Contract Law Revision

Question 1

For a communication to be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms

Question 2

Marking a contract ‘subject to contract’ means that the parties do not yet intend to be legally bound. Negotiations have taken place, but the parties are in agreement that a legally binding agreement will follow

Question 3

Parol evidence rule

Question 4

Categories of contract that require execution as a deed include a conveyance by land or a contract that lacks consideration

Question 5

An invitation to treat is an expression of willingness to negotiate, which falls short of a valid offer

Question 6

A counteroffer is a response to a valid offer, which terminates the original offer and renders it incapable of acceptance

Question 7

When goods are supplied under a contract for services, all the statutory implied terms are implied by the Supply of Goods and Services Act 1982 (‘SGSA’). These terms include conditions relating to the goods similar to those which would be implied by the Sale of Goods Act 1979 (‘SGA’) in the case of a sale of goods contract. They also include terms (which are innominate’ terms) that the work will be carried out with reasonable care and skill, and that it will be carried out within a reasonable time if no time for performance has been agreed

Question 8

Courts usually hold that if a statement is made broadly, such as in an advertisement or catalogue, it will not constitute an offer because it is not reasonable to expect that the sender intended to make offers to all who received the advertisement; rather, the courts usually find such advertisements to be invitations to treat seeking offers. However, price quotations (particularly from a manufacturer) may be considered as offers if given in response to a specific inquiry.

Question 9

Frustration arises when a contract has become impossible to perform or radically different from what was envisaged. As a result, the contract will be discharged under the doctrine of frustration

Question 10

Courts will likely grant the equitable remedy of specific performance to compel someone to sell a piece of land as per the contract

Question 10

A misrepresentation is a false statement of fact or law made by one party to another to induce the other party to enter into a contract

Question 11

Where it is not clear whether a term of a contract is a condition or a warranty, the court will class it as an innominate term and look at the effect of the breach when deciding what remedy should be available to the innocent party. The court will consider whether the occurrence of the breach deprived the innocent party of substantially the whole benefit of the contract. If it did, the court will treat the term as akin to a condition and the innocent party will be entitled to terminate the contract. If it does not, then the court will treat the term like a warranty and the innocent party will only be entitled to damages

Question 12

When a consumer makes his purpose known to a trader, under the Consumer Rights Act 2015 a term will be implied that the goods supplied must be reasonably fit for that purpose

Question 13

A contract for the sale of land is required to be in writing

Question 14

A conveyance of land (that is, the actual transfer of land made in order to implement the contract for sale) which must be executed by deed

Question 15

As a general rule, an individual under the age of 18 lacks capacity to enter into contracts. The exception to this is a contract for the sale to the minor of necessary goods

Question 16

The Contracts (Rights of Third Parties) Act 1999 is a statutory exception to the doctrine of privity

Question 17

For consideration to be valid, it must be sufficient but need not be adequate. The law requires there to be some value to the consideration (that is, sufficiency) but the law will not interfere if you have made a contractually bad bargain, that is, if the value of the consideration flowing from one party to the other is unequal (that is, not adequate)

Question 18

The circumstances in which a court will find a contract void due to a common mistake as to the quality of the subject matter are very limited e.g. a contract for the sale of an old master which subsequently turns out to be a modern copy is one of the examples given by the courts of a mistake that would not render the contract void

Question 19

Vitiating factors will render a contract void or voidable

Question 20

Mistake and illegality are the only viating factors that render a contract void

Question 21

Some contracts entered into by minors (persons under the age of 18) may be voidable, not void

Question 22

If the parties are mutually mistaken but are at cross-purposes, the contract may be held void for mutual mistake

Question 23

Damages for breach of contract are designed to put the innocent party into the position they would have been in had the contract been properly performed

Question 24

A contract will not be frustrated just because it is too difficult or is more expensive to perform

Question 25

For frustration to occur, performance must be impossible, illegal, or radically different from what was agreed

Question 26

The Law Reform (Frustrated Contracts) Act 1943 does NOT apply to charterparties

Question 27

A contract entered for an illegal purpose is void (and not merely voidable)

Question 28

It is possible to incorporate terms, including exclusions of liability, into a contract by referring to them in a notice. However, the more onerous or unusual the term, the greater the effort required to bring it to the other party’s attention.

Question 29

There is a general rule that an agreement to accept part payment in full and final settlement of a debt does not preclude the debtor from subsequently claiming the balance. However, there are a number of exceptions to this general rule, usually where some additional benefit is conferred on the debtor in consideration of their promise to forgo the balance of their debt. An example of this is payment by another method

Question 30

Mistake makes the contract void, not voidable

Question 31

When one party is mistaken as to the identity of the other, the contract may be void, provided that the identity of the party is of fundamental importance to the other party.

Question 32

Non est factum specifically relates to written contracts, and means that a party is bound by their signature unless they mistakenly believe that the document signed represents something completely different from what it actually represents. There must be a fundamental and radical difference, and the signatory must not have been careless in signing the document.

Question 33

A guarantee must be in writing

Question 34

A promise by an offeror not to revoke their offer will be binding only if the offeree gives something in return

Question 35

A minor may keep property transferred to them under a contract they have voided if it is just and reasonable.

Question 36

A party who lacked mental capacity or who was intoxicated at the time a contract was made may void the contract only if the other party knew of the incapacity or intoxication at the time the contract was executed.

Question 37

A promise not to do something in the future may serve as consideration to support a contract

Question 38

Executory consideration

Answer 38

A promise to do something in the future

A promise not to do something in the future

Question 39

A promise to perform an existing obligation owed to a third party can serve as consideration

Question 40

In what situations will there be good consideration for a promise to accept part payment of a debt?

Answer 40

Where it is agreed that payment will be made at a different place, or earlier, or by different means

Where the creditor’s claim is unliquidated or disputed

Where it is agreed that a smaller payment made by a third party will discharge the debt

Where a debtor is in financial difficulty and agrees to pay all their creditors agreed amounts to discharge all of their debts (that is, a composition)

Question 41

Under the Contracts (Rights of Third Parties) Act 1999, what are some examples that will prevent parties to a contract from varying the rights conferred on a third party in the contract?

Answer 41

1. The third party has communicated his agreement to the term benefiting him
2. The third party has relied on the term of the contract and the promisor is aware of that reliance
3. The promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it

Question 42

At common law, what are some examples of exceptions to the privity rule that only a party has rights under a contract?

Answer 42

1. When a party to a contract assigns their rights to a third party
2. Whenever a court finds that there is a collateral contract running to the third party alongside the contract to the parties

Question 43

A party must give notice of assignment of their rights to the other party to the contract before the assignee can rely on those rights to bring a claim

Question 44

A collateral contract can be implied between two parties where one of the parties (A) makes a promise to the other (B), and as a result B enters into another contract with a third party (C). The collateral contract allows A to claim against B, even though the only express contract is between B and C.

Question 45

A statement which induces someone to enter into a contract is a representation

Question 46

Terms may be incorporated into a contract if the parties have notice of them.

Question 47

Supply of Goods and Services Act 1982 applies to contract between businesses only

Question 48

Consumer Rights Act 2015 applies only to contracts for the purchase of goods by an individual acting for purposes that are wholly or mainly outside the individual’s trade, business, craft, or profession

Question 49

What terms does the Consumer Rights Act 2015 say must be taken into account when considering whether a term is unfair

Answer 49

1. Whether the term is drafted in plain, intelligible language
2. Whether the term causes a significant imbalance to the detriment of the consumer
3. The need to resolve any ambiguity in favour of the consumer
4. Whether the term is legible

Question 50

Undue influence is based on whether the relationship between the parties has been abused and does not require proof of bad faith or unlawful conduct

Question 51

A contract may be void for illegality if it is prohibited by statute or performed in a way that is prohibited by statute, contrary to morality or the institution of marriage, or damaging to the government, or if it interferes with justice

Question 52

A correct statement of fact about an item being sold which fails to mention a matter which reduces the value of that statement is classed as a misrepresentation

Question 53

Silence can amount to a misrepresentation

Question 54

Rescission is available at the discretion of the court for fraudulent, negligent, and innocent misrepresentation.

Question 55

Under the Misrepresentation Act 1967, a court has discretion to award damages in lieu of rescission for cases of either innocent misrepresentation or negligent misrepresentation

Question 56

What is the effect of an exclusion of liability for fraudulent misrepresentation?

Answer 56

It is unlikely to be found reasonable under Misrepresentation Act 1967.

Question 57

The law Reform (Frustrated Contracts) Act 1943 does not apply to contracts for the sale of goods which are frustrated because the goods have perished

Question 58

The purpose of damages in contract is to put the innocent party in the position in which they would have been in if the contract had been performed

Question 59

Cost of remedying defects = expectation interest damages

Question 60

For a single breach of contract, a party may NOT recover both expectation interest damages and reliance interest damages

Question 61

What types of non-monetary losses can be compensated for by damages for breach of contract?

Answer 61

1. Loss of amenity suffered by a consumer where the purpose of the contract was enjoyment
2. Physical injury
3. Loss of reputation

Question 62

The party in breach will still be liable if the breach is one of two effective causes of the loss, or if the loss was partly caused by a reasonably foreseeable intervening event

Question 63

Contributory negligence is a defence in contract only where the liability of the party in breach is the same in both tort and contract

Question 64

In a contract for the sale of goods, if the goods are not delivered or the buyer rejects them because they do not conform to the contract, what is the starting point for determining the buyer’s damages?

Answer 64

The difference between the contract price and the market price for the goods at the time of breach

Question 65

A liquidated damages clause allows the innocent party to recover a specified amount for breach of contract without having to prove their loss

Question 66

A guarantee will cease to have effect if the guaranteed obligation is varied or discharged, and the guarantor can rely on any defence available to the party whose obligation is guaranteed

Question 67

Situations in which restitution may be ordered include where a benefit has been provided but there was no contract, where money has been paid by mistake, where a contract has been rescinded, and where property has been transferred under threat or pressure as a result of undue influence.

Question 68

Revocation must be communicated to the offeree, but this can be done by a reliable third party

Question 69

If a request to keep an offer open is supported by consideration, this creates a separate collateral contract. If the offer is then revoked, it is the separate collateral contract that is breached. The remedy for breach of that collateral contract would be a claim for damages. However, a breach of the collateral contract would not entitle the party to accept the original offer if that offer has been revoked

Question 70

A contract to provide personal services is not specifically enforceable: you cannot compel someone to work for you. A court will not order one party to work for another because of the difficulty of enforcement. Another requirement for specific performance is that enforcement must be feasible. Enforcing a services contract generally would create complicated and time-consuming supervision problems, which the courts are reluctant to undertake.

Question 71

Laches

Answer 71

Laches is available as a defence to an equitable remedy if the innocent party has delayed unreasonably in bringing the action and the delay is prejudicial to the other party.

Question 72

Unless a time for acceptance is specified, an offer will lapse after a reasonable time. What is ‘reasonable’ will depend on the nature of the subject matter, for example, an offer to purchase perishable goods, will lapse more quickly.

Question 73

Generally, payment of a smaller sum than due will not be sufficient consideration for a promise by a creditor to discharge a debt, with some common law exceptions, for example payment at an earlier date or payment by a third party

Question 74

Common (the same) mistake, the mistake concerns the quality of the subject matter of the contract, and in such cases, the courts have been reluctant to find a contract void. Common mistake usually renders a contract void if it relates to the existence of the subject matter, for example, if the goods that are the subject of the contract have perished.

Question 75

Under the Contracts (Rights of Third Parties) Act 1999, a third party has a right to enforce a provision of the contract if they were named in the contract (specifically or by class) and it appears the term was intended to be enforceable by the third party.

Question 76

If performance of an existing contractual duty confers a practical benefit on a party which is offering an additional benefit in return, then this can be good consideration for the offer of the benefit.

Question 77

Under the Consumer Rights Act a trader cannot exclude, among other terms, statutory implied terms going to the quality or fitness of the goods.

Question 78

The reasonableness test is imposed by the Unfair Contract Terms Act 1977 (‘UCTA’)

Question 79

Many stores have policies allowing the return of unwanted or defective goods within a particular timescale, but they are under no legal obligation to do so

Question 80

The acquisition by a third party of rights to goods that are the subject matter of a contract is a bar to rescission for misprepresentation. The only remedy is to sue for damages calculated on the basis of the loss, which is the difference between the price paid for the item and the price it was sold on to the third party

Question 81

A guarantee is a promise to pay a debt owed by another party if that party fails to pay. It is one of the categories of contract which must be made in writing.

Question 82

Breach of a warranty entitles the claimant to damages only

Question 83

A contract that is found to have been entered into as a result of undue influence will be voidable, that is, the innocent party has the choice to rescind or affirm the contract.

Question 84

Parol Evidence Rule, generally external evidence cannot add to or vary a contract that has been reduced to writing; that is, there is a strong presumption that the written contract forms the entire agreement between the parties and contains all the terms. It is possible for terms other than written terms to form part of a written contract, but only if the parties so intended

Question 85

Under the postal rule, acceptance by post creates a contract at the moment of posting (with a couple of exceptions). Rejection, on the other hand, is effective when received.

Question 86

When a rejection by post is followed by an acceptance by post, the postal rule will apply and there will be a contract if the acceptance is posted before the rejection is received

Question 87

The fact that a party did not read the rejection does not matter; the time of receipt is the relevant factor

Question 88

A promise made in a deed will be binding even if there was no consideration for it

Question 89

A contract to provide services is not specifically enforceable as you cannot compel someone to work for you

Question 90

In a defective product action under the Consumer Protection Act 1987, property damage which does not exceed £275 cannot be recovered

Question 91

If a period of acceptance is stated in an offer, the offeree must accept within that period to create a contract. Failure to accept in time terminates the power of acceptance in the offeree (that is, a late acceptance will not be effective and will not create a contract). Under the postal rule, an acceptance is generally effective the moment it is posted in the post box. However, the postal rule does not apply where the offer states that acceptance will not be effective until received. In that case, acceptance is effective only upon receipt.

Question 92

Doctrine of waiver

Answer 92

Generally, for a variation of a contract to be enforceable, it must be supported by consideration. However, equity provides a compromise. Where a party promises not to enforce the other party’s obligation, the courts may conclude that the agreement is at least temporarily effective through waiver. The waiving party can reinstate the original obligation. However, they must give reasonable notice.

For example, if the waiving party agreed to defendant could delay installation, which would constitute a waiver, it is unlikely that the court would find giving notice to reinstate the day before performance as reasonable.

Question 93

If there is a genuine dispute as to rights under a contract, an agreement to give up the right to litigate the dispute constitutes sufficient consideration to support a modification such as a compensation term.

Question 94

Damages for breach of contract are designed to compensate the innocent party for their loss. Damages are usually calculated on an expectation interest basis to put the innocent party back into the position they would have been in had the contract been properly performed. In the case of construction contracts, there are two different measures of damages: (1) how much it would cost to cure a defect, and (2) the difference in value between what was contracted for and what the innocent party actually received. If the cost of curing the defect is disproportionate to the benefit that would be gained then the difference in value is what is will be awarded

Question 95

The general rule is that an offer can be accepted by performance or a promise to perform unless the offer clearly limits the method of acceptance.

Question 96

A *^quantum valebat** is a restitutionary remedy that applies if goods have been supplied when there was no entitlement to payment under the contract

For example, because partial performance of an entire contract has not been accepted, or if a contract has not been formed.

Question 97

If no price has been agreed and none can be determined from the dealings between the parties, the Sale of Goods Act 1979 obliges the buyer to pay a reasonable price. This has the effect of supplying the missing term, and it means that there can still be a valid contract for the sale of goods when no price has been agreed.

Question 98

Generally, a contract is NOT void for unilateral mistake unless the non-mistaken party knew or should have known of the mistake when the contract was formed.

Question 99

A buyer can accept non-conforming goods and still recover damages for the breach

Question 100

Price quotations may be considered as offers if given in response to a specific inquiry

Question 101

If the purpose of a contract was enjoyment, this is one of the exceptional cases where damages will be awarded for loss of enjoyment and mental distress.

Question 102

A restrictive covenant is void for illegality as a restraint of trade unless a court finds that it is reasonably necessary to protect the employer’s legitimate interests

Question 103

If agreeing to finish work on time confers a practical benefit to a party by preventing a penalty from being invoked for late completion, then this is sufficient consideration for the promise of additional money for finishing on time

Question 104

Under the postal rule, acceptance by post creates a contract at the moment of posting, rejection on the other hand, is effective when received.

Question 105

As a general rule, silence will not amount to a misrepresentation

Question 106

A contract will be discharged if performance becomes impossible or radically different than anticipated. However, if the frustration was caused by one of the parties, the contract is not discharged. This is a case of self-induced impossibility.

Question 107

A conveyance of land (that is, the actual transfer of land made in order to implement the contract for sale) which must be executed by deed, not a contract for the sale of land.

Question 108

For consideration to be valid, it must be sufficient but need not be adequate.

Question 109

The availability of specific performance is not dependent on whether restitution is available. However, restitution is unlikely to be ordered where damages or an equitable remedy would be adequate.

Question 110

Damages for breach of contract are designed to put the innocent party into the position they would have been in had the contract been properly performed

Question 111

When a contract is rescinded the parties are put back into the same position as if the contract had never been entered into

Question 112

There may be economic duress where there is illegitimate pressure on the victim as a result of which they have no practical choice but to enter into a contract (or in some cases to vary a contract).

Question 113

Common mistake requires the same mistake to have been made by both the parties, usually concerning the existence or identity of the subject matter of the contract, for example, both parties mistakenly thought they were contracting for the sale of a diamond brooch when the stones turned out to be fake.