Contract Law (Underlying) Flashcards
Are words to the effect of ‘I may be prepared to sell’ sufficient to show a valid offer?
No - they do not show an intention to be legally bound
Can an invitation to treat be accepted to form a contract?
No. Invitations to treat are not offers.
Are adverts offers?
Adverts are generally invitations to treat not offers
Exception - Adverts amounting to a unilateral offer can constitute a binding offer. For example, D issues an advert stating ‘£100 to anyone who uses this product for X amount of days but still develops influenza) - since it (a) contained a prescribed act; and (b) a clear intention to be bound, this was held to be an offer that was accepted by those who responded to the advert claiming the £100
What are the twin requirments for an advert to constitute a unilateral offer?
The ‘advert’ specifies….
(a) A prescribed act that must be done to ‘accept’ (e.g. return my dog); and
(b) Show an intention to be bound (e.g. state that you have depositied £1,000 to pay any rewards etc…)
Are price-marked goods displayed on shop shellves or windows an offer that can be accepted?
No they are invitations to treat.
When a customer takes the rpoduct to a till, that is the offer which is accepted at the checkout.
Likewise, websites (e.g. items on amazon) are invitations to treat that are later ‘accepted’ by the seller when you place an order online.
When will a tender constitute an offer?
The act of inviting parties to a tender is generally an invitation to treat. The requestor can accept or reject any tender.
However, there are exceptions…
- If the invitation to tender expressly contains an undertaking to acceot the highest or lowest bid, the requesting party has made an offer to enter into a contract with the party submitting such a bid. This is a unilateral contract (Harvela)
- If the invitation contained an absolute deadline and the requesting party lays down absolute and non-negotiable conditions for submission, there is a contractual duty for the requesting party to CONSIDER those tenders that comply with the conditions (Blackpool)
Is an auction sale an offer?
What about ‘without reserve’ auctions
Generally, the auctioneers request for bids is an invitation to treat
However, if the auction is ‘without reserve’ the seller is promising to sell the the highest bidder whatever that price may be. There is both a bilateral and unilateral contract. If the auctioneer rejects a bid, the highest bidder is entitled to be compensated by way of damages from the autcioneer since there is breach of a unilateral offer. However, they are not entitled to the goods since the actual sale is a bilateral contract (Barry v Davies)
What are the three ways in which an offer can come to an end?
- Rejection
- Lapse
- Revocation
Once an offer is rejected, can it later be accepted?
No - once a rejection is actually communicated to the offeror, it cannot be accepted.
What effect does a counter-offer have on an offer?
The original offer is deemed to have been rejected and cannot subsequently be accepted (Hyde)
A battle of the forms arises when two businesses are negotiating the terms of a contract and each party wants to contract on the basis of its own terms.
How dowe determine the terms that apply?
The person who fires the last shot wins the battle - the person who last assets that their terms and conditions apply prevail
However, an alternative view is that the courts should place greater emphasis on the conduct of the parties: in other words, if the parties have acted as if a contract has been concluded between them, then the law should be slow to turn around and conclude that the parties did not, in fact, conclude a contract (Panasonic)
Can an offeree seek clarification or ascertain whether the offeror would change ancillary aspects of the offer without rejecting it?
Yes - requests for information do not constitute rejection and the offer remains open until accepted or withdrawn
When will an offer lapse?
An offer will lapse so it becomes incapable of accepted either by the passage of time, or death of one of the parties.
- Where no prescribed period is made, an offer lapses if acceptance isn’t made withing a reasonable time judged according to the circumsytances of the case.
- If the offeror dies and the offeree is aware, the offer lapses.
- If the offeror dies but the offeree is unaware, and accepts, this may be valid since the offer may not have lapsed
- If the offeree dies, the offer lapses so that it cannot be accepted by their PRs.
Up until what point can an offeror revoke an offer?
An offeror can withdraw an offer any time before acceptance.
However, once an offer is accepted, the offeror is bound by the ter,s.
How can an offeror revoke an offer?
Actual notice of the revocation must be communicated to the offeree.
Where posted, it takes effect from the moment it reaches the offeree - the postal rule does not apply to revocation.
Revocation can be communicated by a third party.
How can an offeror revoke a unilateral offer?
Acceptance is percieved as the complete performance of the act.
Therefore, you can withdraw the offer until a time where the required act is completed.
EXCEPTION: if an offeree has partly performed the obligation and is willing to complete it, the offeror may be under an implied obligation not to revoke once performance has commenced.
Can a unilateral offer to the world be revoked?
Where an offer is make to the ‘whole world’ whereby the offerees need not express an intention to embark on performance, revocation will onlt be effective if the offeror takes reasonable steps to bring the revocation to the attention of those who may have read the offer (e.g. the same newspaper)
Who can accept an offer?
Only the people to whom the offer is made
What method must acceptance of an offer take?
If the contract does not prescribe a mode of acceptance, any mode can be used.
If the contract stipulates a prescribed method of acceptance, it turns on the extent of the prescription..
- If the prescription excludes other options (e.g. email only) then the acceptance will only be valid if the offeree uses that mandatory mode
- If the prescription suggests a mode but doesn’t seem to make it mandatory, the offeree can use a mode no less advantegous for the offeror
Must acceptance be communicated?
Yes - silence in the face of an offer cannot amount to acceptance
What is the postal rule?
Where a letter of acceptance is posted, it is deemed to have been communicated from the moment of posting rather than receipt by the offeror.
When won’t the postal rule apply?
- For revoking offers
- Incorrectly addressed
- Post is disapplied by offeror
- Post is not contemplated by offeror
Does the postal rule apply if acceptance is delayed or lost in the post?
Yes - a delayed or even lost acceptance is valid from the date of posting
Does the postal rule apply if there is an implied condition that prompt acceptance is required?
No - it is only applicable if it is reasonable for the offeree to use the post. Due to the time of posing, it is not reasonable if promptness is needed and implied/explicit in the offer
Can the offeror require actual communication thereby disapplying the postal rule?
Yes - if an offer states ‘notice in writing’ is required, this implies acceptance has to be recieved. The courts take a broad approach to words that have been said to disapply the postal rule
When is acceptance effective by an instantaneous mode of communication?
The postal rule does not apply to instantaneous communication. Acceptance takes effect upon receipt
When is an email (instant communication) recieved for acceptance purposes?
Starting Point: When the email arrives on the offeror’s email server (Pendrecht)
However, if it will only be ‘recieved’ if the email ought reasonably to have come to the offeror’s attention > that is when in the ordinary course of business it ought reasonably to have come to the attention of offeror.
Therefore, if recieved on the email server outside of business hours of the offeror, receipt is at the start of the next business day (Brimnes; Mondial)
Is there acceptance (and a contract) if an acceptance email does not arrive because the email address is incorrect?
If the offeree is at fault (e.g. mistyped) there is no contract
If the offeror is at fault, a contract would be formed at the time when the email reasonably would have come to the offeror’s attention
If an acceptance email arrives on the offerors email server but fails to ‘get through’ due to an issue with the offerors server, is there a contract?
Yes, the general test for ‘receipt’ is satisfied, the problem lies within the offeror’s control’
Does there need to be communication of acceptance for a unilateral contract?
No. Performance is sufficient to amount to acceptance and no seperate notification is needed.
For example, a ‘lost reward’ is the offer, and the person searching for the lost puppy need not inform the offeror that they intend to search. Acceptance is complete when the finder returns the puppy
What are the two types of consideration?
Executory Consideration - the parties make promises to each other to perform something in the future (e.g. A will pay £10 and B will deliver the goods)
Executed Consideration - At the time of formation, consideration has already been performed (e.g. unilateral contract where the price paid is performance that has been completed)
What are the four principles governing consideration?
- It must not be past
- It must move from the promisee
- It need not be adequate
- It must be sufficient
Can you use as consideration something which has already taken place prior to the promise to pay?
For example, a debt is incurred of £10. You enter into another agreement and say ‘in exchange for X, I will pay the £10 debt off…”
No, consideration cannot relate to an act/forberance that has taken place prior to the promise
However, there is an exception to the past consideration rule (Poa On) ….
- If a prior act or service was provided by the promisee at the promisors request; and
- It was always understood that payment would be made for that act or service at some point
…. This is good consideration. In such a case the promisee is entitled to a reasonable sum for his services by way of a quantum meruit.
Can someone who has not provided consideration enforce a contract?
A person to whom a promise was made can enforce it only if he himself provided the consideration for it. He has no such right if the consideration moved from a third party.
For example, if A promises B to pay £100 to C, C cannot enforce payment since he did not provide consideration.
Must consideration be adequate? What does this mean?
No - there must be consideration but it need to be adequate
You can sell a business for 1p or use chocolate wrappers (Nestle)
A peppercorn consideration is sufficient so long as it is worth something, no matter how small
What does it mean to say that consideration must be sufficient?
If a thing of value can be identified, there will be sufficiency even if not adequate.
Generally, if a party offers as consideration something they are already obliged to do, can this be good consideration?
Generally no - if A is already bound to do something for B, then agreeing to do it again is NOT good consideration
However, there are exceptions to this rule deriving from Roffey etc…
This is the rule in Stilk v Myrick
What is the exception to the Stilk v myrick rule? When will an obligation in an existing contract be good consideration?
If A has entered into a contract with B to do work for payment, but before completion, there is a reason to doubt completion, B can promise to make additional payment and therby obtains a practical benefit or obviates a disbenefit, and it is not due to duress or fraud, then the benefit to B is capable of being good consideration
For example, Jim hires Bob to build a house. Jim worries Bob won’t finish it by December 25. He tells Bob he will pay him an additional £10,000 if he can complete on time. Roffey holds that this is good consideration so long as Jim doesn’t do this due to Bob’s duress or fraud.
Can you rely on an existing obligation to a third party as good consideration for a new contract?
For example, A has an obligation to pay £10 to B. Can A promise to pay B £10, as consideration for an agreement with C?
Yes - a promise to do something which a party is obliged to do pursuant to an obligation to a third party is good consideration
Is part payment of a debt ever good consideration?
For example, A owes B £120. A agrees to pay £70, in exchange for discharge of the remaining £50 debt. If B tries to claim the remaining £50, can A rely on the contract to show that the £50 was discharged?
Foakes v Beer
The general rule is that paying a smaller sum owed is not good consideration.
However, there are exceptions. A promise to pay a smaller sum may be enforceable if….
(a) There is a new element introduced (e.g. provide something different to the money)
(b) A third party offers to pay a lesser sum on behalf of the debtor and the creditor accepts this sum, the creditor cannot then sue the debtor for the difference
(c) In ReSelectmove the uKSC held that the ‘Practical Benefit’ and ‘Roffey’ rule had no application in such a case. However, this was doubted in MWB. This has not yet been re-examined.
How can the harshness of the rule in Foakes v Beer (not enforcement of a promise to accept part payment of a debt) be mitigated?
Promissory Estoppel
A promise can be enforced in equity despite not being supported by consideration if the debtor has relied on the promise by the creditor that they will not require the debt to be paid in full
What are the four requirments/principles of promissory estoppel?
- It acts as a shield not sword
- There must be a clear and unequivocal promise that strict legal rights will not be fully enforced
- There must be a change of position in reliance on the promise
- It must be inequitable to allow the promisor to go back on their promise
What does it mean to say that promissory estoppel is a shield not a sword?
It can only act as a defence.
The debtor cannot sue upon a promise. It can only be raised if, for example, the creditor is seeking payment of the remaining debt.
In promissory estoppel cases, what constitutes a change of position in reliance on the promise?
In part-payment debt cases, the part payment itself is sufficient to be the ‘reliance’ provided the promise influenced the part-payment.
Detriment is not required. It is sufficient if the promisee has made a change of position in reliance. However, since it needs to prove inequitable, detrimental reliance will mean it is more likely that the ‘going back on the promise’ is inequitable
What is the position relating to ItCLR for a commercial agreement?
It is presumed there is an intention to create legal relations unless the presumption is rebutted.
What is the position relating to ItCLR for a domestic agreement?
It is presumed there is not an intention to create legal relations unless the presumption is rebutted.
For example, it agreements in relation to famillt agreements, aroung the table for a drink in a pub etc are presumed not to suggest legal relations
What does ‘subject to contract’ suggest?
It is a strong inference that parties do not intend to be bound untiul the formal execution of a contract.
Can under 18s enter into a contract?
Generally, minors cannot contract and the party under 18 is not bound by any agreement (e.g. even if they lied about their age)
However there are two exceptions:
- A minor is bound by a contract to supply necessaries to them if it is for their benefit. They must pay a reasonable price as opposed to actual price. These things include food, medicine, accomodation etc….
- A minior is bound by a contract of employment, apprenticeship or education if it is for their benefit. For example, a young footballers contract was helf unenforceable since the twerms were onerous and restricted his freedom to develop (not beneficial)
A minor can ratify a contract once they reach 18, and it then becomes bindinf.
A minor who has entered a contract not falling under one of the exceptions can enforce it against other parties, but it cannot be enforced against them
What happens if someone enters into a contract with someone lacking mental capacity?
A person without capacity remains liable to pay a reasonable price for necessaries.
Otherwise, the contract is binding unless the party with mental incapacity can establish they did not understand what they were doing AND the other party knew that to be the case.
This is the same for people entering contracts due to intoxication.
What is duress to the person? What effect does it have on a contract?
Duress to the person amounts to actual or threatened violence
If the duress is only one factor in influencing the wronged party’s behaviour of entering into the contract, it becomes voidable.
It remains in force unless the party subject to duress chooses to avoid the contract (Recission).
What is duress to goods?
A contract can be avoided where there is a threat to seize the owner’s property or damage it unless they enter into a contract
What is economic duress and when does it apply?
There must be…
* Pressure
* The effect of which is complusion or lack of practical choice for the victim
* Which is illegitimate and
* Causes significant cause for inducing the claimant to enter into the contract
But for the duress, the agreement would not have been entered into. It can be avoided and rescinded
What constitutes illegitimate pressure for economic duress?
Relevant factors include…
- Has there been a threatened breach of contract?
- Were the alleged exerting pressure in good or bad faith?
- Did the victim protest at the time?
- Did the victim affirm the contract?
What is the causation limb of economic duress?
It must be shown that the agreement would not have been entered into if there had not been the duress.
This is different from other types of duress where the duress only needs to be one factor. Therefore, if it can be shown that the party would have entered the contract if there had not been duress, ED cannot be made out
Why is the doctrine of economic duress increasingly important?
Since courts are more liekly to find consideration by way of a practical benefit to support contract variation, there is greater scope for economic duress and pressure - the doctrine of economic duress ensures that parties can seek relief from variations where they only entered the variation due to the duress.
What is undue influence? What are the two types?
Undue influence exists where a persons consent to a transaction was produced in a way such that the consent ought not fairly be treated as the expression of their free will.
There are two types:
(a) Overt acts of improper pressure or coercion (e.g. unlawful threats)
(b) Relationships of influence of which unfair advantage is taken
What is an over act of improper pressure for undue influence?
Most cases will be dealt with as duress
The coercion is improper (e.g. deceitful, fraudulent etc…)
What types of relationships have an irrebutable presumption that one party has influence over the other?
What effect does this ‘presumption have’ for undue influence?
- Parent and Child
- Guardian and Ward
- Trustee and Beneficiary
- Solicitor and Client
- Doctor and Patient
> Since influence is presumed and cannot be rebutted, the only question is whether unfair advantage was taken.
Spouses do NOT give rise to such a presumption - the influence must be psoitively shown before asking whether unfair advantage was taken.
Once a relationship of trust and confidence is presumed or shown, what else needs to be established before the burden shifts to the defendant for undue influence?
It must also be shown the transaction is one that requires explaination. One that does not usually fit into the ‘expected transactions’ of such a relationship
It might be suspicious in type of value.
For undue influence, on whom does the burden shift to once a relationship of influence is presumed or show?
Once the relationship has been presumed or shown, and the transaction is of a type that needs to be explained, the burden shifts to the defendant to produce evidence to show there was no undue influence.
If they cannot, undue influence is established automatically.
If they can produce evidence (e.g. of consent and no such influence) then the agreement is valid.
What are the limits on equitable relief for undue influence?
Where proven, a contract may be set aside.
However, this is discretionary and may be refused if there is (a) delay to come to the court; or (b) the party comes with unclean hands.
Wehn can a contract with a third party (e.g. bank) be set aside due to undue influence?
For example, a wife agrees to provide security for her husbands business to the bank. The wife may claim that she only gave security because of undue influence from her husband. The contract with the bank will only be set aside when…?
This depends on whether the third party (e.g. bank) had notice of the undue influence:
The transaction will be set aside if the third party had either…
(a) Actual noticeof the undue influence; or
(b) Constructive notice of the undue influence - this exists in every case where the relationship between parties giving the guarantee and the borrower is non-commercial, unless the bank takes reasonable steps to warn the weaker party of the risks of the transaction or to take independent advice.
If the bank fulfil their duty, but the solicitor fails, the victim will have an action in negligence against the solicitor but no recourse to the lender which is entitled to assume the solicitor properly advised the victim.
What effect does signature of a contract have?
Signing of a contract shows that the parties intended to be bound by the incorproated terms.
This is true even if the parties did not read the terms (L’Estrange)
Remember there are three exceptions to the signature rule: (i) misrepresentation; (ii) non est factum; and (iii) where the document signed was one not intended to have contractual effect but was signed by mistake.
When will a term be incorporated by notice?
Sometimes terms are set out,in a document which is simply handed by one party to the other.
They will be incorporated in the contract if reasonable steps are taken to bring them to Cs attention.
They can be incorporated by reference to another document. However, the clause is unlikely to be incorporated if
- there are no words on the face of the document drawing attention to it
- words on the front of the document refer to terms on the back but the back is blank
- the term is buried in a mass of advertisements
Remember, the more onerous a term, the more that is needed to bring it to the other parties attention
When incorporating a term into a contract by notice what impact does the nature of the term being onerous have?
The more unusual or unexpected a particular term is, the higher will be the degree of notice required to incorporate it.
If the term is of such a nature that the party adversely affected would not normally expect it, then the other party will not be able to incorporate it by simply handing over or displaying a document containing the term.
Post-Interfotoit must be shown that term is ‘onerous’ or ‘unusual’ is a high one – A party who changes his terms in significant respects may be under an obligation to take greater steps to draw these changes to the attention of the other party.
For a clause to be incorproated into a contract, when (timing wise) must reasonable notice be given>
The steps required to give notice of a term must be taken before or at the time of contracting
In cases with automatic ticket dispensers, the contract is formed when C inserts money into the machine and receives the ticket; conditions that are not seen until after this time are not binding
When will a term be incorporated by a course of dealing?
If two parties have made a series of similar contracts each containing certain conditions, and then they make another without expressly referring to those conditions it may be that those conditions ought to be implied.
It must be shown the course of dealing has been consistent over a period of time, and must have been regular. In Hollier, 3/4 times a year was held to be irregular.
What are the two ways a term may be implied?
A term may be implied in fact to give effect to the presumed but unexpresed intentions of the parties
A term is implied in law because the courts/statute require it (e.g. SOGA)
When will a term be implied in FACT?
There are two routes…
(a) Where a term is implied on the ground of a trade cutom - it is assumed the parties are bound by well known trade customs
(b) A term may be implied for business efficacy to make the contract produce its intended objective if, without the term, the arranegment would be so unworkable, The implication should be so obvious that parties would respond ‘oh of course’
The question is what would the reasonable person understand the contract to mean, rather than the subjective intentions of the parties
When will terms be implied in law?
Statute implies terms…
* Sale of Goods 1979
* CRA 2015
* SGSA 1982
When the courts seek to imply a term in law, they are not seeking to decipher the parties’ objective intentions. They are seeking to determine what is a necessary clause for a particular class of contract.
What is the implied term as to title? (s.12 SGA)
The seller has the right to sell the foods.
Breach of this condition gives the innocnet party the right to terminate or affirm & claim damages
To whom does the SGA (Sale of Goods Act) implied terms apply?
It applies to contracts for the sale of goods and the supply of services outside a consumer context.
Thus they still apply private sales and business to business transactions
What does the SGA imply about description and quality?
- s.13(1) where a contract is for the sale for the sale of goods by description, there is an implied term the goods will correspond with the description.
- s.14(2) there is an implied term that the goods are of satisfactory quality and meet the standard a reasonable persfon would regard as satisfactory, taking into acount description and price
Do goods need to be fit for purpose under SGA?
Per s.14(3) goods not only need to be of satisfactory quality but also fit for purpose if the contract was entered into due to an express or an implied ‘purpose’ being made known to the seller
What is the remedy of breach of an implied term of the SGA (s.13,14,15)?
The implied terms as to quality, purpose, title and description are conditions. Breach allows repudiation of the contract.
However, s15A provides if a breach is slight that it would be unreasnable to reject the foods and repudiate the contract, the breach should be treated as a warranty and entilte only to damages.
Can liability under SGA be excluded?
Yes. However UCTAS limits the ability…
You cannot exclude or restrict the undertakings as to title.
You can only exclude/restrict undertakings as to description, quality and fitness subject to the requirment of reasonableness.
What does the Supply of Goods and Services Act 1982 (SGSA) imply into contracts for the supply of services?
Services will be carried out with reasonable skill and care (s.13)
To whom does the Supply of Goods and Services Act 1982 (SGSA) apply?
Same as SGA - business to business contracts
When does the CRA 2015 apply?
Where there is a contractual agreement between a trader and a consumer for the trader to supply goods, digital content or service the CRA 2015 applies > The contract can be written, oral or implied from the parties’ conduct.
What terms (overview) does the CRA imply?
All goods supplied under a consumer contract should:
- be of satisfactory quality;
- be fit for purpose;
- match the description, sample or model; and
- be installed correctly (if part of the contract).
All services supplied under a consumer contract should be;
- carried out with reasonable care and skill;
- completed for a reasonable price
- completed within a reasonable time
- completed in accordance with any information said or conveyed in writing
Who is a consumer for CRA purposes?
An individual acting for purposes wholly or mainly outside of their trade, business, craft or profession
Where a CRA term is breached (e.g. not of satisfactory quality) what are the CRA remedial options?
- Short term right to reject
- Right to repair or Replacement
- Right to Price Reduction or Final Right to Reject
How long is the CRA short term right to reject available to consumers for?
30 days running from the time ownership passed and goods were delivered/installed
When is the right to repair or replacemenet available for CRA?
Available unless the repair or replacement is impossible or disproportionate.
Can a consumer under the CRA recieve both a price reduction and final rejection?
When are they able to be used?
No. They must elect.
Both remedies can only be used where…
(a) After one repair or replacement, the goods still do not conform; or
(b) the consumer can neither repair nor replace the goods due to impossibility or disproportionate costs; or
(c) the consumer has required the trader to repair or replace but the trafer is in breach and has not done so within reasonable time and without significant inconvenience to the consumer
If the right to reject is used within 6 months from ownership passing, there should be a full refund with no deduction for use (excluding motor vehicles)
How long does a trader have to replace or. repair digital content under CRA?
Within a reasonable time and without significant inconvenience to the consumer
