Contract Flashcards
What 3 elements need to be present for a binding contract?
Offer and acceptance
Intention to create legal relations
Consideration
What 2 elements need to be satisfied to show offer and acceptance?
Clear and certain offer displaying intention to be bound
Unequivocal acceptance
What test is applied to determine if there is an agreement between an offeror and offeree?
Objectively, what would the reasonable person say was the intention of the parties having regard to all circumstances
When is a unilateral contract deemed to be accepted?
When the act is performed
If a shop advertises saying special offer will that be an offer or invitation to treat?
Invitation to treat
Are goods displayed on shelves of a self-service store offers or invitation to treat?
Invitations
Are website displays offers or invitations to treat?
Invitations to treat
Is the act of inviting to tender an offer or an invitation?
Invitation
Is an invitation to tender, promising to accept the highest/lowest bid an offer or invitation?
Offer – it is a unilateral contract
What 3 conditions can be satisfied to show that an invitation to tender is actually an offer?
- Tenders are solicited from specified parties known to the requesting party
- Absolute deadline for submission
- Party requesting tenders had laid down absolute and non-negotiable conditions for submission
In auctions, when is the bidders offer deemed accepted?
Fall of hammer
In auctions, when can an offer be revoked?
Before the fall of the hammer
How many contracts are there in an auction without reserve and what are they?
- Bidder makes offer, accepted by hammer
- Unilateral contract based on promise that auction is without reserve and goods go to highest bona fide bidder (no matter how low)
What is a bidder entitled to if it is an auction without reserve and the auctioneer does not give them the goods/say there is an offer?
Damages from auctioneer
How can offers come to an end?
Rejected
Lapses
Revoked
What happens if there is no counter offer but an acceptance of an offer on an offerees terms?
It will be deemed a counter-offer and will still negate the OG offer
When does revocation of an offer take effect?
When the offeree has actual notice
Is an offer revoked in communication by a third party valid?
Yes
When will death lapse an offer?
If the offeree knows the offeror has died
The death of the offeree – offer can’t be accepted by oferee’s representatives
When can a unilateral offer be revoked?
B4 act is complete
What happens if a unilateral offer has been part-performed?
It’ll probably be upheld and there is an implied obligation not to revoke the offer once performance has commenced
How can revocation be effected for a unilateral offer if its impossible to know who all the offerees are?
Must take reasonable steps to bring to the attention of all those who have read the offer
What are the 4 elements for defining whether there has been a valid acceptance?
Acceptance is in response to the offer
Acceptance is unqualified
Necessary prescribed mode of acceptance is followed
Acceptance must be communicated
Can you accept an offer that was not addressed to you?
No
What will a qualified offer likely be?
A counter offer
What is needed to make a prescribed mode of acceptance hold?
It has to be very clearly mandatory or else any mode of acceptance that is no less advantageous to the offeror will bind them
Can silence indicate acceptance if the offer indicates that it will?
No
When does acceptance take place under the postal rule?
The moment the letter is properly posted
In what circumstances are there exceptions to the postal rule?
Is not contemplated that post would be used
Letter is incorrectly addressed
Offeror disapplied the postal rule
To letters revoking offers
When is acceptance effective with instant communications?
When received by the offeror
Offeror can be prevented from denying receipt of communication if they are at fault for the non-receipt
When can a third party accept an offer for the offeree?
With authority of the offeree
When is a letter properly posted?
When in the official letter box or the hands of the postal operative
Does the postal rule apply if the letter is lost in the post?
Yes
When will it not be contemplated that post would be used?
If using the post was not reasonable
When is an email deemed received?
When in the server of the other person during their ordinary office hours
What is the requirement of certainty?
Only contracts where the material terms are certain and complete can be binding
What is the test to establish certainty?
In all circumstances, have the parties agreed all the terms they considered to be a precondition to creating legal relations
What does it mean that consideration must not be past?
Cannot generally have taken place prior to the promise to pay
What does it mean that consideration must move from the promisee?
Party who has not provided consideration may not bring an action to enforce a contract
What does it mean that consideration need not be adequate?
Court will not assess adequacy of the consideration
What does it mean that consideration must be sufficient?
Must have some value in the eyes of the law
What is executory consideration?
Promise to perform something in future, after the contract has been made
Deliver goods and pay on delivery (at time of agreement, neither party has done anything yet)
What is executed consideration?
Time of forming contract, consideration has already been performed
What 4 things should you examine when looking at whether there is adequate consideration?
Not be past
Need not be adequate
Must move from the promisee
Must be sufficient
What are criteria for the exception to consideration must be past rule?
- Act was done at promisors request
- Parties understood the act was to be rewarded by payment or conferment of some other benefit (AGREED OR IMPLIED)
- Payment/benefit would be legally enforceable had it been promised in advance
In what types of context is there an issue with consideration moving from the promisee?
When a contract is for the 3rd parties benefit, who then tries to enforce
But they were not party to the original contract that was for their benefit (e.g., parent buying something for their adult child)
A party who has not provided consideration may not bring an action to enforce the contract.
How is a variation of contract effected?
Must be the same elements as creating an original contract
Are existing obligations good consideration for a new contract?
No
When can existing obligations be good consideration for a new contract?
If it confers some practical benefit
Is carrying out a public duty enforced by law good consideration?
No
Is a promise to do something which a party is obliged to do pursuant to a contractual obligation to a third party good consideration?
Yes
Is agreement to part payment of a debt good consideration?
Usually not
What is factual consideration?
When nothing new is being promised, but the party is still getting something out of the reshaped deal
What are the 6 criteria for establishing factual consideration?
- There is an existing contract for goods or services for payment
- B has reason to believe A can’t complete his side of the bargain
- B promises additional payment to perform contractual obligation on time
- B obtains a benefit or obviates a disbenefit
- Promise isn’t given under economic duress or fraud
- Benefit is capable of being consideration and legally binding
How can you have good consideration for part-payment of a debt?
If other things are varied in the contract too to provide additional consideration e.g.,
Pay at different time
Pay with smth different than money
Pay at a different place
Is it enforceable if a creditor accepts a 3rd party payment of a lesser sum in satisfaction of a debtors obligation?
Yes, the debtor can then no longer be sued for the difference
What famous case illustrates a departure from Williams/Roffey in terms of a promise to accept less?
MWB
Offering delayed rental payments for a tenant because the practical benefit is no vacant property
Is promissory estoppel a defence or cause of action?
Defence
What is required for promissory estoppel to operate?
Clear and unequivocal promise or representation that existing legal rights will not be fully enforced
Promisee relied on that promise
It would be inequitable for promisor to go back on their promise
Can you sue someone for not keeping their promise?
No
Can a promise in promissory estoppel be implied?
Yes
When is intention to create legal relations presumed?
Commercial contracts
When is there a presumption against intention to create legal relations?
Social/domestic agreements
What is the effect of the wording ‘subject to contract’ creating a strong interference for?
That parties do not intend to be bound until the formal execution of a contract
Is the presumption of intention to be bound only B2B contracts or also B2C?
Also B2C
When do people lack capacity to contract?
Drunkenness
Under 18 (*there are exceptions)
Mental capacity act
When are adults lacking capacity still bound by their contracts?
Paying a reasonable price for necessaries
What is the sequence to consider when examining whether a minor is bound by a contract?
- Does the contract concern necessaries?
IF NO
- Is it a contract of employment, apprenticeship or education?
IF NO
Child is not bound
How are necessaries defined?
Essentials: food, clothes, medicine, accommodation, clothing
For the minors ‘real use’ as long as they are not produces and services for comfort or pleasure only
How does the definition for necessaries vary person to person?
Considering age
Considering specific needs and actual requirements
What does it mean that a contract has to be for a minors benefit?
It can’t be a disadvantageous contract e.g.,
Onerous
No clear benefit
Restriction of freedom
Ambiguous terms for payment of wages
In what way are contracts with minors that aren’t under an exception enforceable?
Minors can enforce against the adult
Adult can’t enforce against the minor
How can a contract with a minor become binding?
If they ratify it when 18
Can drunkeness mean lack of capacity?
Yes
What 2 criteria must be satisfied for a person claiming lack of capacity to succeed?
They did not understand what they were doing
Other party knew that to be the case
What is the effect on the enforceability of a contract entered into under duress?
It is voidable
What are the 3 types of duress?
To person
To property
Economic duress
What constitutes duress to a person?
Actual or threatened violence
What constitutes threat to property?
Threat to seize or damage it
What criteria are there for establishing economic duress?
Lack of practical choice as to whether to enter/vary the contract
Caused by illegitimate pressure
What is the proper remedy for duress?
Voided
Rescission
Who has the burden of proof for duress to the person?
The person being accused of duress has to prove that their violence contributed nothing to the victims decision to contract
How much influence does the duress have to have on the influence to enter the contract?
It is at least 1 factor influencing the decision
What is the threshold to establish duress for duress to goods?
But for the duress, agreement would not have been entered into
Lower than for duress to person
What are the 3 ingredients for actionable economic duress?
Illegitimate pressure
Lack of practical choice
Is a significant cause inducing the claimant to enter the contract
What is the remedy for voidable contracts in general?
Rescission
When will rescission no longer be available?
After duress has ceased, innocent party does not challenge in a timely way or acts in compliance with its terms
Contract is affirmed
What 4 things will the court consider when examining whether there has been economic duress?
If there was actual or threatened breach of contract
Where the party exerting the pressure did so in good or bad faith
Whether the victim protested
Whether the victim affirmed after the duress ceased
When does undue influence arise?
When there was a relationship of influence or ascendancy and an abuse of that decision
For which relationships is there an irrebuttable presumption of influence?
parent/minor child
client/solicitor
trustee/beneficiary
guardian/ward
dr/pt
What characteristic does a transaction have to have to establish undue influence?
A transaction that requires explanation
What is the difference between duress and undue influence?
Duress developed in common law
Undue influence in equity
Primary difference is relationship of trust
What is the test for undue influence?
Transaction was produced in such a way that the consent ought not fairly to be treated as the expression of their free will
What 2 types of pressure can amount to undue influence?
Overt acts of improper pressure or coercion
Relationship of influence/ascendancy of which unfair advantage is taken
If there is an overt act of improper pressure that was deceitful/fraudulent, then what is the causation test?
Same as duress to person
Only necessary to establish that undue influence was 1 factor
If there is an overt act of improper pressure that is not deceitful/fraudulent then what test applies?
But for the behaviour, would the innocent party have entered the contract
What is the most common relationship of ascendancy resulting in undue influence claims?
Husband/business owner wants wife to agree to use home as collateral
Who has the burden of proof for undue influence?
The party alleging it was a victim
What must the undue influence victim prove?
That there was a relationship of trust and confidence
Transaction that requires explanation
When will a gift require explanation?
Very large and unreasonable on ground of friendship, relationship, charity or other ordinary motives
When undue influence is exerted by a third-party, when can undue influence render contract set aside?
When the contractor had notice of the undue influence
When is a bank deemed to have constructive notice of undue influence?
When relationship between the party giving the guarantee and the borrower is non-commercial
How can a bank protect itself when on notice of undue influence?
Take reasonable steps to warn the weaker party of the risks
Ensure weak party gets independent advice
When a spouse is offering a guarantee for a matrimonial home, is that a transaction requiring explanation?
Not automatically
They have to show how spouses influence was used unduly
When will a creditor be on notice of undue influence?
X offers to stand surety for her husbands debts:
- transaction does not on the face benefit X
- substantial risk that in procuring X to act as surety, husband commits a legal or equitable wrong
What 3 points dictate the banks obligations and rights when working with a solicitor advising the person offering surety in an undue influence case?
- Can rely on solicitors confirmation that advice was given unless on notice that not true
- Must give solicitor enough information that transaction can be fully explained
- If creditor is aware of active misleading, must inform the solicitor
What advice does a solicitor have to give a wife in an undue influence scenario?
Explanation of documents and consequences - risks
Seriousness of risk, duration and terms of agreement in relation to all assets and means
Fact that the wife has a choice
What are express terms?
Statements made
Intention to be bound
What are implied terms?
Law determines that these exist
What 3 types of statements can be made when negotiating a contract?
Puff
Representations
Terms
What does an untrue statement in a term of a contact amount to?
Breach of contract
When will a representation be a term?
If the parties consider it binding
What will the courts consider to decide whether a representation is a term?
Importance of statement
Timing
Reduction of contract into writing
Special knowledge and skill of person making the statement
Assumption of responsibility by person making the statement
What factor is important in deciding how important a statement was when distinguishing whether it was a representation or term?
Whether the contract would have been entered into or not
What factors are considered when examining time for the purposes of distinguishing a term from a representation?
Statements made at the time of contracting are more likely terms
How long between the statement and signing has been held to be a representation not a term?
A week
Why does reduction to writing make a statement more likely to be a term?
Cause if it is important you write it down
How can terms be incorporated into a contract?
Notice
Course of dealing
Conversations/emails
What is the main way contracts show intention to be bound?
Signing them
What is the effect of an entire agreement clause?
Means anything other than what is in the agreement is not in the contract
Does signing a document which wasn’t intended to have contractual effect demonstrate an intention to be bound?
No
What must be fulfilled for incorporation by notice to be effective?
Reasonable steps have to have been taken to bring the notice to a claimants intention
What threshold of notice is required to incorporate terms which are particularly adverse to the other party?
‘Printed in red ink with a red hand pointing to it’
Can a term be incorporated by notice after the contract is made?
No
BEFORE OR AT THE TIME OF CONTRACTING
What is the exception to incorporation by notice after the time of contracting?
When there was a previous course of dealing if not specified in this particular transaction might be inferred from the past
What would violate the incorporation by dealing notice?
If dealings in the past were inconsistent
Would 3 or 4 transactions over 5 years be sufficiently consistent course of dealing?
No
On what 2 bases can terms be implied?
Fact and law
When can terms be implied in fact?
Basis of custom or course of dealing
To give business efficacy to contract
When can terms be implied by law?
Common law
Policy
Some relationships
Statutes
Will courts imply a term contrary to an express term in the contract?
No
What is the test for implying a term for business efficacy?
Without implying the term, the arrangement would be so unworkable that sensible people could not be supposed to have entered into it
What terms does the Sale of Goods Act 1979 imply?
Seller has the right to sell the goods
Goods comply with description
Goods are of satisfactory quality
Goods are suitable for any purpose made known to the seller
Goods comply with any sample
To whom does the Sale of Goods Act 1979 apply?
Businesses only
What type of term is it in SGA 1979 that the seller has title to sell?
A condition
What rights are given for breach of condition?
Terminate
Affirm and claim damages
What type of term is it that goods must comply with their description?
A condition
What is the test for satisfactory quality?
A reasonable person would regard them as satisfactory taking account of any description of the goods, price and other circumstances
What factors are considered when examining whether goods are of satisfactory quality?
Fitness for purposes which commonly supplied
Appearance and finish
Freedom from minor defects
Safety
Durability
What are the exceptions to the implied term of satisfactory quality?
Defects drawn to buyers attention before contracting
Buyer examined the goods prior to purchase and the defect ought to have been revealed
When is fitness for a particular purpose engaged?
When a buyer expressly or impliedly makes their intention with the goods known
What are the exceptions to fitness for particular purpose?
Circumstances show buyer does not rely, or it is unreasonable for him to rely on the sellers skill or judgement
What type of term is it if goods don’t correspond with sample?
Condition
When will a breach of sample correspondence, match condition and title to sell not bring rights to remedies?
If the breach is so slight it would be unreasonable to repudiate the contract
Can implied terms in SGA 1979 be excluded?
Yes, to the extent not limited
But UCTA significantly limits them
How does UCTA limit exclusion of SGA 1979?
Title to sell cannot be excluded or restricted
Others can be subject to reasonableness
What does s12 say in SGA 1979?
Title to sell
What does 13(1) say in SGA 1979?
Correspond to description
What does s14(2) say in SGA 1979?
Satisfactory quality
What does s14(3) say in SGA 1979?
Fit for implied or express purpose
What does s 15 SGA 1979 say?
Bulk of goods must correspond with sample
What terms does the Supply of Goods and Services Act 1982 imply?
Services will be carried out with reasonable care and skill
What types of transactions does the Supply of Goods and Services 1982 imply terms into?
Some contracts for transfer of property in goods
Contract for hire of goods
Contracts for supply of services
Does SGSA 1982 apply to consumer contracts?
No
What terms does the SGSA 82 imply into contracts for transfer of property in goods and contracts for hire of goods?
Effectively the same as in SGA 79
Define contract for transfer of goods under SGSA
Ownership of goods is changing hands other than:
Contract for sale of goods
Hire/purchase agreement
Trading goods in exchange for trading stamps
Transfer by deed when there is no consideration other than presumed consideration
Contract intended to operate by way of security
What terms are implied into contracts for the hire of goods under SGSA 82?
Rights against hirer selling
Hired goods match description
Quality/fitness for purpose
Matching sample
What terms are implied for supply of services under SGSA 82?
Care and skill
Time of performance (if not fixed in the contract)
Consideration for a reasonable charge (if price left to be determined after performance)
What is the difference between sale of goods and contracts for transfer of property in goods?
?
What contracts does CRA 2015 apply to?
Consumer:
contracts for goods
contracts for digital content
contracts for services
What terms does CRA 2015 imply into goods?
quality
fit for known purpose
comply with description
What terms does CRA 2015 imply into digital content?
quality
purpose
description
What term does CRA 2015 imply into contracts for services?
care and skill
reasonable time (where hasn’t been fixed)
reasonable price (when one wasn’t agreed)
What are the remedies for contracts for goods under CRA 2015?
Short term right to reject
Right to repair or replacement
Right to price reduction OR final right to reject
How long is the short-term right to reject goods under CRA?
30 days from
Ownership passing
Goods being delivered
Goods have been installed and consumer notified
When is right to price reduction or final rejection exercisable?
After repair/replacement goods still don’t conform
Repair/replacement is not possible/is disproportionate
Consumer required repair/replacement, but trader didn’t do so within significant time or without significant inconvenience to the consumer
Under CRA for breach of quality, fitness, description can contract be treated as at an end?
No, only to the extent set out in the act (e.g., failed replacement or repair)
What remedies are available in CRA for digital content?
Repair/replacement
Price reduction
When is a price reduction available for digital content under CRA?
Consumer cannot require repair or replacement
Trader fails to replace/repair without significant inconvenience to the consumer
What is the deadline for a trader to provide a refund under CRA for digital services?
14 days
Can traders impose a fee for a refund under CRA for digital services?
No
What 4 criteria must be fulfilled to be entitled to repair/compensation for damage caused to device by digital content?
Trader supplies content to consumer under contract
Digital content damages the device or other digital content
Device/content damaged belonged to the consumer
Damage would not have occurred if the trader had exercised reasonable care and skill
What are the remedial options allowed under CRA for services?
Require repeat performance
Price reduction
When can a consumer not require repeat performance?
If completion in conformity with the contract is impossible
What 3 classifications of term is there?
Conditions
Warranties
Innominate terms
What remedy is available for breach of condition?
Terminate contract
If the party breaches a warranty, what remedy is available?
Sue for damages
What is an innominate term?
Neither a condition or warranty, is in the middle
What remedies are available for innominate term breaches?
Minor effect – damages
Serious consequences – repudiate and claim damages
Can the innocent party still get damages if they affirm the contract after a breach of condition?
Yes
What is a condition?
Goes to the root of the contract
What is the test for deciding if something is a condition?
Whether the parties intended, at the time of contracting, that a breach of the relevant term could result in the innocent party terminating
What is the test from Hong Kong Fir, to determine whether an innominate term should be treated as a condition or a warranty?
Does the breach deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract?
What are the steps to the procedure or approach that should be followed when trying to classify terms?
- Does statute classify it?
- Did the parties classify it?
- Previous judicial decisions
- Apply other tests
- root of contract
- hong kong fir
What is a repudiatory breach?
A breach that is of a condition
What 3 points need to be considered when examining whether a party can rely on an exemption clause?
Is it properly incorporated?
Construction
Statutory controls
What happens if there is ambiguity in the exemption clause?
Resolved against the party seeking reliance
When is a court less likely to read a clause contra-proferentum?
Equal bargaining power
What is the most important point of construction when seeking to exclude reliability resulting from own negligence?
Clear words, negligence itself is used or a close synonym
What must the wording of the exemption clause contain to be valid?
Exempt from the BREACH and LOSS
What process should be followed to apply UCTA 77?
Identify the breach
Identify the relevant section of UCTA
Identify effect on the exemption clause
Does UCTA apply to consumers?
No
Does UCTA allow exclusion for death or PI?
No
To what extent does UCTA allow restriction of liability for negligence?
Reasonableness
To what extent does UCTA allow exclusion/limitation of breaches of S13-15 SGA 79?
Reasonableness
To what extent does UCTA allow limitations of liability for breach of contract?
Negotiated contract: UCTA does not apply
Reference to standard terms: valid if reasonable
Where general/standard terms have been negotiated, will the courts treat them as standard or negotiated terms?
Standard
Implication is that the exemption clause it self would have to be negotiated
What is UCTAs reasonableness test?
Fair and reasonable to include having regard to the circumstances which were or ought reasonably to have been known to or in the contemplation of the parties when the contract was made
What 5 guidelines to reasonableness does UCTA provide?
Bargaining power
Whether customer received an inducement to agree to the term
Customer knew or ought to have known about the existence and extent of the term
If term excludes/restricts liability if the condition was not complied with, whether it was reasonable at the time of contract to** expect that compliance was practicabl**e
Whether goods were manufactured, processed or adapted to the special order of the customer
How much precedential value to previous decisions about reasonableness in UCTA have?
little, because the tests/factors are so vague
Reasonableness under UCTA is somewhat judicial discretion
What limitation of liability terms are not binding on the consumer under CRA?
Death/personal injury
Stat implied terms under s9/10/11 (goods), s34,35,36 (digital content), s49 (services)
What limitation of liability is allowed about any term that isn’t limitation of stat implied terms, death/PI and transparent terms about contract/price?
Not binding if contrary to good faith and causes imbalance in rights and obligations to the detriment of the consumer
Can transparent and prominent terms be assessed for fairness by the court?
No
What attempts to limit liability for a service is allowed in CRA?
Limitations will not be binding if they prevent the recovery of price paid (refund)
What is the effect of an operative mistake?
Is void
Had no legal effect from the outset
What are the 3 categories of operative mistake?
common
mutual
unilateral
What are the 2 types of common mistake and their effect on the contract?
Both parties suffer from same misapprehension
Existence of the subject matter: void unless contract impliedly/expressly allocates this risk
Fact or quality fundamental to the agreement: void only in the most severe instances
What is a mutual mistake and its effect?
Both parties are mistaken, as to different things, negotiated at cross purposes
Will be void
What is the effect and definition of a unilateral mistake?
There is a mistake and one party knows or is deemed to know
Void, but hard to show in face2face transactions
Will a mistake as to the quality of goods be an operative mistake?
No, not even if utility is effected
In what 3 circumstances will mistake not operate?
Mistake is not sufficiently fundamental
One party is at fault
Contract makes provision for the issue
What is the test for mutual mistake?
What a reasonable 3rd party would believe the agreement to be based on the words and conduct of the parties
If you can’t find one, void for mistake
When is a unilateral mistake of non est factum arising?
Blind, illiterate, senile
Trick, fraudulent misrep to sign, provided all reasonable precautions were taken b4 signing
What is the presumption in a face2face contract of unilateral mistake for identity?
That the person intended to deal with that person in front of them
How is the face2face assumption rebuttable?
Identity, not attributes was of vital importance
What about parties contracting through correspondence?
Mistaken identity likely to be void
What is the trio of conditions the court will consider when deciding whether to provide remedies for an illegal contracts?
Underlying purpose of the prohibition transgressed and whether purpose is enhanced by denial of claim
Other relevant public policy that denial will have an impact on
Whether denial would be proportionate to the illegality, bearing in mind that punishment is for the criminal courts
Can you assign rights, benefits or both under a contract?
Benefits, if the contract permits it
What should you do if a third-party can’t bring a claim in contract?
Consider a claim in tort
What are the common law methods of circumventing the doctrine of privity of contract?
Agency
Assignment
Collateral contract
Actions in Tort
Other judicial attempts to avoid the doctrine
What are the 3 requirements to develop a relationship of agency in contract?
Principal named, is clear is acting on somebody else’s behalf
Agent should be authorised to act as agent (frequently scope will be limited)
Consideration has moved from the principal
Can a contractual assignee sue the original party for breach?
Yes
What can an assignee acquire from the contract?
No more than the OG benefit
Not the burden
What is the collateral contract exception to privity of contract?
Court implies a contract between x and a third-party when there are very close ties of benefit and burden
Why can a claim in tort instead of contract be a good option for some third parties?
DOC can be imposed
Under the Contracts (Rights of Third Parties) Act 1999, when will a third party have a right to enforce a term of a contract?
Where the contract states it should
Where the contract purports to confer a benefit on it, unless it appears the parties didn’t intend it to be enforceable
Does a third party have to exist on creation of the contract for there to be a benefit conferred under statute?
No, e.g., unborn child
What does the term ‘purports to confer a benefit’ give rise to under statute for third-party enforceability of contracts?
An assumption that the third-party can enforce unless this is rebutted by examining the contract
Can third parties deriving rights under statute rely on exemption and limitation clauses?
Yes
How do third-party rights alter the flexibility/variability of a contract?
The parties cannot alter the contract in a way that affects the third party without consent if:
Third party has communicated his asset to the term to the promisor
Promisor is aware that the third party has relied on the term
Promisor can reasonably be expected to have foreseen that the third-party would rely on the term
Can the parties contract out the requirement for third party consent?
Yes
When can the courts dispense with third party consent?
Unknown whereabouts
Mentally incapable of consent
Reliance on term cannot be reasonably ascertained
*CAN impose conditions, e.g., compensation
In what 5 ways can a contract be discharged?
Performance
Expiry
Agreement
Breach
Frustration
What are the 4 exceptions to a contract being discharged by performance?
Party accepts partial performance, other party is entitled to payment for the partial performance (quantum meruit)
One party substantially performed contract, may be entitled to contract price subject cost of remedying defect
Party entitled to payment of a party of a divisible contract
Party prevented from completing performance by other partys default, can sue for damages of breach and claim quantum meruit
What is the entire obligations rule?
A contract is only discharged if the entirety of the obligation is discharged
This is interpreted very strictly - NO MONEY, if ALL the obligations aren’t performed.
What are the exceptions to the entire obligations rule?
Acceptance of partial performance
Substantial performance
Divisible obligations
Wrongful prevention of performance
When will the court consider when examining whether a contract has been substantially performed?
When the defects and omissions do not go to the root of the contract
The cost of repair vs overall cost of the contract
What is the defence for failure to perform the contract?
Tender of performance
The claimant refused performance of the terms of the contract and then tried to sue
How can parties discharge a contract by agreement?
Enter a new contract, supported by consideration or effected by deed
What is a condition precedent?
A condition of the contract stating that a condition must be satisfied before rights come into existence… prevents contract from being binding
What is a condition subsequent
Term provides for termination of the contract and discharge of obligations outstanding under the contract upon the happening of a specific event
Is the consideration of waiving rights under a previous contract good enough to discharge the OG contract?
Only if neither party has fully performed their obligations
What is accord for satisfaction?
Both contractual parties agree to release the other from obligations under a contract
How can you achieve accord for satisfaction when one party has completed its full obligation?
Deed
What rights does an innocent party have when there is an anticipatory breach?
Has the right to accept ‘renunciation’ and treat the contract as terminated
What can the innocent party claim for after a repudiatory breach?
The breach losses
Loss of the contract as a whole
What are the 2 limitations on the ability to affirm?
Co-operation of breaching party is required
Innocent party has no legit interest financial or otherwise in continuing
What is required to show affirmation?
Communicated clear and unequivocal commitment to continue the contract
What is discharge by frustration?
Without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it radically different
What are the 3 most common ways discharge by frustration occurs?
Performance is impossible
Performance is illegal
Parties common purpose is frustrated
What is a frustrating event not?
Caused by the default of a party
Provided for in the contract
Merely an increase in expense/onerousness
Something the parties could reasonably have contemplated
What is the definition of frustration?
Without default of either party
Contract has become incapable of being performed because circumstances in which performance is called for render it a thing radically different to that which was undertaken in the contract
It was not something promised to do
What case law examples dictated events when frustration would be impossible/unavailable?
Hired venue is physically destroyed
Machine repair contract frustrated by fire destruction of whole factory
Musician is ill and can’t perform
Unavailable ship for charter party because was contracted elsewhere for 5/12mo of the contract
What was the example for frustration by illegality?
Delivering items to enemy occupied Poland in WW2
What criteria (1) must there be for frustration of purpose to apply?
It frustrated the JOINT purpose of both parties
What was the case law example of frustration of purpose THAT WAS upheld?
Hiring a room to view king procession which was then cancelled
*very narrowly decided
What 2 examples of frustration of purpose were NOT upheld?
Booking a cruise for a cancelled naval show when the cruise could still go ahead
Getting out of rent because of Brexit
What is a force majeure clause?
A clause that states what will happen to a contractual relationship if there are natural disasters etc
Does frustration happen automatically?
Yes
In frustration, can money paid before frustrating even be recovered?
Yes
What discretionary power does the court have regarding allowing a party to retain funds after frustration?
For expenses incurred in attempting to perform the contract
What must the court do if a party received a non-monetary benefit before frustration occurred?
Identify value of benefit
Make an assessment of a just sum to be paid for that benefit
What is the cap that the court can award to keep if a contract was frustrated?
The cost in the contract itself
Who has the burden of proof when seeking to retain or recover expenses after frustration?
The person trying to get the money
How much discretion does the court have when deciding how to allocate money after frustration?
Very broad
Case by case
What are the 2 main ways of calculating damages in contract?
Expectation interest
Reliance interest
What is expectation interest?
Damages put the innocent party in the same position post-breach as they would have been had the contract been performed
Cost of cure
Difference in value between promised and received
Loss in amenity
What is reliance interest?
Looking backwards at putting the claimant back in the position they would have been in had they never contracted
Is a claimant who has not suffered a loss entitled to a judgement?
Yes, just only nominal damages
Is loss of amenity likely to be available in commercial settings?
No
When will reliance be awarded instead of expectation?
When expectation is highly speculative
At what time to reliance losses occur?
Prior to the breach, sometimes prior to signing the contract
What defence does the defendant have to a reliance loss claim?
That the money would have been wasted regardless of their act
When are damages for mental distress, anguish or annoyance likely to be recoverable?
When the major purpose of the contract was to provide pleasure, relaxation and peace of mind
Are damages generally awarded for loss of reputation?
No
When are damages for loss of chance recoverable?
If the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition
How will the courts calculate damages for loss of chance?
Proportion of the chance that is proved
Unless chance of obtaining benefit was 50% or greater then expectation loss can be recovered in full, based on the balance of probabilities
What is the test in Hadley v Baxendale?
Must be a loss of a type ordinarily and naturally arising from the breach
If the losses are too unusual for that then to recover
You have to establish that the D had sufficient/actual knowledge of the particular special circumstances to be aware of the risk of those losses
When does it have to have been in contemplation and knowledge under Hadley?
At the time of contracting
To what extent is a party expected to mitigate?
Reasonable steps
Can reasonable steps include accepting a performance offered by D under a new contract even if it amounts to a breach under the initial contract?
Yes
What is the test for factual causation in contract?
The test is whether the defendant’s actions were a dominant or effective cause of the loss
What is restitution interest?
Damages on the basis of restoring to the claimant a benefit which the defaulter acquired at their expense
*RARE
When can a restitution claim arise?
For a total failure of consideration
What is the second, less common way of considering remoteness other than Hadley?
Whether objectively, the D assumed responsibility for the loss in question
What needs to be proved to establish reliance interest?
That the contract would have enabled them to recoup expenses had it been properly performed
Who has the burden of proof for reliance interest?
The defendant has to prove the claimant would not have recouped had the contract gone ahead
What is the ‘useful general guide’ the courts use when deciding whether restitution interest is recoverable?
Whether the claimant has a legitimate interest in preventing the defendants profit-making activity and hence depriving him of his profit
What is an ‘efficient breach’
In restitution claims, a type of breach that might make it more likely that restitution could be applied
What 3 criteria make up an efficient breach?
Breach was cynical and deliberate
Breach enabled defendant to enter into a more profitable contract elsewhere
By entering into a new, more profitable contract, the D put it out of his power to perform the contract with the claimant
What is a key consideration which is likely to dictate whether restitution interest can be considered?
Whether other remedies would be adequate
What 2 remedies are available for non-conforming goods?
Short term right to reject (30 days)
Right to repair/replacement
IF:
IMPOSSIBLE/DISPROPORTIONATE
FAILED ATTEMPT AND STILL BAD
TRADER FAIL TO REPAIR/REPLACE
Right to price reduction/final right to reject
What remedies are available for non-conforming digital content?
Repair/replace
IF:
IMPOSSIBLE/DISPORPORTIONATE
TRADER FAILED TO REPAIR/REPLACE
Right to a price reduction
What remedy is available if the trader had no right to supply the content?
Refund
What remedy is available if digital content damaged a device/other content?
Repair/compensation
What remedy is available for non-conforming services?
Repeat performance
IF IMPOSSIBLE/TRAFER FAILED TO PROVIDE
Right to a price reduction
What does a liquidated damages clause provide for?
A sum payable for a specific breach of contract
What is a penalty clause?
An excessive liquidated damages clause
What is the Makdessi approach for?
Determining whether something is a liquidated damages clause or a penalty clause
What are the steps in the Makdessi appraoch?
Is the clause a primary or secondary obligation? If primary, will not engage the penalty rule
If secondary, the clause will be a penalty if it imposes a detriment out of all proportion to any legitimate interest of the innocent party in the performance of the primary obligation. Identify the legitimate business interest, then consider whether the detriment imposed is extravagant
Who has the burden of proof with penalty clauses?
The person alleging that the clause is a penalty
When will a clause be primary under Makdessi?
If part of the primary obligations in the commercial context
Furthers the commercial objective
When will a clause be secondary under Makdessi?
If is an obligation triggered by breach of contract to compensate the innocent party
What 2 steps will the Supreme Court take when deciding whether a secondary clause imposes a detriment out of all proportion to legitimate interest?
What legitimate business interest is served and protected by this clause
Is the detriment imposed to protect that interest extravagant, exorbitant or unconscionable?
What is the possible punishment for specific performance and prohibitory injunction breaches?
Contempt of court
When are specific performance and prohibitory injunctions available?
When damages are not appropriate
What 2 things mean equity won’t be available to you?
Dirty hands
Delay
When will specific performance not be awarded?
Cause undue hardship on defendant
Promise given for no consideration, even if made by deed
Breach of employment contract
Services, where there is a breakdown of trust and confidence
To perform a series of acts requiring constant supervision of the court
Breach of contract not binding on both parties
If a contract is varied, would a guarantee or indemnity stay in force?
An indemnity does
Guarantee doesn’t
What are the formalities for a guarantee?
In writing
Signed by guarantor
Can an indemnity be used between 2 parties to skirt traditional rules of contract?
Yes, e.g., to avoid remoteness rules
