that the act was to be remunerated; and
c) The payment must have been legally enforceable if it had been promised before.
Is part payment of a debt good consideration?
No.
What are the 6 exceptions to the rule that part payment of a debt cannot be good consideration?
a) Debt is disputed in good faith;
b) Unliquidated claims;
c) Payment at a different place, or earlier payment;
d) A third party makes the payment;
e) Payment is made by different means; or
f) A composition with creditors.
What is promissory estoppel?
An equitable principle that gives legal effect to an agreement unsupported by consideration. It stops a party going back on a promise.
What are the three requirements for promissory estoppel?
a) There must be a clear and unequivocal promise by the promisor that they will not rely on existing legal rights;
b) The promisee must have altered their position relying on this promise; and
c) It must be inequitable for the promisor to go back on their promise.
What does the doctrine of privity of contract mean?
Only the parties to a contract may sue and be sued under it.
In what 2 scenarios does the Contracts (Rights of Third Parties) Act 1999 allow a third party to enforce a term of a contract?
a) The contract expressly provides that the party may enforce the term; or
b) A term of the contract purports to confer a benefit on the party and it appears from the terms of the contract that the parties intended it to be enforceable by them.
What is the requirement for a third party to sue under the Contracts (Rights of Third Parties) Act 1999?
They must be expressly named in the contract.
What is required if the parties want to vary or rescind a contract but a third party has agreed to a right benefitting them or has relied or is likely to rely on it?
The consent of the third party.
What are the 5 common law exceptions to the Contracts (Rights of Third Parties) Act 1999?
a) Agency;
b) Assignment;
c) Subrogation;
d) Collateral contracts; and
e) Trusts.
What can be assigned under a contract?
The benefit, NOT the burden.
What is required if someone wants to assign the burden of a contract?
A novation.
What are terms of a contract contrasted with?
Representations.
What are the two kinds of terms?
a) Conditions; and
b) Warranties.
When are terms incorporated into the contract during negotations?
When the parties intended them to form part of the contract.
What is a representation?
A statement of fact or law made to induce the other party into entering the contract.
How do you determine whether a statement is a term or a representation?
By determining the intentions of a party viewed objectively having regard to the conduct of the parties.
What three factors will the court take into account when considering whether a statement is a term or a representation?
a) The importance of the statement;
b) The stage of negotiations; and
c) Whether the party making it had any specialist knowledge.
What are the two classifications of terms?
a) Conditions; and
b) Warranties.
What can an innocent party do when the other party has breached a condition?
Repudiate the contract and claim damages.
What is a condition?
A term of the contract that is so fundamental that it goes to the root.
What is a warranty?
A term that is incidental or collateral to the main terms.
What is an innominate term?
A term as to which it is unclear at the outset whether it is a condition or warranty.
What will the courts do to determine if a innominate term is a condition or a warranty after it has been breached?
Consider whether the breach of the term results in the innocent party losing substantially the whole of the benefit of the contract.
What happens if a party breaches a contract in which time is of the essence?
They commit a repudiatory breach.
What is the general presumption regarding time in commercial contracts?
That it is of the essence.
When will a term form part of a contract?
If the other party has reasonable notice of it.
What does the parol evidence rule mean?
There is a general presumption that external evidence cannot add to, subtract from, contradict or vary the terms of a written contract.
What are the 4 ways terms can be implied into a contract?
a) Statute;
b) The courts;
c) Custom and usage; or
d) A course of dealings between the parties.
What are the 4 terms implied by the Sale of Goods Act 1979?
a) The seller has title to the goods;
b) The goods will match any description given;
c) The goods will be of satisfactory quality; and
d) They will be fit for purpose made know to seller.
What does ‘satisfactory quality’ mean in the Sale of Goods Act 1979?
Fit for the purpose for which such goods are generally used.
What are the terms implied by the Sale of Goods Act 1979 generally treated as?
Conditions.
When will the terms implied by the Sale of Goods Act 1979 be considered a warranty?
When the breach is so minor that it would be unreasonable for the buyer to reject the goods.
What terms does the Supply of Goods and Services Act 1982 imply?
a) The supplier will carry out the service in reasonable time;
b) The service will be carried out with reasonable care and skill; and
c) Any goods supplied will have the same terms implied by the SGA.
What kind of terms are implied by the Supply of Goods and Services Act 1982?
Innominate terms.
What are the four terms implied by the Consumer Rights Act 2015?
The same as the SGA and services will be carried out:
a) With reasonable care and skill;
b) In accordance with any information which the consumer relies on;
c) For a reasonable price; and
d) Within a reasonable time.
Can the terms of the CRA 2015 be excluded?
No.
When will the courts imply terms?
Rarely - only to give the contract business efficacy. The term must be ‘so obvious to a reasonable person that it goes without saying’.
What are the three requirements for an exclusion clause to work?
a) It must have been incorporated;
b) It must have been properly drafted to be construed; and
c) It must not be prohibited.
What are the three ways an exclusion clause can be incorporated into a contract?
a) By signature;
b) By notice; and
c) Through custom or course of dealings.
When must an exclusion clause have been brought to the attention of the other party if incorporated by notice?
Immediately before or at the time the contract was concluded.
How must a party intending to rely on an exclusion clause show it was incorporated effectively by notice?
They must show that they took reasonable steps to bring it to the attention of the other party.
What is the contra preferentum rule?
Any ambiguity in an exclusion clause is held against the party seeking to rely on it.
What two kinds of clause are automatically void under the Unfair Contract Terms Act 1977?
a) Any term purporting to exclude liability for death or personal injury caused by negligence; and
b) Any term purporting to exclude the implied condition as to title under SGA 1979.
What three kinds of clause will only be effective if reasonable under UCTA 1977?
a) Any clause purporting to exclude liability for any loss except death or personal injury by negligence;
b) Any of the terms except the one as to title under SGA 1979; and
c) If relying on standard terms & conditions, any clause that excludes or restricts liability to actually deliver the contract in the way agreed.
What 5 things will the courts consider when determining whether a clause is reasonable under UCTA 1977?
a) The strength of the bargaining parties;
b) Any inducement received;
c) Whether the customer knew about the clause;
d) Whether compliance was practicable; and
e) Whether there was a special order of the customer.
At what point in time does the test under UCTA 1977 consider the reasonableness of the clause?
When it was included in the contract, not whether it is reasonable to rely on it.
To what kind of agreements does UCTA 1977 apply?
Business to business.
What terms are prohibited under the CRA 2015?
Any clause that purports to exclude liability for the terms implied by the CRA 2015 and that purports to exclude liability for personal injury as a result of negligence.
When is a term unfair under the CRA 2015?
When it causes a significant imbalance to the detriment of the consumer.
What two terms cannot be deemed unfair?
Terms relating to the main subject matter of the contract and to the price payable, so long as they are prominent and transparent.
What two things can render a contract void?
a) Mistake; and
b) Illegality.
What are the two ways a mistake can render a contract void?
a) It operates to prevent formation; or
b) It makes the agreement fundamentally different from what was intended.
What is common mistake?
The parties have made the same mistake (often subject matter).
What is mutual mistake?
The parties are mistaken about different things.
What is a unilateral mistake?
Where one party is mistaken and the other party is aware of it e.g. error in price.
What is the mistaken identity test?
Would the parties have contracted irrespective of the identity of the other party?
What are the 3 kinds of duress?
a) Duress of the person;
b) Duress of goods; and
c) Economic duress.
What is a general requirement for duress?
Illegitimate pressure.
What is required for economic duress?
A coercion of the will so as to vitiate consent and illegitimate pressure.
What is the result if a contract is found to have been made under duress?
It is voidable.
What are the two ways of proving undue influence?
a) Actual undue influence due to overt acts; and
b) Presumed undue influence because of a relationship between the parties.
When does presumed undue influence arise?
When there is a relationship of trust and confidence between the parties.
When is there a presumption of undue influence?
When there is a special relationship between the parties and the underlying transaction calls out for explanation.
Does silence amount to a misrepresentation?
No.
What is a misrepresentation?
A false statement of fact or law that induces the other party to enter a contract.
What will the courts consider when deciding if a misrepresentation induced the party?
Whether it was material and whether a reasonable person in the claimant’s position would have been influenced.
What are the three kinds of misrepresentation?
a) Fraudulent;
b) Negligent; and
c) Innocent.
What does the party against whom a claim of negligent misrepresentation have to prove to be found innocent?
Any misrepresentation is actionable unless the person making the statement can prove that they had reasonable grounds for believing, and did believe, the facts were true.
What is the main remedy available for all 3 kinds of misrepresentation?
Rescission.
What are the 4 bars to rescission?
a) Affirmation;
b) Lapse of time;
c) Impossibility of restitution; and
d) Third-party rights.
In what two kinds of misrepresentation claims are damages available?
a) Fraudulent; and
b) Negligent.
What are the two requirements for a contract to end by agreement?
a) All the parties must agree; and
b) Consideration.
Why can parties agree to discharge a contract if they all have remaining obligations under it?
They are each offering to extinguish rights/obligations under the contract as consideration.
How can a contract be discharged if only one party has remaining obligations?
By deed.
What is the disadvantage of a waiver?
The party waiving their rights can reinstate them by notice.
What is the entire obligations rule?
Only full performance will discharge a contract.
What is a common law exception to the entire obligations rule?
Substantial performance.
When can a party terminate a contract after receiving notice of an anticipatory breach?
a) When they receive the notice; or
b) When performance is due.
What are the 3 ways a contract can be frustrated?
a) Impossibility;
b) Illegality; or
c) Substantially different.
What does the Law Reform (Frustrated Contracts) Act 1943 allow a party to a frustrated contract to do?
A party can claim back all sums paid in respect of the contract before the frustrating event and any expenses incurred.
What should expectation damages do?
Put the party into the position that they would have been in had the contract been properly performed.
What can the innocent party do if expectation damages are too speculative to measure?
Claim reliance damages.
What do reliance damages cover?
Any expense incurred in reliance on the contract before the date of breach.
When are damages assessed?
At the date of breach.
What are the two requirements for remoteness in contract?
a) The damages should fairly and reasonably be considered to arise naturally from the breach; or
b) Have been in the reasonable contemplation of the parties as a probable result of the breach.
What will the courts consider regarding causation?
Was the breach an effective cause of the loss.
When is contributory negligence available as a defence?
When liability is the same in both contract and tort.
What must an innocent party do to ensure they receive full damages?
Mitigate their loss.
What is a valid liquidated damages clause?
One that is a genuine pre-estimate of loss.
What will the court do to penalty clauses?
Strike them out.
What are three examples of equitable remedies?
a) Specific performance;
b) Injunctive relief; and
c) Rescission.
