Contract Flashcards
What contracts must be in writing?
- guarantees
- contracts for sale of land
- consumer credit agreements
When must a contact be by deed?
- where no consideration
- conveyance of land
What is the time limit for a claim under contract made by deed?
12 years from date of breach.
What are the elements of a contract?
Agreement (offer & acceptance)
Consideration
Intent
What is the test for whether an agreement is present?
Did the words or conduct of the parties manifest a present intention to enter into a contract?
- objective standard.
What are the requirements of an offer?
Must create reasonably expectation in offeree that offeror is willing to enter into a contract on the basis of all material terms contained in offer
Must be intent to enter into contract, not just negotiations.
Offer must be definite and certain in essential terms, is contract including them capable of being enforced?
Offeree must have knowledge of offer, must be communicated to them.
What does not amount to an offer?
- responses to requests for information
- invitations to treat. Advertisements, shops sales, price lists, tenders, invitation to tender, auction catalogue
Quotations may amount to offer if intention is there from prior correspondence.
What is a unilateral contact?
Case where advertisement is classed as offer.
Arise where person making offer promises to do something if person does something in return and the person actually does it.
Only one party assumes an obligation when offer made.
Frequently made by advertisement promising reward for a particular action. Clear offeror intends to be bound.
When is an offer terminated?
Revocation by offeror (retracted).
- Revoked by direct communication.
- Can be indirect if offeree receives 1) correct information 2) from reliable source 3) of acts of offeror which indicate to a reasonable person that the offeror no longer wishes to make an offer.
- Can be revoked at any time up to acceptance even if promise not to, except where there is a collateral contract.
Unilateral contract
- becomes irrevocable once performance began as unfair, but not accepted until performance completed
Termination by offeree
- express rejection, effective when received.
- counter offer, extinguishes offer and makes new one
- lapse of time, if fail to accept within time specific or if no deadline within reasonable time (takes into account subject matter)
- operation of law, death of either party, destruction of subject matter, supervening illegality, failure of condition
When is an offer accepted?
- Must be unqualified. Person who offer addressed to of member of class has power of acceptance
- Generally can’t be assigned
- Agent can accept terms on principles behalf.
- Offeree must know of offer to accept.
How is an offer accepted?
By any reasonable manner by any medium reasonable under circumstances.
If method stipulated and offeree doesn’t use it, no valid acceptance. But exception where method is no less advantageous to offeror.
Silence doesn’t amount to acceptance.
Acceptance of unilateral contract, once act completed accepted, offeree has no obligation to complete performance. Must notify offeror within reasonable period after performance been completed.
Acceptance by conduct, offeror must be aware of offerees conduct to satisfy requirement for communications. Acceptance = delivering goods or accepting goods.
Acceptance must be communicated. Offeror can expressly waive need for it to be communicated.
Acceptance by post
- postal rule, acceptance creates contract at moment of posting, even if gets lost providing that
1) properly addressed and stamped
2) not unreasonable to accept by post
3) offer says, expressly or implied that acceptance not effective until received.
- postal rule doesn’t apply to email, communicated when opened.
Revocation effective when received
Battle of forms - last shot rule.
What is the presumption re intention in domestic relationships and social settings?
Domestic relationship
- Presumption that do not intend to be legally bound.
- Can be rebutted by evidence.
- if either party knew other didn’t intend to be legally bound, agreement won’t be binding even if evidence to support
Social
- Presumption that do not intend to be legally bound.
- Can be rebutted by evidence.
What is the presumption in commercial settings?
Strong presumption that intend to be legally bound. To rebut must have clear and unambiguous evidence.
Rebutting:
- subject to contract or binding in honour only suggest no intention
Does a minor have capacity to enter into contacts?
Under 18s general rule - voidable.
Minors can enforce contracts but not bound unless they ratify when turn 18
Exceptions:
- necessaries for reasonable price. Necessities are goods suitable to condition of live and their requirements at the time. Varies. If got lots, not necessary.
- employment contracts if terms are of benefit to them
- contracts for acquisition of permanent interest in property, binding less minor repudiates.
Minors Contracts Act 1987 - deals with unfairness on other party. If other party transferred property to the minor, the court may require the minor to transfer it back if her and equitable.
What happens if someone lacks mental capacity?
Voidable by that person, only if other party knew they lacked capacity.
Under MCA 2015, person lacks capacity if unable to make a decision for themselves in relation to the matter.
Involves:
- unable to understand info relevent to decision
- unable to retain information
- unable to weigh up
- unable to communicate
Upon recovery, can ratify.
May be required to pay reasonable price for necessaries.
What happens if someone is intoxicated?
Have to pay reasonable price for necessaries
Not bound if other party aware
What is consideration?
Act or forbearance of one party or promise of
- can be executed or executory (promise in future)
- can be positive or negative obligation
- must more from the promisee
- must be sufficient but need not be adequate
- must not be illusory
Is performance of an existing duty good consideration?
Generally no, no consideration.
If extra money for going beyond duty, yes.
Exceptions
- practical benefit. If performance of existing duty confers practical benefit on other party, eg avoidance of sanctions, may be good consideration.
Is performance of an existing contractual duty owed to a third party good consideration?
Yes.
Is performance of an existing statutory duty good consideration?
No, however, if go over and above and able to charge, may be good consideration
Is past consideration good consideration?
Generally no.
Exception
- if earlier act given at promisor’s request and there is implied understanding that payment would follow, may be sufficient consideration.
3 conditions:
1) act must have been done at promisors request
2) parties must have understood that the act was to be remunerated either by payment or another benefit and
3) payment or other benefit must have been legally enforceable had the promise been made in advance
Does English law recognise part payment of a debt?
Generally no as fresh consideration to support promise to part pay.
Exceptions
- where debt disputes in good faith, agreeing to pay something is consideration
- unliquidated claims, where amount owed is uncertain
- payment at different place or earlier, confers a benefit
- third party makes payment
- payment by different means at respect of party accepting lesser amount
- composition with creditors
What is promissory estoppel and what are the requirements?
Equitable principle that gives legal effect to agreement unsupported by consideration. Prevents going back on promise. Use as shield not a sword, defence not basis for claim, ie if landlord sues for full rent after agreed to accept less
1) must be clear and unequivocal promise by promise not to rely on revisiting legal rights (eg accepting part payment)
2) promisee must have altered position in reliance on promise and
3) must be inequitable for promise to go back on their promise
Only has suspensory effect, original rights revived after conditions that caused estoppel in first place no longer exist.
What is privity of contract?
Only parties to contract can sue and be sued
What are statutory exceptions to privity of contract?
Contracts (rights of third parties) Act 1999. Allows third party to benefit but not impose obligations on a third party.
Third party has a right to enforce a term of the contract if:
- the contract expressly provides that the third party may enforce the term or
- the term of the contract purports to confer a benefit on the third party and it appears from the terms that the parties intended the term to be enforceable by the third party.
Party must be expressly named or be a member of a benefitting class of people described.
Doesn’t apply to employment contracts and articles of association, also doesn’t apply if excluded.
If a third party has rights under a contract, can the original parties vary?
If the third party has:
- third party has communicated agreement to term benefitting them
- third party relied on term and promisor aware of this or
- promisor should have foreseen that the third party would rely on the term and third party has relied on it.
Then any amendment to the contract that will be to detriment third parties detriment will need their consent
What are the common law exceptions to privity of contract?
Agency
- under law of agency, if third party unaware of existence of principle and thinks dealing with agent, both agent and undisclosed principle can be sued or sue under contract.
Assignment
- contractual right can be transferred to 3rd party.
- Notice must be given to party liable to perform transferred obligation.
- Only benefit can be assigned, not burden. If want to transfer both, need notation agreement between new and old parties.
Subrogation
- insurance contracts, if insurer pays claim to policyholder, insurer surrogates to rights of policyholder. Means insurer stands in shoes of policyholder and has all rights that they have against person who caused loss.
- may also arise in guarantor/guarantee relationships
Collateral contracts
- where court finds collateral contract between promisor and third party running alongside main contact.
Trusts
- court may find that promises held on trust for another person, means third party can enforce promise against.
- parties must intent to create a trust.
What are the types of terms?
Can be express or implied by statute, courts or custom and usage.
Terms may be:
Conditions - term so fundamental goes to root of contract. If breached contract doesn’t work without it. If breached has option to terminate and claim damages.
Warranties - term that is incidental or collateral to main terms. Doesn’t go to root, breach less serious. Remedies fewer and can’t bring to an end
Innominate terms - unclear whether condition or warranty, doesn’t say and consequence is breach is unclear. If term breached, courts look at effect of breach to determine what remedy should be available. If innocent party loses substantially whole benefit of contract, treated as condition. If breach only incidental, treated as warranty.
How to determine is a statement made during negotiations is a term (incorporated) or a representation?
Determined by intentions of parties, viewed objectively from perspective of reasonable person having regard to parties conduct.
Courts will take into account:
- importance of statement to person it was made. If wouldn’t have entered into it if not made, likely to be term.
- what stage statement made? If made at time contract made, more likely to be term.
- if person making has any special knowledge or information, more likely to be term.
If contract in writing and oral statement not included, likely to find representation not term.
If statement turns out to be untrue:
- if representation, remedy depends on whether made fraudulently, negligently or innocently. Damages may still be available.
- if term, breach of contract and can claim damages.
When is time of the essence?
If time is of the essence in relation to an obligation which is a condition, late performance entitles innocent party to terminate and claim damages.
If time if not of the essence, it is a warranty and innocent party can only claim damages
Presumed in commercial that time if of the essence for delivery of time for delivery has been agreed. Provisions in contract may displace presumption.
How are terms incorporated?
By signature
- sign = bound. No defence to not read
- defence if induced by misrepresentation
- defence if non est factum applies. Special difficulties needed, fundamental difference between what signed and what thought signed.
By notice
- party seeking to rely on it must have taken reasonable steps to bring to attention of other party. What is reasonable depends on nature of clause. More unusual or onerous, more required to bring to attention.
- clause must be incorporated or referred to in document that has contractual effect. Not receipt.
- timing of notice important, must be bought to attention before or at time contract concluded
Through custom or previous dealings
- if can show established record of contracting on standard ts&cs, likely to find that these apply still.
- need to show regular and consistent course of dealings
What is the parol evidence rule?
If contract in writing, general presumption that external evidence cannot add to, subtract from, contradict or vary terms of written contract.
Exceptions:
- implied terms
- collateral contracts
Doesn’t apply where court finds partly written and partly oral.
Entire agreement clause provides that written document contains whole agreement. Purpose to uphold parol evidence law. Court likely to uphold unless attempt to avoid liability for misrepresentation.
What statutes imply terms into contracts?
Sale of Goods Act 1979
- applies business to business and private sales
Consumer Rights Act 2015
- implies terms into consumer contracts
Supply of Goods and Services Act 1982
- applies business to business and private sales
What terms does the Sale of Goods Act 1979 imply?
- seller has legal right to sell goods
- goods match any description applied to them by seller
- in a sale by a business, be of satisfactory quality
- in a sale by a business, be fit for any particular purpose made known by the buyer
Satisfactory quality means goods be fit for purpose for which generally used, free from minor defects, safe and durable. Exceptions for defects bought to buyers attention and any defect obvious on inspection.
Terms implied are conditions.
UCTA doesn’t let exclude terms as to title, exclusion of other implied terms only valid if reasonable.
What terms does the Supply of Goods and Services Act 1982 imply?
Services
- service carried out in reasonable time
- with reasonable care and skill
These are innominate terms rather than conditions.
Goods
- title
- satisfactory quality
These are conditions
What terms does the Consumer Rights Act 2015 imply?
All goods should:
- match description
- be of satisfactory quality and
- be fit for purpose
Liability cannot be excluded or limited.
Also implies terms into contracts for services
- carried out with reasonable care and skill
- completed in accordance with information which consumer relies on
- completed for reasonable price and
- completed within a reasonable time
When will the court imply terms?
Courts reluctant to interfere with presumed intentions of parties but will imply terms if necessary to give contract business efficacy - make work in way parties intended. Stringent.
Only be implied if so obvious too a reasonable person that goes without saying (officious bystander test)
When are terms implied by custom and usage?
If industry or market standard, may imply terms that are normal in that industry.
Can be excluded by express term of contract.
Terms may be implied if can show regular and concierge course of dealings on same terms, these terms may be implied.
What happens when an agreement is incomplete or vague? Will the courts get involved?
Court may get involved if parties clearly intended for a binding agreement.
Test is sufficient certainty, if not sufficiently certain, won’t get involved.
If courts can’t conclude that parties intended to be bound without its intervention, unlike to get involved, won’t speculate.
Court may get involved to resolve uncertainty if satisfied that parties intended to be bound by terms. May be likely to find binding if:
- mechanism agreed between parties to resolve uncertainty.
- commercial cases where familiar with trade
- cases of contracts for future performance over period of time where matters are left to be adjusted
- where there has been partial performance
Implied terms under statutes may help.
Court may also server the uncertain term, test is whether term can be severed without effecting substance of bargain between the parties
What are the requirements for a valid exclusion clause?
1) must be incorporated
2) must be properly construed (interpreted)
3) must not be prohibited by statute. UCTS and CRA prohibit some or may permit if pass reasonableness test
How should an exclusion clause be constructed?
- wording must be clear, unambiguous and cover loss suffered.
- contra proferentum rule means that if any ambiguity, will be interpreted against party seeking to rely on the clause
