Contract Law

Question 1

What is a contract?

Answer 1

An agreement giving rise to obligations which are enforced or recognised by law
- Case law approach, common law

Question 2

What forms do contracts come in?

Answer 2

Bills of exchange - form of payment in commercial transactions (transfer of money)

Contracts for the sale or disposal of land

Agreements regulated by the Consumer Credit Act 1974

Verbal

By conduct (vending machine - entering contract with the person who owns the machine)

Question 3

What is the doctrine of privity of contract?

Answer 3

Only a party to the contract acquires the rights and obligations under it - private between the parties making it, no third parties can be sued or sue

Question 4

What is the case of Tweddle v Atkinson (1831) in terms of doctrine of privity of contract?

Answer 4

• Couple intending to marry
• Father of groom enters contract with father of bride
• Agree to give a sum of money each
• Groom father paid, bride father died and then groom father died
• Groom tried to sue but not a party to that original contract so couldn’t acquire rights even though it was at his benefit

Question 5

What is the case of Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd (1915) HL in terms of doctrine of privity of contract?

Answer 5

• Tyres manufactured by Dunlop
• Contract with supplier where they had to sell tyres at a particular price (RRP)
• Supplier sold tyres to Selfridge who sold them at a cheaper price
• Dunlop tried to sue Selfridge but court said Dunlop was not a party in the contract between Selfridge and their supplier

Question 6

What is the Contracts (Rights of Third Parties) Act 1999?

Answer 6

1) 3rd party must be identified in the contract by name or as a member of a class - state who will benefit
2) Benefit must be identified in the contract - what they will receive
3) 3rd party must be given express right to enforce contract - express right to sue

Question 7

What is a valid contract?

Answer 7

A contract that has the necessary contractual elements:

• Agreement
• Consideration - for something to be passed between parties, intention to be legally bound
• Legal capacity of parties - knowing what they are entering into, e.g minors don’t understand legal ramifications, mental impairmnet
• Legal purpose

Question 8

What is a void contract and a voidable contract?

Answer 8

Voidable - party has the option of avoiding or enforcing the contractual obligation, exists in law

Void - no contract exists, or a contract without legal obligations, maybe due to missing one of the factors , never existed in law

Question 9

What is an enforceable contract?

Answer 9

A valid contract that can be enforced because there are no legal defences against it

Question 10

What is an unenforceable contract?

Answer 10

A contract exists, but it cannot be enforced because of a legal defence

Question 11

What are the essentials of a contract?

Answer 11

• Agreement of offer and acceptance
• Intention to be legally bound
• Certainty of terms
• Passing of consideration

Question 12

What are the types of contract?

Answer 12

Unilateral = 1 party agrees to do something in exchange for some act or performance from another

• Promise made by one person to the world at large
• Not entered into with a specific individual

Bilateral = mutual exchange of promises between the contracting parties, most common e.g purchasing an item in a shop

Question 13

What is the case of Carlilil v Carbolic Smokeball Co (1893) in terms of unilateral contract?

Answer 13

• Advert from CSCo: device to prevent flu, “if you get flu after using device, we will pay £100” even offered demonstration of sincerity
• Mrs Carlill used it and got flu
• Court favoured Mrs Carlill as the words were clear and certain, clear offer to the world at large, Mrs Carlill bound herself through purchasing the device

Question 14

What is the difference between an offer and an invitation to treat?

Answer 14

Offer = defined proposal of a set of terms with intention of it being accepted “I will sell you my car for £5000”

Invitation to treat = expression of willingness to enter into negotiations; pre contract negotiations “I’m looking to sell my car” not actually selling it

Question 15

What is the case of Moran v University of Salford (1993) in terms of offer/invitation to treat?

Answer 15

• Binding agreement existed between Moran and university
• University made offer in error and Moran quit job
• Despite the university’s error, the unconditional offer could still be accepted by him

Question 16

What is the case of Pharmaceutical Society of GB v Boots Cash Chemist (Southern) Ltd (1953) in terms of offer/invitation to treat?

Answer 16

• Display of goods constitutes an invitation to treat
• Customer made the offer by presenting the goods to the cashier and the cashier accepted the offer by taking the customer’s money
• Case arose due to prescribed medication being on display
• Boots argued invitation to treat and pharmacist abides by regulations when sale is made

Question 17

What is the case of Partridge v Crittenden (1968) in terms of offer/invitation to treat?

Answer 17

Advertisement for hens and cockerels and price, was an invitation to treat whereas Carlill v Carbolic Smoke Ball Co (1893) was clearly an offer

Question 18

How does silence relate to acceptance of an offer?

Answer 18

Silence is not a valid form of acceptance - cannot assume agreement if you don’t hear anything

Question 19

What is the case of Felthouse v Bindley (1862) in terms of acceptance of an offer?

Answer 19

Acceptance must be communicated to the offeror by some form of positive action

• Horse being sold between family members
• Offer made, horse about to be auctioned
• Acceptance of willingness to buy the horse not communicated, horse sold to someone else
• Court said that because the acceptance had not been communicated to the person selling the horse, the contract had not actually been entered

Question 20

What are the rules of acceptance of an offer?

Answer 20

• Must be to all terms of the offer
• In the manner specified - writing/express/by conduct
• Via third party or agent
• Post or electronic means

Question 21

What are the cases of Adams v Lindsell (1818) and Entores v Miles Far East Corp (1955) in terms of rules of acceptance?

Answer 21

1) Post - delay reaching offer, court ruled that acceptance occurs from time of postage, not time it reach recipient
2) Fax - rules concerning business hours, if you send out of office hours, the acceptance won’t take place until 9am when the business opens and they are capable of receiving the electronic transmission

Question 22

What is intention to create`legal relations?

Answer 22

Law presumes that in domestic and social agreements, there is no intention to be legally bound.

In a commercial setting, or anything other than social or domestic, law assumes you intend to be legally bound –> accepting the legal consequences if things go wrong

Question 23

What is the case fo Hadley v Kemp (1999) in terms of intention to create legal relations?

Answer 23

• Band of relatives and friends
• Martin Kemp had the copyright for the songs because he wrote them and gave out royalties
• When the band split he stopped sharing royalties and was sued
• Court ruled he didn’t have to split, only one entitled to royalties as he owned copyright, was a social arrangement at the time where he shared royalties

Question 24

What is the case of Balfour v Balfour (1919) in terms of intention to create legal relations?

Answer 24

• Husband working away, wife joins, gets ill and then goes back home
• He was supposed to send her money, she sued, but social and domestic so no intention to be legally bound

Question 25

What is the case of Merritt v Merritt (1970) in terms of intention to create legal relations?

Answer 25

• Married couple separated, verbal agreement over mortgage repayment, proceeds of sale
• Divorced and house was sold
• Dispute over house, other party tried to claim for the house
• Court honoured original agreement because they had split so were no longer social and domestic

Question 26

What is a consideration?

Answer 26

Consists either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment or loss undertaken by the other

Each party myst pass something of value for the contract validity (Currie v Misa 1875)

Question 27

What is the difference between executed and executory consideration?

Answer 27

Executed - exchanged at the time of entering the contract, as you carry out the consideration e.g immediate payment for work

Executory - promised exchange after the consideration e.g getting paid at the end of the month for working

Question 28

What is the case of Re McArdle (1951)?

Answer 28

Agreement was unenforceable. The work the claimant undertook predated the promise to reimburse. Agreement has to be made before the work is done.

Question 29

What is the case of Mountford v Scott (1975) in terms of consideration?

Answer 29

Despite the obvious inequality of the bargain, the £1 had value in the eyes of the law and thus constituted a good consideration

Must be sufficient but does not have to adequate

E.g Peppercorn rate uni of bath

Question 30

What is the case of Collins v Godefroy (1831) in terms of consideration?

Answer 30

One subpoenaed, the claimant was legally obliged to attend court and give evidence if required.

As he was doing no more than was required by the law, he had not provided consideration for the six guineas.

Consideration must be legal - cannot sue drug dealer

Must do over and above what is expected of you e.g firefighter cannot demand money to save occupants

Question 31

What is repudiation?

Answer 31

When party chooses to stop contract due to breach, damages are calculated from the point of breaking the contract

Rescission not awarded here because you have benefited up to this point

Commitment has been made up to this point, lesser reward

Question 32

What is rescinding a contract?

Answer 32

Parties are restored to their precontract position, damages (if awarded) will be calculated from the point before the contract

• The law believes this shouldn’t have been a contract
• Award of rescission (to pre contract position)

Difference depends on the damages that are recorded

Question 33

Why can you not just walk away if the contract is breached?

Answer 33

You can only walk away if the term is a condition. Can get damages if the term is a warranty but cannot walk away.

E.g rent - fundamental term = condition

Keep plants watered - minor term = warranty –> damages awarded = you have to replace plants, tenancy not ended

Question 34

What is the case of Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha (1961) in terms of contract breach?

Answer 34

• Kawasaki decided to charter a ship for 2yrs
• Terms about sea worthiness: ship became faulty, had to be repaired, fault was partly due to ship condition
• Boat in dock so not used for 3 months, wanted to repudiate contract
• Court ruled not substantially deprived as had 21 months of good use - warranty

Question 35

What is the case of Poussard v Spiers (1876) in terms of contract breach?

Answer 35

Stars of the shows (ballet) unwell and unable to rehearse – one court found the term was a warranty, one found the term was a condition.

Question 36

What is the case of Bettini v Gye (1876) in terms of contract breach?

Answer 36

Bettini agreed to perform as opera singer for 3 months. Missed 6 day rehearsal as was ill. Employer sacked him (ended contract).

Court said Bettini breached warranty so employer was not entitled to end contract. Rehearsals was not root of the contract.