Contract Flashcards
1
Q
What contracts must be in writing?
A
- guarantees
- contracts for sale of land
- consumer credit agreements
2
Q
When must a contact be by deed?
A
- where no consideration
- conveyance of land
3
Q
What is the time limit for a claim under contract made by deed?
A
12 years from date of breach.
4
Q
What are the elements of a contract?
A
Agreement (offer & acceptance)
Consideration
Intent
5
Q
What is the test for whether an agreement is present?
A
Did the words or conduct of the parties manifest a present intention to enter into a contract?
- objective standard.
6
Q
What are the requirements of an offer?
A
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.
7
Q
What does not amount to an offer?
A
- 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.
8
Q
What is a unilateral contact?
A
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.
9
Q
When is an offer terminated?
A
- 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
10
Q
When is an offer accepted?
A
- 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.
11
Q
How is an offer accepted?
A
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.
12
Q
What is the presumption re intention in domestic relationships and social settings?
A
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.
13
Q
What is the presumption in commercial settings?
A
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
14
Q
Does a minor have capacity to enter into contacts?
A
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.
15
Q
What happens if someone lacks mental capacity?
A
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.
16
Q
What happens if someone is intoxicated?
A
Have to pay reasonable price for necessaries
Not bound if other party aware
17
Q
What is consideration?
A
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
18
Q
Is performance of an existing duty good consideration?
A
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.
19
Q
Is performance of an existing contractual duty owed to a third party good consideration?
A
Yes.
20
Q
Is performance of an existing statutory duty good consideration?
A
No, however, if go over and above and able to charge, may be good consideration
21
Q
Is past consideration good consideration?
A
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
22
Q
Does English law recognise part payment of a debt?
A
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
23
Q
What is promissory estoppel and what are the requirements?
A
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.
24
Q
What is privity of contract?
A
Only parties to contract can sue and be sued
25
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.
26
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
27
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.
28
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.
29
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.
30
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.
31
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
32
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.
33
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
34
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.
35
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
36
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
37
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)
38
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 consistent course of dealings on same terms, these terms may be implied.
39
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
40
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
41
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
42
How does UCTA regulate exclusion clauses?
Applies only to business to business contacts:
- any clause that attempts to exclude liability for death or PI from negligence, automatically void.
- any clause that tries to exclude liability for another loss caused by negligence eg property damage, void unless reasonable
- liability for breach to implied condition as to title under SGA & SGSA cannot be excluded
- liability for breach of obligations as to compliance with description, quality or fitness for purpose cannot be excluded or restricted unless reasonable
- if one party contracts on standard form terms and conditions, cannot rely on a term that 1) excludes or restricts liability for breach of contract 2) reserves right to render contractual performance substantially different from what was expected or 3) renders no contractual performance at all unless reasonable
43
What is the reasonableness requirement under UCTA?
Term must be ‘fair and reasonable to be included having regard to what circumstances were, or ought reasonably to have been know or in contemplation of parties when contract made’
Court will consider:
- strength of bargaining positions of parties
- whether any inducement received by customer to agree to term or whether had opportunity to enter into similar contract without having to accept similar term
- whether customer knew or ought to have known about existence and extent of term
- whether reasonable at time of contract to conclude that compliance with condition was practicable and
- whether goods manufactures, processes or adapted to special order. If so, more likely to be reasonable
44
What will the courts consider where liability is limited rather than excluded?
In commercial setting, may be more likely to be reasonable.
Court will look at in addition to other factors, resources open to party seeking rely and whether open to protect themselves using insurance
45
When is reasonableness considered under UCTA?
Test whether reasonable to include clause in contract not whether reasonable to rely on it.
Considered when contact concluded, having regard to what knew at the time.
Burden on person relying on clause to prove reasonable.
46
What terms are prohibited under CRA 15?
Transfer cannot exclude or limit statutory implied terms as to title, compliance with description, quality or fitness for purpose.
Cannot exclude or limit implied term that service be provided with reasonable care and skill or within reasonable time.
Prohibited so not binding.
Clause excluding or limited liability for PI or death from negligence also prohibited
47
What terms are unfair under CRA?
Any term which is not prohibited but can be unfair.
Term is unfair if ‘contrary to requirements of good faith, it causes a significant imbalance in the parties rights and inflations under the contract to the detriment of the consumer’
Whether fair is assessed by looking at the subject matter of the contract, other terms and surrounding circumstances.
48
What other requirements are they for contracts terms under CRA?
Should be transparent and drafter in plain and intelligible language. Must be legible, if not, unfair.
Any ambiguity in consumers favour.
49
What happens if term if considered unfair?
Not binding unless consumer chose to rely on it.
Contract still binds parties but that term doesn’t bind consumer. Doesn’t render contract unenforceable.
50
What are potentially unfair terms under CRA?
List in CRA, non exhaustive.
Terms which have object and effect of:
- excluding or limiting traders liability in event of death or PI to consumer resulting from act or omission of trader other than negligence
- term that requires that, if consumer decides not to conclude or perform, consumer must pay trader disproportionately high sum in compensation or for services not supplied.
- enabling trader to terminate contract of indeterminate duration without reasonable notice unless serious grounds to do so
- enabling trader to alter terms unilaterally without valid reason
- giving trader direction to decide price after consumer bound
- excluding or hindering consumers right to take legal action or exercise any other remedy
51
What terms doesn’t fairness test apply to under CRA?
Won’t be assessed for fairness is specifies main subject matter of contract or related to price payable provided that transparent and prominent.
52
When might a contract be considered void?
Mistake
Illegality
Void means contract has no legal effect from the beginning. Cannot be enforced by either so no remedy. Can’t transfer title to property.
53
When is a contract voidable?
Duress
Undue influence
Misrepresentation
Voidable means operates as valid contract until a party elects to avoid it. Innocent party can rescind or affirms
54
What are the different types of mistake?
Common mistake
- both made the same mistake
- usually about existence of subject matter not mistake as to quality.
Mutual mistake
- both mistaken but about different things
- court will look at whether reasonable person would take agreement to mean what each party did, if random result, no agreement, void
Unilateral mistake
- one party mistaken as to terms and other party aware eg error in price when other party realised error. Can be assumed.
- no agreement so valid. Mistake as to quality of subject matter not sufficient
Mistake as to identity
- court when one party believes they are contracting with person other party pretending to be. Court have to determine whether innocent party would have contracted irrespective of identity, if that is the case, may have claim for misrep, if other parties identity was fundamental to the decision to enter into, will be void for mistake
55
What is required for non est factum?
1) fundamental and radical difference between what thought signed and what actually signed
2) signing party must not have been careless in signing
Limited in scope
Heavy burden
Only special difficulties likely to succeed.
56
When can a contract be rectified by the court?
Where parties agree on terms but incorrectly recorded when reduced to writing.
Courts can rectify if written document failed to express common intention accurately or document is irrational or arbitrary. Common intention can be deduced from evidence of each parties understanding. May not be possible if inequitable.
57
What is duress? What is the effect on a contract?
Contract voidable.
Duress is governed by common law.
Duress will succeed only if illegitimate pressure, must he a factor in decision to enter into contract.
Duress of person - physical duress, eg threats, need to show one of reasons entered into contract, no need to be only reason.
Duress of goods - party keeping goods to exert pressure to enter into contract.
Economic duress - where one party in stronger economic position that other and use this in illegitimate manner to force other party to enter into contract. Must be significant factor in innocent parties decision to enter into contract.
Factors considered when considered if illegitimate pressure:
- does threat deprive from practical choice?
- threat unlawful? If threat lawful, court will only find duress in exceptional circumstances.
- did innocent party seek to rely on the contract?
- did innocent party protest?
May also arise where varying contact, rules apply for existing duty ie good consideration if practise benefit or additional consideration, If consideration obtained under duress then that variation voidable
58
What is undue influence and what is its affect?
Equitable doctrine, if proved, contact voidable.
Undue influence more concerned with improper conduct and whether innocent party arrived at own decision and have true consents.
2 ways to prove
1) actual undue influence by reference to overt acts
2) presumed undue influence as a result of the relationship between 2 parties.
59
What is actual undue influence?
Innocent party must prove that other party overtly influenced them into entering into contract by improper pressure.
Can be directly through threats or indirectly by misleading where relationship of trust and confidence exists, or putting excess pressure on them. Conduct doesn’t need to be in bad faith.
Only needs to be a factor in decision to enter into contract, no need to be only or main.
If proved, no need for innocent party to show transaction was disadvantageous to them, entitled as of right to have it set aside.
60
What is presumed undue influence?
Requires relationship of trust and conference between parties. Exists automatically in some situations - fiduciary, parent/child, dr/patient, solicitor/client.
Can exist in other cases but only if proved, eg between spouses.
If relationship of trust and confidence between the parties and resulting transaction, viewed objectively calls for an explanation, there is a presumption of undue influence.
Innocent party just need to show relationship between parties doesn’t readily explain transaction.
Can be rebutted, burden on influencer to rebut and prove no undue influence and other party entered with free will and informed consent. If can show obtained independent advice, strong evidence but not conclusive
61
What is third party undue influence?
Where undue influence is exerted by 3rd part to contract, eg spouse of party.
If party is aware that there may be undue influence on the other party but doesn’t take reasonable steps to ensure entering into at own free will, transaction may be set aside.
May be actual or presumed on basis of relationship between 3rd party and innocent party’s.
Eg bank giving loan to wife for husbands business, if know intent for loan and no reasonable steps, constructive notice of undue influence
62
When is a contract void for illegality or under public policy?
If contract is illegal as formed, void. Cannot recover anything from it.
Contract to do something illegal is void.
Contracts performed in an illegal manner
- rights withheld from party that committed illegal act, doesn’t stop innocent party being able to have a remedy (providing not aware or involved).
- once aware of illegality, cannot accrue any rights.
- court may be able to sever illegal part
63
What are the types of illegality?
- Illegal by statute
- Illegal by common law
- Contexts contrary to morality or institution of marriage - public policy considerations.
- Contracts damaging to government
- Contracts that interfere with justice
64
Are clauses which restrain trade valid?
No void unles reasonable.
Includes restrictive covenants in employment contracts to prevent competition or non compete clauses in business agreements
Reasonable depends on circumstances, such as whether acting in normal commercial relationship and whether terms negotiated with benefit of legal advice
Will also look at activities covered, scope, duration, need to be proportionate. Must be reasonably necessary for protection of legitimate interests.
Anti competitive agreements are likely to be void as breaches of competition law
65
What is an actionable misrepresentation?
- false statement of fact or law
- words or conduct (eg covering up defect)
- false = not substantially correct.
- facts = past/present conditions, not opinion as long as honestly, genuinely and reasonably held
- can’t be of future conditions as no way of knowing,
- statement of intention can be if knew false when made it
-silence usually won’t amount to misrep but may be required in fiduciary relationships or in uberrimae fidei (contracts of utmost good faith)
- half truths can amount to actionable misrep
- failure to correct representation can also
Must induce party to enter into contract, no need to be only reason but substantial reason. Will look at whether reasonable person in C’s position would be influenced by statement.
If didn’t believe it, or not aware, not actionable
If mere puff not actionable
66
What are the types of misrepresentation?
Fraudulent
- statement made 1) knowingly 2) recklessly (careless as to whether true or false) or 3) without believe in truth
- hard to prove
Negligent
- created by Misrepresentation Act 1967
- any misrepresentation is actionable unless person making it can prove they had reasonable grounds for believing and did believe that facts were true
- burden is disproving negligence on maker of statement
- easier to prove than fraudulent
Innocent
- representation not made fraudulently or negligently.
- maker has reasonable grounds for believing true
67
What is the effect of misrepresentation?
Contact is voidable.
Innocent party can chore whether to rescind or affirm.
Rescission available for all types, allows contact to be set aside. Parties put back into position would have been had misrepresentation never taken place.
68
What is rescission and what are the bars?
Contract set aside/ unwound.
Innocent party must notify other party of intention to rescind otherwise entitled to treat as ongoing.
Bars:
- affirmation, if carry on cannot rescind. Can only occur if innocent party aware of misrep. Can be through conduct or words
- lapse of time, if delay and lose right to rescind. Clock starts running when discover misrepresentation or should have.
- impossibility of restitution. If impossible to restore to pre contract position due to value declining or subject matter changing, can only bring action for damages.
- third party rights, if bona fide 3rd party acquired rights under contract, not possible (as long as they are unaware)
69
When are damages available for misrepresentation?
Depends on what type
Fraudulent
- damages intend to put in position would be is statement no made.
- innocent party can recover all loses incurred as a result of transaction
- no need to prove foreseeable
Negligent
- MA created right for damages.
- measure same as fraudulent
- may have a course of action in tort also
Damages in lieu of rescission
- court may award damages instead of rescission for negligent or innocent misrep not fraudulent if equitable to do so. But not available if right to rescind lost by bar.
70
How are damages awarded for misrepresentation?
Put into position had misrep not been made, ie, not entered into contract
Losses that arise from entering into contract and any incidental expenditure.
Can recover even if rescinded. Innocent party required t take reasonable steps to mitigate loss.
71
When is a contract discharged and what is the effect?
Discharge means bring to an end
- contract for fixed term and expires on term
- agreement to end or vary
- frustration
- breach
72
How can a contract be discharged by agreement?
May contain term which allows for discharge before full performance, notice or breached. If no provision can still be discharged by agreement. New contract to end old one. All terms must be agreed and consideration. Issue = considerstjon
If both owe outstanding obligations, consideration is suffering detriment by giving up rights and benefit from being excused from obligations.
If one party has performed obligations in full, issue. Like part payment of debt, no consideration.
- Needs to be entered into by deed or
- new consideration needed for release
73
How can a contract be varied?
- must agree
- supported by consideration
- if no consideration must be by deed to be binding
74
Can a party waiver rights under contract? can this be implied?
They can do, but limited as can reinstate original terms by giving reasonable notice.
In practice, parties can continue Asif there was a new understanding between them even though nothing said. Court may find implied variation if new understanding and consideration. If not, may still be implied waiver.
75
How can a contract be discharged by performance?
General rule = full performance will discharge contract. Must be exact and precise. Entire obligations rule.
May produce unfair results so common law exceptions:
- substantial but imprecise performance has been held to be sufficiently. Substantial performance = condition, minor breach is warranty. Entitled to damages to rectify. Applies to lump sum contracts where whole contract needs to be performed to get payment.
- if contract divisible, court may be able to subdivide obligations into components. Failure of one part doesn’t prevent enforcement of others eg delivering goods by installments
- partial performance accepted by other party. Can be agreed but new contract, binding if only consideration. If partial performance agreed but no revised price agreed, court will asses amount due on quantum meruit basis - reasonable remuneration. If no choice but to accept, won’t order payment.
- performance prevented by other party, other parties conduct may be breach of condition. Innocent party can terminate and claim damages but if beyond control, frustrated.
76
How is a contract ended by breach?
Non performance or defective performance (actual) or when indicates won’t perform (anticipatory)
77
What happens if condition breached?
Innocent party can terminate contract and sue for damages. Has choice to terminate or accept.
Termination must be communicated.
Rights and obligations which accrued before termination remain in place. Innocent party may be able to claim for damages.
If goods delivered and do not confirm to contract and buyer terminates, buyer not obliged to pay for them but must return them and can claim damages.
If contract affirmed, right to terminate is lost.
78
What are innocents parties options if other party indicates they will breach?
If breach of condition, can accept breach immediately, terminate and claim damages.
Can also wait until performance due. But risky as event may intervene before due date and frustrate the contract and they lose their rights.
79
When is a contract frustrated?
Automatically discharges. Event occurs without fault of either occurs after formation but before performed in full.
Requirements
- contract must be impossible, eg illness, death, subject matter destroyed
- supervening illegality can frustrate if becomes illegal due to change in law
- if contract is radically different due to supervening event. Must be fundamental to the contract and not be in contemplation of parties when forming
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What isn’t frustration?
- more expensive of difficult to perform
- self induced caused by a party
- foreseen event
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What is effect of frustration?
Parties released from further liability to eachother.
No damages recoverable
Discharged from moment event occurred
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What does the Law Reform (Frustrated contracts) act 1943 provide?
Unfairness in impact mitigated.
Sets out rules to appropriate loss between parties
- All sums paid in respect of contract recoverable
- all sums paid before discharge cease to be payable
- if expenses incurred before discharge, court may allot retention of sums paid for expenses incurred.
- if party obtained non-monetary benefit might have to pay for it
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When doesn’t LR(FC)A apply?
Where excluded
Charter parties
Insurance contracts
Sale of goods where frustrated by reason of fact goods perished
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What is a force majeure clause?
Clause where parties try to anticipate supervening events and draft contract in a way that allocates risk.
Allows for termination on occurrence of event outside of control.
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What are the measure of damages?
To put claimant into position would have been in had contract been properly performed.
Not punitive, compensatory:
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What types of damages are there?
Expectation interest
Reliance interest
Non-monetary losses
Nominal damages
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What is expectation measure of damages designed to do? How are these determined?
Designed to put in position would have been in had been performed.
Loss of bargain
Determined by:
- how much to cure defect or
- difference in value between what provided and what should have been
Look at loss and cost it would be to put in same posit on
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When is reliance interest measure used?
If expectation interest too speculative, if can’t say what profits would have made if been performed.
Compensates innocent party for expenses incurred in reliance on contract up to time of breach.
Aims to put in position would have been if never entered into contract.
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Can damages be claimed for non-monetary losses?
Yes, can be claimed for physical injury as long as not too remote.
Injuries to feelings usually not awarded
Exception for loss of amenity, where sole purpose of contract was for enjoyment eg holiday.
Damages may also be recoverable for loss of reputation.
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When might nominal damages be awarded?
Where breach but no actual loss
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When are damages assessed?
Date of the beach.
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What losses are recoverable?
If loss is too remote, not recoverable.
Damages should:
- fairly and reasonably be considered to arise naturally from breach or
- be in reasonable contemplation of both parties as the probable result of a breach.
Remoteness considered when contract entered into, not when breached.
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What is the test for causation?
Whether breach of contract was an effective cause of the loss.
Intervening event which could reasonable be foreseen wouldn’t break chain of causation
If breach one of 2 effective causes, party in breach will still be liable for loss. Court doesn’t consider what was most effective
If loss caused party by intervening act by 3rd party, court may still award damages for that loss
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Can contributory negligence be taken into account in a contract claim?
May arise where
- when liability is same both in contract and tort. Partial defence.
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What remedies are available under sale of goods act 1979?
- if buyer has breach of claim for non delivery or rejected goods because they do not conform to contract, measure if estimated loss resulting directly or naturally from sellers breach
- if available market, starting point is difference between contract price and market price at time were meant to be delivered
- if buyer breaches by refusing to accept delivery when seller tries to deliver, similar rules apply.
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Must an innocent party take steps to mitigate?
Yes reasonable steps to minims loss. Cannot recover losses that are a direct consequence of failure to mitigate
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Are liquidated damages and penalty clauses allowed?
Liquidated damage clause - try to determine what damages available for breach. Not always effective
To be valid must:
- be based on pre-estimate of the parties loss
Court may view as a penalty clause:
- If court is a penalty clause it will be struck out If it imposes a detriment out of proportion to obligations breached
- party intending to rely on clause must be able to demonstrate that it protects a legitimate business interest and that is proportionate to protect that interest.
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What are the differences in recovering for a debt claim?
Claim for debt not damages
- no need to consider remoteness or causation
- No duty to mitigate
Amount claimed is liquidated and will not be altered by court
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What are equitable remedies?
Discretionary
Specific performance
- requires party and breach to carry out obligations in full only granted if damages is not an adequate remedy
- under the sale of goods act 1979 it has that effect
- often granted the breach of contracts concerning land
- will not be granted if it would cause undue hardship to the party in breach
- won’t be awarded if consideration agreed is insufficient and would lead to unfairness or hardship
- won’t be awarded employment or personal service contracts and would not be ordered if would require supervision by the courts
Injunctions
- injunction requires a party not to breach the contract
- used to prevent breach of a negative term and restrict behaviour by the party in breach very rare
- mandatory injunction can be granted compelling someone to do something but it’s unusual
Rescission
- precision is the cancellation of avoidable contract.
- The parties are left asif the contract never been made
- grounds must’ve occurred either before or at time contract was entered into
- grounds are misrepresentation undue influence and duress
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What are defences to suitable remedies?
- unconscionable behaviour of claimant
- waiver
- unreasonable delay
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What remedies are available under CRA 2015?
Under consumer contracts the consumer rights act gives consumers certain specific rights in addition to their usual rights under general law
- Includes the right to reject defective goods within 30 days after they were supplied in return for a full refund
- If the consumer does not reject the goods or if the 30 day period has passed a right to require the trader to repair or replace them at the traders expense and
- If repair replacement is not successful too expensive or cannot be carried out with a reasonable time and without causing the consumer significant inconvenience right to require the trailer to reduce the price or to reject the goods in return for a refund
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What is restitution?
Based on preventing unjust enrichment where one party has acquired a benefit at the expense of the other in an unjust manner, for example by reason of mistake and influence
Maybe available as an alternative to damages
Usually awarded in exceptional circumstances where other remedies are in adequate
Requirements
- innocent party must show legitimate interest in preventing the party in breach from keeping any profit.
- other party must be unjustly enriched and the court will consider whether they were enriched, if the enrichment was at the expense of the other party? if it was unjust? and if there were any defences?
might include situations where work or services were provided with no contract where there has been a total failure of consideration if there’s money paid by mistake or property is transferred by threat or pressure
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What are restitution remedies?
Can be either the money or property order.
- for example in order that the party and breach returns any gain to the innocent party.
- if it is in relation to services monetary award known as a quantum meruit can be made which requires payment of a reasonable remuneration for work undertaken
- if goods have been supplied rather than services then award is a quantum valebat payment
- court may order that party in breach account to innocent party for profits made
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When does the postal rule not apply?
When opted out
Can be where offer stayed that acceptance not effective until received
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