Contract MCQS Flashcards

Question 1

Q

What are the requirements of a binding contract?

A) Offer, acceptance, agreement, and consideration

B) Offer, acceptance, consideration and intention to create legal relations

C) Offer and acceptance

D) Offer, acceptance, and intention to create legal relations

Answer

A

B) Offer, acceptance, consideration, and intention to create legal relations

Question 2

Q

Which of the following best describes an ‘offeree’?

A) The person who breaches a contract

B) The person who makes an offer

C) The reasonable person

D) The person to whom an offer is made

Answer

A

D) The person to whom an offer is made

Question 3

Q

What approach does the court take when determining whether an agreement exists between the offeror and offeree?

A) An objective approach by reading their written contract

B) A subjective approach by asking the parties to explain what the intention in their minds was

C) An objective approach, by considering what the reasonable person would say was the intention of the parties having regard to all the circumstances

D) The court will take evidence from an expert in contract law.

Answer

A

C) An objective approach, by considering what the reasonable person would say was the intention of the parties having regard to all the circumstances

Question 4

Q

What are the requirements of a valid offer?

A) The offer must be clear, certain and show an intention to be bound

B) The offer must be clear, certain and accepted

C) The offer must be clear, certain and supported by consideration

D) The offer must be clear, certain and binding

Answer

A

A) The offer must be clear, certain and show an intention to be bound

Question 5

Q

A man is showing off his rare first edition book to his neighbour when he says, ‘I might consider selling this book for a five-figure sum’. The next day, the neighbour tells the man that he accepts his offer and gives him a cheque for £10,000. Which of the following options best describes whether the man made a valid offer to his neighbour?

A) No, because he did not mention the title of the book in his statement

B) No, because his statement was not clear and certain about the book and price

C) Yes, because his statement was clear and certain about the book and price

D) No, because the statement was not clear about the price, nor did it show an intention to be bound

Answer

A

D) No, because the statement was not clear about the price, nor did it show an intention to be bound

(A valid offer must be clear and certain and display an intention to be bound. The man’s statement did not meet these requirements.)

Question 6

Q

Which of the following is correct regarding a bilateral contract?

A) Each party makes an offer to the other party

B) The offer is accepted by performance of the required act

C) Each party assumes an obligation to the other party

D) Only the party making the offer assumes an obligation

Answer

A

C) Each party assumes an obligation to the other party

Question 7

Q

In which case did the court find a valid offer?

A) Gibson v Manchester City Council

B) Hyde v Wrench

C) Storer v Manchester City Council

D) Partridge v Crittenden

Answer

A

C) Storer v Manchester City Council

(The court held that the council’s statement was a valid offer as it was clear, certain and displayed an intention to be bound)

Question 8

Q

The general rule that an advertisement is an invitation to treat does not apply where the advertisement amounts to a unilateral offer. What is a unilateral offer?

A) An offer which prescribes an act which, when performed, constitutes acceptance

B) An offer that originates from a manufacturer of goods

C) An offer to one party only

D) An offer that is not sufficiently clear and certain

Answer

A

A) An offer which prescribes an act which, when performed, constitutes acceptance

(This is illustrated in the case Carlill v Carbolic Smoke Ball Co)

Question 9

Q

Which of the following is correct in relation to an invitation to treat?

A) An invitation to treat is the final step in forming a contract

B) An invitation to treat can be accepted to form a binding contract

C) An invitation to treat cannot be accepted to form a binding contract

D) An invitation to treat displays an intention to be bound

Answer

A

C) An invitation to treat cannot be accepted to form a binding contract

(An invitation to treat is a first step in negotiations and it is not capable of being accepted to form a binding contract)

Question 10

Q

Which of the following is not an invitation to treat?

A) A notice on a tree offering a reward for the return of a missing cat

B) An auctioneer’s request for bids in an auction sale

C) A car advertised for sale on a website

D) A dress displayed for sale in a shop window

Answer

A

A) A notice on a tree offering a reward for the return of a missing cat

(This is a unilateral offer - an exception to the general rule that adverts are regarded as invitations to treat)

Question 11

Q

In which case did the court find there was an invitation to treat?

A) Storer v Manchester City Council

B) Fisher v Bell

C) Harvela Investments Ltd. v Royal Trust Company of Canada (CI) Ltd

D) Carlill v Carbolic Smoke Ball Co

Answer

A

B) Fisher v Bell

(The appeal court held that a display of goods with a price tag in a shop window was an invitation to treat)

Question 12

Q

Which of the following is not an example of how an offer can come to an end?

A) Following revocation by the offeror

B) By making a counter-offer

C) A request for further information

D) Following the death of the offeree

Answer

A

C) A request for further information

(A request for further information does not change or reject the offer. The original offer remains open and capable of acceptance)

Question 13

Q

Which statement is a correct description of the difference between a counter-offer and a request for further information?

A) A request for further information terminates the original offer but a counter-offer does not

B) A counter-offer prevents the offeree from changing their mind and accepting the original offer but a request for further information does not

C) A counter-offer does not change the terms of the offer but a request for further information does.

D) A request for further information can be made by the offeree but a counter-offer cannot

Answer

A

B) A counter-offer prevents the offeree from changing their mind and accepting the original offer but a request for further information does not

(A counter-offer has the effect of terminating the original offer and that offer cannot subsequently be accepted. A request for further information on the other hand has no effect on the original offer and that offer remains open. Revisit this element and consider the section ‘Rejection – distinguishing a counter-offer from a request for further information’)

Question 14

Q

Which of the following is not a valid means of an offer terminating?

A) Rejection

B) Breach

C) Lapse

D) Revocation

Answer

A

B) Breach

(Breach normally relates to the non-performance or defective performance of a contractual obligation or promise. Revisit this element and consider the section ‘Termination of an offer’)

Question 15

Q

A woman offers by email to sell her snooker table to a man for £3,500. The man replies that he is happy to pay £3,500 for the snooker table but wants the cues, balls and framed O’Sullivan picture included for that price. The woman is happy to go ahead with that suggestion. What is the effect of the man’s reply?

A) It amounts to a counter offer.

B) It amounts to an effective acceptance.

C)It amounts to request for further information.

Answer

A

A) It amounts to a counter offer

(To be an effective acceptance, the acceptance must be unqualified. This is not an unqualified acceptance because the man has introduced additional terms relating to the balls etc)

Question 16

Q

A farmer telephones his neighbour on Monday and offers to sell him three ducks for £50. The neighbour responds that he will pay £40 for the ducks. Later that evening, the neighbour informs his brother of the farmer’s offer. The brother immediately telephones the farmer and informs him that he accepts the farmer’s offer. On Tuesday morning, the neighbour telephones the farmer and says he has changed his mind and he accepts the offer of £50. Is there a contract formed?

A) Yes, there is a contract between the farmer and the brother because the brother accepted the farmer’s offer

B) Yes, there is a contract between the farmer and his neighbour for £40

C) Yes, there is a contract formed on Tuesday between the farmer and his neighbour for £50

D) No, there is no contract between the farmer and the brother because the farmer did not accept the brother’s offer

Answer

A

D) No, there is no contract between the farmer and the brother because the farmer did not accept the brother’s offer

(The brother’s acceptance was not a valid acceptance as it was not made in response to the farmer’s offer. The brother’s statement was a valid offer which the farmer did not accept)

Question 17

Q

What is the effect of a counter-offer?

A) The original offer is terminated

B) It mirrors the terms of the original offer

C) The original offer can be subsequently accepted

D) The original offer remains open

Answer

A

A) The original offer is terminated

(A counter-offer is a rejection of the original offer and it has the effect of ‘killing off’ the original offer)

Question 18

Q

Which case establishes the fact that an offeror can include terms which prescribe that a particular mode of acceptance is to be used for the acceptance to be binding?

A) Tinn v Hoffman

B) Manchester Diocesan Council for Education v Commercial and General Investments

C) Carlill v Carbolic Smoke Ball

D) Hyde v Wrench

Answer

A

B) Manchester Diocesan Council for Education v Commercial and General Investments

Question 19

Q

What is the meaning of the rule that acceptance must be unqualified?

A) The acceptance must follow the mode prescribed by the offeror

B) Only the person/people to whom the offer was made can accept the offer

C) The acceptance must correspond with the offer

D) The acceptance must be made by words

Answer

A

C) The acceptance must correspond with the offer

(The rule is also known as the ‘mirror image rule’)

Question 20

Q

Who can accept an offer?

A) Anyone

B) The person / people who have notice of the offer

C) The person / people to whom the offer was made

D) The person / people capable of performing the obligations under the contract

Answer

A

C) The person / people to whom the offer was made

(If an offer is made to particular people, only those people can accept the offer)

Question 21

Q

A woman offers by email to sell her snooker table to a man for £3,500. The man replies that he is happy to pay £3,500 for the snooker table but wants the cues, balls and framed O’Sullivan picture included for that price. The woman is happy to go ahead with that suggestion. What is the effect of the man’s reply?

A) It amounts to a counter offer

B) It amounts to request for further information

C) It amounts to an effective acceptance

Answer

A

A) It amounts to a counter offer

(To be an effective acceptance, the acceptance must be unqualified. This is not an unqualified acceptance because the man has introduced additional terms relating to the balls etc)

Question 22

Q

What is the postal rule?

A) Where acceptance is communicated by post, the contract is formed as soon as the postman delivers the letter of acceptance to the offeror

B) Where acceptance is communicated by post, the contract is formed as soon as the letter of acceptance is properly posted

C) Where acceptance is communicated by post, the contract is formed as soon as the offeror reads the letter of acceptance

D) Where the revocation of an offer is communicated by post, the revocation takes effect as soon as the letter is properly posted

Answer

A

B) Where acceptance is communicated by post, the contract is formed as soon as the letter of acceptance is properly posted

(This rule was laid down in Adams v Lindsell)

Question 23

Q

Which case was not concerned with communication by instantaneous means?

A) Entores v Miles Far East Corporation

B) The Brimnes

C) Mondial Shipping and Chatering BV v Astarte Shipping Ltd

D) Carlill v Carbolic Smoke Ball Co

Answer

A

D) Carlill v Carbolic Smoke Ball Co

(This case concerned a unilateral offer)

Question 24

Q

In which situation will the postal rule apply?

A) Where the offeror states that they must receive the acceptance

B) Where the letter accepting an offer is posted by being placed in the hands of a postman who is only authorised to deliver letters

C) Where the offeror posts a letter revoking an offer

D) Where the letter accepting an offer is lost in the post

Answer

A

D) Where the letter accepting an offer is lost in the post

Question 25

Q

A binding contract requires all material terms to be certain and complete

A) True

B) False

Question 26

Q

What test does the court apply to determine whether the parties have reached an agreement on all material terms?

A) A subjective test

B) An objective test

Answer

A

B) An objective test

Question 27

Q

The courts will readily strike down an agreement if it lacks certainty

A) True

B) False

Answer

A

B) False

(Correct. This is seen as a last resort and the courts will look to enforce the agreement, reflecting the intentions of the parties, where this is possible)

Question 28

Q

Which statement correctly describes executory consideration?

A) Executory consideration is consideration that is adequate

B) Executory consideration is consideration that is clear and certain

C) Executory consideration is consideration that has been promised but not yet provided

D) Executory consideration is consideration that has already been provided

Answer

A

C) Executory consideration is consideration that has been promised but not yet provided

(Executory consideration is where contracting parties make promises to each other to perform something in the future after the contract has been formed.)

Question 29

Q

Which of the following is a rule governing consideration?

A) Consideration must move from the promisor

B) Consideration must be adequate

C) Consideration must move from the promisee

D) Consideration need not be sufficient

Answer

A

C) Consideration must move from the promisee

(Correct. This is a rule governing consideration)

Question 30

Q

What does the rule that consideration must move from the promisee mean?

A) Consideration must move to the promisor

B) A party who has not provided consideration may not bring an action to enforce the contract

C) Only a person who is party to a contract may sue or be sued on that contract

D) Consideration must have some value in the eyes of the law

Answer

A

B) A party who has not provided consideration may not bring an action to enforce the contract

(A person to whom a promise is made can only enforce the promise if they have provided consideration for the promise)

Question 31

Q

Which case is concerned with a promise to pay more, not a promise to accept less?

A) MWB v Rock

B) Pinnel’s Case

C) Williams v Roffey

D) Foakes v Beer

Answer

A

C) Williams v Roffey

(This case applies to promises to pay more only)

Question 32

Q

A woman pays a cat sitter £70 to feed her cat while she and her flatmate are on holiday. Unknown to the woman, her flatmate had already paid the cat sitter £100 to feed the same cat. The woman is demanding that the cat sitter returns the £70 she paid him, but the cat sitter is refusing to return the money. Which of the following statements is most accurate?

A) The cat sitter is obliged to return the money to the woman as consideration must be sufficient

B) The cat sitter is not obliged to return the money to the woman as past consideration is not good consideration

C) The cat sitter is obliged to return the money to the woman as performance of an existing contractual obligation is not good consideration

D) The cat sitter is not obliged to return the money to the woman as performance of an existing obligation owed to a third party is good consideration

Answer

A

D) The cat sitter is not obliged to return the money to the woman as performance of an existing obligation owed to a third party is good consideration

(Performance of the existing duty owed to Jack is good consideration for the promise by Polly)

Question 33

Q

Which of the following is an example of good consideration?

A) Performance of an existing duty owed to a third party

B) Performance of an existing obligation in a contract between the parties

C) Part payment of a debt

Answer

A

A) Performance of an existing duty owed to a third party

Question 34

Q

Which rule of consideration does promissory estoppel provide an exception to?

A) Consideration must move from the promisee

B) Part payment of a debt without fresh consideration does not discharge the debt obligation

C) Consideration must not be past

D) Consideration must be sufficient but need not be adequate

Answer

A

B) Part payment of a debt without fresh consideration does not discharge the debt obligation

(Promissory estoppel provides an equitable exception to this rule)

Question 35

Q

A restaurant owner owes a vegetable supplier £2500. The restaurant owner knows that the supplier is experiencing financial problems. The restaurant owner gives the supplier a cheque for £1000 in full and final satisfaction of the debt owed. The supplier accepts the cheque but later sues the restaurant owner for the balance of £1500. Which of the following statements is correct?

A) The supplier cannot recover the balance of £1500 because their acceptance of the cheque for £1000 is binding

B) The supplier cannot recover the balance of £1500 as it would be inequitable for them to go back on their word

C) The supplier can recover the balance of £1500 as it is not inequitable for them to go back on their promise

D) The supplier cannot recover the balance of £1500 as their acceptance of the cheque for £1000 discharged the debt

Answer

A

C) The supplier can recover the balance of £1500 as it is not inequitable for them to go back on their promise

(The supplier’s promise to accept less was obtained as a result of pressure on the supplier, therefore the restaurant owner is unlikely to successfully rely on the equitable doctrine of promissory estoppel as it is unlikely that it would be considered inequitable for the supplier to go back on his promise

Question 36

Q

A tenant has lost his job and he is struggling to pay his rent. Keen to help, the landlord informs the tenant that she is willing to accept half the rent due each month until he finds a new job. The tenant pays half rent for two months and uses some of the money he saved to buy new shoes to wear at interviews. The landlord is now having second thoughts. Under what circumstances can the landlord demand full rent?

A) The landlord can demand that full rent is paid immediately

B) The landlord cannot demand full rent as the tenant has accepted her offer therefore she is bound

C) The landlord can demand full rent after the expiry of reasonable notice

D) The landlord cannot demand full rent before the tenant has found a new job

Answer

A

C) The landlord can demand full rent after the expiry of reasonable notice

(A promisor may resume his full legal rights after giving reasonable notice - Tool Metal v Tungsten)

Question 37

Q

Which of the following statements is correct in relation to intention to create legal relations (ICLR)?

A) ICLR is presumed to exist in commercial situations and it is impossible to rebut that presumption

B) ICLR is presumed to exist in all situations unless one of the parties can show that there was no intention to be bound

C) ICLR is determined by taking evidence from the parties as to what was in their minds when entering the contract

D) ICLR is presumed to exist in commercial situations but presumed not to exist in domestic or social situations

Answer

A

D) ICLR is presumed to exist in commercial situations but presumed not to exist in domestic or social situations

(Note that presumptions can however be rebutted)

Question 38

Q

In which type of agreement is intention to create legal relations presumed to exist?

A) Domestic agreements

B) Unilateral agreements

C) Commercial agreements

D) Bilateral agreements

Answer

A

C) Commercial agreements

Question 39

Q

Two companies agree the sale of a house ‘subject to contract’. What does the phrase ‘subject to contract’ imply?

A) The companies have signed a contract and are bound

B) The companies have agreed a binding contract

C) The companies do not intend to be bound until they sign a formal contract

D) The companies are taking advice on the subject matter of the contract

Answer

A

C) The companies do not intend to be bound until they sign a formal contract

(The phrase creates a strong inference that the companies do not intend to be bound until the execution of a formal contract)

Question 40

Q

Which of the following statements is correct regarding the contractual capacity of a minor?

A) A minor can enter into a contract for necessaries and they must pay the actual cost of the necessaries supplied

B) A minor is not bound by a contract which he enters into during their minority

C) A minor who lies about their age is bound by a contract they entered into

D) A minor is bound by a contract of employment but only if it is for their benefit

Answer

A

D) A minor is bound by a contract of employment but only if it is for their benefit

Question 41

Q

What does capacity to contract mean?

A) A person’s ability to understand the terms of a contract

B) The number of contracts a person can enter at a given time

C) A person’s ability to perform the requirements of a contract

D) The ability of a person to enter a binding contract

Answer

A

D) The ability of a person to enter a binding contract

(Adults of sound mind have full contractual capacity. However, minors, the mentally incapacitated and those intoxicated have limited contractual capacity)

Question 42

Q

Which statute defines what necessaries are?

A) The Sale of Goods Act 1979.

B) Minors’ Contracts Act 1987

C) Consumer Credit Act 1974.

D) Law Reform (Frustrated Contracts) Act 1943

Answer

A

A) The Sale of Goods Act 1979

(The definition is found in section 3(3) of that Act)

Question 43

Q

A 16 year old boy cycles to and from school every day. He no longer likes his bicycle as he thinks it is old. He tells his neighbour he is 19 years old and agrees to buy the neighbour’s motorbike for £199. After taking delivery of the motorbike, the boy refuses to pay for it. Which of the following statements is correct?

A) The contract is voidable because the boy lied about his age

B) The boy is bound by the contract as it is for necessaries and for his benefit

C) The neighbour cannot enforce the contract against the boy as he is a minor

D) The neighbour can enforce the contract against the boy as the boy lied about his age

Answer

A

C) The neighbour cannot enforce the contract against the boy as he is a minor

(Correct. The neighbour cannot enforce the contract against the boy as he is a minor and the motorbike is unlikely to fall under the exception of necessaries)

Question 44

Q

In which case was the current definition of economic duress first set out?

A) Barton v Armstrong

B) DSND Subsea Ltd v Petroleum Geo Services ASA

C) Carillion Construction Ltd v Felix (UK)

D) Occidental Worldwide Investment Corporation v Skibs A/S Avanti (The Siboen and The Sibotre)

Answer

A

B) DSND Subsea Ltd v Petroleum Geo Services ASA

(Correct. Mr Justice Dyson stated that: ‘The ingredients of an actionable duress are that there must be pressure, (a) whose practical effect is that there is compulsion on, or a lack of practical choice, for the victim, (b) which is illegitimate, and (c) which is a significant cause inducing the claimant to enter into the contract…’)

Question 45

Q

What is the causation test for duress to the person?

A) The duress must be the only factor influencing the victim’s decision to enter the contract

B) The duress need be only one factor influencing the victim’s decision to enter the contract

C) The duress must be a significant cause influencing the victim’s decision to enter the contract

D) The duress must be a serious factor influencing the victim’s decision to enter the contract

Answer

A

B) The duress need be only one factor influencing the victim’s decision to enter the contract

(There may be many reasons why the victim entered into the contract – the actual or threat of violence need only be one of the reasons (and need not be significant))

Question 46

Q

What is the legal effect of duress on a contract?

A) The contract is voidable

B) The contract is barred

C) The contract is affirmed

D) The contract is void

Answer

A

A) The contract is voidable

(The contract is formed and remains in force, but the victim of the duress may take action to have the contract set aside)

Question 47

Q

What is the causation test for economic duress?

A) The illegitimate pressure might have caused the making of the agreement

B) The illegitimate pressure is one factor that caused the making of the agreement

C) The illegitimate pressure contributed to the making of the agreement

D) The illegitimate pressure must have been decisive in the making of the agreement

Answer

A

D) The illegitimate pressure must have been decisive in the making of the agreement

(Correct. The illegitimate pressure must have been decisive in the making of the contract, in other words, ‘but for’ the pressure, the victim would not have entered into the contract)

Question 48

Q

What key principle was established in the case of Huyton SA v Peter Cremer GmbH & Co?

A) That the causation test for economic duress is the ‘but for’ test

B) Fresh consideration is required for a valid variation agreement

C) That the victim of duress must take prompt action to set aside the contract once the pressure has ceased

D) That a contract entered into as a result of duress is voidable

Answer

A

A) That the causation test for economic duress is the ‘but for’ test

(Correct. The duress must be a significant cause of the victim entering into the contract, in other words, ‘but for’ the illegitimate pressure, the victim would not have entered into the contract)

Question 49

Q

Which of the following is a factor for establishing economic duress?

A) A false representation inducting the decision to vary the contract

B) A lack of practical choice for the party subjected to duress

Answer

A

B) A lack of practical choice for the party subjected to duress

(Correct - this is one of the factors outlined by Dyson J in the leading test for duress, DSND Subsea v Petroleum Geo Services)

Question 50

Q

Felix’s threat to Carillion was made in:

A) Good faith

B) Bad faith

Answer

A

B) Bad faith

(Correct. Felix’s threatened breach of contract was an unlawful threat in bad faith)

Question 51

Q

The effect of the economic duress exerted by Felix was to render the variation of contract between Carillion and Felix:

A) Void

B) Voidable

Answer

A

B) Voidable

(Correct. Economic duress renders a contract voidable)

Question 52

Q

In the case of Carillion v Felix, Carillion had no viable alternative but to agree to Felix’s demand. Which one of the following was NOT one of the circumstances giving rise to Carillion’s lack of practical choice?

A) Carillion had insufficient time to pursue legal action

B) Carillion had insufficient time to find an alternative subcontractor to replace Felix

C) If they did not complete the main contract on time, Carillion would incur late fees in the main contract

D) If they did not complete the main contract on time Carillion would lose out on a future contract with the main contractor

Answer

A

D) If they did not complete the main contract on time Carillion would lose out on a future contract with the main contractor

(Correct. This was not one of the circumstances detailed in Carillion v Felix)

Question 53

Q

A and B have a contract. A offers B more money to perform an existing contractual obligation. When does B provide legal consideration in return for the promise of extra payment?

A) B exceeds their contractual obligation to A

B) B provides A with a practical benefit

Answer

A

A) B exceeds their contractual obligation to A

(Correct. By exceeding their contractual obligation B has provided fresh, legal consideration)

Question 54

Q

In the case of Williams v Roffey did Williams exert duress to bring about Roffey’s promise to pay more?

A) No

B) Yes

Answer

A

A) No

Correct. The absence of duress was an element of Glidewell LJ’s test in Williams v Roffey which was satisfied in this case.

Question 55

Q

The modern trend is to take a more creative approach when assessing whether consideration for a variation is present and instead test the validity of the renegotiation through the doctrine of economic duress.

A) False

B) True

Answer

A

B) True

(Correct. This summarises the current position)

Question 56

Q

What is the leading case on undue influence?

A) Royal Bank of Scotland PLC v Etridge (No. 2)

B) Allcard v Skinner

C) Barclays Bank PLC v O’Brien

D) Barton v Armstrong

Answer

A

A) Royal Bank of Scotland PLC v Etridge (No. 2)

(Correct. The House of Lords heard 8 conjoined appeals and it took the opportunity to lay down guidelines on the law on undue influence)

Question 57

Q

Which of the following is unlikely to be a relationship of influence or ascendancy?

A) A relationship of trust and confidence

B) A relationship of sufficiency

C) A relationship of dependence

D) A relationship where one party is vulnerable

Answer

A

B) A relationship of sufficiency

(Correct. A relationship of sufficiency is unlikely to be one of influence or ascendancy. However, relationships of trust and confidence, or dependence or vulnerability are likely to be relationships of influence or ascendancy)

Question 58

Q

In which of these relationships does the law presume irrebuttably that one person had influence over the other?

A) Employer and employee

B) Guardian and ward

C) A business and its customers

D) Husband and wife

Answer

A

B) Guardian and ward

(Correct. The law presumes irrebuttably that in a relationship between a guardian and his ward, one party had influence over the other. This is irrespective of the true facts. However, the presumption that the transaction was procured by that influence may be rebutted)

Question 59

Q

Why is the case Barclays Bank plc v O’Brien significant in regard to the doctrine of undue influence?

A) It provided guidance as to what bank managers should do if their employees did not follow instructions

B) It provided guidance for lenders concerning how they might avoid being fixed with notice of a contracting party’s undue influence

C) It clarified the law regarding the legal and evidential burden when proving undue influence

D) It clarified the law regarding the effect of undue influence

Answer

A

B) It provided guidance for lenders concerning how they might avoid being fixed with notice of a contracting party’s undue influence

(Correct. The House of Lords in RBS v Etridge (No. 2) continued this theme and provided further guidance as to the steps a lender ought to take to satisfy itself that the charge was the product of the spouse’s free will)

Question 60

Q

When will a bank be put on inquiry that a surety transaction might be tainted by undue influence?

A) Whenever one party in a non-commercial setting is standing as surety for the other party

B) When the debtors default on the loan agreement

C) When the bank meets with the spouse and explains the nature of the loan agreement to that spouse

D) If the transaction is for a large sum of money

Answer

A

A) Whenever one party in a non-commercial setting is standing as surety for the other party

(Correct. This was stated by Lord Nicholls in RBS v Etridge (No. 2))

Question 61

Q

What step should a bank take to satisfy itself that that a surety transaction is not affected by undue influence?

A) The bank should see the spouse itself and discuss the surety transaction with them

B) The bank should provide the solicitor advising the spouse with the bare minimum information about the transaction

C) If the bank is aware that the spouse may have been misled, the bank should tell the solicitor of this

D) The bank should ensure that the spouse has read all the documents pertaining to the transaction

Answer

A

C) If the bank is aware that the spouse may have been misled, the bank should tell the solicitor of this

(Correct. This will enable the solicitor to advise the spouse appropriately regarding the transaction)

Question 62

Q

What remedy will a spouse have if they are unhappy with the standard of service provided by a solicitor regarding a surety transaction?

A) The spouse can sue the solicitor in negligence

B) The spouse can sue the bank for the solicitor’s negligence

C) The bank can sue the solicitor in negligence

D) The spouse can bring a claim for the surety transaction to be set aside

Answer

A

A) The spouse can sue the solicitor in negligence

(Correct. The solicitor has a duty to the spouse, and they can be sued in negligence if they breach that duty)

Question 63

Q

What is a term of a contract?

A) Statements made by the parties which have no legal effect

B) Statements made by the parties in order to induce formation of the contract but which the parties do not intend to be binding

C) Statements made by one party to coerce another party into a contract

D) Statements of fact made by the parties which they intend to be binding

Answer

A

D) Statements of fact made by the parties which they intend to be binding

(Correct. These statements are normally promissory in nature)

Question 64

Q

Which factor is not generally relevant when deciding whether the parties to a contract intended a statement to be binding?

A) The timing of the statement

B) The importance of the statement

C) Special knowledge or skill of the person making the statement

D) The age of the person making the statement

Answer

A

D) The age of the person making the statement

(Correct. The age of the person making the statement is not relevant when deciding whether the parties intended the statement to be binding. The factors that are relevant include the timing and importance of the statement and whether the person making the statement had special knowledge or skills)

Answer 64

A

C) The innocent party can sue for breach of contract

(Correct. The usual remedy for breach of contract is an award of damages)

Answer 65

A

C) Incorporation by agreement

(Correct. This is not a means of ascertaining the terms of a contract. The terms can be ascertained where there is a signed written contract, where there is incorporation by notice, or where there is incorporation by course of dealing)

Answer 66

A

C) The parties can include an ‘entire agreement’ clause in their written contract

(Correct. An entire agreement clause provides that a particular contract or set of contracts constitutes the entire agreement between the parties)

Answer 67

A

C) The claimant was not given reasonable notice of the clause either before or at the time of contracting

(Correct. For a clause to be incorporated into a contract, reasonable notice of it must be given before or at the time of contracting)

Answer 68

A

B) The term operates irrespective of the intention of the parties unless there is a valid exemption clause

(This is the correct answer. Statutory implied terms are imposed in contracts by statute and they operate irrespective of the intention of the parties unless there is a valid exemption clause)

Answer 69

A

A) Unfair Contract Terms Act 1977

(This is the correct answer. The Unfair Contract Terms Act 1977 regulates exemption clauses. The Sale of Goods Act 1979, Supply of Goods and Services Act 1982 and Consumer Rights Act 2015 all contain implied terms)

Answer 70

A

A) Under the common law

(This is the correct answer. Terms implied at common law are not implied in fact. The grounds for implying terms in fact are to give business efficacy to a contract, where the parties have dealt with each other consistently and regularly in the past and on the grounds of trade and professional customs)

Answer 71

A

A) s13

(Correct. It is likely that this table does not correspond with its description)

Answer 72

A

B) s14(2)

(Correct. The goods are not of satisfactory quality as they are not fit for the purpose for which they are commonly supplied)

Answer 73

A

D) The Sale of Goods Act 1979 implies a term that the seller of goods has a right to sell the goods

(This is the correct answer. The Act implies a term that the seller of goods has a right to sell the goods. This implied term is found in s.12(1) of that Act.
The SGA applies to business-to-business contracts only, and not to consumer contracts ie between a trader and a consumer. Satisfactory quality under the Act is judged on an objective basis (s14(2)), and contracting parties can agree to exclude or restrict ss13,14 and 15 of the SGA 1979, subject to the Unfair Contract Terms Act 1977)

Answer 74

A

D) Contracts of sale of goods

(This is the correct answer. The Supply of Goods and Services Act 1982 does not apply to contracts of sale of goods (see s1(2)(a) of the 1982 Act).
The SGSA however applies to, and implies terms to contracts for the hire of goods, contracts for the supply of services and certain contracts for the transfer of property in goods)

Answer 75

A

D) Performed with reasonable care and skill

(This is correct. See S 13 SGSA 1982)

Answer 76

A

D) s9 of the Supply of Goods and Services Act 1982

(This is the correct answer. The contract for the hire of the vehicle is an example of a contract for the hire of goods and accordingly, s 9 of the SGSA 1982 which implies a term regarding quality or fitness to contracts, may be relevant.
Regarding the other options, the Consumer Rights Act 2015 does not apply as the contract in the scenario is not between a trader and a consumer; the Sale of Goods Act 1979 does not apply as the contract is for the hire of the vehicle, and not for sale of goods, and finally, s13 of SGSA applies where services are being supplied – that is not the case in this scenario)

Answer 77

A

C) The consumer has a right to require the trader to perform the service again to the extent necessary to complete its performance in conformity with the contract

(This is the correct answer. The right to repeat performance is governed by s.55 of the Consumer Rights Act 2015. Where a trader breaches the implied term that he must perform the services contract with reasonable care and skill, the consumer has only two remedies available to him under the 2015 Act. The first is the right to repeat performance already stated, and the second remedy is the right to a price reduction)

Answer 78

A

C) A trader and a consumer

(This is the correct answer. S1(1) of the 2015 Act states that the Act regulates agreements between a trader and a consumer. Sections 2(2) and 2(3) of the Act define a trader and a consumer)

Answer 79

A

B) s34(1) of the Consumer Rights Act 2015

(This is the correct answer. The contract is between a bookshop (a trader) and a student (a consumer) therefore the Consumer Rights Act 2015 applies. An e-book is an example of digital content. S.34(1) of the 2015 Act states that ‘every contract to supply digital content is to be treated as including a term that the quality of the digital content is satisfactory.’)

Answer 80

A

B) The term is classified as a condition, but it may be treated as a warranty if the breach is so slight that it would be unreasonable for the buyer to reject the goods

(This is the correct answer. The term is classified as a condition by s 13(1A). However, s 15A of the Act must be considered and the classification of the term may change depending on the severity of the breach)

Answer 81

A

A) The innocent party is limited to suing for damages where the consequence of the breach is minor

(This is the correct answer. The remedy for breach of an innominate term can be identified by applying the test in the case of Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha Ltd.
The test focuses on the consequences of the breach and asks the question whether the breach has deprived the innocent party of substantially the whole benefit of the contract. Where the question is answered in the affirmative, ie the consequences of the breach are serious, the term will be treated as a condition. Where the question is answered in the negative, ie the consequences of the breach are minor, the term will be treated as a warranty.
Regarding the other options, note that the remedy of rescission is not available for breach of contract)

Answer 82

A

A) The innocent party can accept the repudiatory breach, affirm the contract and sue for damages

(This is the correct answer. The right to accept the repudiatory breach is mutually exclusive to the right to affirm the contract – the innocent party either accept the repudiatory breach or they can affirm the contract. They cannot do both. Please note that whichever option the innocent party takes, they will also have the right to sue for damages for the breach.
The other options given in the answers are all open to the innocent party.)

Answer 83

A

A) Construction means interpreting the exemption clause to determine whether the clause as drafted covers the breach and loss that has occurred

(This is the correct answer. Construction of an exemption clause is simply interpreting the clause to see if it succeeds in protecting the party in breach from liability)

Answer 84

A

B) Using the word negligence or a close synonym for negligence

Answer 85

A

A) When an exemption clause occurs in a commercial contract between parties of equal bargaining power

(This is the correct answer. Following Persimmon Homes Ltd v Ove Arup & Partners Ltd [2017] when an exemption clause occurs in a commercial contract between parties of equal bargaining power, the contra proferentem rule and the Canada Steamship test might well be less useful than considering the normal meaning of the words construed in the light of the other provisions of the contract)

Answer 86

A

C) A clause excluding liability for death or personal injury resulting from negligence

(This is the correct answer. This is by virtue of s2(1) of the 1977 Act.
The other options are incorrect as the exemption clauses can exclude liability if they satisfy the requirement of reasonableness)

Answer 87

A

A) The Act regulates exemption clauses that seek to exclude or restrict liability where both parties are acting in the course of a business

(This is the correct answer. The purpose of the Act is set out in the preamble while its scope is set out in s1(3))

Answer 88

A

A) At the time the contract was made

(This is the correct answer. The reasonableness test is set out in s.11 of the Act and guidelines to be used in applying the test are found in schedule 2 of the Act.
S.11 states that the reasonableness of a contractual term is judged taking into account the circumstances which were or ought reasonably to have been known or in the contemplation of the parties when the contract was made)

Answer 89

A

B) A contract of employment

(This is the correct answer. S. 48(2) of the 2015 Act states that contracts of employment are not covered by the Act.
In contrast, the Act covers contracts for the supply of goods to consumers, contracts for the supply of digital content to consumers and contracts for the supply of services to consumers)

Answer 90

A

C) A term is unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer

(This is the correct answer. S.62(4) of the Act states that ‘A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.’)

Answer 91

A

A) The Act makes unenforceable any term which restricts liability for breach of the requirement that services are performed with reasonable care and skill

(This is the correct answer because this proposition is not correct. S.57(1) provides that a customer is not bound by a term in a contract to supply services to the extent that it would totally exclude the trader’s liability to perform the service with reasonable care and skill, but a restriction of liability (to a specific sum) will not be binding to the extent that it would prevent the consumer from recovering the price paid, but otherwise could be binding.
The other three answers are all correct interpretations of the 2015 Act and its effects)

Answer 92

A

A) A statement asserting the truth of a given state of facts

(Correct. This definition was given in the case of Kleinwort Benson Ltd v Malaysia Mining Corp)

Answer 93

A

A) Conduct

(Correct. Statements can also be made by conduct. In the case of Gordon v Selico, the intentional concealment of dry rot was found to be a misrepresentation)

Answer 94

A

D) A representation that is known to be untrue by the representee

(Correct. There will be no actionable misrepresentation as the representation is unlikely to have induced the representee to enter into the contract)

Answer 95

A

A) A statement that relates to an issue that would have influenced a reasonable person

(Correct. This objective test for materiality was stated by Lord Mustill in Pan Atlantic Co Ltd v Pine Top Insurance Co Ltd)

Answer 96

A

D) A statement that is technically true but misleading

(Correct. This was illustrated in the case of Dimmock v Hallett where a property was described as fully let. The property was indeed fully let at that time, but the vendor did not disclose to the buyer that the tenants had given notice to quit)

Answer 97

A

C) Contracts of service

(Correct. This is not an exception to the rule that silence is not a statement of fact. The exceptions to the rule include half-truths, contracts uberrimae fidei and continuing representations)

Answer 98

A

B) Where it is proved that the opinion expressed was not one which the representor believed

(Correct. This also applies if the opinion expressed is not one which a reasonable man with the knowledge of the representor could have reasonably held)

Answer 99

A

D) At the time the representors made the statement of future intention, they knew that they did not intend to do what they said they would do

(Correct. The statement of future intention was elevated to a statement of fact because of the deception)

Answer 100

A

D) A false representation that was made knowingly or without belief in its truth or recklessly

(Correct. These requirements were stated by Lord Herschell in Derry v Peek)

Answer 101

A

C) s2(1) Misrepresentation Act 1967

(Correct. The definition of an innocent misrepresentation is derived from the Misrepresentation Act 1967, s.2(1))

Answer 102

A

A) The normal burden of proof is reversed and the defendant bears the burden of proving that they had reasonable grounds for believing their statement and that they did believe it

(Correct. The claimant bears the burden of proof in a claim for fraudulent misrepresentation and it is a difficult burden to discharge. However, the 1967 Act reverses the standard of proof for negligent misrepresentation and places the burden on the defendant to prove that he had reasonable grounds to believe his statement and that he did believe it)

Answer 103

A

B) Rescission, damages in lieu of rescission and indemnity

Answer 104

A

A) Yes, as long as the clause satisfies the requirement of reasonableness as stated in s. 11(1) of the Unfair Contract Terms Act 1977

(Correct. This is stated in s. 3 of the Misrepresentation Act 1967)

Answer 105

A

A) Negligent misrepresentation

(Correct. Contributory negligence is available as a defence to a claim for negligent misrepresentation only)

Answer 106

A

A) Misrepresentation and breach of contract

Answer 107

A

B) Negligent misstatement

(Correct. The correct claim is negligent misstatement. There is no claim in negligent misrepresentation as the accountancy firm’s negligent advice did not induce the client to enter a loss making contract with them but with a third party. See s 2(1) MA 1967)

Answer 108

A

A) …of no legal effect from the outset

(A contract which is void, in contrast to voidable, is void from the outset. It has no legal effect from the outset.
The other answers are incorrect. A contract which is void does not need to be / cannot be terminated: it never has any legal effect in the first place. For a similar reason, it does not need to be / cannot be set aside by the court. Similarly, it cannot be effective to transfer property, because it has no legal effect)

Answer 109

A

B) Fundamental mistake

(This is not one of the three categories of mistake that can amount to an operative mistake. The three categories are common mistake, mutual mistake and unilateral mistake – each is explained in this element)

Answer 110

A

B) The contract will be void if the seller can persuade the court that the identity of the buyer and not their attributes was of vital importance to the contract

(Correct. The general rule is that where there is a unilateral mistake as to identity in a face to face setting, the contract formed is voidable as it is presumed that the seller intended to contract with the person in front of them identified by sight and hearing and that is what happened. However, the contract will be void if the seller can persuade the court that the identity of the buyer was fundamental to the contract)

Answer 111

A

A) A distance selling transaction

(This is the correct answer, well done)

Answer 112

A

B) In a face-to-face transaction where there is a fraudulent misrepresentation as to the attributes of the buyer

(Correct, the contract between the fraudster and the seller is voidable. Title will pass to the innocent third party)

Answer 113

A

B) Ex turpi causa non oritur actio

(Well done! This translates approximately to ‘no action may be based on an illegal cause’, as it is another way of referring to the defence of illegality.
Volenti non fit injuria is another way of referring to the defence of consent)

Answer 114

A

C) Has the claimant committed an illegal (or grossly immoral) act?

(Well done. Whilst in almost all cases the defence involves illegality, it appears that gross immorality may also allow the defence to be raised. It is neither necessary, nor sufficient, that the claimant has committed a tort. It is true that unless the defendant had committed a tort, you would not be looking at defences at all: but the defendant committing a tort is not part of the defence itself. The illegality must be on the part of the claimant)

Answer 115

A

C) Whether the claimant’s claim is founded upon their own criminal or immoral act

(Well done. Prior to Patel v Mirza it was generally thought that the defence only arises if the facts which give rise to the claim are inextricably linked with the criminal activity. The court made clear that that was no longer the test, but this is still likely to be a relevant consideration when considering proportionality. The other three answers are the three considerations identified in Patel v Mirza)

Answer 116

A

C) A person who is not a party to a contract cannot acquire any rights under that contract or be subject to any of its obligations

(No person can sue or be sued on a contract unless he is a party to it)

Answer 117

A

B) Consideration must move from the promisee

(There is a close relationship between the doctrines of privity and consideration as demonstrated by the cases of Tweddle v Atkinson and Dunlop v Selfridge)

Answer 118

A

A) Contracts (Rights of Third Parties) Act 1999

(The Act provides a statutory exception to the doctrine of privity by enabling a third party who is neither a party to the contract, nor has provided consideration to enforce a term of the contract in certain circumstances)

Answer 119

A

C) Dunlop Pneumatic Tyre Co. Ltd. v Selfridge & Co

(The House of Lords held that the claimant, a third party, had no right to enforce the contract between Dew & Co. and the defendant because of the operation of the doctrine of privity of contract)

Answer 120

A

D) Shanklin Pier v Detel Products

Answer 121

A

C) Restitution

(Restitution is not a method of circumventing the doctrine of privity of contract. Restitution is a remedy that seeks to restore a benefit conferred in circumstances in which it would be unfair for the recipient to retain that benefit)

Answer 122

A

D) No. The wife should sue the car manufacturer in the tort of negligence

(The doctrine of privity, which prevents the wife from suing the car manufacturer and car dealer in contract, does not apply in tort actions. The wife should therefore sue the car manufacturer in tort for breach of their duty of care)

Answer 123

A

B) A third party has available to them the same remedies as the parties to the contract

(Correct. S1(5) of the 1999 Act makes available to a third party the same remedies for breach of contract which are available to a party to the contract)

Answer 124

A

C) The wife can enforce the contract under s1(1)(b) and s1(3)

(Correct. The wife can enforce the contract as it purports to confer a benefit on her (s1(1)(b)) and she has been identified by description s1(3))

Answer 125

A

B) Where the contract expressly provides that they may

(Correct. This is pursuant to s1(1)(a) of the 1999 Act)

Answer 126

A

B) Discharge by mistake

(This is the correct answer. A contract affected by mistake is either void or voidable depending on the type of mistake. A void contract has no legal effect from the very beginning, so it does not need to be discharged(terminated). A voidable contract can be rescinded by the innocent party and will then be treated as having no effect from the beginning)

Answer 127

A

B) Substantial performance

(This is the correct answer. A contractual obligation is discharged by a complete performance of the obligation. The effect of this is that a party is entitled to payment only after he has completed performance. However, an exception arises where a contract has been substantially performed. The party who rendered substantial performance may be awarded the contract price subject to a deduction to reflect the proportion of the obligation not performed.
The other exceptions to the entire obligations rule are acceptance of partial performance, divisible obligations and wrongful prevention of performance)

Answer 128

A

A) An obligation is discharged by complete performance of the obligation. Until the obligation is completely performed, the performing party is not entitled to payment

(This is the correct answer. This rule was illustrated in the case of Cutter v Powell. Cutter died seven weeks into performance of the contract and nineteen days before its end. His widow sued Cutter’s employer for a proportion of the agreed price. Her action failed as the court found the contract to be entire, and Cutter was obliged to perform his obligations in full before he could be entitled to any payment)

Answer 129

A

B) By a subsequent binding contract between the parties

(This is the correct answer. The parties form a new contract by which they agree to bring the old contract to an end and release each other from their obligations under the old contract)

Answer 130

A

B) The dress maker and customer can enter a new contract in which they waive their rights under the old contract in consideration for being released from their obligations under the old contract

(This is the correct answer. This is known as mutual waiver.
The other options are problematic for various reasons: only one party is released from their obligation, no consideration has been provided in the new contract, and in the case of Jenny suing Cathy for breach of contract, litigation is normally not an amicable means of resolving a problem)

Answer 131

A

D) It is a condition in a contract that must be fulfilled before the contract itself or certain contractual rights or obligations become binding

(This is the correct answer. The condition precedent suspends the contract or specific right or obligation until the condition is satisfied)

Answer 132

A

A) This is where one party breaches a term of the contract which is either a condition or an innominate term which is to be treated as a condition

(This is the correct answer. The consequence of a repudiatory breach is that the innocent party has a right to damages plus either terminate or affirm the contract)

Answer 133

A

C) The innocent party can claim damages arising from the specific breach as well as the loss of the contract caused by the termination of the contract as a whole

(This is the correct answer. The usual remedy for breach of contract is an award of compensatory damages. However, where the breach is repudiatory in nature, the innocent party can treat the contract as terminated and sue for damages for the loss of the contract as a whole)

Answer 134

A

C) The innocent party must mitigate their loss when deciding whether or not to affirm the contract

(This is the correct answer. A party who chooses to affirm the contract is not required to mitigate their loss. This was illustrated in the case of White & Carter (Councils) Ltd v McGregor)

Answer 135

A

C) Performance of the contract is more expensive

(This answer is correct. Lord Simon in National Carriers Limited v Panalpina (Northern) Limited stated that a contract is not frustrated because it has become more expensive or onerous to perform.
The other three answers will make a contract radically different thus frustrating the contract)

Answer 136

A

B) Defend the action on the ground that the contract has become frustrated as performance is impossible

(This is the correct answer. Frustration due to impossibility can extend to illness and other reasons. In Condor v Barron Knights, the contract was frustrated when the drummer in a pop group was taken ill and only capable of performing 3 or 4 nights a week. The dressmaker should therefore run frustration as a defence to the action)

Answer 137

A

A) An act which has been declared illegal

(This is the correct answer. An act which has been declared illegal will lead to a contract becoming frustrated)

Answer 138

A

A) The Law Reform (Frustrated Contracts) Act 1943 deals with obligations arising prior to the frustrating event

(This is the correct answer. Regarding the other options, it is important to note that the 1943 Act deals with the consequences of frustration only. It does not deal with the situations that will lead to a contract becoming frustrated – that is dealt with under the common law rules)

Answer 139

A

C) The decision clarified that the court has a broad discretion under s 1(2) Law Reform (Frustrated Contracts) Act 1943 to order such retention or recovery of money as it thinks just in all the circumstances to account for expenses incurred by the payee

(This is the correct answer. The broad discretion of the court under s 1(2) Law Reform (Frustrated Contracts) Act 1943 allows justice to be done between both parties)

Answer 140

A

B) BP Exploration (Libya) Ltd v Hunt (No.2)

(This is the correct answer. This is the correct answer. The case established that there are two steps involved in a s.1(3) claim: (i) identification and valuation of the benefit and (ii) the assessment of a ‘just sum’. The court examined these two steps in detail in the decision.
Regarding the other answers, Gamerco SA v ICM/Fair Warning (Agency) Ltd is the leading case on s.1(2) of the Act, and Appleby v Myers and Taylor v Caldwell are common law decisions that pre-date the Act)

Answer 141

A

D) Loss of reputation

(This is the correct answer. Expectation interest can be calculated using one of the following mechanisms: cost of cure, diminution in value or loss of amenity)

Answer 142

A

B) It is aimed at putting the innocent party in the position they would have been in had the contract been properly performed

(This is the correct answer. It is the default approach to compensating the innocent party for the losses they have suffered as a result of the breach of contract)

Answer 143

A

B) Anglia Television Ltd v Reed

(This is the correct answer. The court held that a party may recover his reliance loss where he has incurred expenses before the conclusion of the contract. The court further held that a party may recover pre-contract expenses as part of their reliance interest as long as the expenses were within the reasonable contemplation of the parties that it would be wasted as a result of the defendant’s breach)

Answer 144

A

C) An award of damages is aimed at compensating the innocent party for the damage or loss they have suffered as a result of the other party’s breach of contract

(This is the correct answer. Contract law aims at compensating the innocent party for the loss they have suffered, and not punishing the party who is in breach of contract)

Answer 145

A

C) Damages will be awarded for loss of chance if the lost chance is quantifiable in monetary terms and there was a real and substantial chance that the opportunity might have come to fruition

(This is the correct answer. This was as a result of the decision in the case of Chaplin v Hicks)

Answer 146

A

A) The House of Lords introduced a further exception to the general rule that damages will not be awarded for mental distress

(This is the correct answer. The House of Lords allowed damages for loss of amenity where a major object of the contract was to provide pleasure, relaxation and peace of mind. This was moving on from the position in Jarvis v Swann where damages were awarded only where the whole object of the contract was pleasure, relaxation and peace of mind)

Answer 147

A

C) The test is whether the defendant’s actions were a dominant or effective cause of the loss

(This is the correct answer. This was stated by the court in Galoo Ltd v Bright Grahame Murray)

Answer 148

A

A) The damages which arise naturally according to the usual course of things from the breach, or those which the parties contemplated at the time they made the contract would probably be caused by a breach of contract

(This is the correct answer. This rule was established in the decision of the House of Lords in the case of Hadley v Baxendale (1854) 9 Ex 341)

Answer 149

A

C) The claimant will not be able to recover the losses attributable to the failure to mitigate

(This is the correct answer. While there is no duty to mitigate one’s losses, the claimant will not be able to recover losses which are due, not to the breach itself, but their own failure to behave reasonably after the breach)

Answer 150

A

A) An innocent party cannot recover expenses that would have been wasted whether or not the breach of contract occurred

(This is the correct answer. The claimant was unable to recover the money he spent improving the premises as he was unable to show that he would have been able to recoup that expenditure had the contract not been breached.
Regarding the other options, it should be noted that reliance losses are incurred prior to the breach of contract and they are intended to put the claimant in the position he would have been in had he not entered into the contract.
The decision in C & P Haulage v Middleton confirms that reliance interest is not recoverable where the claimant’s losses are as a result of having made a bad bargain)

Answer 151

A

B) In exceptional circumstances where traditional remedies are inadequate

(This is the correct answer. Lord Nicholls’ decision in the Blake case shows that the inadequacy of other remedies is key to the award of an account of profits. A further requirement is that the claimant must show that they have a legitimate interest in depriving the defendant of his profit)

Answer 152

A

A) 30 days

(This is the correct answer. Section 22(3) of the 2015 Act states that the short-term right to reject non-conforming goods is available to a consumer for 30 days running from the time that: (i) ownership has passed (or, in the case of contracts for hire or the like, possession has been transferred) and (ii) the goods have been delivered and (iii) in cases where the trader is required to install the goods or to take other action to enable the consumer to use the goods, the trader has notified the consumer that the required steps have been taken)

Answer 153

A

A) The right to repeat performance

(This is the correct answer. The right to repeat performance is not available when goods supplied are non-conforming. The right to repeat performance is available when services standards are breached)

Answer 154

A

A) The consumer has a right to a price reduction

(This is the correct answer. S.44(3)(a) of the 2015 Act provides that a consumer has a right to a price reduction because of S.43(3)(a) of that Act ie where the consumer cannot require the trader to repair or replace the digital content if that remedy is impossible)

Answer 155

A

C) A clause which stipulates a certain sum of money which is payable in the event of a particular breach of contract

(This is the correct answer. The Supreme Court examined the law on liquidated damages clauses and penalty clauses in the joined cases of Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis)

Answer 156

A

C) The liquidated damages clause will be struck down and the claimant will be entitled to unliquidated damages assessed by the court using the normal rules of contract law

(This is the correct answer. The law on liquidated damages clauses and penalty clauses changed following the judgment of the Supreme Court in Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis)

Answer 157

A

C) It is an obligation triggered by breach of contract to compensate the innocent party

(This is the correct answer. The distinction between a primary and a secondary obligation is of paramount importance when establishing whether a liquidated damages clause is valid or whether it is a penalty. A primary obligation will not engage the penalty rule, whereas a secondary obligation could potentially be a penalty)

Answer 158

A

C) Breaching the court order has severe consequences as it can be treated as contempt of court and lead to imprisonment

(This is the correct answer. The possibility of imprisonment makes it more likely that a respondent will comply with an order for specific performance)

Answer 159

A

D) It is an order restraining a party from breaching a term in a contract which requires him not to do something

(This is the correct answer. Another way of defining a prohibitory injunction is that it is an order that restrains a party from breaching a negative term of a contract)

Answer 160

A

C) It is available to a successful party as of right

(This is the correct answer. An order for specific performance is an equitable remedy so it is granted at the discretion of the court)

Answer 161

A

B) Where Party X gives a guarantee to Party Y, Party X is promising that Party Z will do what it agreed to do, and/or Party X will carry out that obligation in Party Z’s place if Party Z fails to do so

(Correct. Well done! The other definitions are either nonsensical or describe an indemnity rather than a guarantee)

Answer 162

A

B) Party X promises that if Party Y suffers a loss then Party X will cover the loss. The type of loss covered will be defined in the indemnity

(Correct. Well done. Note that the answer ‘Party X promises that if Party Y suffers a loss following Party Z’s default then Party X will cover the loss. The type of loss covered and the identity of Party Z will be defined in the indemnity’ does also describe a type of indemnity, but the concept of indemnity is broader, and can include a two-party as well as a three-party situation, which is why this definition is correct)

Answer 163

A

B) The man has made an offer which is accepted by someone returning the dog to the man

(Correct: this is what the case of Carlill v Carbolic Smoke Ball Company suggests. This is a unilateral contract. Only returning the dog will constitute acceptance – simply finding the dog would be insufficient)

Answer 164

A

B) The notice constitutes an invitation to treat. The woman’s letter dated 5 February is an offer. The Council’s letter of 11 February is an acceptance

Answer 165

A

E) The advert is a unilateral offer. The woman and the man are both entitled to a token as they have completed the act prescribed by the advert

Answer 166

A

C) The auctioneer is in breach of a unilateral contract and the antique collector is entitled to damages

(Although a request for bids at an auction is usually no more than an invitation to treat, a statement that an item will be auctioned ‘without reserve’ constitutes a unilateral offer which is accepted by the act of a bona fide bidder making the highest bid (Warlow v Harrison, confirmed in Barry v Davies). No contract for sale of the table has been concluded between the parties, as the auctioneer’s hammer has not fallen (which would otherwise constitute acceptance of the antique collector’s offer – Payne v Cave). As a result, the antique collector is not entitled to the table. However, the antique collector has accepted the auctioneer’s unilateral offer by making the highest (albeit the only) bid at the auction and is therefore entitled to damages for breach of that separate collateral contract (Barry v Davies))

Answer 167

A

C) The interested buyer’s response is a request for further information. The campervan owner’s offer remains open for acceptance

(Correct. The statement is a request for further information as the interested buyer is making an enquiry about an ancillary matter. The answer correctly states the legal effect of a request for further information (see Stevenson Jacques v McLean [1880] 5 QBD 346). The other answers seem plausible, but they are not correct. A request for further information does not terminate the offer (see Stevenson Jacques v McLean [1880] 5 QBD 346) A valid acceptance must be unconditional (see Hyde v Wrench 49 ER 132) A counter offer must propose alternative terms for acceptance (see Hyde v Wrench 49 ER 132))

Answer 168

A

D) The landlord is likely to be entitled to £12,000 going forward, but not to recover £4,500 for each of the 9 months when the tenant only paid £7,500

(Correct. This is the likely result of applying the principles of promissory estoppel to this situation. Promissory estoppel suspends the right to full payment (of £12,000), but that right is brought back to life by reasonable notice in this scenario)

Answer 169

A

C) No, the contract is not enforceable against the girl as she is a minor and none of the exceptions to the general rule apply

Answer 170

A

B) The gardener is entitled to payment. The client requested the work was carried out, the client and gardener must have understood that the act was to be rewarded and the payment would be legally enforceable if promised in advance

(Correct. The exception to the past consideration under Pao On v Lau Yiu Long [1979] UKPC 17 is particularly relevant to this scenario)

Answer 171

A

C) The contractor will be entitled to the extra £10,000 if the contractor’s ability to honour his promise to his guests amounts to factual consideration

(Correct. This is the likely result of applying the case of Williams v Roffey Bros & Nicholls Contractors Ltd [1989] EWCA Civ 5 to this situation)

Answer 172

A

E) As the friend accepted the man’s offer when they were friends there is a presumption that the parties did not intend to create legal relations. However, this presumption is rebutted by the parties’ conduct

Answer 173

A

B) Yes. The physical threat was one of the reasons the man entered into the contract and duress will be found unless the seller can prove the threat contributed nothing

(Correct. This answer correctly applies the leading case on duress to the person, Barton v Armstrong. The other answers seem plausible but are not correct as they do not correctly outline the elements of duress to the person and/or the test of causation applied to duress to the person)

Answer 174

A

A) The landlady’s claim for economic duress is likely to succeed. Although the landlady delayed taking action to set the contract aside this is unlikely to amount to an act of affirmation

(Correct. The builder’s demand is likely to amount to economic duress applying the leading test set out by Dyson J in DSND Subsea v Petroleum Geo Services. Although delay in seeking to set aside the contract can prevent a claim in duress succeeding, the land lady’s short delay in setting the contract aside is unlikely to be sufficient to be regarded as an act of affirmation. The other answers seem plausible but they are not correct. All elements of Dyson J’s test for duress need to be considered. It is not correct to state that duress will succeed based on only one element of the test)

Answer 175

A

E) Yes. The publisher was using this as a means of extorting money it knew was not due to it

(Correct. This answer correctly applies the criterion of illegitimate pressure. The other answers seem plausible, but they are not correct. Duress trumps the principle of freedom of contract. The relevant test for illegitimate pressure looks at the intentions of the person making the threat. Access to another credit facility is not relevant to illegitimate pressure but to a different part of the test – lack of practical choice)

Answer 176

A

B) Undue influence

(Correct. Although there is some overlap between the doctrines of duress and undue influence, this is the most appropriate cause of action on the facts)

Answer 177

A

D) As long as the restaurant can make another high quality meal for the critic, they have sufficient practical choice, such that there was no duress

(Correct – for economic duress, there must be a lack of practical choice. The test is practical choice in relation to acquiescence to the demand. As long as the restaurant can make another dish which is equally likely to impress the critic then they had a practical choice, and did not have to agree to pay £1000. The sellers demand was a threat made in bad faith (but it did not present a lack of practical choice))

Answer 178

A

E) The online retailer has breached an implied term under the Sale of Goods Act 1979 to provide goods of satisfactory quality. The company owner may have been entitled to return the forklift truck; however, he affirmed the contract by using the forklift truck for a month. Consequently, he cannot return the forklift truck and get a refund

(Correct. This answer correctly identifies the breach, the available remedy and the effect of affirmation)

Answer 179

A

E) The stable yard owner’s statement that the pony is happy to be petted is likely to be a term of the contract. This is because it was important to the mother, the stable yard owner had specialist knowledge, she prevented the mother from checking, and the statement was made on the same day the contract was entered into

(Correct. This answer correctly applies the legal principles on distinguishing a representation from a term)

Answer 180

A

B) The company has breached the implied term under the Consumer Rights Act 2015 that a service must be performed with reasonable care and skill

(Correct. This answer recognises the distinction between business-to-consumer contracts, and business-to-business contracts and applies the correct statute)

Answer 181

A

D) The remedies available to the customer as a result of this breach are as set out in the Consumer Rights Act 2015

(Correct. The other answers seem plausible, but they are not correct as they fail to identify which legislation this implied term comes from)

Answer 182

A

A) The Term was not incorporated into the parties’ contract because an objective party would not consider the document to have contractual effect

(This answer correctly applies the principles of incorporation of contractual terms)

Answer 183

A

E) The supplier has breached an implied term under the Sale of Goods Act 1979 as the hairdryer was not of satisfactory quality. Although, the exemption clause was incorporated by signature, the Unfair Contract Terms Act 1977 states that it would only be possible to limit liability for the property damage in so far as the exemption clause satisfies the requirement of reasonableness

(Correct. This answer sets out the correct breach under the Sale of Goods Act 1979 and recognises that the clause has been effectively incorporated but would be subjected to the requirement of reasonableness under the Unfair Contract Terms Act 1977. Although the other answer options sound plausible they are all incorrect. This contract does not fall under the Consumer Rights Act 2015. The clause has been validly incorporated through signature. As there is no personal injury loss s2(1) Unfair Contract Terms Act 1977 is not engaged. The fact that this clause could relate to personal injury caused by negligence does not invalidate the clause vis a vis other heads of damage)

Answer 184

A

C) The Clause will not be effective to exclude liability for the student’s injuries

(This is the correct position under the Consumer Rights Act 2015)

Answer 185

A

C) The carpenter has breached an implied term of the Supply of Goods and Services Act 1982 by failing to carry out the service with reasonable care and skill. The exemption clause limits liability for negligence at common law, however the clause will only be effective in accordance with the Unfair Contract Terms Act 1977 if it satisfies the requirements of reasonableness

(Correct. This answer sets out the correct breach under s 13 SGSA and recognises that the clause is effective at common law (passing incorporation and construction) but would be subjected to the requirement of reasonableness under the Unfair Contract Terms Act 1977)

Answer 186

A

B) This clause is enforceable

(Correct. This is a consumer contract. The Consumer Rights Act 2015 includes a broad provision that makes terms generally not binding on the consumer if they are unfair. However, the court cannot assess terms specifying the main subject matter of the contract or assess the fairness of the price of goods. The payment obligation cannot be interfered with. If the court was able to assess this term for fairness, the test would be whether it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer)

Answer 187

A

B) The extent to which the clause is effective is likely to depend on the price paid by the homeowner

(Correct. The clause has been incorporated – it is contained within a signed contract. This is a consumer contract for services, and this situation is governed by the Consumer Rights Act 2015. The obligation which the decorator seeks to exclude is the obligation under s 49 of the Act to provide the service with reasonable care and skill. Any attempt to entirely excludethis term will not be binding on the consumer. Any attempt to restrict / limit liability under section 49 will not be binding to the extent that it would prevent the consumer from recovering the price paid – so effectively, liability cannot be limited to less than the price paid, but a restriction / limitation that does not have this effect is not necessarily problematic (although it could be if it falls under the broader regulation of ‘unfair terms’). For this reason, the price paid is important)

Answer 188

A

D) The seller’s statement about future plans is likely to be an actionable misrepresentation which would be categorised as fraudulent

(Correct. All the requisite elements of a claim in misrepresentation are present (statements of intention are actionable in limited circumstances), and as this statement was a knowingly false statement of fact (Edgington) it seems likely that it would fulfil the definition of fraud - Derry v Peek – knowingly, without honest belief in truth of statement, or recklessly – ‘total disregard for the truth)

Answer 189

A

A) The hotelier’s statement about the contractual licence is an actionable misrepresentation

(Correct. All the elements of an actionable misrepresentation are present. It is neither a statement of opinion, intention nor ‘advertising hyperbole’)

Answer 190

A

E) The representee will be able to set aside the contract for misrepresentation unless the representor is able to show that her statement did not influence him

(Correct. The representor has made a material representation. The representee will be able to set the contract aside unless the representor is able to show the statement did not influence the representee (Pan Atlantic v Pine Top). The other answers seem plausible, but they are not correct. If the representee does not rely on the representor because he exclusively relies on his own independent check then a claim in misrepresentation will fail. However, if the misrepresentation continues to play a real and substantial part (despite the independent check) then the claim can still succeed. A one week delay is unlikely to act as a bar to rescission. If the representee carries out a negligent check this will not impact on a claim or the remedy available for fraudulent misrepresentation. Note that damages may be reduced for contributory negligence if the misrepresentation was negligent (the statement in the scenario is fraudulent))

Answer 191

A

C) The Caravan owner’s conduct in hiding the damp will not amount to an actionable misrepresentation as the buyer did not inspect the bathroom prior to contracting, consequently, she was not induced to enter into the contract by this conduct

(Correct. This answer sets out the issues of inducement in relation to this potential misrepresentation correctly. The other answers appear plausible but are incorrect. As the bathroom was not inspected there is no inducement and consequently no misrepresentation. Had the buyer inspected the statement this would be a fraudulent misrepresentation)

Answer 192

A

D) The cake shop owner has made an actionable misrepresentation. This will be a negligent misrepresentation

(Correct. This answer correctly identifies that an actionable misrepresentation has been made by the seller. This is a continuing representation (With v O’Flanagan). This will be a negligent misrepresentation as she will not be able to discharge the burden proof upon her under s 2(1) to show actual belief and reasonable grounds to believe that her statement is true at the time the contract was made (as the circumstances changed before the sale). The other answers seem plausible but they are not correct. Whilst there is no general duty of disclosure under English law, a continuing representation (With v O’Flanagan) is an exception to this principle. It cannot be said that this will be a fraudulent misrepresentation. Fraud must be proved in relation to the failure to disclose the change in circumstances. As the cake shop owner does not know she is obligated to share this information it will not be fraudulent. This is not an innocent misrepresentation as the seller will not be able to discharge the burden upon her under s 2(1) to prove her statement was not negligent. Even if a court were to consider that the buyer should have investigated the profit levels himself prior to sale, this will not prevent the statement from being actionable, it will only have an impact on the seller’s defence of contributory negligence)

Answer 193

A

C) This is likely not a mistake as to identity but one of attributes, and therefore there is no operative mistake, and the contract may be voidable but not void as a result

(Correct on both applications! There is not likely to be an operative mistake (if there was, the contract would be void, not voidable). There may be a misrepresentation, in which case the contract would be voidable, not void)

Answer 194

A

B) Only B can bring proceedings against C as there is no privity of contract as between A and C unless A can show a collateral contract exists between A and C, and thereby claim directly from C

(This answer is correct. Here a collateral contract is likely to be found and so an exception to the privity rule is likely to be established. See the common law methods of circumventing the doctrine of privity and the case of Shanklin Pier v Detel. Therefore, A is likely to be able to bring proceedings against C.
There is no viable claim in negligence, there is no agency / principal relationship and no reason why A would hold sums on trust for B)

Answer 195

A

A) Stan will not be able to get the watches back on the grounds of either mistake or misrepresentation

(Correct. There is no mistake that would render the contract void: Lewis v Avery. The contract is probably voidable for misrepresentation, but rescinding at this stage won’t get the watches back, because they have already been sold to Jacob, who has good title to them)

Answer 196

A

E) The telecommunications company can authorise a third party to act as its agent to negotiate and sign the contracts on its behalf

(Correct. There is no need for the third party to sign on behalf of itself. It signs as an authorised agent on behalf of the telecommunications company. This is likely to be more efficient than either of the options which require representatives of the company itself to travel. ‘Authorising a principal’ is not a recognised concept)

Answer 197

A

E) The contract of sale is void as there is no agreement

(There is no real agreement as the seller made a unilateral mistake in expressing their intention so the acceptance does not correspond to the offer. In cases of mistake, a contract is void, not voidable)

Answer 198

A

A) Unless the retailer can prove that the advertising company did not have a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price

(Correct. This answer correctly sets out the innocent party’s right to affirm the contract in response to a breach of condition. Although the other answer options sound plausible, they are all incorrect. The burden of proof is on the contract breaker to show that the innocent party did not have a legitimate interest in affirming. It is only in exceptional circumstances that the party in breach of condition will be able to discharge this burden and fetter the innocent party’s right to affirm)

Answer 199

A

A) The contract now being substantially more difficult to perform will not render the contract frustrated

(Correct. Just because a contract is harder / more expensive to perform does not allow for the defence of frustration. The builder could not argue this in order to get out of the contract)

Answer 200

A

B) The builder is entitled to £15,000 as the contract allows for sums to be payable by divisible amounts

This is a contract where payment is payable in instalments (it is divisible). As works are completed at each stage the requisite payment of £15,000 will be due in respect of the works done, namely one of the three stages having been satisfied.

Answer 201

A

B) The agreement is binding because of accord and satisfaction

(This is the correct answer. Under the general rule, performance of an existing obligation is not good consideration for a promise to accept less. However, as the company has agreed to accept a lesser sum plus dental services instead of the full sum, there has been accord and satisfaction here so this agreement will be binding. The original contractual obligation to pay the full sum has been discharged by agreement)

Answer 202

A

D) The contract is not fulfilled, and the electrician is entitled to reasonable expenses incurred prior to the frustrating event not exceeding the initial deposit

(Correct – this is the likely outcome in light of the Act and Appleby v Myers. The court will use its discretion to award such a sum as is reasonable prior to the frustrating event (see s 1(2), namely no more than such sums paid prior to the frustrating event))

Answer 203

A

D) The printing press can recover for the ordinary extra printing business that they would have taken on but the lucrative printing contracts would be too remote as the retailer did not have actual knowledge of these

(Correct. Well done! The retailer has imputed knowledge in relation to the ordinary extra printing because it is a loss which arises naturally. This is not true in relation to the loss of the lucrative printing contracts, and nor does the retailer have actual knowledge of those contracts)

Answer 204

A

A) The Garden Centre is likely to obtain an award for reliance interest, being the reasonable pre-contract costs incurred in designing the advert

(Correct. It is likely that the pre-contract expenses will be awarded. These are relatively easily quantifiable. The court is unlikely to make an award on a restitutionary basis because there are no exceptional circumstances and the usual remedies appear adequate. The court is unlikely to make an award for the expectation interest because it would be hard to calculate and/or speculative)

Answer 205

A

B) The café owner will not be able to recover damages for their personal injury or property damage because there is a break in the chain of causation

(Correct. This statement correctly applies the law in relation to factual and legal causation. The defective cooker was the effective cause of the fire (so factual causation is established) but the café owner’s intervening act of using the cooker knowing it is unsafe to do so will break the legal chain of causation as this would not be deemed ‘likely to happen’ (see Lambert v Lewis [1982] AC 255))

Answer 206

A

E) The leisure company will be able to claim the £110,000

(Correct. This answer reflects the cost of cure which is the default mechanism for calculating expectation loss in a contract for defective works. Although the other answer options sound plausible, they are all incorrect. Cost of cure is reasonable on the facts as it not out of all proportion to the benefit to be obtained. Diminution of value is not a viable alternative to cost of cure as it is too difficult to calculate. Loss of amenity is not a viable alternative to cost of cure as it is not available for commercial contracts of this nature)

Answer 207

A

E) The printing press can recover for the ordinary extra printing business that they would have taken on but the lucrative printing contracts would be too remote as the retailer did not have actual knowledge of these

(Correct. Well done! The retailer has imputed knowledge in relation to the ordinary extra printing because it is a loss which arises naturally. This is not true in relation to the loss of the lucrative printing contracts, and nor does the retailer have actual knowledge of those contracts)

Answer 208

A

E) The caterer can claim the £800 in damages. She will not be able to claim the £5,000 as this is too remote

(Correct. This answer reflects the correct application of remoteness of damage to the facts. The other answers are incorrect. The damages are not too speculative (they are quantified). There is a causal link between the breach and both losses. The £800 loss would be recoverable under limb 1 of Hadley v Baxendale [1854] EWHC J70. The £5,000 loss would not be recoverable under limb 1 of Hadley v Baxendale as it is not a loss in the usual course of things. The £5,000 loss would not be recoverable under limb 2 of Hadley v Baxendale because this loss is not in the reasonable contemplation of the wholesale food supplier on these particular facts)

Answer 209

A

E) The court is unlikely to grant the injunction because of the delay

(This is correct. Any delay in applying for an injunction can damage seriously the prospects of obtaining one. In terms of the other answers, an award of financial compensation would appear to be inadequate. The homeowner has not ‘taken matters into this own hands’. The homeowner has not failed to come to court with clean hands)

Answer 210

A

E) Damages

(Correct. Damages are likely to be awarded, because the delivery company is likely to be entitled to a remedy. There is no reason on these facts to think that a prohibitory injunction is justified – there is nothing relevant to prohibit the delivery company from doing, and damages would appear to be an adequate remedy. There is no reason on these facts to think that a mandatory injunction is justified, and if the intention is to compel the company with the fleet to make vans available, then an order for specific performance is more appropriate – but again, damages would appear to be an adequate remedy, so an order for specific performance will not be granted.)

Answer 211

A

D) A valid liquidated damages clause has been incorporated into the contract and accordingly the retailer is likely to be awarded £1,000 in damages

(The manufacturer has breached by the contract by delivering the games 2 days late. The clause has been incorporated by signature – in those circumstances, the fact that it is in ‘small print’ is not relevant. The clause is likely to be a valid liquidated damages clause: there is likely to be a legitimate business interest in performance here as the games need to be ready for the sale to coincide with the day of advertised release. Many keen customers will be disappointed and the sales momentum from the release date will be lost. In addition, the detriment imposed by the clause is proportionate to protect the legitimate interest - the amount of £500 would be considered by reference to the value of future retail sales and the value of any loss of reputation. When you consider the loss of goodwill from fans and loss of sales momentum, this is unlikely to be seen as out of all proportion. UCTA does not apply)

Answer 212

A

A) The court is likely to make an award of £4,500 on the basis that the clause providing for payment of £13,500 is a penalty clause

(Correct. In terms of the other answers, the clause is a secondary obligation (not a primary obligation) – it arises upon breach. It is penal, because the detriment it imposes is out of all
proportion to any legitimate interest of the innocent party in the performance
of the primary obligation – the interest in performance appears to be simply to recover the fee of £4,500, and so a penalty of £13,500 (three times that sum) appears disproportionate, on the facts presented. The effect of finding a clause to be penal is that the court will need to assess the damages itself – not that any award at all is refused)

Answer 213

A

E) The student can enforce the owner of the flat’s promise through an order for a prohibitory injunction

(Correct. An injunction is an order of the court restraining the defendant from breaching a term of a contract. This option has the advantage (compared to damages) of the fact it can be sought before the actual breach is committed ie before the party takes place. Neither the police nor the local authority are likely to assist in relation to a purely contractual matter. It is unlikely the student can seek to recover the £500 paid in advance to the owner of the flat because it is unlikely that the student will convince the court that the owner of the flat has been unjustly enriched at her expense. Further, there is no total failure of consideration so the money paid in advance will not be recoverable (in any event, recovering the £500 would not be ‘enforcing the promise’ so much as unwinding the transaction))

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