Contract Law Flashcards
What is a unilateral contract?
A one-sided open offer made to any number of people (even the whole world) where the promisor promises to pay a reward to someone (the promisee) who performs a certain action. In a unilateral contract, a promisee has the option to participate and is not legally bound to deliver the performance. However, if he fully performs the requested act, he has accepted the offer and the promisor has to pay him the reward.
For example, if A wants B to mow his lawn, he could make a contract with him. The consideration would be B mowing the lawn and A paying £300. Both would be obligated to give their consideration.
Alternatively, A could make a unilateral contract with B and say “if you mow my lawn, I will pay you £300”. B does not have to mow the lawn, but if he does, A will then have to pay him £300. Similarly, A could stick a poster up on his door saying “anyone who mows my lawn gets £300”. This is a unilateral contract with the whole world. Anyone who does mow the lawn gets £300. NB someone who only half mows the lawn does not.
When can domestic/social agreements result in an intention to create legal relations?
By default, such agreements do not involve an intention to create legal relations.
However, where someone acts to his detriment on faith of an agreement, it is more likely to be enforceable.
The court takes an objective view: would a reasonable bystander consider there to be an intention to create legal relations?
What does “subject to contract” mean?
It means the contract being discussed is not binding until the parties sign a written contract.
Give three definitions of consideration.
Some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.
An exchange of promises.
The price for which a promise is bought.
NB the value of each promise does not only have to go between the two parties. For example, A could promise to pay B £100 if B promises to pay C £50. The contract is between A and B but A does not recieve anything of value from B.
Can performance of an existing duty amount to sufficient consideration?
Only if the duty is owed to a third party. For example, B and C had an agreement and B was thinking of abandoning it. A promises to pay B £100 if B continues with his contractual duties to C. This is valid consideration.
NB that the law is a bit ambiguous regarding duties owed to the promisor. For example, if C was the one offering to pay B, it is not clear whether this would be sufficient consideration.
Finally, NB that payment of an existing debt is not sufficient consideratiojn unless the debt is altered in some way. For example, if B owes A £100, a deal for A to forgive £10 if B pays the remaining £90 is not valid. However, a deal for A to forgive £10 if B pays the remaining £90 and washes A’s car is valid.
Recite section 1 of the Contracts (Right of Third Parties) Act 1999.
(1) A third party may enforce a term of a contract if
(a) the contract expressly provides that he may, or
(b) subject to subsection (2), the term purports to confer a benefit on him.
(2) Subsection (1)(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party.
(3) The third party must be expressly identified in the contract either by name or by satisfying a particular description.
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What are the requirements for a document to be a deed?
It must:
- be in writing;
- make it clear that it is intended to be a deed;
- be validly executed (signed by the parties with a witnessed signature).
A deed is a solemn promise by the person making the deed whereas a contract is a bargain between the parties. Thus, deeds do not need consideration.
What are the three kinds of implied terms?
- Terms implied by custom (e.g., a dozen means 13 in the context of baking, not 12).
- Terms implied by the court (see test below).
- Terms implied by statute (when a statute overrides part of a contract, e.g. s42 UKPA).
Terms may be implied by the court if they are considered to have been intended by the parties when they made the contract, even though they were not explicitly stated at the time. Terms are implied if they
* are reasonable and equitable;
* are necessary to give business efficacy to the contract;
* are so obvious that it goes without saying (officious bystander);
* are capable of clear expression; and
* do not contradict any express term.
Robin Ray v Classic FM confirmed that an implied term must not exceed what is necessary in the circumstances. Particularly in the context of whether a client owns the copyright in the work produced by a contractor that he hired, the court ruled that if it is necessary to imply some grant of rights in the work, and the need could be satisfied by either a licence or an assignment of the copyright, the implied term should be to a licence only.
The licence should be limited in scope to only what was necessary, and must take into account only the knowledge of the parties at the time of forming the contract, not any later knowledge about the work’s value or anything like that, as this could not have formed part of the intention of the parties at the time.
An implied assignment will only arise if the client needs the ability to enforce the copyright against third parties and to exclude the contractor from using the work, in addition to the benefits conferred by a license.
What are the three types of terms in a contract?
Conditions - a term that goes to the root of a contract. Breach of a condition entitles the innocent party the right to sue for damages and to repudiate the contract.
Warranties - a term of lesser importance. Breach of a warranty entitles the innocent party to damages only.
Innominate terms - either a condition or a warranty depending on whether the breach of the term deprives the innocent party of the substantial benefit of the contract.
What is the principle for awarding damages in contract law?
To put the injured party financially as near as possible into the position he would have been in had the promise been fulfilled.
NB there is a remoteness element to it. If A breaks his contract with B and as a result B gets depressed and, in a moment of madness, torches his car, A is probably not paying damages for that.
NB a claimaint cannot sue for damages for a loss that he ought to have avoided - he is under a duty to mitigate his damages and must take reasonable steps to do so.
What is “specific performance”?
Specific performance is an equitable remedy for breach of contract which is basically an order for the guilty party to do something. It’s typically only used where damages are not appropriate for some reason. Like all equitable remedies, it is at the discretion of the court and it’s only available if the innocent party has acted in good faith.
E.g., A buys the last remaining Nokia phone in the world off B. B fails to deliver. For whatever reason A really needed that particular phone. The court may order B to deliver it.
What does “capacity” mean in contract law?
A contract is only binding on someone who had sufficient mental capacity when entering into the contract.
Contracts are generally not binding on a minor unless they are voidable by the minor (e.g., a partnership) or are generally for their own benefit (e.g., a Saturday job).
The court has equitable power to set aside a contract made by a mentall ill person or drunk person, depending on the circumstances.
What is a “misrepresentation” in contract law?
A false statement of fact made by one party to another, where it is reasonable under the circumstances that the statement be taken seriously, which induces the receiving party to enter into a contract.
A misrepresentation may be innocent, negligent or fraudulant.
In all cases, the recipient can rescind the contract.
Where a misrepresentation was negligent, the recipient can sue for damages under the Misrepresentation Act or in tort.
Where a misrepresentation was negligent, the recipient can sue for damages udner the Misrepresentation Act and in tort.
How does one assign an IP right?
It must be assigned in writing and be signed by the assignor.
However, if a valid assignment contract exists, even if the above is not done, then it counts as an equitable assignment, and the person the equitable assignment has been made to is the beneficiary.
The legal owner must respect the equitable contract and cannot do anything with the IP which is against the beneficiary’s interests.
The beneficiary can apply to the court for an equitable specific performance order for the assignor to “perfect” the contract by formally assigning legal ownership to him.
What is the difference between an assignment of a contract and a novation of a contract?
An assignment of a contract tranfers the benefit of the contract and may be done with the permission of the parties currently deriving the benefit and the new parties who are being assigned the benefit. The contract may prevent an assignment or may give extra conditions.
A novation of a contract tranfers both the beneft and the burden of a contract, thus effectively replacing one party with another. This requires the consent of all parties to the contract. In a novation, the original contract is extinguished and a new contract is created.
