Contract Flashcards
What are the main elements to a contract
Offer
Acceptance
Intention to make it legally binding
What contracts require to be in writing?
Guarantees
Sale of interest in land
what contracts require to be by deed?
promises where nothing is received or promised in return such as a conveyance of land
What communication should be made for an offer?
It must contain an expression of a promise, undertaking or commitment to enter into a contract. The offeree must also have knowledge of the offer. It can be to specified individual or group or to the world at large
What are the terms of an offer?
Must be definite and certain in its essential terms. They cannot be too vague. Mainly, is the wording capable of being enforced.
what constitutes an invitation to treat rather than an offer?
Advertisements
Price lists
shop sales
Tenders
Auctions
What are unilateral contracts?
These arise when an offeror promises to do something if the offeree does something in return and actually performs what the offeror has asked.
How does revocation effect contracts?
An offer cannot be accepted if it has been terminated. It can be terminated by the offeror or offeree
How can an offeror revoke an offer?
The offer can directly or indirectly communicate to the offeree the termination of the offer
An offer can only be revoked indirectly if the offeree receives one of the following
- Correct information
- From a reliable source
- Acts of the offeror which would indicate to a reasonable person that the person no longer wishes to make an offer
When is revocation effective?
When received by the offeree either from offeror or a reliable third party
Revocation distinction from unilateral contracts?
An offer becomes irrevocable once performance under a unilateral contract has begun. This is similar for bilateral contracts however it is not the offer is irrevocable rather that performance constitutes acceptance.
How does an offeree revoke an offer?termination
Express rejection
Counteroffer
Lapse of time (varies depending on the type of goods being sold i.e fresh fish, fabrics, shares)
Distinction on mere enquires
Mere enquiries for further information will not constitute a counteroffer thus not rejection the offer. The test for this is whether a reasonable person would believe that the original offer had been rejected
When can offer be terminated by law?
Death of offeror or offeree
Destruction of subject matter
Illegality
Who may accept an offer?
only to the person whom the offer was made. A member of a class of people can also accept if the offer is directed to certain people i.e. readers of a certain newspaper
Rule of assigning
Generally acceptance of an offer cannot be assigned to someone else. However, agents may accept terms of an offer on the principal’s behalf. This would result in a contact between the offeror and the agent
Methods of acceptance of an offer?
Any reasonable manner and by any reasonable medium under the circumstances
Acceptance via specific method
If a particular method is expected by the offeror for acceptance unless this is fulfilled acceptance has not been made. However, acceptance can still be made if a done via another method that is not less advantageous than the one stipulated.
Silence on acceptance
Acceptance requires positive steps taken by the offeree, silence does not constitute this so, generally, silence will not be valid acceptance. there are some exception but these are rare.
Acceptance via conduct
An offeror can accept an offer via conduct,. The offeror must be aware of offeree’s conduct as to satisfy the communication element.
intention to create legal relations in domestic setting
The general presumption within domestic arrangements that parties do not intend to make legally binding agreements. This can be rebutted with evidence to the contrary
Capacity of creating legal relations
Persons under 18 are consider a minor. If a minor enters into a contract this would be voidable . Exception to this can be entering onto contracts for necessary goods or services and employment contracts.
What are the two types of consideration?
Executed - An act of forbearance is performed
Executory - Forbearance is promised in the future
How should consideration be applied the contract?
Consideration must move from the promise otherwise the contract cannot enforced if consideration was not provided.
What is the requirement of consideration?
Consideration must be sufficient but need not be adequate. However, courts still require consideration to have some value in the eyes of the law.
Performance amounting to consideration
Performance of an existing duty under a contract to the promisor is not good consideration . Yet if the promise is given in return for work beyond their obligation, then the parties are entering a new contract i.e. extra consideration for extra money
Exception to performance of an existing duty
An exception can arise under an existing duty under contract. If performance confers a practical benefit on a party offering extra consideration. Such as meeting a deadline to avoid sanctions, this may amount to good ocnsideration
Performance to a 3rd party considered consideration?
A promise to perform an existing duty owed to a 3rd part will be sufficient consideration for a promise given by the promisor
Effect of past consideration on a contract
Past consideration performed or promises that were done prior to entering the contract will not be sufficient consideration. There are three exception to this:
- Parties understood that the act was to be remunerated either by payment or other benefit
- Payment or other benefit must be legally enforceable
- The act must of been done at the promisor’s request
Consideration on part payment of a debt
Part payment will not satisfy a promise to accept this because there is no fresh consideration. Thus the promisor could still claim against the promisee for the remaining amount
What are the exceptions to the part payment of a debt rule?
- Debt is disputed in good faith
- Unliquidated claims, where the amount is uncertain
- Paying at a different place or earlier payment
- 3rd Party makes payment
Payment is made by different means i.e certain item of value - A composition with creditors, agreement with all creditors
What is promissory estoppel?
This gives legal effect to a legal agreement unsupported by consideration. This is an equitable principle which stops a creditor from going back on a promise to accept a lesser amount. It suspends creditors originals rights. Debtors can use this as a shield, not a sword. Creditors rights reactive when the reason for the creditor to not go back on their promise no longer applies.
what elements of promissory estoppel must apply
- There must be a clear and unequivocable promise by the promiser not to rely on existing legal rights.
- Promise must have altered the position in reliance of the promise.
- It must be inequitable form the promisor to go back on their promise.
Terms of a Contract?
The terms are the agreed content between parties in a contract. They differ from representations, which are non-binding statements intended to induce agreement. Terms in written contracts are clear, while oral contracts may require extraneous evidence to determine terms. Oral statements may supplement written contracts but are harder to prove due to the parol evidence rule.
Types of Contract Terms?
Terms can be classified as conditions or warranties:
Express Terms: Explicitly agreed upon or incorporated into the contract.
Implied Terms: Added by statute, courts, custom, or course of dealing.
The distinction between these types affects remedies in cases of breach.
Conditions vs. Warranties
Condition: Fundamental term; its breach allows termination and damages (e.g., failure of a singer to perform an opera).
Warranty: Incidental term; its breach only permits damages (e.g., missing rehearsals but performing shows).
Innominate Terms: Not classified as either; remedies depend on the breach’s effect
Representations vs. Terms
Representation: Induces contract entry but is not part of the contract.
Term: Incorporated into the contract; its breach entails a breach of contract.
Courts assess whether statements are terms or representations by examining their significance, timing, and the maker’s expertise
Keys statutes dealing with Implied Terms
Sale of Goods Act 1979 (SGA)
Consumer Rights Act 2015 (CRA)
Supply of Goods and Services Act 1982 (SGSA)
What are the implied terms under Sale of Goods act 1979 (SGA)?
Seller has legal right to sell the goods
Match any description applied by the seller
In sale of business, be of satisfactory quality
Be fit for any particular purpose made known to the buyer by the seller
This applies to
What are implied terms under Supply of Goods and Services Act 1982 (SGSA)
Provided with reasonable care and skill.
Completed within a reasonable time (if no deadline is agreed).
These are innominate terms, meaning remedies depend on the breach’s seriousness.
Also to note that these services are only for business to business contracts
What are implied terms under Consumer Rights Act 2015 (CRA)?
The CRA applies to contracts between traders and consumers. It ensures:
Goods match descriptions.
Goods are of satisfactory quality Good be fit for purpose.
Liability for breaches under the CRA cannot be excluded or limited.
What are implied terms for services carried out under Consumer Rights Act 2015 (CRA)?
Provided with reasonable care and skill.
Completed within a reasonable time (if no deadline is agreed).
Completed for a reasonable price.
What is the Parol Evidence Rule?
In written contracts, external evidence typically cannot alter terms unless exceptions apply (e.g., implied terms, collateral contracts, or partly oral agreements). For example, an oral promise about shipping conditions could be part of a contract if it was intended to complement the written agreement.
What is an Entire Agreement Clause?
A clause stating that the written document constitutes the full agreement, preventing extraneous evidence from being considered. Courts uphold these clauses unless used to evade liability for misrepresentation.
How do Courts view Incomplete or Unclear Agreements?
Courts avoid enforcing vague contracts lacking certainty (e.g., “hire purchase terms”). However, they may intervene if:
A mechanism resolves uncertainties (e.g., arbitration).
The contract involves standard practices in a trade.
Partial performance suggests intent.
Terms may be severed to preserve the contract if feasible.
Incorporation of Exclusion Clauses
For an exclusion clause to be enforceable, it must be incorporated by:
Signature: Signing binds parties unless fraud or misrepresentation applies.
Notice: Reasonable steps must be taken to inform the other party, especially for unusual or onerous clauses.
Timing: Any exclusion must brought to the attention of the other party before or at the time the
Custom/Previous Dealings: Established course of dealings or industry custom may imply incorporation.
What language must be used on exclusion clauses
Courts require such clauses to be drafted in clear and unambiguous language
what is the Contra Proferentem Rule?
Explanation: A principle of contract interpretation that resolves ambiguities in exclusion clauses against the party relying on them. Courts ensure clarity and fairness, particularly when negligence is involved.
What are the Exclusions under Unfair Contract Terms Act 1977 (UCTA)
Applies to business-to-business contracts. Key rules include:
Clauses excluding liability for death or personal injury due to negligence are void.
Clauses excluding any loss by negligence-based liabilities must be reasonable.
Clause excluding breach of implied condition as to title cannot be excluded or restricted
Clauses restricting statutory obligations (e.g., satisfactory quality or fitness for purpose under the SGA) are enforceable only if reasonable.
What is Reasonableness Test (UCTA)
Explanation: Courts assess whether terms are “fair and reasonable” at the time of contract formation. Factors include:
Bargaining positions.
Awareness of the clause.
Alternative contract options without such terms.
Whether compliance with conditions was practicable.
What are the exclusions under Consumer Rights Act 2015 (CRA)?
Explanation: Governs trader-to-consumer contracts. Key provisions:
Prohibits exclusion of liability for death or personal injury due to negligence.
Ensures statutory terms (e.g., fitness for purpose) cannot be excluded.
Requires terms to be transparent (plain language) and prominent to avoid being deemed unfair.
What are Unfair Terms Under CRA?
A term is deemed unfair if it causes significant imbalance to the consumer’s detriment. Examples:
Allowing unilateral price changes.
Terminating contracts without reasonable notice.
Excluding consumer legal remedies.
High sums in compensation for services which have not been supplied
Effects of unfair terms under CRA
Unfair terms are unenforceable but do not void the entire contract.
How must language be Transparency and Legibility under (CRA)?
Use plain and intelligible language.
Be legible and transparent.
Courts resolve ambiguities in favor of consumers, as per the contra proferentem rule.
Difference between Void & Voidable Contracts
Void Contract: Lacks legal effect from the start. Example: a contract to commit a crime.
Voidable Contract: Valid unless rescinded by the aggrieved party. If a contract is affirmed, the aggrieved party cannot go back on the contract.
Contracts that are Void
Mistake
Illegality
Contravention of public policy
Contracts that are voidable
Duress
Undue Influence
Misrepresentation
What are the 3 types of Mistake that can arise from a contract?
Common Mistake: Both parties share the same incorrect assumption. Example: goods no longer exists
Mutual Mistake: Parties misunderstand each other. The contract is void if it creates ambiguity.
Unilateral Mistake: One party is mistaken, and the other party knows or should know.
Mistake as to Identity
Occurs when one party is misled about the identity of the other:
Void if identity is critical to the contract.
Example: Selling to a person pretending to be a celebrity.
If identity is not crucial, it may be a case of misrepresentation, making the contract voidable.
What is the rule of Non est factum?
This protects those who sign something in the mistaken belief that it represents something completely different from what it actually is. There is very limited scope for this due as there must be a radical difference what was signed and what the signatory though they were signing
What is Duress?
Contracts entered under illegitimate pressure.
Types of duress:
Duress of Person: Physical threats, e.g., “Sign or I’ll harm you.”
Duress of Goods: Withholding goods unlawfully.
Economic Duress: Exploiting economic disparity with unlawful or coercive demands.
What is Undue Influence
An equitable doctrine protecting parties from being improperly influenced:
Actual Undue Influence: Requires proof of pressure or abuse of trust. This can be directly or indirectly.
Presumed Undue Influence: A relationship of trust (e.g., solicitor-client) combined with an unusual transaction raises a presumption.
If founded it is for the influencer to rebut the presumption and prove that no undue influence has taken place.
Contracts under Illegality and Public Policy
Illegal Contracts: Void from formation, e.g., agreements to commit crimes or torts.
Contracts Performed Illegally: Void for the guilty party but may allow remedies for innocent parties unaware of illegality.
Examples: Contracts interfering with justice or damaging to the government.
Illegal Performance of an Otherwise Legal Contract
A contract legal at formation but performed unlawfully becomes void for the guilty party.
Example: A lorry driver without a proper license cannot enforce a contract to transport goods.
Innocent parties unaware of illegality may retain some rights
Contracts Illegal by Statute
Statutory provisions may render certain contracts void.
Examples include:
Employment contracts breaching minimum wage laws.
Agreements violating licensing requirements.
Contracts Illegal at Common Law
Common law prohibits contracts involving:
Commission of crimes or civil wrongs.
Agreements contrary to morality, such as exploitation.
Interference with justice, like concealing evidence.
Morality and Contracts Against Public Policy
Contracts offensive to societal values or morality may be void.
Example: Contracts promoting prostitution or other unethical activities.
Public policy evolves with societal norms, so interpretations may change over time.
When can Restraint of Trade
be used?
They can be used when:
They protect a legitimate interest.
They are reasonable in scope, duration, and geography.
Examples of Restraint of Trade
A baker restricting a former employee from working within 1 mile for six months (reasonable).
Prohibiting the employee from baking in the city for five years (unreasonable).
What are Anti-Competitive Agreements?
Contracts breaching competition laws, like:
Price-fixing.
Market division.
These contracts are void as they harm consumers and market fairness.
What is required for a misrepresentation claim?
It requires a false statement of fact or law to be made to one party to another to induce them to enter into a contract
Ways in which things statements can or can’t be wrong in fact or in law?
- False = not substantially correct
- Statement of facts are present or past conditions
- statement of opinion is not a statement of fact as long as the opinion is honest, genuinely and reasonably held.
- A promise goes beyond a statement of fact and therefore not a representation.
- A statement about future events cannot be a statement of fact.
How does silence function in misrepresentation of contracts
Silence will not usually amount tot a misrepresentation. however, contacts of utmost good faith, where it is necessary for disclosure as a party relies on knowledge that is essential to the contract (like insurance), half-truths can amount to ana actionable misrepresentation.
When is misrepresntioan actionable?
If it induce a party to enter the contract and it doesn’t just have to be not just the only reason for entering a contract but to be a substantial reason.
How do courts look at misrperenstation?
Courts will look at of the misrepresentation was material and whether, objectively, a reasonable person would have been influenced by the false statement
Types of misrepresentation
Fraudulent
Negligent
Innocent
What is Fraudulent misrepresentation?
When a statement is made:
1)Knowingly
2) recklessly that is careless whether it is true or false or
3) Without belief in its truth
This can be the most difficult misrepresentation to prove
What is Fraudulent misrepresentation?
It is actionable unless claimant can prove they had reasonable grounds for believing and did believe until the contract was entered into, the facts represented were true.
Easier to prove than Fraudulent misrepresentation
What is Innocent misrepresentation?
The maker has reasonable grounds for believing a misrepresentation is true
Remedies for misrepresentation?
Contracts under misrepresentation are voidable meaning the innocent party can rescind or carry on with contract.
What is recission?
This unwinds the contract and both parties are put back into the position would have been in had the misrepresentation had not happened. An equitable remedy so only courts have discretion to issue this.
What is affirmation?
If the innocent party has knowledge of the misrepresentation and chooses to continue with the contract they are said to affirm the contract. They may lose the right to rescind the contract on this basis
Lapse of time with misrepresentation?
if an innocent party delays in rescinding then they may lose it altogether. If good have declined or nature of the subject matter has changed substantially, this may prove an impossibility to rescind.
Damages available under misrepsenations?
Fraudulent: Innocent party can recover all losses and do not need to prove reasonable foreseeability for their losses
Negligent: Same as fraudulent, may also have a cause of action in tort
Innocent: Damages are not available, however this does not preclude damages awarded by the courts in lieu of recission pursuant to the MA
Measure of damages under misrepresentation?
Innocent party can recover damages even if they rescinded the contract. The party is required to take reasonable steps to mitigate loss once the misrepresentation has come about. Any damages received will be reduced by the value of any benefit the innocent party received form the contract
Discharge of a contract
A contract can be discharged by agreement, this will form a new contract to end the old one so all parties must agree and there must be consideration for the new one. Rights under a discharge remain, which have accrued after this.
Two distinct situations with discharging a contract
Parties still have unperformed obligations
One party performed obligations in full
Parties still have unperformed obligations
Each party will suffer a detriment by giving up rights under the contract but gain the benefit of being excused from their obligations too. Thus this will be consideration for the new agreement so the discharge of the old contract will be binding.
One party performed obligations in full
If a party releases the other form their obligations is akin to letting them walk away with a debt. Agreement to accept party-payment of debt is not binding, the agreement will need to be entered by deed due to being unsupported by consideration. If there is no new deed new consideration will be required
Effect of performance on discharging a contract
Full performance - Will discharge the contract under the ‘entire obligations’ rule. Partial performance will therefore not discharge a contract
Substantial performance - common law exception has found that substantial but imprecise performance has been held to be sufficient
performance in divisible contracts
substantial performance applies to these contracts where performance can be split into components.
Effect of partial performance
This can be accepted by the other party if there is consideration as this is a variation to the terms of the original contract. If note agreed, courts will apply costs on a quantum meruit bases.
What are the 2 forms of breach of contract
Actual breach
Anticipatory breach
Occurs when one party does not fulfil their obligations. A party who terminates for breach, will have accrued rights & obligations before termination. Will able to claim damages. If they affirm the contract rights to terminate are lost.
Actual Breach
Breach taking place at the time due for performance with no prior indication
Anticipatory breach
One party indicates that they are not going to fulfil their obligations under contract. If a condition, they can terminate and claim damages. They do not have to wait for performance.
What are the components to discharge by frustration under a contract?
Impossible - the subject matter no longer exists through no fault of parties. Can also apply to party members as well
Illegality - at the outset renders contract unenforceable supervening illegality can frustrate a contract
Radically different - occurs when a supervening act makes performance radically different from what was envisaged, even if performance could technically be done.
What does not constitute frustration?
If its more onerous to perform, either more difficult or expensive. If only frustration by one party it will only be a breach. The burden of proof is on the party alleging frustration to show it was not self induced.
Frustration - events that could be foreseen
If either party was aware of a possible event occurring for frustration, then this maty not apply as it is triggered by unforeseen events. Parties would be liable for breach.
Effect of Law Reform (Frustrated contracts) Act 1943 on contracts
This seeks to put parties back into their position before frustration if monies and costs have incurred. All sums paid before discharge will be recoverable, and sums payable before discharge cease to be payable. Any expense incurred, courts may allow retention of sums paid to account or them.
Types of Damages
Expectation Interest
Reliance Interest
Non-Monetary Losses
Punitive Damages
Nominal damages
What is Expectation Interest?
Compensates for loss of the bargain, putting the innocent party in the position they would have been in had the contract been performed.
What is Reliance Interest?
Covers expenses incurred in reliance on the contract when expectation damages are speculative.
What are Non-Monetary Losses?
Includes damages for physical injury or loss of amenity in consumer cases and loss of reputation.
What are Punitive Damages?
Damages to punish the party in beach
What are Nominal damages?
awarded if breach happened but no actual loss is proven
Remoteness of Damages
Losses must either:
- Arise naturally from the breach.
- Be within the reasonable contemplation of both parties at the time the contract was made.
Losses from unusual arrangements are often too remote unless disclosed.
When are damages assessed?
At the time of breach. They can seek alternative contract form this time/date also. Exepction to this can be when the party was not ware of the breach for a period of time.
Causation of damages
A party is only liable for the losses cause by their breach. Court take a common sense approach to causation.
Measure of damages
Diminution of value
Cost of remedying defect
Value of loss of amenity
Sale of Goods Act 1979 also provides a starting point for measuring damages
Mitigating factors
When seeking damages, the innocent must take steps to mitigate their loss. Cannot recover losses as consequence of not mitigating
Liquidated Damages vs. Penalty Clauses
Liquidated Damages: Pre-agreed sums reflecting genuine pre-estimates of loss, enforceable in court.
Penalty Clauses: Unenforceable if deemed extravagant (out of proportion) or punitive, rather than compensatory. Party relying on it must demonstrate its reliance to protect a legitimate business interest
Equitable remedies available under a breach of contract
Specific Performance
Injunction
Recission
What is Specific Performance?
An order requiring the breaching party to perform their contractual obligations. Granted when:
Damages are inadequate.
The subject matter is unique (e.g., land or rare goods).
Not granted if it causes undue hardship, lacks mutuality, or requires court supervision.
What is an Injunction?
Prohibitory Injunction: Prevents breach of a negative term in the contract.
Mandatory Injunction: Rare; compels a specific act.
Example: Restricting a former employee from contacting prior clients after leaving a job.
What are Restitutionary Remedies?
Ensures a breaching party does not unjustly profit. such as:
Quantum Meruit: Payment for partial services rendered.
Quantum Valebat: Payment for goods delivered.
Account of Profits: Surrender of profits gained from the breach (e.g., royalties from a breach of confidentiality).
Consumer Rights Act 2015 Remedies
- Right to reject defective goods within 30 days for a full refund.
- Right to repair or replace goods.
3.Right to a price reduction or
refund if repair/replacement is unsuccessful or delayed.
