Contract Law (Underlying) Flashcards

Question

Can the offeror require actual communication thereby disapplying the postal rule?

Answer 1

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

Answer 2

The postal rule does not apply to instantaneous communication. Acceptance takes effect upon receipt

Answer 3

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)

Answer 4

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

Answer 5

Yes, the general test for ‘receipt’ is satisfied, the problem lies within the offeror’s control’

Answer 6

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

Answer 7

**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)

Answer 8

* It must **not be past** * It must **move from the promisee** * It need **not be adequate** * It must be **sufficient**

Answer 9

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.

Answer 10

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.

Answer 11

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

Answer 12

If a thing of value can be identified, there will be sufficiency even if not adequate.

Answer 13

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

Answer 14

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 ## Footnote 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.

Answer 15

Yes - a promise to do something which a party is obliged to do pursuant to an obligation to a third party is good consideration

Answer 16

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.

Answer 17

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

Answer 18

1. It acts as a **shield** not sword 2. There must be a clear and **unequivocal promise** that strict legal rights will not be fully enforced 3. There must be a change of position in **reliance** on the promise 4. It must be **inequitable** to allow the promisor to go back on their promise

Answer 19

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.

Answer 20

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

Answer 21

It is presumed there **is** an intention to create legal relations unless the presumption is rebutted.

Answer 22

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

Answer 23

It is a strong inference that parties do not intend to be bound untiul the formal execution of a contract.

Answer 24

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**

Answer 25

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.

Answer 26

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).

Answer 27

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

Answer 28

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

Answer 29

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?

Answer 30

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

Answer 31

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.

Answer 32

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

Answer 33

Most cases will be dealt with as duress The coercion is improper (e.g. deceitful, fraudulent etc...)

Answer 34

* 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.

Answer 35

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.

Answer 36

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.

Answer 37

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.

Answer 38

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 notice**of 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.

Answer 39

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.

Answer 40

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

Answer 41

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-Interfoto it 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.

Answer 42

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

Answer 43

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.

Answer 44

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)

Answer 45

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

Answer 46

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.

Answer 47

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

Answer 48

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

Answer 49

* 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

Answer 50

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

Answer 51

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.

Answer 52

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.

Answer 53

Services will be carried out with reasonable skill and care (s.13)

Answer 54

Same as SGA - business to business contracts

Answer 55

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.

Answer 56

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

Answer 57

An individual acting for purposes wholly or mainly outside of their trade, business, craft or profession

Answer 58

* Short term right to reject * Right to repair or Replacement * Right to Price Reduction or Final Right to Reject

Answer 59

**30 days** running from the time ownership passed and goods were delivered/installed

Answer 60

Available unless the repair or replacement is impossible or disproportionate.

Answer 61

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)

Answer 62

Within a reasonable time and without significant inconvenience to the consumer

Answer 63

Only where repair or replacement is impossible or disproportionate, or the trader has failed to repair/replace within a reasonable time

Answer 64

Within 14 days, a full refund without imposing a fee to the payment method used for the purchase

Answer 65

* Is the clause incorporated? * Does the clause cover liability as a matter of interpretation? * If so, is it covered by UCTA/CRA?

Answer 66

In case of doubt, wording in a contract is to be construed **against** a party who seeks to rely on it in order to exclude or limit a legal liability

Answer 67

Clear words MUST be used if the party is seeking to exclude its own negligence. However, it is less likely to apply in a contract between commercial partioes of equal bargaining power (Persimmon Homes)

Answer 68

If its a business-business contract, consider whether the exemption/limitation clause is allowed under **UCTA 1977** In a business-consumer contract, consider the **CRA 2015**

Answer 69

UCTA applies only to “business liability” Liability for breach of obligations or duties arising from things done or to be done by a person **in the course of a business** or from the occupation of premises used for business purposes of the occupier

Answer 70

You cannot exclude or restrict liabiliy for **death or personal injury** deriving from a negligent breach (s.2 UCTA) Such a clause will be void and of no effect

Answer 71

Yes, per UCTA s.2(2), such a clause will be valid if reasonable

Answer 72

Per s.6(1A) UCTA you can if reasonable

Answer 73

Liability for breach of contractual terms can only be excluded or restricted if (a) The term limiting liability is in a contract made on a party's “written **standard terms** of business” and (b) It passes the **reasonableness** test

Answer 74

The term must be fair and reasonable having regard to the circumstances - this is judged at the time the contract was made. Consideration should be had for... * **strength of the bargaining positions** of the parties * whether the customer received an **inducement** to agree to the term or could have bought elsewhere without being subjected to a similar term * the **customer’s knowledge or means** of knowledge of the existence and extent of the terms * whether the goods were manufactured, processed or adapted to the special order of the customer.

Answer 75

Consumer Rights ACt 2015

Answer 76

The consumer act for purposes that are ‘wholly or mainly’ outside his or her trade or business

Answer 77

No. Section 65 ensures that in a consumer contract a trader cannot exclude or restrict a liability for negligently caused personal injury or death. This is analogous to UCTA 1977 s.2(1)

Answer 78

**No**. A term of a contract to supply goods is not binding on the consumer to the extent that it would exclude or restrict the trader’s liability under the following provisions of s.9 (goods to be of satisfactory quality); s.10 (goods to be reasonably fit for any purpose made known); s.11 (compliance with description); s.12 (certain pre-contract information treated as included as a term); s.13 (compliance with sample); s.14 (compliance with model); s.15 (liability for incorrect installation in a ); s.16 (liability for non-conforming digital content in a “mixed contract” for the supply of goods and digital content); s.17 (trader’s right to supply the goods); Unlike UCTA, there is no 'reasonableness' test - you simply cannot exclude or restrict?

Answer 79

No. You cannot exclude liability for the following: * s.34 (digital content to be of satisfactory quality); * s.35 (digital content to be reasonably fit for any purpose made known); * s.36 (compliance with description); * s.37 (certain pre-contract information treated as included as a term); and * s.41 (trader’s right to supply the digital content).

Answer 80

* An attempt to exclude (**entirley**) implied terms relating to service to be performed with reasonable skill and care (s.49) are not binding. * Any attempt to restrict or limit liability under s.49 will not bind to the extent it prevents the consumer recovering the price paid. If it would not prevent the consumer from doing so, the term in question may still be challenged under the test of fairness

Answer 81

Any term in a consumer contract is not binding on the consumer if it is unfair. Main terms (e.g. price) cannot be assessed for fairness if they are transparent and prominent. Otherwise, a term is unfair if it causes significant imbalance in the parties rights and obligations.

Answer 82

* An **unambigious** * **False statement** of fact * Addressed to the Claimant * **Inducing** them to enter into the contract

Answer 83

A statement too vague and ambiguous such as a mere puff cannot amount to an actionable misrepresentation For example, to describe land as “fertile and improvable” is mere sales talk which affords no ground for relief.

Answer 84

The statement **cannot** be an opinion. However, a statement of opinion can, by implication, involve a statement of fact if the facts are not equally known to both sides

Answer 85

If the facts are **not equally known** to both sides, then a statement of opinion by the one who **knows the facts best** involves very often a statement of a material fact For example, if a landlord says that he considers that the relations between himself and his tenant are satisfactory, he implies that the facts within his knowledge are “such as to render that opinion reasonable.”

Answer 86

No since it cannot be true or false at the time the statement is made. The fact that the state of affairs do not come true does not give rise to liability

Answer 87

Generally, no > tacit acquiescence in another’s self-deception does not itself amount to a misrepresentation. However, there may be misrepresentation for half truths - even though what is actually stated is literally true if a false impression is created because of what is not stated.

Answer 88

Yes since it is a half truth.

Answer 89

Yes Where a statement was made that was true at the time and during the course of negotiations becomes untrue, then the maker of the statement, **if he is aware** that it has become untrue, must disclose the change of circumstances to the other party

Answer 90

Materiality gives rise to an **inference of fact** that C did in fact rely on the statement. It operates as a presumption of fact that the representee had so relied on the statement (Hayward, Museprime). However, if the statement is not material the claimant must prove that they relied on the misrepresentation/were induced (it is not presumed)

Answer 91

“But for” requirement of causation Had the representation not been made to him, the representee would not have entered into the contract at all, or would not have done so on the same terms ## Footnote Note, some cases state that the requirment is that the statement played a “real and substantial part”

Answer 92

The statement it need only be **a** reason and it is no defence that, but for the representation, C would have entered into the contract anyway (*Barton*).

Answer 93

* The representation **did not come to his notice** * The representation was **made only after** he had entered into the contract * C relied on his **own information** * It is proved that the representee **knew the representation was false**

Answer 94

Yes. Reliance can be reasonable even where the claimant had an opportunity to discover the truth by the exercise of reasonable care and diligence but **failed** to do so.

Answer 95

If the contract contains a clause that excludes liability for misrepresentation. It must *also* pass the exclusion clause tests under UCTA (subject to reasonableness requirment) and CRA (subject to faiirness test)

Answer 96

* Fraudulent * Negligent * Innocent

Answer 97

* Recission of Contract * Damages in Lieu of Recission per MA 2(2) * Damages per MA s.2(1) * Tort og Negligence & Deceit

Answer 98

The parties are placed in exactly the same position as if they never entered into the contract Remember, it is an equitable discretionary remedy

Answer 99

1. Restitution Impossible 2. Affirmation 3. Lapse of Time 4. Third Party Rights

Answer 100

Where the subject matter cannot be restored. For example, destruction of the property Note, the exceptions... * A commerial equivalent may be acceptable; and * Mere deterioration of the subject-matter will not constitute 'impossibility' * Impossibility covers difference in kind not quality (e.g. a mine with less minerals vs a mine with no minerals)

Answer 101

Rescission will be barred if, having discovered the truth and the right to rescind, nonetheless affirmed the contract There may be affirmation where C is... * Continuing to make use * Stays on the property and pays rent * Failing to rescind However, there may not be affirmation if.. * C only hears rumours that the representation may be untrue * C uses the subject matter for the purpose of ascertaining the veracity of the misrepresentation * C uses the subject matter for a short time following up on allegations

Answer 102

If there is delay that is inequitable. Debate as to what this means.... *Leaf* says the bar is lapse of time and that 5 years was too long despite the claimant onlt discovering the misrepresentation a few months prior. *Salt* says it is the affirmation, in which case whether delay is unreasonable turns on the time from discovery (e.g. it becomes unreasonable at the point of affirmation)

Answer 103

Rescission is barred where third party rights intervene, e.g. where bona fide purchaser for value acquires property rights in the subject matter

Answer 104

Damages in lieu of rescission per s.2(2) MA 1967

Answer 105

Where... * Misrepresentations are **not fraudulent,** * **Rescission is not barred** * It seems more equitable to award damages than recission The measure is the difference in price paid & current value; or the cost of correcting the defect.

Answer 106

* It is better than a claim in the tort of negligence because there is **no need to show that the defendant owed a duty of care** * It is more advantageous than a claim in deceit because the claimant can recover the same measure of damages **without having to *prove* that the defendant had been fraudulent.** Note, damages are not available for an innocent misrepresentation

Answer 107

* C must have suffered loss which would be recoverable *if* D had made the misrepresentation fraudulently * Unless D had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true Simply.... Has C suffered loss? If it had been done fraudulently would D be liable for damages? If yes, fraud need not be proved. But, did D have reasonable ground to believe the facts he represented were true?

Answer 108

Yes, they will not be available if the representor is able to show that they had reasonable grounds to believe that the facts represented were true This will be hard to prove

Answer 109

Assessed on the basis of damages available in the **tort of deceit** not general contractual principles. * **Difference in value between the price paid for product and their actual value** * Potential loss of profits recoverable (East v Maurer). * Damages for non-pecuniary loss with respect to mental distress recoverable The remoteness test for the tort of deceit is if loss is direct > it need *not* be foreseeable

Answer 110

If C is a consumer and has a right to redress under the 2008 Consumer Regulations. However, in all cases (consumer or trader) damages by way of tort are not barred by way of .... * Negligent Misrepresentation: Tort of Negligence; and * Fraudulent Misrepresentation: Tort of Deceit

Answer 111

Damages under s.2(1) are NOT available. Onyl recission (and damages in lieu) and an indemnity to cover the cost of the legal obligations is available

Answer 112

* Common Mistake * Mutual Mistake * Unilateral Mistake

Answer 113

Both parties are suffering from the **same** mistake For example, A agrees to sell cortn being transported by ship A. Neither party know that at the time of contracting, the ship sank and the corn destroyed.

Answer 114

Where **both parties are mistaken** but about **different** things For example, A agrees to sell B a horse. A intended the brown horse. B thought it was the black horse.

Answer 115

When only one party is mistaken and the other party (a) knows; or (b) is deemed to know of the mistake

Answer 116

If both are mistaken as to the subject matter, the contract is **void** for mistake This is unless one party bears the risk of non-existent subject-matter For example, if one party promises the exiostence of the subject matter and is at fault in making the mistake and inducing the other party, the contract will not be void.

Answer 117

The general rule is that mistake as to quality does not make performance impossible and the contract remains **valid** However, there is an *exception* - if the existence of some quality makes the thing without the **quality substantially different** from the thing as it was believed to be, it is void (Bell) - but it is unclear the extent of application since it was held that a worthless paining was not 'esentially different' since it is still a painting. In other words, it isn't about value but about a **fundamental quality **

Answer 118

Mistake as to quantity may be capable of invalidating a contract at law.

Answer 119

The circumstances must be “wholly exceptional and contracts which have been found to be void for mistake are few and far between.” The non-existence of the state of affairs must not be attributable to the fault of either party and render performance of the contract impossible.

Answer 120

The contract is void.

Answer 121

The court employ an objective test and decide what a reasonable third party would have thought the agreemend was. If a reasonable person would infer the existence of a contract in a specific way (e.g. a black horse) the court states that it is that 'version' that is binding notwithstanding the material mistake If a reasonable person cannot attribute meaning, the contract is void.

Answer 122

If it is a Face To Face Contracts, there is a presumption that A intends to contract with the person in front of them. Since there is a contract, it is **voidable**. If B sold it to C, the third party is protected. A’s claim loses, the third party succeeds. For example, if A and B contract for the sale of the car but B is a fraudster. If B sells the car to C, since the contract is only voidable, C is protected.

Answer 123

There is no presumption that A intended to contract with the rouge There is no contract - it is **void**. Therefore any claim against a third party will suceed.

Answer 124

Something so **fundamental**, so that consent is negatived This includes... * Mistaken as to the **identity** of the other * Mistake as to the **subject matter** or quality * Mistake as to the **terms** of the contract

Answer 125

Consent is negatived if one party intends to deal with one thing, and the other with a different one. However, consent is not generally negatived by a mere mistake as to **quality** For example If a person buys oats, thinking that they are old, from a seller who knows that they are new, there is a good contract. This is because, an oat is an oat.

Answer 126

When it is obvious that the seller has made a mistake in the terms of an offer, one may not simply "snap up" the offer and be able to enforce the agreement The contract will be void. However, what constitutes knowledge? Constructive knowledge does not suffice for the purposes of unilateral mistake. The buyer must actually know of the mistake

Answer 127

Usually we say the contract is void. However, A may be able to seek rectification of the contract so as to state its price at X (the intended price).

Answer 128

Prior to Patel v Mirza, such a contract was void and unenforceable. However, now, a court will adopt a discretionary approach. It will be enforced if allowing recovery of something ollegal is proportionate and will not produce disharmony in the law.

Answer 129

No person can sue or be sued on a contract unless they are party to it

Answer 130

* Relationship of agency (A enters a contract on behalf of B, party B becomes party to the contract) * Collateral Contracts * Assignment of Rights * Actions in Tort * C(RTP)A 1999

Answer 131

**Parties can assign their rights but not obligations.** If A contacts to build B a wall in exchange for payment, B can assign their right to C. C can enforce the contract (e.g sue A if they don't build the wall) but the obligation to pay remains with B. If A wants paymment, they sue B. If there is prohibition of assignment in the contract, assignment of rights will be unsuccesful.

Answer 132

Under a collateral contract a third party is not in fact a TP but a **party to a contract with the party who has failed to carry out his promise.** A contracts to paint Bs house. B enters into a cotnract with C for the paint that will last 5 years. The paint fails. A can sue C because there is a collateral contract between A and C.

Answer 133

A third party, in limited situations, may enforce a contract to which they are not a party, even if they have not provided any consideration.

Answer 134

No. C(RTP)1999 is only for the benefit of third parties.

Answer 135

(A) Where the contract **specifically** states it should (e.g. X has the right to sue); or (B) Where the contract p**urports to confer a benefit** on it, unless it appears the parties did not intend the term to be enforceable by the third party Note, the third party does not have to be named (e.g. Joe Smith ). Rather it is sufficient if the third party is expressly identified in the contract **as a member of a class** or as answering a particular description (eg, ‘person living at 3 Coronation Street’ or ‘B’s nominee’).

Answer 136

No. * Section 1(3) makes clear that the third party does not have to be named > it is sufficient if the third party is expressly identified in the contract as a member of a class or description * The third party does not need to be in existence when the contract is made, so that contracting parties may confer rights on an unborn child, a future spouse etc...

Answer 137

It excludes third party rights

Answer 138

A contractual obligation is discharged by a compete performance of the obligation. However, there are several exceptions that mitigate the harsh effect of the rule.... * Partial Performance * Substantial Performance * Divisible Obligations * Wrongful prevention of performance

Answer 139

The innoncent party might, rather than reject the work done, accept part prformance. This is at the discretion of the voluntary party. If they do, the party is entitled to patment on a quantum merit basis (as much as is deserved) for the work completes.

Answer 140

They can obtain the contract price subject to a deduction that reflects the cost of remedying the defect.

Answer 141

The party prevented from performance is entitled to full payment despite not having completed the rest of the obligation. They can either sue for damages for breach, or claim a quantum merit.

Answer 142

Yes, in two ways... (a) Subsequent binding contract between the parties where there is accord (release from the original obligation) and satisfaction (consideration for the new promise to release); **or** a deed (no need for accord or satisfaction) (b) An operating term of the original contract > (i) by a **condition precedent** whereby rights do not come into play until a condition is fulfilled; or (ii) a **condition subsequent** providing for termination of the contract and discharge of obligartion in specific situations.

Answer 143

Damages Only

Answer 144

Damages + Right of election: (a) affirm; or (b) terminate

Answer 145

The breach must deprive the party who has further undertakings still to perform **of substantially the whole benefit** of the contract. Whilst the breach may not be a specific 'condition' it is treated as such. The breach must be very serious going to the **root of the contract.** In deciding whether it is so serious, the court consider the adequacy of damages and ratio of failure to the performance undertaken

Answer 146

A "Condition” is here a contractual term the breach of which gives the injured party the right to terminate the contract. If the term is a 'condition', breach of it need not deprive of substantially the whole benefit of the contract. Breach of condition is an exception to the requirement of substantial failure in performance

Answer 147

If a contract expressly says that a particular term is a condition, or that performance of the term is “of the essence”, that term will generally be a condition If a term can be broken in a way which will cause only trifling loss, the court may hold that such a breach will only be a warranty

Answer 148

Innominate terms... * differ from conditions in that their breach does not of itself give rise to a right to terminate; and * differ from warranties in that the injured party’s remedy is not even prima facie restricted to damages. He can terminate for breach of an intermediate term **only if** the requirement of substantial failure is satisfied.

Answer 149

Commercial parties sometimes insert into their contracts a termination clause which confers on the parties (or one of them) an express right to terminate the contract in certain defined circumstances. Both aprties are released from future obligations. However, contrary to repudiatory breach, there is **no right to recover damages for loss of bargain** where he terminates for a non-repudiatory breach under an express provision

Answer 150

It puts an **end to all primary obligations** of both parties that are **unperformed** Therfore, termination is... * Prospective not retrospective * Discharges Unperformed Obligations * The contract secondary obligations (e.g. agreed damages clauses) remain

Answer 151

* Repudiatory breach; * Breach of condition; * Termination clause

Answer 152

Yes. If a term is a condition, the courts now regard the parties as having agreed to treat any breach as if it is repudiatory. Consequently, a breach of condition may also sometimes be referred to simply as a repudiatory breach

Answer 153

In all types of breach, the claimant is entitled to damages for loss flowing from any breach committed prior to termination But it is only if the contract is terminated for **repudiatory breach, or for breach of condition**, that the claimant is also entitled to damages for loss of bargain. If the claimant exercises a right of contractual termination in circumstances where the breach relied upon is not a repudiatory breach in fact, he is not entitled to damages for loss of bargain.

Answer 154

The non-breaching party can choose not to act upon the breach of the other party by (a) rejecting the repudiation; and (b) going ahead with their performance and claiming the contract price through an action for the agreed sum This rule is subject to two exceptions: * **The Cooperation Qualification** The innocent party *cannot* elect to perform the contract where it is impossible to do the further required acts without the co-operation of the guilty party, who refuses to give it and who cannot be compelled to act by the court. * **The Legitimate Interest Qualification** An innocent party to a breach will be unable to elect to perform the contract and claim the price if they have no legitimate interest in performing the contract, whether financial or otherwise.

Answer 155

D can argue that these obligations where discharged by a “frustrating event” and the parties walk away. Whe asking who is claiming frustration, ask 'who wants out' - who doesn't want the contract to remain on foot?

Answer 156

The circumstances in which performance is called for would **render it a thing radically different** from that which was undertaken by the contract

Answer 157

Where performance depends on the **continued existence of a given person or thing**, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance For example, if the contract is for the hire of Concert Hall X, and it burns down, the destruction is the frustrating event

Answer 158

No. For example, a contract for a music hall will not be frustrated if just the gardens are burnt but the hall is untouched. However, the contract ***can*** be frustrated notwithstanding that the destruction of the subject matter was only partial (e.g. only the stage burnt down).

Answer 159

It depends on the contract... Imagine a contract provides for the hire of a boat. It sinks, but there is a second boat... The question is whether the contract provided for the hire of boat 1 “with no alternative”, or whether it provided for the hire of a luxury yacht (which may be performed by means of boat 1 or 2)

Answer 160

There is frustration where “the delay is so long as to destroy the identity of the work or service, when resumed..." It depends on (a) **length** of delay; (b) **likely continuance** of the term after the interruption; and (c) the **gravity** of disruption. For example, a road closure resulting in an inability to use a road leading to a property with a 10 year lease of a warehouse for a 20 months was not a frustrating event.

Answer 161

* Krell > C books a hotel to view a procession for two days but not the nights. The procession was cancelled. The contract was frustrated because the provider had knowledge of the special purpose and therefore there was a common purpose (e.g. watching the parade) * Herne > D hired a vessel for two days to watch a naval show. The naval show was cancelled but the ships remained in the area. This wasn't frustated because (a) D had two purposes of viewing the show and to see the boats; and (b) D was acting in a commercial capacity The difference... A cotnract may be frustated as to purpose if... * The purpose is a common purpose * There is no secondary purpose; and * The (possibly) the party is not commercial

Answer 162

* Force majeure clauses may cover the situation * Contracts may exclude frustration provided it makes provision for the consequences of the supervening event

Answer 163

No. If the cause of the delay is not remarkable and does not result in a significant change in obligations, rather, it merely makes them more onerous and costly, there is no frustration of contract. **A more onerous and costly performance does not give rise to frustration**

Answer 164

A party cannot rely on frustration due to his own conduct or to the conduct of those for whom he is responsible. The onus of proving that frustration is self-induced is on the party who alleges that this is the case.

Answer 165

No. A’s inability to perform his contract with B is the result of his “election” to perform his contract with C instead. However, if the contract specified the baot that sank, then this would be frustated. The question is whether D has a choice which he makes that renders the contract impossible to perform

Answer 166

Discharge the contract automatically Both parties are then released from their obligations to perform. However, in the absence of a breach of contract, there can be no action for damages for breach.

Answer 167

Yes per Law Reform (Frustrated Contracts) Act 1943.

Answer 168

All sums paid or payable in pursuance of the contract before the discharge shall be **recoverable** + **recover expenses** incurred prior to termination for for the purpose of, performing the contract.

Answer 169

Section 1(3) lays down that * a party who, in or for the purpose of performing the contract and * prior to the time of discharge, * has conferred a valuable non-money benefit on the other party * can **recover a just sum up to the maximum value of that benefit.** The word ‘benefit’ refers to the end product of the services, not the services themselves. For example, if A is painting a warehouse, the benefit is not A painting the warehouse but the painted warehouse itself

Answer 170

Imaging B starts paining a house. It burns down. The effect of section 1(3)(b) will be to reduce the award to nil, because the defendant’s benefit conferred is destroyed (This is undair but how it works >there is no end product and so nothing to value)

Answer 171

To compensate for the damage and loss suffered Compensation means to put the defendant back into the position they would have been in but for the breach

Answer 172

The expectation interest is to put the defendant into the position post-breach that they should have been had there been performance. Damages put them in the position they **expected** to be in

Answer 173

* Cost of Cure * Diminuation in Value * Loss of Amenity

Answer 174

Usually used where there is defective works. This represents the **cost of substitute or remedial work** to put C into the position they woud have been had the contract of been performed properlt C must act reasonably - it is unreasonable to demolish and rebuild the entire property to cure a simple aesthetic defect

Answer 175

Cs expectation interest could be calculated by reference to the difference in value between performance recieved and the promised contract. For example, if the contract is worth £5000 but the value of the item recieved is only £4500, this would be £500 However it doesn't always work. In Ruxley the pool was built at the wrong depth. The value was the same. Therefore the diminuation in value is £0. In such cases another method (e.g. cost of cure or loss of amenity) should be used.

Answer 176

Even if loss is not economic value (e.g. the pool value in Ruxley) in a contract expectation interest may be assessed by the non economic loss of pleasure suffered for not getting what you contracted for. Unlikely to be used in a commercial (business to business) setting.

Answer 177

The reliance interest

Answer 178

This allows C to **recover wasted expenses** incurred in preparing for, or in part performance of the contract. It is backward looking and puts C in the position they would have been in had they NOT contracted

Answer 179

The reliance basis This is likely to be used when the expectation interest is hard to calculate

Answer 180

No. However, it will be awarded forwhere the whole purpose or major object of the contract is **providing pleasure**, relaxation, peace of mind (e.g. a holiday)

Answer 181

General rule is that they are not recoverable. However, some cases (e.g. ADDIS) have suggested that whilst the loss of reputation itself is not compensable, the financial loss consequent upon the loss of reputation is recoverable.

Answer 182

Yes if the lost chance is quantifiable in monetary terms and there was a real and substantial chance the opportunity might have come to fruition. C must show that their loss of chance of a benefit falls below 50% and the loss is real and substantial. If the 'lost chance' is greater than 50%, C should seek to recover their full expectation loss if it can be proved on the balance of probabilities

Answer 183

To be recoverable, the **type of loss** must have been **reasonably contemplated as a serious possibility** (a) Did the loss arise naturally according to the usual course of things from the breach of contract?; and (b) Was it in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it?

Answer 184

Mitigation rules out losses that were suffered but not caused by breach. There are three main rules. * **Avoidable Loss** > C cannot recover damages for a loss that C ought to have avoided * **Losses Incurred Avoiding Losses** > Where C does take reasonable steps to mitigate the loss to them consequent upon D’s wrong, C can recover for loss incurred in so doing * **Avoided Loss** > C has to give credit for certain benefits accruing to him in consequence of the breach

Answer 185

A contract may contain a term which provides for the payment of a fixed sum on breach, or some other form of agreed remedy. However, a liquidated damages clause, or other form of agreed remedy, is not enforceable if it amounts to a “**penalty**” and, in some circumstances, the court may also grant equitable relief.

Answer 186

A liquidated damages clause that requires the party in breach to pay an excessive sum . It will not notmally be upheld, resulting in C damages on normal principles.

Answer 187

(a) The clause must be a secondary obligation concerning things such as remedies - it cannot be a penalty clause if it is a primary obligation; and (b) Does the secondary obligation impose a detriment out of all proportion to any legitimate interest of the innocent party in the performance of the primary obligation? Is the detriment extravagent, exorbirant or unconscionable? | Test from Makdessi

Answer 188

* It must *not* cause undue hardship * It applies to positive terms * Damages must be inadequate * Court constant supervision must not be required * The contract must be binding on both parties * It cannot relate to a contract for employment/personal service

Answer 189

The client is obliged to the contractor the contract price minus the cost of remedying the defect, amounting to £9,500..

Answer 190

A contractor who has completed most of the work to a satisfactory level is entitled to payment, less any necessary deductions to fix defects The client is allowed to make a deduction for the cost of remedying the defect, even if the contract has been substantially performed.

Answer 191

No. Loss of amenity is not a viable alternative to cost of cure as it is not available for commercial contracts of this nature.

Answer 192

Presumed that the seller intended to deal with the person physically present. This makes the contract voidable for misrepresentation.

Answer 193

There must be express identification of the class. There cannot be implication or construction. Therefore, general descriptions such as "current liabilities" are too vague.

Answer 194

If the clause does not reflect the legitimate interest in ensuring the contract is performed. If it is extravegant and unconscionable they will not be pursuing a legitimate interesr Note, under UCTA, the reasonaleness test is not relevant for penalty clauses - ask the 'legitimate interest' question.

Contract Law (Underlying) Flashcards

(218 cards)