Contract Flashcards
What are the basic requirements for a contract to exist?
An agreement between parties intending to be legally bound, consisting of:
Offer
Acceptance
Consideration
Which contracts must be in writing to be enforceable?
A guarantee
A contract for the sale of land
Consumer credit transactions
Define consideration in contract law.
An act, forbearance, or promise of legal value that each party gives to support the agreement.
What is the postal rule in contract law?
Acceptance by post creates a contract at the moment of posting unless:
The letter isn’t properly addressed/stamped
It wasn’t reasonable to use post
The offer specifies acceptance isn’t valid until received.
What are the remedies for a misrepresentation in a contract?
Rescission (unless affirmed, delayed, or restitution is impossible).
Damages (for fraudulent and negligent misrepresentation).
What is a unilateral contract?
A contract where the offeror promises something in return for the offeree’s performance of a specific act. The offer becomes irrevocable once performance begins.
Define the doctrine of frustration in contract law.
A contract is discharged when unforeseen events make performance impossible or radically different from what was originally agreed.
When is an exclusion clause valid in a contract?
It was incorporated into the contract.
It was brought to the other party’s attention.
It is clear and unambiguous.
What is the postal rule in contract law?
Acceptance by post creates a contract at the moment of posting unless:
The letter isn’t properly addressed/stamped
It wasn’t reasonable to use post
The offer specifies acceptance isn’t valid until received.
What is promissory estoppel?
A doctrine that makes a promise enforceable without consideration if:
The promisor promised not to enforce their legal rights.
The promisee relied on it detrimentally.
It would be inequitable for the promisor to retract the promise.
What distinguishes an offer from an invitation to treat?
An offer shows an intention to be bound upon acceptance.
Invitations to treat are invitations for others to make an offer (e.g., advertisements, goods on display).
Can silence constitute acceptance in a contract?
Generally, no. Silence cannot be deemed acceptance unless:
The offeree expressly agrees that silence will constitute acceptance.
There is a pre-existing relationship where silence has previously been used as acceptance.
When can an offer be revoked?
Before acceptance, unless a collateral contract to keep it open exists.
Revocation is effective upon being communicated to the offeree.
What are the presumptions regarding the intention to create legal relations in different contexts?
Domestic/Social agreements: Presumed not to intend legal relations (can be rebutted).
Commercial agreements: Presumed to intend legal relations unless expressly stated otherwise.
What makes consideration valid in contract law?
Consideration must:
Have legal value (e.g., money, a promise, or an act).
Be sufficient but need not be adequate.
Not be past, unless it was requested with an implied promise of payment.
What is the significance of promissory estoppel in consideration?
Promissory estoppel can make a promise enforceable without fresh consideration if:
A clear promise was made.
The promisee relied on it to their detriment.
It would be unfair for the promisor to withdraw the promise.
When is an exclusion clause valid under the Unfair Contract Terms Act (UCTA) 1977?
Exclusion clauses are void if they:
Exclude liability for death or personal injury caused by negligence.
Breach the implied condition of title under
the Sale of Goods Act.
Other clauses may be void unless reasonable, such as those excluding liability for non-negligent losses.
What are the three types of misrepresentation?
Fraudulent: Made knowingly, recklessly, or without belief in its truth.
Negligent: False statement made without reasonable grounds for belief.
Innocent: False statement made without fault.
What remedies are available for misrepresentation?
Rescission: Restores parties to pre-contract positions.
Damages:
Full damages for fraudulent misrepresentation.
Damages for negligent misrepresentation (unless disproved).
Limited damages or discretion for innocent misrepresentation under the Misrepresentation Act.
How can a contract be discharged?
Performance: Completion of all contractual obligations.
Agreement: Mutual agreement to terminate.
Frustration: Events making performance impossible or radically different.
Breach: Serious breach (e.g., of a condition).
What is the primary goal of damages in contract law?
To place the innocent party in the position they would have been in had the contract been performed.
What are the types of damages in contract law?
Expectation damages: Compensate for lost benefits of the contract.
Reliance damages: Reimburse expenses incurred in reliance on the contract.
Nominal damages: Token award where no actual loss is proven.
The owner of a bicycle wrote a letter to her friend offering to sell her bicycle to him for £150. The friend received the letter on 18 January. On 19 January, he mailed a letter back saying that he was not interested in purchasing the bicycle because he had just bought a gym membership. However, the friend changed his mind on 20 January and posted a letter to the owner accepting her offer to sell the bicycle and enclosing a cheque for £150. The owner received the friend’s rejection letter on 21 January but put it aside without reading it. The next day, she received the friend’s acceptance letter, which she opened and read immediately.
Do the parties have a contract?
Yes, because an acceptance is effective when it is posted, whilst a rejection is effective when received.
A man wanted to buy a car from his nephew, who worked at a car dealership. The two spoke on the phone to discuss a possible sale, and after offering to buy the car the man concluded the phone call by saying, ‘If I hear no more about the car, I consider it mine for £500’. The nephew said nothing, but moved the car from the forecourt before leaving for his lunch break. In his absence, another member of the dealership’s staff sold the car to a third party.
Was there a valid contract between the man and his nephew?
No. The nephew did not communicate his acceptance of the offer.
On 1 July, a buyer orders goods from a seller by email. The seller replies by email on 2 July, agreeing to the order, stating that its standard conditions of sale apply and supplying a copy. The buyer replies on 3 July, stating that their standard conditions of purchase apply and also supplying a copy. On 4 July, the seller replies again that its standard conditions of sale apply. The seller then delivers the goods on 5 July. The buyer unloads the goods, places them in their warehouse, and uses them.
On what day was a contract formed and which party’s standard conditions apply?
5 July, the seller’s because the seller’s reply of 4 July was a counteroffer which the buyer accepted by unloading and using the goods.
Two friends enter an agreement in writing. The agreed terms are that for one friend will pay the other £50 if they stop complaining about the weather.
Would this be a valid contract?
No. The consideration in this case is not sufficient.
A paper manufacturer offers to sell 100 reams of copier paper to a printing business at £10 per ream. The offer is on the paper manufacturer’s standard terms and conditions and states, ‘You are required to email acceptance of any offer to supply to your sales associate by 5pm on the day the offer is made’. The terms and conditions go on to state that delivery will be two weeks later and that payment is required on delivery. The purchasing manager of the printing business telephones the manufacturer’s main number and leaves a message on the answerphone before 5pm accepting the offer. In reliance on the contract that has been made with the manufacturer, the printing business enters into a contract to print 200 copies of a brochure for a local estate agent.
Is there a binding contract between the paper manufacturer and the printing business?
No, the method of acceptance prescribed was email, and the printing business accepted by telephone.
On 3 November, an investor sent an email to a dealer in precious metals: “Please quote your best price on 800 troy ounces platinum bars for immediate delivery at my bank”. At 10 a.m. the next morning (4 November) the dealer replied by email, “My best price is £475 per ounce”. The investor received the dealer’s message later on that same day.
What is the best characterisation of the communications between the investor and the dealer?
A request for an offer and an offer.
Two businesses are negotiating a contract for a delivery of coal. The parties have finalised all the terms including payment and delivery, but as one of the directors of the coal supplier is going on holiday, signature of the written contract is delayed and it is marked ‘subject to contract’ pending her return.
Do the parties have a binding enforceable contract?
No. There is no intention to be legally bound.
The investor’s communication was a request for an offer and the dealer’s response was an offer. For a communication to be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms. The investor’s communication does not pass the test because it is clear on its face that he did not want to be bound by whatever price the dealer came up with, but rather wanted to find out what the dealer would offer. The dealer’s communication, on the other hand, passes the test. Whilst it said nothing more than the price, it was sent in response to a request containing specific delivery terms and a specific quantity. Under the circumstances, the dealer’s response would have created a reasonable expectation in the investor that the dealer was willing to enter into a contract under the terms of the two communications.
What is an ‘invitation to treat’?
An expression of willingness to negotiate, which falls short of a valid offer that is capable of acceptance.
On 6 December, the owner of an electronics store sent a written request to a computer manufacturer asking for the price of a certain laptop computer. The manufacturer sent a written reply with a catalogue listing the prices and descriptions of its computers. The letter stated that the terms of sale were cash within 30 days of delivery. On 14 December the store owner ordered the computer, enclosing a cheque for £4,000, the listed price. Immediately on receipt of the order and cheque, the manufacturer informed the store owner that there had been a pricing mistake in the catalogue, which should have quoted the price for that computer as £4,300. The store owner refused to pay the additional £300, arguing that his order of 14 December in which the £4,000 cheque was enclosed was a proper acceptance of the manufacturer’s offer.
Will the manufacturer’s claim for the extra £300 succeed?
No, because the store owner’s letter of 14 December was a proper acceptance of the manufacturer’s offer.
A carer comes into the home of an elderly lady twice a week to clean for her and do her shopping. Over time the elderly lady forges a close bond with the carer, so when the carer suggests to her that she withdraw a large chunk of her life savings and pay it into a charity of which the carer is the main beneficiary, the elderly lady agrees.
What is the effect of undue influence on the transaction that has taken place between the carer and the elderly lady?
The contract is voidable.
A contract that is found to have been entered into as a result of undue influence will be voidable, that is, the innocent party has the choice to rescind or affirm the contract. The facts of this scenario point to a presumed undue influence situation. A relationship of trust and confidence existed between the parties, and the donation calls out for an explanation based on that relationship. There is nothing in the scenario that suggests that the presumption of undue influence is rebutted. (C) is therefore the correct answer.
Can the singer terminate the contract and sue for damages if the concert venue burns down due to an electrical fault before the first concert?
No. The contract has been frustrated, and it is automatically discharged, meaning damages are not payable.
Explanation: The fire occurred without fault of either party, rendering the contract incapable of being performed. According to the Law Reform (Frustrated Contracts) Act 1943 (LRFCA):
All sums paid before discharge are recoverable, and all sums payable cease to be payable.
The court may allow retention of sums to cover reasonable expenses incurred.
Any valuable benefit obtained before discharge may be recoverable, and the benefiting party may need to pay for it.
A company and a computer supplier entered into a written contract for the design and supply of a sophisticated stock management computer system. The supplier worked for over a year on the design of the system, but it became clear that it was not going to be able to create a system which meets the company’s requirements. The parties agreed to end the contract, with no further payment due from the company. There is nothing in the contract dealing with termination.
What else needs to be done to bring the contract to an end?
Nothing, because the oral agreement is sufficient to end the contract.
Nothing else needs to be done to bring the contract to an end. All that is needed is an agreement to terminate the contract. There are no formal requirements, but it would be sensible to record the detail of what has been agreed in a new written contract terminating the old one. The main problem when dealing with termination (or variation) of a contract is consideration. Here, both parties are giving up rights under the contract. The company is giving up its right to future performance, and the supplier is giving up its right to payment for that performance. So consideration is not a problem.
A well-known comedy double act enters into a contract with a manager under which the manager will manage the act for 10 years. One of the two members of the act is called up for military service and so can no longer perform. There are no terms in the contract dealing with this situation.
Has the contract been frustrated?
Yes, the contract is now radically different from what was agreed.
Yes, the contract has been frustrated. Frustration arises when a contract has become impossible to perform or radically different from what was envisaged. Here, performance has either become impossible (because one of the parties is not available through no fault of their own) or performance would be radically different (because the identity of the performers is an essential characteristic of a comedy double act). As a result, the contract will be discharged under the doctrine of frustration.
A woman contracted with a dog breeder for the purchase of a show dog. At the time of the sale, the breeder falsified the dog’s pedigree records to indicate that there were several champions in the dog’s bloodline. After a few weeks of enjoying the dog’s companionship, the woman discovered what the breeder had done.
What is the status of the contract between the woman and the dog breeder at the time of the revelation?
The contract is voidable. The breeder has made a (fraudulent) misrepresentation, which has induced the woman to enter into the contract. A contract is voidable for misrepresentation at the election of the innocent party. Misrepresentation does not render a contract invalid
An antiques dealer and a customer have entered into a contract for the sale of a painting. The antiques dealer is delighted to have agreed a price of £200 for the painting which he thought was of unknown origin and has been struggling to sell. Whilst packaging up the painting to send to the customer, the antiques dealer notices a previously concealed signature, and now believes the painting to be significantly more valuable than he originally thought. The antiques dealer refuses to sell the painting to the customer.
What is the position in law?
The contract would not be void, the antiques dealer would be required to sell the painting to the customer.
A deep sea fishing company hires a trawler from its owner. The parties are aware that a licence is required to operate the trawler. The fishing company has four other trawlers and applies for five licences, but is granted only three. The fishing company decides to use the licences for its other trawlers.
Can the fishing company rely on the doctrine of frustration to escape the contract to hire the trawler?
No, the fishing company could have used one of the licences for the trawler that it has hired.
A contract will be discharged if performance becomes impossible or radically different than anticipated. However, if the frustration was caused by one of the parties, the contract is not discharged. This is a case of self-induced impossibility. The fishing company could have used one of its licences for the trawler that it had hired, but it chose not to. Therefore the contract is not frustrated.
A man and a woman enter into a contract under which the man agrees to sell the woman his 19th century cottage in a village. The man later changes his mind and refuses to go through with the sale.
What remedy is most likely to be available to the woman?
Specific performance.
As a piece of land, particularly a period cottage in a village, is likely to be unique, damages would not be an adequate remedy to compensate the woman for her loss as she would not be able to acquire another property which is exactly the same. It is therefore likely that the courts would be willing to grant the equitable remedy of specific performance to compel the man to sell her the cottage as per their contract.
Question
A woman is shopping online for a dress. She finds a dress that she likes for £110 on several websites. After searching some more, she finds the same dress on one seller’s website for £95. She agrees with the seller to buy the dress and sends the seller £95. Two weeks later the seller notifies the woman that it will not be able to deliver the dress after all. The contract does not include any remedy terms. The woman immediately looks for a replacement but can only find the dress for £130. She waits to place another order, in case the price drops, but it rises instead. Eventually she has to pay £140 for a replacement dress.
How much can the woman claim from the seller who did not deliver?
£130
When there is a breach, the usual remedy is damages to compensate the nonbreaching party for their loss–damages sufficient to put the nonbreaching party in the position they would have been in if there had been no breach. The loss usually is measured on the date of breach. Here, if there had been no breach, on the day of the breach, the woman would have received a dress. The market price of the dress on the day of the breach was £130. Since she had already paid the original seller £95, she would need all £130 to put her in the position she would have been in had the first seller delivered (that is, in possession of a dress that cost her £95). This can be described in a more complicated way: restitution of the £95 pounds she paid plus £35 damages for the benefit of her bargain (that is, the difference between the market price on the day of delivery (£130) and the contract price (£95)
A private buyer is interested in buying a boat. She asks the seller whether the boat is sound. The seller says that it is, but advises the buyer to have her own survey carried out. The buyer does so. The survey report says that the boat is sound. The buyer buys the boat. It turns out to be unseaworthy.
What rights is the buyer most likely to have against the seller?
The buyer likely has no rights against the seller.
It is likely the buyer has no rights against the seller. The buyer’s strongest argument would be based on misrepresentation by the seller. Under such a claim, the buyer would have to prove that the seller’s statement induced her to enter into the contract. That is going to be difficult, because it appears the buyer bought the boat based on the surveyor’s report rather than the seller’s statement.
A man tells his friend that a certain plot of land would be ideally suited for grazing dairy cows, and that it would support a herd of 100, although the man has no previous experience as a cattle farmer. The friend purchases the land on the basis of the man’s representations. However when he tries to graze cattle on the land, it becomes clear that it is unsuitable for grazing and that there is not adequate space for a herd of 100 cows. The friend informs the farmer that the land is not actually suitable for grazing and wishes to sell the land back to the farmer. The farmer refuses and the friend has come to your office, asking whether he can have the contract set aside for misrepresentation.
define misrepresentation.
A misrepresentation is a false statement of fact or law made by one party to another to induce that party to enter into a contract.
A misrepresentation is a false statement of fact or law made by one party to another to induce that party to enter into a contract.
If a misrepresentation has taken place, what effect does it have on the subsequent contract?
The contract is voidable.
A ship owner hires their ship to a customer for two years. It is a term of the contract that the ship be seaworthy. It becomes clear that the crew are unable to sail the ship properly due to its antiquated machinery and because they are insufficient in number. During the voyage, the ship breaks down several times and is out of service undergoing repairs for a few weeks to make it seaworthy. After it has been repaired, only 7 months remain of the original two-year contract.
Can the customer terminate the contract for breach?
No. The term requiring the ship to be seaworthy was an innominate term which only entitled the customer to sue for damages.
Where it is not clear whether a term of a contract is a condition or a warranty, the court will class it as an innominate term and look at the effect of the breach when deciding what remedy should be available to the innocent party. The court will consider whether the occurrence of the breach deprived the innocent party of substantially the whole benefit of the contract. If it did, the court will treat the term as akin to a condition and the innocent party will be entitled to terminate the contract. If it does not, then the court will treat the term like a warranty and the innocent party will only be entitled to damages. In this scenario, the requirement that the ship is seaworthy is not classified by the contract as either a condition or warranty. Unseaworthiness could cover numerous different breaches, some fundamental but others trivial, so this term is an innominate term and the court will need to consider the nature of the event to which the breach gives rise. Here, the customer had received the benefit of the contract for 17 out of 24 months, so the court is likely to hold that the breach was adequately remedied by damages.
What is the purpose of the Consumer Rights Act 2015 (CRA)?
The CRA provides protection for consumers in contracts with traders, ensuring goods, services, and digital content meet certain standards and offering remedies if they do not.
What conditions are implied under the CRA for the sale of goods?
Be of satisfactory quality (fit for general use and free from defects).
Match any description provided by the seller.
Be fit for a particular purpose if the consumer informs the trader of that purpose.
Can the implied terms for goods under the CRA be excluded by contract?
No, the implied terms cannot be excluded or limited. Any attempt to do so is void
What remedies are available to a consumer under the CRA if goods fail to meet required standards?
Right to reject: The consumer can reject goods within 30 days for a full refund.
Repair or replacement: If the goods are not rejected, the consumer can request a repair or replacement.
Price reduction or final right to reject: If repair/replacement is unsuccessful, the consumer can request a price reduction or reject the goods for a partial refund (taking into account use).
What is the time limit for claiming a repair or replacement for defective goods?
A consumer has six months to claim a repair or replacement unless the trader can prove the goods were not defective at the time of delivery.
What terms are implied into contracts for services under the CRA?
Services must:
Be carried out with reasonable care and skill.
Be performed within a reasonable time (if no time is agreed).
Be completed for a reasonable price (if no price is agreed).
What remedies are available for services that do not meet the required standards?
Repeat performance: The trader must re-perform the service to meet the standards.
Price reduction: If repeat performance is not possible, the consumer can request a price reduction.
How does the CRA regulate digital content?
Digital content (e.g., software, games, apps) must:
Be of satisfactory quality.
Match any description provided.
Be fit for a particular purpose if specified by the consumer.
What terms are considered unfair under the CRA?
A term is unfair if it:
Creates a significant imbalance in the rights and obligations of the parties.
Is contrary to the requirements of good faith.
Three friends share a flat together. One friend decides to re-decorate the living room and carries out the work herself. The other friends are so impressed with the transformation that they tell the friend doing the decorating that they will pay her £200 for the work she has done, and they even enter into a contract for payment to show their intent. Six months later, no money has been paid to the friend doing the decorating, so she sues the other friends for breach of contract.
Will the friend doing the decorating succeed in her claim?
No. The work carried out by the decorator friend was carried out before the agreement to pay her.
Consideration that is provided in the past, that is, before a contract has been agreed, is not good consideration for the promises in the contract. In this case the promise to pay the friend for the decorating was for work carried out in the past
What key conditions are implied under the Sale of Goods Act 1979?
The following conditions are implied:
The seller has the right to sell the goods.
The goods must match any description applied by the seller.
The goods must be of satisfactory quality and fit for the purpose for which such goods are generally used.
The goods must be fit for any special purpose the buyer has communicated to the seller.
Can the condition of the seller’s title be excluded under the Sale of Goods Act 1979?
No, the condition of the seller’s title cannot be excluded.