Contract Law Flashcards
What type of contracts are there? (2)
Oral or Written
Which contract type is easier to enforce?
Written
What is another name for an oral contract?
Simple or Parol
What is another name for a written contract?
Speciality
True or false- can a contract arise due to conduct?
True
What are the 5 key elements of formation of contract?
- An agreement
- Consideration
- Intention to create legal relations
- Compliance
*Capacity
Who cannot enter into a contract?
Minors, intoxicated people, those lacking capacity
What are implied terms
Terms that are binding but are not explicitly in the contract. IE- Goods sold must be fit for purpose and of a reasonable quality (Consumer Rights Act 2015)
What are unenforceable clauses?
Clauses that cannot be enforced such as excluding liability for death or injury (Unfair Contract Terms Act 1977)
What is the time limit for action under the Limitation Act 1980?
6 years
Give 3 types of non legal contracts
- Void contracts
- Voidable contracts - binding on one party but set aside for another. if the contract is NOT set aside then it is still VALID
- Unenforceable contracts - if a party won’t carry out their duties then court won’t enforce
What is a typical issues that arises with unenforceable contracts?
When contract terms are breached and court action may need to follow - ie sale of land that isn’t in writing and therefore may or may not be enforceable
What is the primary intention needed for a contract to be created?
An intention to create legal relations
Is there usually an intention to create legal relations in a social/domestic contract?
No - Balfour 1919
Is there usually an intention to create legal relations in a commercial contract?
Yes, there is a presumption that it is legally binding
How can a presumption of legal relations be rebutted?
By showing clear evidence to the contrary
What are the exceptions that allow minors to enter into a contract?
Contracts for necessaries (see Nash v Inman 1908) and Contracts for beneficial services (i.e training, education, employment, apprenticeships)
What is the law around intoxication and entering into a contract
If the party under the influence is unaware of the nature of the transaction they are entering into, and the other party IS aware, then the contract is unenforceable
When is a contract entered into by a company NOT valid?
When the public or private company acts outside its powers (ultra vires) or outside its constitution.
How does the Companies Act 2006 protect third parties in a contract?
It removes the effect of the ultra vires rule to protect third parties acting in good faith.
Who is an OFFEROR
The person who communicates a clear offer
Who is an OFFEREE
The person who accepts an offer
What is an invitation to treat?
An indication a person is open to negotiation
Is an invitation to treat an offer?
No
What did the CoA hold in the Carbolic Smoke Ball Company (1893) case regarding certain terms in an advert?
That an advert containing certain terms to get a reward constituted a binding unilateral (one sided, anyone can benefit from the terms) offer that could be accepted by anyone who performed its terms.
Define an offer in relation to a contract
An offer is an expression of willingness to contract on certain terms, made with the intention that it is legally binding once it is accepted by the person to whom it is being made.
Can an offer be accepted after it has been terminated?
No
Do you need to communicate revocation of an offer?
Yes
Does an acceptance of an offer have to be unconditional?
Yes
How can acceptance of an offer be communicated?
By words or conduct
In the postal rule, at what point is an acceptance binding?
At time of postage. Acceptance is VALID even if it never arrives.
Do you need to communicate offer/acceptance for unilateral contracts?
No, ie rewards for lost pets
What are examples of implied terms in the sale of goods and services?
- Trader has lawful rights to transfer goods
- The goods are of satisfactory quality
- The goods match their description
- The goods are fit for purpose
- Pre-contractual information is part of the contract
- The goods match the same sample/model
- The service to be performed with reasonable skill and care
- Info about trader or service to be binding
- Reasonable price and time
- These terms cannot be excluded from a consumer contract
What are four ways an offer can be terminated?
- Termination by revocation (offer is withdrawn)
- Termination by lapse of time
- Termination by death
- Termination by rejection and counter offer
What is consideration?
Currie v Misa 1875 - the giving of a benefit or a suffering of a loss. Given by both parties.
True or false - a binding contract must be supported by consideration or made by deed?
True
What is executory consideration
A promise to do something in the future
What is executed consideration
Consideration that has already been completed
Is past consideration adequate for a valid contract?
No - Re McArdle 1951
Is a request with an implied promise to pay (ie getting into a cab) consideration?
Yes- Pao On v Lau Yiu Long (1980)
True or false - Consideration must be provided by promisee/offeree?
True - Tweddle v Atkinson 1861
True or false- Consideration must be sufficient but not adequate
True
Can part payment of a debt be consideration?
Yes- Pinnel’s Case (1602)
What is Promissory Estoppel?
It is when a Lender can ask the court to use its equitable power to stop a debtor going back on a promise to pay full debt.
What does privity of a contract mean?
That the contract is between the offeror and offeree. If a person is not party to the agreement then they are not bound by it.
What are the exceptions to privity of contract?
◦ Where contracts are made for the benefit of a group of persons
◦ Contracts where the benefit is held in trust for a third party
◦ Contractual rights assigned to a third party
◦ Contracts are made between one party and an agent
◦ Collateral contracts
◦ Contracts of insurance
◦ Contracts(Rights of Third Parties) Act 1999. Privity rule still applies but Act does allow 3rd parties rights in contracts which have been made for their benefit in some circumstances
What are express terms
Must be stated by one of the parties orally or in writing
What are implied terms
May be considered part of a contract by statute, trade custom or courts (Moorcock 1889)
What are the three types of contract terms
Conditions - Go to the root of a contract so are FUNDAMENTAL
Warranties- Minor term of the contract
Innominate terms
What does an exemption clause do
One party to a contract may try to limit or exclude their liability to the other party by inserting a limitation or exclusion clause into the contract
What are the 2 criteria’s for exemption clauses?
The exemption clause must be incorporated, and if the contract is not signed then the parties must take reasonable measures to bring the clause to the parties attention.
The exemption clause must be clear and unambiguous
True or false- Exemption clauses in business to business contracts must comply with the Unfair Contract Terms Act 1977
True
True or false - The Consumer Rights Act 2015 governs all terms in consumer contracts, including exemption clauses
True
True or false- Persons acting in the course of business cannot exclude liability for negligently causing death or injury
True
In business to business contracts, can liability for other loss or damage via negligence be excluded?
Yes BUT only in so far as it is reasonable
What statute governs what is and is not unfair to exclude from liability
Consumer Rights Act 2015
What are the remedies available under the Consumer Rights Act 2015
Rejection of goods (usually within 30 days)
Replacement
Reduction of price
If the service does not conform to the contract then the consumer has the right to repeat performance and a price reduction
What does section 12 of the Sale of Goods Act 1979 give as an implied term?
Seller has lawful right to sell goods and transfer ownership of them - term can never be excluded from the contract
What does section 13 of the Sale of Goods Act 1979 give as an implied term?
Goods must match description
What does section 14 (2) of the Sale of Goods Act 1979 give as an implied term?
Goods must be of a satisfactory quality
What does section 14 (3) of the Sale of Goods Act 1979 give as an implied term?
Goods must be fit for purpose
What does section 15 of the Sale of Goods Act 1979 give as an implied term?
The goods must match the sample - must be free from defect in quality that is not apparent on reasonable examination of the sample
To which type of contracts do sections 12,13,15 of the Sale of Goods Act 1979 apply?
Non consumer contracts for the sale of goods
Which type of contracts do sections 14 (2) and (3) apply to?
Goods being sold by a seller in the course of a business
What are the four main remedies in the Sale of Goods Act 1979?
◦ Delivery and acceptance and payment according to the terms of the contract
◦ Seller can take action against buyer for the contract price by suing him personally or for damages for non-acceptance of the goods
◦ Seller may have right of lien (legal claim over someone’s property as security for a debt),stop goods in transit or the right to resale
◦ Buyer’s rights - Reject goods or repudiate contract where goods have not been accepted or claim damages or specific performance
Define misrepresentation
Misrepresentation in contracts – there must be an untrue statement of fact made by one contracting party to the other, that acted as an inducement to enter into the contract
When is a false preliminary statement actionable?
When there is a breach of contract term or a misrepresentation
What is ‘mere puff’?
Extravagant/ exaggerated sales talk that is not meant to be believed, and so is not actionable if untrue.
What are the steps the court uses to test whether the preliminary statement is a term or representation?
◦ Relative skill and knowledge of the parties
◦ Whether the maker of the statement suggested the other party check the accuracy
◦ Timing of the statement
◦ If there is a written contract, was any earlier statement included in it?
◦ Did the innocent party stress the importance of the statement?
True or false- a contract made after misrepresentation makes a contract voidable?
True
How can a misrepresentation statement be delivered?
Orally, written or by conduct
What are the three types of misrepresentation
Fraudulent misrepresentation - A party makes a statement knowing it not to be true
Negligent misrepresentation - A party believes the statement to be true but has no reasonable grounds for that belief
Innocent misrepresentation - False statement of fact made by a party who had an honest and reasonable belief in its truth
What are the remedies for misrepresentation?
Rescission - Sets the contract aside as if the parties had never entered into the contract
Damages - Fraudulent misrepresentation innocent party entitled to damages for all losses suffered. Damages based on tort of deceit
In Negligent misrepresentation - innocent party entitled to damages under s2(1) of the Misrepresentation Act 1967
In Innocent misrepresentation -Recission & damages under Misrepresentation Act 1967 if court decides that award of damages a more appropriate remedy
In Exclusion Clauses - Clauses inserted to exclude fraudulent misrepresentation invalid but negligent or innocent misrepresentation possible if reasonable under Misrepresentation Act 1967.
What is a mistake in contract
Applies in exceptional circumstances, must be a fundamental mistake that undermines the agreement and MAKES THE CONTRACT VOID
What are the three types of mistake?
‘Unilateral mistake’ - where one party only has made a mistake. Usually only applies to cases of mistaken identity of the other party (where the identity is fundamental to the contract).
‘Common mistake’ - where both parties made the same mistake. Here, there is agreement but one which is vitiated by a mistake. E.g. A agrees to buy B’s house, but B’s house has burned down, and neither party yet knows this.
‘Cross-purpose mistake’ – it is impossible to resolve an ambiguity in the contract about what was agreed, and both parties thing the contract term is to be understood in their favour. E.g. Raffles v Wickelhaus [1864].
How can a contract be terminated?
Performance (woohoo, everything went right!)
Agreement of the parties
Frustration – this automatically terminates a contract, and the parties have no further legal obligations to one another. Force majeure clauses often found in commercial contracts; as long as this is a valid clause (meets UCTA reasonableness), the contract will not be frustrated.
Discharge following a repudiatory breach (the innocent party can choose to affirm or discharge the contract).
Discharge due to breach (if breach is a condition)
What are the limitations on awards of damages?
◦ Types of loss
◦ Remoteness of the loss
◦ Mitigation
◦ Specified damages
Give 3 examples of remedies that are not damages
◦ Action for an agreed sum – sometimes referred to as an action in debt. This is using for a fixed amount of money that is owed (usually the price of goods or services supplied under the contract). The payment needs to be due/ late.
◦ Specific performance (an equitable remedy). – This enables the court to require the defendant to do what it is they promised to do. This will be usually be used where damages are not an adequate remedy.
◦ Injunction (an equitable remedy). The opposition of specific performance – they stop a defendant from doing something that they promised not to do (e.g. setting up a competitive business in the local area). This will be usually be used where damages are not an adequate remedy.
When does restitution apply?
When a contract is breached AND where no contract was ever formed
What is restitution
Prevents one party from being unjustly enriched/ (unfairly benefitting) at the expense of the other. This can therefore include:
- The recovery of any money paid where there been a total failure of consideration (where the person who received the consideration has not done any part of what they were supposed to do under the contract).
- A claim for a reasonable sum for goods or services supplied (this would be an alternative to damages), where the contract has been broken. This would be an alternative to damages.
- A claim for a reasonable sum for work done, if the contract was never formed. E.g. A starts doing building or landscaping work for B, before they finalise the contract. Despite the fact that the contract was never formed, A can seek a reasonable sum for the work they have already performed for B.
what is restitution
Restitution is the act of giving back to a person something that was lost or stolen
Is restitution possible if a building has been demolished
No as the buildings cannot be ‘given back’
