Contract Law for International Finance

Question 1

What is a Contract?

Answer 1

“A contract is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty.”

American Law Institute | Restatement Second of the Law of Contracts – Section 1.

Question 2

What are the Fundamental Ingredients of a Contractual Agreement?

Answer 2

1. Offer.
2. Acceptance.
3. Consideration.
4. Intention.
5. Capacity.
6. Definitveness.

Question 3

What is an Offer?

Answer 3

A proposition to contract upon a set of terms, made with the intention to enter into a legally-binding agreement upon acceptance by the offeree.

Question 4

What are the Core Characteristics of an Offer?

Answer 4

A valid offer is one which:

• (a) demonstrates an Intention to contract;
• (b) is Clearly communicated to the offeree; and
• (c) is Definitive in outlinie the terms of the agreement.

Question 5

For how long is an offer valid?

Answer 5

Until it has been either accepted, rejected, or revoked, or until a reasonable amount of time has passed without response.

Routledge v Grant (1828) 130 English Reports 920; Dickinson v Dodds (1876) 2 Ch D 463.

Question 6

What is Acceptance?

Answer 6

An indication by the offeree to be legally-bound, unconditionally, by the terms of the offer as they stand.

Harvey v Facey [1893] AC 552; Hyde v Wrench (1840) 49 English Reports 132; Gibson v Manchester City Council [1979] 1 WLR 294.

Question 7

How must Acceptance be demonstrated?

Answer 7

By clear communication to the offeror, either by words or by action.

Felthouse v Bindley (1862) 142 English Reports 1037.

Question 8

Can one accept an offer that one is unaware of?

Answer 8

No.

Tinn v Hoffman (1873) 29 LT 271.

Question 9

What is Consideration?

Answer 9

It is, “either some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.” Curry v Misa (1875) LR 10 Ex 153.

Question 10

Generally speaking, who is empowered to enforce a contract?

Answer 10

Those with consideration, i.e. the Doctrine of Privity, subject to any exceptions in the contract.

Contracts (Rights of Third Parties) Act 1999.

Question 11

In the context of Contract Law, what is Intention?

Answer 11

The willingness to enter into a legally-binding agreement with another.

Question 12

When would a Court Imply a Term into a Contract?

Answer 12

If it is so compelled by:

1. Statute;
2. Common law;
3. Previous dealings;
4. Business customs; or
5. Parties’ intentions.

Question 13

With respect to Parties’ Intentions, when specifically will a Court see fit to Imply a Term?

Answer 13

When either the Business Efficacy Test or the Officious Bystander are satisfied, in addition to the term being clearly expressable and in accord with all express terms.

The Moorcock (1889) 14 PD 64; Southern Foundries Ltd. v Shirlaw [1940] AC 701.

Question 14

What is Frustration?

Answer 14

The termination of a contract due to an unforeseen event rendering it impossible to perform.

Davis Contractors Ltd. v Fareham UDC [1956] AC 696.

Question 15

What is the Object of Interpretation?

Answer 15

The intention expressed by the words used in a contract, as viewed against the factual background.

River Wear Commissioners v Adamson (1877) 2 App Cas 743.

Question 16

What is the Central Test that Interpretation is subject to?

Answer 16

The Test of Reasonableness.

§11(1) Unfair Contract Terms Act 1977; Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28.

Question 17

Through which Lens are Interpretations constructed?

Answer 17

The Lens of Objectivity.

Attorney General of Belize v Belize Telecom Ltd. [2009] UKPC 10.

Question 18

What do the Courts seek to Accomplish when interpreting a contract?

Answer 18

To give effect to the presumed intention of the parties.

Marquis of Cholmondeley v Clinton (1820) 2 Jac & W 1.

Question 19

How do Courts Primarily go about discerning the parties’ Intentions?

Answer 19

By observing their use of language against the factual background.

Bank of Credit and Commerce International SA v Ali [2001] UKHL 8.

Question 20

What may be Classified as Relevant Context?

Answer 20

“Anything which would have affected the way in which the language of the document would have been understood by a reasonable man.”

Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28.

Question 21

Are Previous Negotiations admissible?

Answer 21

No, unless they are being used in an action for rectification.

Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28.

Question 22

Is Post-Contractual Performance admissible?

Answer 22

No.

Lexington Insurance Co. v AGF Insurance Ltd. [2009] UKHL 40.

Question 23

How should the Meaning of Words be observed?

Answer 23

Words should be given their ‘natural and ordinary meaning’.

Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28.

Question 24

Does the Commercial Purpose of a contract for a part of the Factual Background?

Answer 24

Yes.

Gold Coast Ltd. v Caja de Ahorros del Mediterraneo [2002] EWCA Civ 1806.

Question 25

How is Jargon treated by the Courts?

Answer 25

Technical terms will be given their technical definitions.

Robertson v French (1803) 4 East 130.

Question 26

Is the Interpretation of an Oral Contract a Matter of Law?

Answer 26

No, it is a matter of fact, with preference given to constructions that make a contract valid as opposed to invalid.

Maggs v Mersh [2006] EWCA Civ 1058; Lancashire County Council v Municipal Mutual Insurance Ltd. [1996] EWCA Civ 1345.

Question 27

How does Business Commonsense factor into Contract Interpretation?

Answer 27

Interpretations which, “flout business commonsense… must be made to yield to business commonsense.”

The Antaios Compania Neviera SA v Salen Rederierna AB [1985] AC 191; Rainy Sky SA v Kookmin Bank [2011] UKSC 50.

Question 28

Why are Lists in contracts typically exhaustive?

Answer 28

Because of the presumption that the specific mention of a particular item or matter excludes similar but distinct unmentioned items or matters.

Netherlands Insurance Co. v Ljunberg [1986] 3 All ER 767.

Question 29

May Market Practices be admitted into the relevant context?

Answer 29

Yes.

Crema v Cenkos Securities Plc. [2010] EWCA Civ 1444.

Question 30

For Agents and Principals, what are the Requirements for Apparent Authority?

Answer 30

That a representation in respect to which be made:

1. By the principal or agent acting with real authority.
2. Be made to a third-party or their class/agent.
3. Be relied upon by the third-party or their class/agent.

Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd. [1964] 2 QB 480; Hely-Hutchinson v Brayhead Ltd. [1968] 1 QB 549.

Question 31

What is Frustration?

Answer 31

One’s release from their contractual obligations due to them unforeseeably becoming impossible to perform, e.g. illegality.

For examples, see: Denny, Mott & Dickson v James B. Fraser & Co. Ltd. [1944] A.C. 265; Mahonia Ltd. v J.P. Morgan Chase Bank (No. 1) [2003] 2 Lloyd’s Rep. 911.

Question 32

What is Frustration’s Scope of Application?

Answer 32

Exclusively unforeseeable impossibilities; neither impracticality, unprofitability, nor the like can frustrate a contract.

For examples, see: Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] A.C. 524; The Super Servant Two [1990] 1 Lloyd’s Rep. 1.; Davis Contractors v Fareham UDC [1956] A.C. 696; Thames Valley Power Ltd v Total Gas & Power Ltd [2006] 1 Lloyd’s Rep. 441; Gold Group Properties Ltd v BDW Trading Ltd [2010] EWHC 323 (TCC

Question 33

Is Frustration practically relevant?

Answer 33

Due to its immensly high burden of proof, no.