Contract - Assessment Level MCQs Flashcards
A builder agrees to build a house for a landlady, due for completion on 1 February, for £100,000. The landlady agrees with a third party to rent the property from 3 February, at a premium rate. On 20 January a labour shortage occurs and the builder, knowing the landlady will not find another builder, threatens to stop work unless he is paid an extra £10,000. The landlady protests, but pays the extra £10,000. The house is completed on 1 February. The landlady waits until the third party begins renting the property and then seeks the return of the £10,000.
Which of the following statements best describes the legal position in relation to the landlady’s potential claim for economic duress?
Likely to succeed. Delay in bringing the action is quite short (matter of days), therefore unlikely to render claim under duress unsuccessful.
An adult daughter acts as her elderly mother’s carer. The daughter asks the mother for a loan to support a new business venture. The mother is reluctant as it is for a very large amount. The daughter is furious and asks her mother why she will not support her given how much she has done for her. The mother reluctantly agrees to the loan as she does not want to upset her daughter as she is so reliant upon her.
The daughter’s business fails, and she does not repay the loan. The mother is now in residential care and wants to her money back.
Identify the most appropriate cause of action for the mother.
Undue influence
- relationship of ascendancy
Rescission
A remedy which involves returning the parties to their pre-contractual position.
When a contract has been entered into or varied under duress, it is [__]
voidable
Consider a contract by which Party A agrees to transport goods for Party B at an agreed price. If the cost of petrol rises, it may become difficult for Party A to continue to transport the goods at that price. But, if Party A seeks to renegotiate the contract under threat of breaching it, it risks the contract being [__]
unenforceable due to duress.
A publisher contracts to sell 100 books to a shop, with a 14-day credit facility. The books are stored at a warehouse which floods, destroying the books. The publisher knows the books were still its responsibility, but falsely tells the shop it believes the books were their responsibility and unless the shop pays for them, threatens to revoke the credit facility. The shop knows it is not liable for the books, but decides that paying is better than losing the credit facility.
Was the publisher’s threat to remove the credit facility “illegitimate pressure”, for the purposes of establishing economic duress?
Yes. The publisher was using this as a means of extorting money it knew was not due to it.
A high end restaurant is being reviewed by an influential food critic and the head chef wants to make a dish requiring rare truffle oil. It contracts to buy some for £100 from the only UK supplier. The supplier later learns of why the restaurant wants the truffle oil and states that it will now only sell the oil for £1000. The restaurant agrees, but on receipt of the invoice refuses to pay more than £100.
Which of the following statements best describes the legal position in relation to the restaurant’s potential claim for economic duress?
Will not succeed as long as the restaurant has sufficient practical choice.
Could make another meal or buy it from another supplier.
The owner of a construction company (‘company owner’) purchases a forklift truck from an online retailer. After the forklift truck is delivered, he notices a dent at the front. The company owner decides to use the forklift truck anyway. One month later, the company owner decides that he wants to get a different forklift truck from a different shop. He telephones the online retailer and says that he wants to return the forklift truck and get a refund but the online retailer refuses.
Which one of the following statements best explains the legal position?
The company owner was entitled to return the forklift truck HOWEVER he affirmed the contract by using it.
Therefore, cannot return the truck and get a refun.
A road maintenance company hires a van from vehicle hire company, at a cost of £270. The van is wholly unreliable and causes the maintenance company significant losses. Under the contract between the two parties, the maintenance company has to return the van in the same condition as at the start of the hire period. On returning the van to the hire company’s yard, the hire company inspects the van, and presents the maintenance company with a sheet of A4 paper, marked “Record of vehicle condition at end of hire period”. The paper has a diagrammatic representation of a car split into various areas. Next to each area is written “no damage”. The hire company signs this sheet, and asks the maintenance company’s representative to sign it, which he does. At the foot of the page are various terms and conditions, in small print, which the maintenance company’s representative does not read. One of these terms (the ‘Term’) provides that the hire company’s liability for losses during the hire period is limited to £300. The maintenance company seeks to recover its losses caused by the van being unreliable, which exceed this sum, and the hire company seeks to rely on the Term to limit any liability.
Exemption clause; is it valid? If so, on what ground?
valid if reasonable at the time of making the contract taking into account knowledge of the parties.
A carpenter contracts with a company to carry out plumbing services. At the time of contracting an agent of the company signs a form, without reading it, containing the following clause, ‘Our total liability to you, including but not limited to our liability in negligence, shall not exceed £500’. The carpenter carries out the services with a lack of reasonable care and skill causing damage to company property.
What statement best explains the legal position?
The carpenter has breached an implied term of the Supply of Goods and Services Act 1982 by failing to carry out the service with reasonable care and skill. The exemption clause limits liability for negligence at common law, however the clause will only be effective in accordance with the Unfair Contract Terms Act 1977 if it satisfies the requirements of reasonableness.
A caravan owner is selling his caravan. The caravan owner paints a stain stopping paint to cover up some damp in the bathroom. The buyer looks around the caravan but does not go into the bathroom. After the sale the buyer discovers the damp and wants to sue the caravan owner for misrepresentation.
Which one of the following statements best explains the legal position?
The Caravan owner’s conduct in hiding the damp will not amount to an actionable misrepresentation as the buyer did not inspect the bathroom prior to contracting, consequently, she was not induced to enter into the contract by this conduct.
A hairdresser wishes to purchase a salon. She visits a salon which is advertised for sale and asks the seller about their future plans. The seller responds, ‘don’t worry I won’t open a rival business close by, I am planning to move out of the area.’ The hairdresser is reassured by this and purchases the salon. In fact, the seller was already in discussions to purchase a new salon two streets away. One month after the hairdresser’s purchase is completed the seller opens their rival business and the hairdresser loses the vast majority of her clients as a result. Which of the following most accurately applies the law of misrepresentation?
The seller’s statement about future plans is likely to be an actionable misrepresentation which would be categorised as fraudulent.
A caravan owner is selling his caravan. The caravan owner paints a stain stopping paint to cover up some damp in the bathroom. The buyer looks around the caravan but does not go into the bathroom. After the sale the buyer discovers the damp and wants to sue the caravan owner for misrepresentation.
Which one of the following statements best explains the legal position?
As the bathroom was not inspected there is no inducement and consequently no misrepresentation. Had the buyer inspected the statement this would be a fraudulent misrepresentation.
A cake shop owner is selling her shop. She tells the buyer what profit the cake shop makes each month. After this and before the sale the cake shop’s monthly profit halves. The cake shop owner knows that the buyer has relied on her earlier statement and would want this new information, but she does not know whether she needs to tell him. The sale completes without the cake shop owner advising the buyer of the changed circumstances.
Which of the following most accurately applies the law of misrepresentation?
NO DUTY. STATEMENT WAS TRUE AT THE TIME IT WAS MADE.
A representor makes a material fraudulent misrepresentation when selling her business to the representee. The representee carries out his own cursory investigation before buying the business. If the representee had carried out this investigation more thoroughly he would have discovered that the representor’s statement was false. When carrying out his own investigations the representee finds out further information about the business that he was not told by the representor. This new information influences the representee’s decision to purchase the business. A week later, the representee discovers that representor’s fraud. The representee wants to rescind the contract for misrepresentation.
Which of the following most accurately applies the law of misrepresentation?
The representee will be able to set aside the contract for misrepresentation unless the representor is able to show that her statement did not influence him.
- if the misrepresentation continues to play a real and substantial part (despite the independent check) then the claim can still succeed.
The representor has made a material representation. The representee will be able to set the contract aside unless the representor is able to show the statement did not influence the representee.
A buyer is shopping for a wedding dress when she sees a dress by a famous designer on sale for £100. The seller had made a mistake when writing the price tag and it should have been on sale for £1000. The buyer knows that the dress has been mispriced and she quickly buys the dress.
Which of the following statements is correct as to whether or not the contract is valid / void / voidable, and why?
NOT void bcs mistake as to attributes, can only be void if ID was of vital importance. But is voidable for misrepresentation.
DIRECT ANALOGY BELOW
it is presumed that the seller intended to deal with the person in front of them identified by sight and hearing and that is what had happened. So the contract was not void for mistake, although it would be voidable for misrepresentation (the fraudster had
misrepresented who he was).
This presumption will only be rebutted, and the contract held void for mistake, if the seller is able to establish that identity, rather than attributes, was of ‘vital importance’.
An advertising company sells advertising space. A retailer agrees to buy advertising space for three months from the advertising company for £1,000. It provides the advertising company with an advert to use for the three-month period. Before the advert is posted the retailer changes its mind and refuses to pay the £1,000.
Which one of the following statements best explains the legal position?
Unless the retailer can prove that the advertising company did not have a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price.
- innocent party’s right to affirm the contract in response to a breach of condition
- It is only in exceptional circumstances that the party in breach of condition will be able to discharge this burden and fetter the innocent party’s right to affirm.
- The burden of proof is on the contract breaker to show that the innocent party did not have a legitimate interest in affirming.
A dental surgery contracted with a small company to install new lighting in the surgery. After the work was completed, the dental surgery explained to the company that it was in financial difficulties and asked if the company would accept a lesser sum than the amount due under the contract in exchange for a free dental check-up for the company’s employees. The company agreed.
Which statement best describes whether this agreement is binding?
mutual waiver
The agreement is binding because of accord and satisfaction.
An electrician agreed to install light fittings in a hotel at a cost of £10,000. A deposit of £2,000 was paid at the time of contracting with the balance being payable upon completion. The hotel was destroyed by a typhoon two weeks prior to the work being fully completed.
Under the Law Reform (Frustrated Contracts) Act 1943 what is the most likely outcome should the electrician wish to enforce the contract?
The contract is not fulfilled, and the electrician is entitled to reasonable expenses incurred prior to the frustrating event not exceeding the initial deposit.
A printing press, decided to expand its business and ordered a large printer from a specialist retailer. Unfortunately when the printer arrived, it was faulty and Kate had to wait 3 months for a replacement. Kate would like to claim for (i) the loss of the extra printing business that she could have taken on with immediate use of the new printer; and (ii) the loss of a number of highly lucrative printing contracts which she could have obtained.
What advice would you give the printing press?
The printing press can recover for the ordinary extra printing business that they would have taken on [impted knowledge BCS loss arises naturally] but the lucrative printing contracts would be too remote as the retailer did not have actual knowledge of these [too remote and no actual knowledge].
A dealer supplied a defective cooker to a café owner. The café owner discovered the defect but went on to use the cooker knowing that is was unsafe to do so. The cooker caught fire resulting in personal injury to the café owner and damage to his property.
Which one of the following statements best describes the legal position in relation to the damages recoverable by the café owner in a claim against the dealer for breach of contract (assuming a breach of contract is established)?
There is no material difference in relation to the claim set out between the café owner’s entitlement to damages for property damage and that for personal injury.
A Garden Centre with a large supply of Christmas trees pays a local magazine to advertise their company in the November edition of the publication. A full-page colour advert is designed for the magazine. Shortly before the release date the magazine informs the Garden Centre that the advert will not go into the November edition as a rival Garden Centre has offered them twice the price to advertise their Company instead.
Which of the following statements best describes the basis of the assessment of damages the Garden Centre is likely to obtain from the court for breach of contract by the magazine ?
The Garden Centre is likely to obtain an award for reliance interest, being the reasonable pre-contract costs incurred in designing the advert.
A dealer supplied a defective cooker to a café owner. The café owner discovered the defect but went on to use the cooker knowing that is was unsafe to do so. The cooker caught fire resulting in personal injury to the café owner and damage to his property.
Which one of the following statements best describes the legal position in relation to the damages recoverable by the café owner in a claim against the dealer for breach of contract (assuming a breach of contract is established)?
The café owner will not be able to recover damages for their personal injury or property damage because there is a break in the chain of causation.
A games manufacturer’s long awaited computer game is to be released on 10 September. The manufacturer agrees to sell 10,000 games to a retailer at a wholesale cost of £20 each. As the retailer is anticipating large queues and a high volume of sales on the day of advertised release, they have agreed that the games must be delivered on 9 September. Clause one of the contract between the parties (which both parties have signed) indicates in small print that, in the event of late delivery, the manufacturer must pay the retailer £500 every day until delivery is made. The manufacturer delivers the games 2 days late.
Based on the above information, which of the following most accurately describes the remedy available to the retailer?
A valid liquidated damages clause has been incorporated into the contract and accordingly the retailer is likely to be awarded £1,000 in damages.
A delivery company enters into an agreeement to hire six vans from a company which has a fleet of vans for a period of 3 months. In breach of contract, the company with the fleet of vans fails to make any vans available on the agreed date.
What remedy is the court likely to grant the delivery company?
Damages
A recruitment company agrees with a web-design company that the web-design company will pay £4,500 to the recruitment company if it engages an IT developer introduced to it by the recruitment company. The terms agreed between the parties provide that the web-design company must tell the recruitment company before it engages the IT developer, and that if it fails to do so, it must pay a sum of £13,500 instead. The web-design company engages the IT developer without telling the recruitment company.
How is the court likely to determine the sum to be paid by way of damages?
he court is likely to make an award of £4,500 on the basis that the clause providing for payment of £13,500 is a penalty clause.
