Contract Law

Question 1

Describe the role of an offeror and an offeree in a contract.

Answer 1

The offeror is the person who makes the offer, which is a definite promise to be bound by specified terms, while the offeree is the person to whom the offer is made and who has the option to accept or reject it.

Question 2

Define what constitutes a binding contract.

Answer 2

A binding contract is formed when one party makes an offer that is accepted by another party, creating a mutual agreement on specified terms.

Question 3

How do offers differ from invitations to treat in contract law?

Answer 3

An offer is an expression of willingness to contract on certain terms with the intention of becoming binding upon acceptance, whereas an invitation to treat is merely an invitation for others to make offers.

Question 4

Define the difference between an offer and an invitation to treat.

Answer 4

An offer is a definitive proposal to enter into a contract, while an invitation to treat is merely an invitation for others to make offers, indicating a willingness to negotiate.

Question 5

Describe the scenario that illustrates an invitation to treat.

Answer 5

When someone states they are thinking of selling an item and mentions a potential price, such as ‘I am thinking of selling my car for £7,000,’ this is an invitation to treat, not a binding offer.

Question 6

How is a contract concluded in a supermarket setting?

Answer 6

A contract in a supermarket is concluded at the checkout when a customer offers to buy the goods, and it is up to the cashier to accept or reject that offer.

Question 7

Describe the nature of the contract established in the case of Mrs. Carlill.

Answer 7

The contract was a unilateral contract, where the company’s promise to pay £100 was an offer in return for the specific act of purchasing the smoke ball and completing the prescribed course.

Question 8

How is a sale concluded at an auction according to the Sale of Goods Act 1979?

Answer 8

A sale is concluded when the auctioneer’s gavel goes down, which signifies the acceptance of the last bid made.

Question 9

Define the term ‘reserve price’ in the context of auctions.

Answer 9

A reserve price is a minimum price agreed upon by the owner and auctioneer, below which the auctioneer will not sell the property, and potential bidders are informed that there is a reserve price without knowing its exact amount.

Question 10

Describe the measure of Mr. Barry’s damages in the auction scenario.

Answer 10

Mr. Barry’s damages were measured as the difference between his bid of £400 and the total value of the machines, which was £28,000, resulting in a loss of expectation of £27,600.

Question 11

How does the concept of tenders apply in business contracting?

Answer 11

Tenders involve businesses inviting multiple companies to submit offers for services, and generally, the inviting company is not obligated to accept any specific tender unless it has made a promise to do so.

Question 12

Define the implications of a unilateral contract in the context of tenders.

Answer 12

If a company promises to accept the lowest tender or to consider all conforming tenders, failing to comply with that promise can result in a breach of contract, creating liability.

Question 13

Describe the role of silence in contract acceptance.

Answer 13

Silence can amount to acceptance if it is coupled with conduct that clearly signifies acceptance when viewed objectively. However, generally, an offeror cannot bind the other party to a contract by silence alone.

Question 14

Define a counter-offer in the context of contract law.

Answer 14

A counter-offer is a conditional response to an offer that imposes a condition on acceptance, effectively destroying the original offer and representing a new offer that the other party can accept or reject.

Question 15

How do businesses typically handle standard terms and conditions in contracts?

Answer 15

Businesses often attach their own standard terms and conditions (Ts & Cs) to documents they submit, leading to a ‘battle of the forms’ where both parties exchange their Ts & Cs, with the last set submitted generally prevailing.

Question 16

Describe the implications of the postal rule in the context of acceptance of an offer.

Answer 16

The postal rule states that a letter of acceptance is effective when posted, but it may not apply if the offer explicitly requires notice to be received by the offeror. In this case, the court held that the use of the word ‘notice’ implied that acceptance must arrive with the defendant to be effective.

Question 17

How can an offer be terminated according to the content provided?

Answer 17

An offer can be terminated through rejection by the offeree, a counter-offer, lapse of time, express rejection, or withdrawal.

Question 18

Define the conditions under which acceptance by post is valid.

Answer 18

Acceptance by post is valid if it is reasonable to accept by post, the letter is properly stamped, addressed, and posted, and the rule has not been excluded by the offeror.

Question 19

Describe the conditions under which an offer can be revoked.

Answer 19

An offer can be revoked any time before acceptance, even if the offeror promised to keep it open for a certain period, unless the offeree provided consideration for that promise.

Question 20

Define the term ‘counter-offer’ in the context of contract law.

Answer 20

A counter-offer is a response by the offeree that proposes different terms from the original offer, which effectively rejects the initial offer.

Question 21

How does consideration affect the revocation of an offer?

Answer 21

If the offeree provides consideration, such as payment, for the promise to keep the offer open, the offer cannot be revoked during the agreed period.

Question 22

Describe the process of revoking an offer made to the public at large.

Answer 22

The offeror can publish a notice of revocation in the same place and with the same prominence as the original offer, as established in cases like Carlill v Carbolic Smoke Ball Co.

Question 23

How does the communication of acceptance differ from the communication of revocation?

Answer 23

Acceptance must be communicated by the offeree or an authorized agent, while revocation can be communicated by the offeror or a reliable third party, and the postal rule does not apply to revocation.

Question 24

Define the concept of ‘lapse of time’ in relation to offers.

Answer 24

An offer will lapse after a specified time or after a reasonable time, which varies based on circumstances, such as the nature of the goods involved.

Question 25

Define the key factor that determines whether an agreement is legally binding.

Answer 25

The key factor is the intention of the parties to create legal relations.

Question 26

Describe the difference between commercial and domestic agreements in terms of legal binding.

Answer 26

Commercial agreements are generally presumed to be legally binding, while domestic agreements are typically presumed not to be legally binding.

Question 27

How does the law resolve disputes regarding the intention of parties in an agreement?

Answer 27

The law uses rebuttable presumptions to determine whether an agreement was intended to be legally binding, based on the context of the agreement.

Question 28

Define consideration in the context of contracts.

Answer 28

Consideration is the concept that, to enforce a promise, there must be an agreement to provide something in return, which can be a promise (executory consideration) or an act (executed consideration).

Question 29

Describe the difference between bilateral and unilateral contracts.

Answer 29

Bilateral contracts involve an exchange of promises between parties, while unilateral contracts consist of a promise made in exchange for an act.

Question 30

How does the concept of benefit and detriment relate to consideration?

Answer 30

Consideration can be defined as a benefit to one party and a detriment to the other, meaning that each party must provide something of value in the agreement.

Question 31

Describe the implications of public policy on promises to refrain from certain behaviors like swearing or drinking alcohol.

Answer 31

Public policy can influence court decisions by encouraging individuals to refrain from harmful behaviors. Courts may hold that a promise to stop such behaviors constitutes sufficient consideration, even if the promisor does not intend to engage in them.

Question 32

Define consideration in the context of legal promises.

Answer 32

Consideration refers to something of value that is exchanged between parties in a contract. It is necessary for a promise to be enforceable, and it can include actions, forbearance, or refraining from certain behaviors.

Question 33

How does exceeding a public duty relate to consideration in legal agreements?

Answer 33

Exceeding a public duty can be regarded as sufficient consideration for a promise, as it goes beyond what is legally required, thus providing value to the other party in the agreement.

Question 34

Describe the role of consideration in contract formation.

Answer 34

Consideration is a promise or an act given in return that is required for the formation of a contract. It rarely causes problems at the point of formation but is more significant when it comes to later variations of contracts.

Question 35

How does consideration affect contractual variations?

Answer 35

For a contractual variation to be binding, it requires agreement, consideration, and intention to create legal relations, similar to the formation of a contract. Often, the challenge lies in ensuring that consideration is not one-sided.

Question 36

Define the requirements for valid consideration in a contract.

Answer 36

Valid consideration must not be past, need not be adequate, and must be sufficient to support the contract.

Question 37

Describe the concept of consideration in a contractual agreement.

Answer 37

Consideration refers to something of value that is exchanged between parties in a contract. It can be a benefit to the promisor or a detriment to the promisee, and it is essential for the enforceability of a promise.

Question 38

How does the case of Williams v Roffey Bros & Nicholls modify the general rule of consideration?

Answer 38

The case illustrates that if a party exceeds their contractual obligations and this results in a benefit to the promisor and a detriment to the promisee, it can still constitute valid consideration for a promise of extra payment.

Question 39

Define the term 'detriment' in the context of contractual obligations.

Answer 39

Detriment refers to a loss or disadvantage suffered by a party in a contract, often as a result of fulfilling their obligations or providing a benefit to the other party.

Question 40

Describe the general rule regarding performance of an existing contractual duty and extra payment.

Answer 40

Performance of an existing contractual duty owed to the other party is generally not considered sufficient consideration for a promise of extra payment.

Question 41

How does exceeding a contractual duty relate to consideration for extra payment?

Answer 41

Exceeding a contractual duty is regarded as sufficient consideration for a promise of extra payment.

Question 42

Define the rule in Pinnel’s Case regarding part payment of a debt.

Answer 42

The rule in Pinnel’s Case states that an agreement for a creditor to accept part payment in full settlement of an undisputed debt is not binding on the creditor.

Question 43

Describe the doctrine of promissory estoppel.

Answer 43

Promissory estoppel prevents a creditor from going back on a promise to accept part payment if it would be unfair to do so, even if the promise lacks consideration.

Question 44

How does reliance on a promise affect legal rights under promissory estoppel?

Answer 44

If someone relies on a promise not to enforce legal rights, the promisor may be estopped from enforcing those rights if it would be inequitable to do so.

Question 45

Define the significance of the case Central London Property Trust v High Trees House in relation to promissory estoppel.

Answer 45

This case established the doctrine of promissory estoppel, where a landlord agreed to accept reduced rent during wartime, and later sought to recover the full rent, which the court found inequitable.

Question 46

Describe the role of consideration in a contract and its variations.

Answer 46

Consideration is something given in return for a promise, and for a contract or contractual variation to be binding, there must be agreement, intention to create legal relations, and consideration.

Question 47

How does promissory estoppel relate to part payment of a debt?

Answer 47

Promissory estoppel may be raised as a defense if certain conditions are satisfied, such as acting in reliance on the promise and it being inequitable or impossible to resume strict legal rights.

Question 48

Define the implications of part payment of a debt in contract law.

Answer 48

Part payment of a debt is not considered valid consideration for a promise to accept less, unless there is a common law exception that makes the agreed variation binding.

Question 49

Describe the significance of determining the parties involved in a transaction.

Answer 49

It is crucial because only the contracting parties can have rights and liabilities under the contract.

Question 50

How does agency law function in the context of commercial contracts?

Answer 50

Agency law determines how individuals (agents) are given the authority to bind companies and partnerships in contracts.

Question 51

Describe the significance of terms implied by statute in contracts.

Answer 51

Terms implied by statute are crucial as they establish mandatory rights and obligations within contracts, particularly in business-to-business transactions, ensuring fairness and clarity.

Question 52

Define the classifications of terms in a contract.

Answer 52

Terms in a contract are classified as conditions, warranties, or innominate terms.

Question 53

Describe the ways express terms may be incorporated in contracts.

Answer 53

Express terms can be incorporated in contracts through signature (if the clause is legible and not onerous), reasonable notice before or at the time of the contract, and a previous consistent course of dealing.

Question 54

How does the Consumer Rights Act 2015 protect consumers in goods and services contracts?

Answer 54

The Consumer Rights Act 2015 ensures that goods and services provided must meet implied terms of satisfactory quality and fitness for purpose. If these terms are breached, as in the case of Patrick's patio where the wrong material was used and improperly laid, the consumer has the right to seek remedies.

Question 55

Describe the implications of a breach of contract in the context of goods and services.

Answer 55

A breach of contract in goods and services can lead to liability for the provider, as seen in the case of Windows Ltd, where they were held responsible for defective window panels despite claiming it was a manufacturing defect. This highlights the strict liability under the Consumer Rights Act 2015.

Question 56

Describe the implied terms regarding the quality of goods under the Consumer Rights Act 2015.

Answer 56

Under the Consumer Rights Act 2015, when goods are sold or supplied in the course of a business, there is an implied term that the goods will be of satisfactory quality, fit for the purpose made known by the buyer, and correspond with any description provided.

Question 57

Define the Consumer Rights Act 2015 in relation to business-to-consumer contracts.

Answer 57

The Consumer Rights Act 2015 is a statute that implies certain terms into business-to-consumer contracts for the sale of goods and the supply of goods and services, ensuring that goods are of satisfactory quality, fit for purpose, and correspond with their description.

Question 58

How does strict liability affect the seller's responsibility under the SGA 1979?

Answer 58

Strict liability means that the seller is liable for defects or non-compliance with the goods' description regardless of whether they were at fault.

Question 59

Describe the implications of breaching conditions under sections 12, 13, and 14 of the SGA 1979.

Answer 59

Breaching these conditions allows the innocent party to reject the goods, obtain a refund, and claim damages, as these conditions impose strict liability on the seller.

Question 60

How do the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982 influence contracts?

Answer 60

These statutes imply essential terms into contracts, such as the seller's right to sell goods, the requirement for goods to match their description, and the assurance of satisfactory quality.

Question 61

Describe how express terms are determined in a contract.

Answer 61

Express terms are determined by what the parties have explicitly agreed upon, such as the item being purchased and its stated price, or through a signed written contract.

Question 62

How do implied terms protect consumers in transactions?

Answer 62

Implied terms protect consumers by ensuring that products meet certain standards, such as being free from defects and fit for their intended use, even if these terms are not explicitly stated in the purchase agreement.

Question 63

Describe the concept of implied terms in a contract.

Answer 63

Implied terms are those that are not expressly stated in a contract but are necessary to give effect to the agreement, ensuring that it makes sense and functions as intended. They are often obvious and go without saying, such as the expectation that goods purchased will be fit for their purpose.

Question 64

How does case law influence the interpretation of contract terms?

Answer 64

Case law can establish judicial recognition of certain terms as conditions or warranties, providing clarity and certainty in contracts, such as the determination that 'expected ready to load' clauses in charter parties are conditions.

Question 65

Describe the significance of terms in a contract drafted by a non-lawyer.

Answer 65

Terms in a contract drafted by a non-lawyer may not accurately reflect their legal significance, such as the difference between a 'condition' and a 'warranty'. This can lead to misunderstandings about the consequences of a breach.

Question 66

Describe the implications of breaching a warranty in a contract.

Answer 66

Breaching a warranty does not allow for termination of the contract; the only remedy available is the claim for damages, regardless of the severity of the breach.

Question 67

Define the difference between conditions and warranties in a contract.

Answer 67

Conditions are important terms that, if breached, allow the non-defaulting party to terminate or affirm the contract, while warranties are minor terms where the only remedy for breach is damages.

Question 68

How can terms be incorporated into a contract through a previous consistent course of dealing?

Answer 68

Terms can be incorporated if the parties have had regular dealings in the past on the same terms and conditions, indicating familiarity with those terms, even if they were provided after the contract, such as in an invoice.

Question 69

Describe the requirements for an exemption clause to be considered sufficient in a contract.

Answer 69

The exemption clause must be printed in red ink on the face of the document, with a red hand pointing to it, and it must be legible.

Question 70

How can terms and conditions become part of a contract when purchasing items like cinema tickets?

Answer 70

Terms and conditions can become part of a contract through various means, including small print on tickets or notices, which may be incorporated even if no formal signature is provided.

Question 71

How does an action for an agreed sum function in contract law?

Answer 71

An action for an agreed sum involves suing for a fixed amount of money owed under a contract, typically for goods or services supplied, and is a more direct remedy than claiming damages.

Question 72

Define frustration in contract law.

Answer 72

Frustration occurs when a party is excused from non-performance of a contractual obligation due to an unforeseen event beyond their control, leading to the automatic termination of the contract.

Question 73

Describe the concept of mitigation in the context of contract termination.

Answer 73

Mitigation refers to the obligation of a party to take reasonable steps to reduce their loss after a contract has been terminated. This may involve seeking quotes from reputable builders and accepting the cheapest option to complete the work.

Question 74

How does an innocent party decide to respond to a breach of contract?

Answer 74

The innocent party has the choice to either affirm the contract, treating it as ongoing, or discharge the contract, effectively ending it.

Question 75

Describe the circumstances under which an innocent party can terminate a contract due to a breach.

Answer 75

An innocent party can terminate a contract when there is a breach of condition or a very serious breach of an innominate term, known as repudiatory breaches.

Question 76

Define the difference between a guarantee and an indemnity in contractual obligations.

Answer 76

A guarantee requires written evidence and is a secondary obligation, while an indemnity creates a primary obligation where one party promises to reimburse the other for specific losses, and does not need to be evidenced in writing.

Question 77

Describe the requirements for a contract of guarantee to be valid.

Answer 77

A contract of guarantee must be evidenced in writing, meaning there must be some written evidence of the transaction that existed before the creditor seeks to enforce the contract, and it must be signed by the guarantor.

Question 78

Describe the significance of the case Wrotham Park Estate v Parkside Homes in understanding restitutionary damages.

Answer 78

The case illustrates how restitutionary damages can be applied when a claimant suffers no clear financial loss, yet it would be unjust to allow the defendant to fully benefit from their breach of contract.

Question 79

Define restitutionary damages in the context of contract law.

Answer 79

Restitutionary damages refer to a type of award that compensates a claimant not solely based on their financial loss, but rather aims to prevent the defendant from unjustly benefiting from a breach of contract.

Question 80

How are building contractors compensated if a contract is not ultimately formed after negotiations?

Answer 80

Building contractors are entitled to a reasonable sum for the work they have done, even if the contract negotiations break down.

Question 81

Describe the outcome of the British Steel Corp v Cleveland Bridge and Engineering Co Ltd case regarding contract formation.

Answer 81

The court held that no contract had been formed because the parties were still negotiating and had not reached an agreement on key terms.

Question 82

How can a payer recover money in the event of a total failure of consideration?

Answer 82

In cases of total failure of consideration, the payer can bring a claim in restitution to recover their money. For instance, if Bill pays £800 in advance for painting services and the painter does not show up, he can claim restitution to recover the £800.

Question 83

Describe a situation that would lead to a total failure of consideration in a contract.

Answer 83

A total failure of consideration occurs when one party does not receive anything in return for their payment. For example, if Shakira pays £500 in advance for goods and the seller refuses to deliver them, this constitutes a total failure of consideration.

Question 84

How might an injunction be applied in a business context?

Answer 84

An injunction could be sought to prevent a business owner from starting a competing business in a restricted area, as in the example of Reya agreeing not to open another hairdresser's in the same village.

Question 85

Describe the difference between specific performance and injunctions in legal remedies.

Answer 85

Specific performance compels a defendant to fulfill their contractual obligations, while injunctions restrain a defendant from violating their contractual promises.

Question 86

Describe the purpose of awarding damages in contract law.

Answer 86

The purpose of awarding damages in contract law is to provide compensation for the loss suffered by the claimant due to a breach of contract, rather than to punish the defendant or recover any benefits gained from the breach.

Question 87

Describe the main remedy for breach of contract.

Answer 87

Damages is the main remedy for breach of contract, allowing the innocent party to claim compensation for losses incurred.

Question 88

Define the significance of the case Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis in relation to penalty clauses.

Answer 88

This case clarified that a clause cannot be deemed a penalty unless it offers an exorbitant alternative to ordinary damages, and that the absence of a genuine pre-estimate of loss does not automatically classify it as penal.

Question 89

Describe the two key questions the Supreme Court considers to determine if a clause is a penalty clause.

Answer 89

The Supreme Court considers whether the provision provides an exorbitant alternative to ordinary damages and whether the means of influencing the contracting party's conduct are unconscionable or extravagant.

Question 90

How did the House of Lords approach the issue of damages in Ruxley Electronics v Forsyth?

Answer 90

The House of Lords approached the issue by considering the reasonableness of the cost of cure in relation to the actual benefit received. They determined that while the cost of cure is typically the standard measure for defective work, it should not be applied if it is disproportionate to the loss suffered, leading them to uphold the original award of £2,500.

Question 91

Describe the case of Ruxley Electronics v Forsyth and its significance in determining damages.

Answer 91

Ruxley Electronics v Forsyth involved a dispute over a swimming pool construction where the deep end was not built to the stipulated depth. The House of Lords had to decide whether to award the cost of rectification (£21,560), the difference in value, or a lesser amount. They ultimately reinstated the original award of £2,500, emphasizing that the cost of cure should not be used if it is unreasonable compared to the benefit.

Question 92

Describe a scenario where mitigation of loss is applicable.

Answer 92

In a situation where Sheila is dismissed from her job as a dental assistant in breach of contract, she should actively seek suitable alternative employment to mitigate her losses.

Question 93

Define mitigation of loss in the context of contract law.

Answer 93

Mitigation of loss refers to the obligation of a claimant to take reasonable steps to reduce the amount of loss incurred due to a breach of contract, rather than allowing losses to accumulate.

Question 94

Describe the scenario involving Rudi and the camera to illustrate remoteness of loss.

Answer 94

Rudi sold a camera with a one-year guarantee for £100. When the camera broke, he was expected to cover repair costs. However, the buyer lost £2,000 in profit from a wedding photography contract due to the camera's failure. Rudi would not be liable for the lost profit as it was deemed too remote.

Question 95

Define 'remoteness of loss' in the context of contract law.

Answer 95

Remoteness of loss refers to the principle that determines whether a particular type of loss was foreseeable and within the reasonable contemplation of the parties at the time of the contract, affecting liability for damages.

Question 96

How did the Court of Appeal rule regarding the damages claimed by Anglia Television?

Answer 96

The Court of Appeal ruled in favor of Anglia Television, awarding them damages for wasted expenditure related to the production. This included costs such as director's fees and designer's fees, emphasizing that Anglia could claim for expenses incurred even before the contract was finalized, as they could not ascertain potential profits from the contract's proper performance.

Question 97

Describe the case of Anglia Television v Reed and its significance in contract law.

Answer 97

Anglia Television v Reed illustrates the principle of wasted expenditure in contract law. In this case, Anglia engaged an actor to lead a television production, but the actor refused to fulfill the contract, forcing Anglia to abandon the project. The Court of Appeal awarded Anglia damages for all wasted expenditures, including costs incurred before the contract was signed, highlighting that damages can be claimed for wasted costs rather than lost profits when the latter cannot be determined.

Question 98

Define the profit calculation for Smith's cable manufacturing business.

Answer 98

Smith's profit is calculated by subtracting his weekly costs of £5,000 from his revenue of £10,000, resulting in a profit of £5,000 per week.

Question 99

Describe the financial implications for Jason after Carol canceled the gardening contract.

Answer 99

Jason would likely be awarded £220 in court, which represents his net profit after deducting expenses from the total contract value of £250.

Question 100

How are nominal damages defined in the context of contract breaches?

Answer 100

Nominal damages are a small sum awarded, often around £10, to acknowledge that a contract has been broken, even if the claimant has not suffered any actual loss.