Contract Law Flashcards
what are the 3 requirements for a binding contract?
- offer and acceptance
- intention to create legal relations
- consideration
who is the offeror?
the person making the offer
who is the offeree?
the person receiving the offer
what must an offer be?
offer must be clear and certain
‘may be prepared to sell’ is not clear
what approach is taken for intention to be bound?
it is an objective approach - what a reasonable person would say the parties intend
may vs will
what is a bilateral contract?
each party assumes an obligation to other party by making a promise to something
eg, sell item for exchange of payment (common contract)
what is a unilateral contract?
make offer/proposal in terms which call for an act to be performed by one or more other parties.
actual performance of the required act constitutes performance
eg, if you find my watch and return in 10 days then I will immediately give you £100
what are the 4 different invitations to treat?
- adverts
- display of goods
- invitations to tender
- auctions
what is the general rule for adverts?
they are invitations to treat
what is the exception to the general rule for adverts?
general rule doesnt apply where adverts amount to unilateral offer
what are the 2 requirements that Carlill makes clear of a unilateral offer?
- a prescribed act; and
- a clear intention to be bound
what is an invitation to tender?
a request for tender is used where a party (usually a company or public body) wishes to purchase a major item or service.
deemed as an invitation to treat
what is the exception to the general rule that invitation to tender is an invitation to treat?
a displacement of the general principle has been firmly recognised where invitation to tender expressly contains an undertaking to accept the highest or the lowest bid.
this is a form of unilateral contract: required act is making the highest/lowest bid, and when this is carried out, the other party is bound
what is the difference between an auction and an auction sale without reserve?
auction - bid is the offer which is accepted by the fall of the auctioneer’s hammer.
in auction sale without reserve, the auctioneer can be sued if they refuse to sell the highest bidder.
what are the 3 ways a party can terminate an offer?
1) rejection
2) lapse
3) revocation
when does rejection take effect?
it doesnt take effect until it is actually communicated to the offeror as only then will the of error now they are free from the offer.
what is the effect of a counter-offer on an offer?
a counter-offer makes the original offer deemed to have been rejected and therefore, cannot be accepted
what are the 2 ways that a lapse of offer can occur?
a) by the passage of time; and
b) by the death of one of the parties
how does an offer lapse through the passage of time? (there are 2 circumstances)
1) where acceptance is not made within the period prescribed by the offeror
2) where no period is prescribed and acceptance is not made within a reasonable time
if the offeror is dead = what is the effect of this?
if the offeree knows = then offer lapse
if the offered is unaware = then doesnt lapse
if the offeree is dead = what is the effect of this?
if offeree is dead then the offer cannot be accepted
can an offer be revoked after acceptance?
no it cannot be revoked as it has been validly accepted
what is the effect of the request for further information about an offer?
this is not a counter-offer and doesn’t amount to a rejection of the original offer
when is communication of the revocation become effective?
upon actual notice of it reaching the offeree. when revocation is communicated by post, then it takes effect from the moment it is received by offeree and not from time of posting
what is the general rule on revocation of a unilateral offer?
unilateral contracts, acceptance is perceived as the complete performance of the act(s) required by the terms of the unilateral offer therefore, it is possible to revoke any time BEFORE completion of the required act.
what is the exception to the general rule on revocation of a unilateral offer?
exception to the rule: where offeree has partly performed obligation.
therefore, after starting performance of obligation, cannot revoke.
what are the 4 key rules in relation to acceptance?
1) acceptance must be in response to the offer
2) acceptance must be unqualified
3) may be necessary to follow prescribed mode of acceptance
4) acceptance must be communicated.
if there is not a prescribed mode of acceptance - how can a party accept?
can use another mode of acceptance that is no less advantageous to the offeror
can a third party communicate acceptance?
yes they can, but need authority of the offeree
what is the postal rule?
acceptance takes effect from the moment the letter of acceptance is properly posted - (official letterbox or hands of postal operative)
does postal rule apply if acceptance is delayed or lost in the post?
yes, it does apply
when does the postal rule not apply (4 situations)?
1) if it is not contemplated that post would be used
2) if letter is incorrectly addressed
3) if the offeror disapplied the postal rule
4) doesnt apply to letters revoking offers
when an acceptance is made by instantaneous communications (eg, telephone) when is communication effective?
acceptance takes place at the moment acceptance is received by the offeror
do you need to communicate acceptance in a unilateral contract?
no because acceptance is done by performance
what is executory consideration?
when contracting parties make promises to each other to perform something in the future after the contract has been performed
what is executed consideration?
where, at the time of the formation of the contract, the consideration has already been performed
what are the 3 exceptions to the rule that consideration must not be in the past?
a) act must have been done at the promisor’s request
b) parties must have understood that the act was to be rewarded, either by a payment or the conferment of some other benefit
c) payment, or conferment of other benefit, must have been legally enforceable, had it been promised in advance
what does it mean ‘consideration must move from the promisee’?
a party who has not provided consideration may not bring an action to enforce a contract
when can an existing obligation be good consideration?
when the new contract constitutes a practical benefit and criteria in Williams v Roffey is satisfied
if carrying out an obligation imposed by a public duty is this sufficient consideration?
no, generally not good consideration
if a party is obliged to do something owed to a third party - is there consideration?
yes, good consideration
what are the exceptions to the rule that part payment of a debt is not good consideration?
1) if creditor introduces a new element eg, pay to different place ect
2) payment of a lesser sum by a third party
3) practical benefit
what is promissory estoppel?
an equitable doctrine that effectively allows a promise to be enforced, despite not being supported by consideration. stops a person from going back on a promise when a party has relied on such a promise.
what are the 4 parameters of promissory estoppel?
1) acts as a Shield not a sword
2) clear and unequivocal promise that strict legal rights will not be fully enforced
3) change of position in reliance on the promise
4) inequitable to allow promisor to go back on their promise
what does the use of ‘subject to contract’ create? (intention to create legal relations)
it creates a strong inference that the parties do not intend to be bound until the formal execution of the contract
what is the law’s assumption on social and domestic agreements = are they binding? (intention to create legal relations)
there is a presumption that a there is not an intention to create legal relations (can be rebutted with clear evidence)
what is the presumption for commercial contracts (intention to create legal relations)?
there is a presumption that there is an intention to create legal relations
what are the 2 exceptions when a minor can enter and be bound by a contract?
relates to necessaries
contract of employment, apprenticeship or education
if a minor ratifies a contract after turning 18 - is the contract binding?
yes because they have ratified the contract (eg, can be made by making payment)
if a person is intoxicated and enters a contract when is it voidable?
if the intoxicated person can prove they did not understand what they were doing due to their intoxication and the other party was aware or should have been aware of their impaired state.
can an intoxicated / person without capacity remain liable for contract of necessaries?
yes, they are still liable to pay a reasonable price for necessaries
if a person doesnt have capacity - when is the contract voidable? (what needs to be proved)
if it can be shown that the person was unable to understand the nature of the transaction due to their mental state, and the other party was aware or should have been aware of their condition.
how does duress to the person be proved? (significant cause)
actual or threatened violence
amounts to one factor influencing the decision to enter into the contract (need not be decisive)
how does duress to property be proved? (significant cause)
seizure or damage to owner’s property (or threat of this)
but for the duress, the agreement would not have been entered into
how does economic duress be proved? (significant cause)
lack of practical choice
caused by illegitimate pressure
but for the duress, the agreement wouldn’t have been entered into
what are the key things that need to be proved (generally) for duress?
must be pressure
creating lack of choice for V
which is illegitimate
which is a significant case inducing the C
for duress to be established does the threat need to be the main factor influencing the decision to enter the contract?
no - it can be established if threat was one of the factors influencing the decision to enter the contract - it doesnt need to be the sole reason
if a bank is aware of a non-commercial relationship between guarantor and debtor - what should they do? (undue influence)
they are put on inquiry and they must take reasonable steps to ensure that the weaker party understands the transaction and is independently advised to prevent situations where weaker party may be under undue influence
if a party was to allege it has been unduly influenced what must they show?
relationship of trust and confidence
transaction which requires explanation
what is the difference between representation and a term?
representation induces the party into making the contract whereas terms are statements of facts which are intended on being binding to the parties
what will the court consider when deciding if a statement is a term or representation? (5 things)
1) importance of the statement
2) timing of the statement
3) the reduction of the contract into writing
4) special knowledge or skill of the person making the statement; and
5) assumption of responsibility by the person making the statement
what terms are implied by the sale of goods act? (business to business)
- seller has the right to sell the goods
- goods correspond with their description
- goods are of satisfactory quality
- goods should be fit for purpose
- goods suitable for any purpose made known to the seller
- goods comply with any sample
for supply of goods and services act when are terms implied (what 3 situations)?
1) transfer of property in goods
2) contracts for hire of goods
3) contracts for supply of services
if a party does not understand or read the terms, are they bound by the terms in the contract?
yes - party can express an intention to be bound even if they do not understand or have read contract
what must a party do if they want to incorporate terms that are adverse to the other party?
when a clause is particularly onerous it needs to be ‘printed in red ink, with a red hand pointing to it, or something equally startling’.
if the breach is slight (sale of goods act 1979) that it is unreasonable for buyer to reject the goods = what is the remedy?
should be treated as a breach of warranty - as the breach is so slight that it is unreasonable for buyer to reject the goods and repudiate the contract (only entitles the buyer the claim damages)
what is implied under supply of goods and services act 1982 for transfer of goods contracts? (there are 4)
- title
- description
- quality or fitness
- transfer by sample
what is implied under supply of goods and services act 1982 for hire goods? (there are 4)
- right to transfer possession
- description
- quality or fitness
- transfer by sample
what is implied under supply of goods and services act 1982 for contracts for the supply of services?
- supplier carries out service with reasonable care and skill
- carry out service within a reasonable time
- party contracting with supplier will pay a reasonable charge
what type of contracts does the consumer rights act 2015 imply terms in?
consumer contracts for goods, digital content and services
what are the 3 remedies available for non-conforming goods (contract for goods) (consumer rights act)?
1) short term right to reject
2) right to repair or replace
3) right to price reduction or the final right to reject
what are the 2 remedies available for contracts for digital goods? (consumer rights act)
right to repair or replace
right to price reduction
what are the 2 remedies available for contracts for services (consumer rights act)?
- right to require repeat performance; and
- right to a price reduction
what is the difference between a condition and a warranty?
condition: is an important term that does to the root of the contract
warranty: less important term not going to the root of the contract
what is an innominate term?
it is a term that is on the outset neither a condition or warranty but is of an immediate nature.
(if breached: need to prove that consequence of breach substantially deprived party of the whole benefit of the contract)
can you exclude liability for personal injury resulting from negligence?
no you cannot, this is void under the unfair contract terms at. as any term that attempts to exclude or restrict liability for death or PI resulting from negligence is void.
can you exempt liability for breach of statutory implied terms about goods?
no you cannot - it is not binding on a consumer
- satisfactory quality
- fit for particular purpose
- goods as described
what test must be used to establish if an exemption clause is valid and fair?
the reasonableness test (take into account):
- strength of bargaining position
- whether customer received inducement to agree term
- whether customer knew or ought reasonably to have known of existence
- where term excludes or restricts any relevant liability if some condition was not complied with
- whether goods were manufactured, processed or adapted to special order of customer
what are the implied statutory terms about goods Consumer Rights Act?
- satisfactory quality
- fit for particular purpose
- goods as described
can you limit liability for breach of statutory implied term about digital content?
no you cannot - it is not binding
- satisfactory quality
-fit for particular purpose - content as described
what is misrepresentation?
unambiguous false statement of fact made to C and which induces C to enter into contract with statement maker
can a statement of opinion lead to an actionable misrepresentation?
yes - a statement of opinion can lead to an actionable misrep is it implies the existence of facts that justify the opinion, especially when representer knows these facts are false
what is the effect of misrepresentation?
the contract is voidable NOT void = wronged party must take action to rescind the contract
what is common mistake?
when both parties are suffering from the same misapprehension
what is mutual mistake?
when both parties are mistaken but they are mistaken about different things
what is unilateral mistake?
one party is mistaken and the other party knows or is deemed to know of the mistake
when are the 2 situations when you can raise a defence of non est factum (not my doc)?
1) blind, illiterate or senile
2) trick or fraudulent misrepresentation as to nature of doc, provided person took all reasonable precautions before signing
what is the effect if there is a mutually mistaken belief in a contract?
mutual mistake where each party misunderstood a different fundemantl aspect of the contract, leading to no true agreement being formed. when there is a mutually mistaken belief about what is being offered and accepted, there is no genuine consent and thus contract is void
what is the key test for illegality = Patel v Mirza?
determine whether allowing recovery would produce inconsistency and harm in the integrity of the legal system
what is the general rule in contracts on assigning rights and obligations?
general rule: a party can assign its rights under a contract (but not its obligations) to another party, but the contract concerned might prohibit this
when does a third party have a right to enforce a contract under contracts (rights of third parties) act 1999? (there are 2 situations)
1) contract states third party should
2) contract purports to confer benefit on it, unless it appears the parties didn’t intend the term to be enforceable by the third party
once a third party has established they have a right to enforce in a contract - do the term parties need the 3rd parties consent to reduce/extinguish this right?
yes, once 3rd party has a right is cannot be reduced/extinguished by the other parties without the 3rd parties consent
what are the 4 exceptions to: performing party is not entitled to payment until obligation is completely performed?
1) one party accepts partial performance (other party enetited to partial payment as much is deserved)
2) one party has substantially performed the contract (may be entitled to contract price, subject to deduction for cost of remedying defect)
3) divisible obligations (party is entitled to payment for each part - turns on intention of the parties)
4) one party is prevented from completing performance because the other party defaulted (can sue for damages for breach of contract or claim quantum meruit - as much as one deserves)
what is 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 differently
what are examples of ways that a contract can become frustrated?
- performance is impossible
- performance is illegal
- parties common purpose is frustrated
what is the effect of a frustrated contract?
it discharges FUTURE obligations
what does the principle of substantial performance of contract mean?
if party has completed most of then work to a satisfactory level it is entitled to payment, less any necessary deductions to fix defects.
what is the legal effect of a condition precedent?
it requires fulfilment before any contractual obligations come into effect.
how can a contract be discharged (there are 5 ways)?
1) performance
2) expiry
3) agreement
4) breach
5) frustration
what does it mean to calculate a claimant’s loss based off of the expectation interest?
damages to put the innocent party in the same position post-breach that they should have been in, had the contract been performed.
what are the 3 different methods of expectation interest for calculating damages for a claimant?
1) cost of cure
2) diminution in value
3) loss of amenity
when is cost of cure used to calculate damages?
usually for defective works
it represents the cost of substitute or remedial work required to put the C in the position they would have been in had the contract been performed properly
(C must act reasonably in relation to the defective works)
what is diminution in value (calculating damages)?
the difference between the performance received and that promised (note: quit often the same as cost of cure)
what is loss in amenity (calculating damages)?
a sum to represent that the performance received is less valuable to the innocent party than that promised, even if the economic value is the same
(non-economic losses)
what is the reliance method (calculating damages)?
what type of expenditure does it allow to be recovered?
allows C to recover the expenses which have been incurred in preparing for, or in part performance of, the contract which have been rendered pointless by the breach. (back-ward looking)
only recover WASTED expenditure = more likely to be used when it is hard to calculate expectation measure
can only recover losses that could have been recouped had the contract been properly performed
when can damages for mental distress, anguish or annoyance be recoverable?
they are generally not recoverable however, if the whole or a major purpose of the contract is to provide pleasure, relaxation and peace of mind then can recover.
can you claim damages for loss of reputation?
no it is generally not allowed
can you claim damages for loss of chance?
yes, they are recoverable only IF it is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition
