Contract MCQS Flashcards

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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

A

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

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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

A

D) The person to whom an offer is made

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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.

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

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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

A

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

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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

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.)

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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

A

C) Each party assumes an obligation to the other party

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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

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)

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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

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)

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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

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)

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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

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)

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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

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)

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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

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)

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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

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’)

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14
Q

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

A) Rejection

B) Breach

C) Lapse

D) Revocation

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’)

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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.

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)

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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

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)

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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

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)

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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

A

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

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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

A

C) The acceptance must correspond with the offer

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

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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

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)

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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

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)

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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

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)

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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

A

D) Carlill v Carbolic Smoke Ball Co

(This case concerned a unilateral offer)

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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

A

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

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25
Q

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

A) True

B) False

A

A) True

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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

A

B) An objective test

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27
Q

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

A) True

B) False

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)

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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

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.)

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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

A

C) Consideration must move from the promisee

(Correct. This is a rule governing consideration)

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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

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)

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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

A

C) Williams v Roffey

(This case applies to promises to pay more only)

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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

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)

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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

A

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

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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

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)

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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

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

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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

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)

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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

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)

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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

A

C) Commercial agreements

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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

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)

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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

A

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

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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

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)

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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

A

A) The Sale of Goods Act 1979

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

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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

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)

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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)

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…’)

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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

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))

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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

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)

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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

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)

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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

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)

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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

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)

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50
Q

Felix’s threat to Carillion was made in:

A) Good faith

B) Bad faith

A

B) Bad faith

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

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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

A

B) Voidable

(Correct. Economic duress renders a contract voidable)

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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

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)

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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

A

A) B exceeds their contractual obligation to A

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

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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

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.

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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

A

B) True

(Correct. This summarises the current position)

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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

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)

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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

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)

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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

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)

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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

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)

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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

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))

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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

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)

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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

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)

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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

A

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

(Correct. These statements are normally promissory in nature)

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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

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)

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65
Q

What happens if a term of a contract is not fulfilled as required or at all?

A) The innocent party can sue for discharge

B) The innocent party can sue for misrepresentation

C) The innocent party can sue for breach of contract

D) The innocent party can sue for rectification

A

C) The innocent party can sue for breach of contract

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

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66
Q

Which of the following is not a means by which we can ascertain the terms which the parties to a contract intend to be bound by?

A) A signed written contract

B) Incorporation by notice

C) Incorporation by agreement

D) Incorporation by course of dealing

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)

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67
Q

How can parties to a written contract reduce the possibility of a claim that there are binding oral terms alongside the written terms?

A) The parties can say that there are no binding oral terms alongside the written terms

B) The parties can include an exemption clause in their written contract

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

D) The parties can include a ‘complete agreement’ clause in their written contract

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)

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68
Q

Why was the clause not enforceable against the claimant in Thornton v Shoe Lane Parking?

A) The defendants were prevented from relying on the clause because their employee orally misrepresented the meaning of the clause to the claimant

B) The clause was contained in a document that did not have contractual effect

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

D) The parties previous dealings had not been regular and consistent

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)

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69
Q

Which of the following is correct regarding a term implied by statute?

A) The term is implied to give effect to the presumed but unexpressed intentions of the parties

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

C) A statutory implied term is binding to a less extent compared to an express term

D) The term is imposed in the contract by the courts

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)

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70
Q

Which of the following statute does not contain implied terms?

A) Unfair Contract Terms Act 1977

B) Sale of Goods Act 1979

C) Consumer Rights Act 2015

D) Supply of Goods and Services Act 1982

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)

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71
Q

Which of the following is not a basis for implying terms in fact into a contract?

A) Under the common law

B) Where the parties have dealt with each other consistently and regularly in the past

C) On the grounds of trade or professional customs

D) To give business efficacy to a contract

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)

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72
Q

A restaurant purchases 30 round tables for its business. When the tables are delivered they are rectangular. Which section of the Sale of Goods Act 1979 implied into this contract is most likely to have been breached?

A) s13

B) s15(3)

C) s14(3)

D) s14(2)

A

A) s13

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

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73
Q

A property development company purchases some radiators. The radiators do not heat up properly. Which section implied by the Sale of Goods Act 1979 is most likely to have been breached?

A) s13

B) s14(2)

C) s14(3)

D) s15(3)

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)

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74
Q

Which of the following is correct about the Sale of Goods Act 1979?

A) The terms implied by ss 13, 14 and 15 of the Sale of Goods Act 1979 cannot be excluded or restricted by agreement of the contracting parties

B) The Sale of Goods Act 1979 implies a term that the goods will be of satisfactory quality if they meet the standard that the buyer of the goods regards as satisfactory

C) The Sale of Goods Act 1979 implies terms to an agreement between a trader and a consumer

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

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)

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75
Q

The Supply of Goods and Services Act 1982 does not imply terms in which type of contracts?

A) Contracts for the hire of goods.

B) Certain contracts for the transfer of property in goods

C) Contracts for the supply of services.

D) Contracts of sale of goods

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)

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76
Q

A service that is carried out in the course of a business needs to meet what standard under the Supply of Goods and Services Act 1982?

A) An absolute standard - liability is strict

B) A satisfactory standard

C) The relevant industry standard

D) Performed with reasonable care and skill

A

D) Performed with reasonable care and skill

(This is correct. See S 13 SGSA 1982)

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77
Q

The director of a minicab business hires a vehicle from a hire company for use in his minicab business. Which of the following implied terms is relevant to the contract between the two businesses?

A) s9 of the Consumer Rights Act 2015

B) s13 of the Supply of Goods and Services Act

C) s14(2) of the Sale of Goods Act 1979

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

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)

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78
Q

What remedy is available to a consumer under the Consumer Rights Act 2015 where a trader breaches the implied term that the trader must perform the services contract with reasonable care and skill?

A) The consumer has a right to reject the service

B) The consumer has a right to treat the contract as at an end because of the breach

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

D) The consumer has a right to receive a refund from the trader of all money paid by the consumer for the service

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)

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79
Q

The Consumer Rights Act 2015 regulates contracts entered into by what people?

A) A company and a consumer

B) A business and a business

C) A trader and a consumer

D) A business and a consumer

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)

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80
Q

A university student buys an e-book from an online bookshop for £29.99. The e-book is missing several pages and the writing is blurred. Which implied term is the student likely to rely upon against the bookshop?

A) s49(1) of the Consumer Rights Act 2015

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

C) s14(2) of the Sale of Goods Act 1979

D) s9(1) of the Consumer Rights Act 2015

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.’)

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81
Q

Under the Sale of Goods Act 1979, what is the classification of the implied term that goods will correspond with their description?

A) The term is classified as a warranty

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

C) The term is classified as an intermediate term

D) The term is classified as an innominate term

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)

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82
Q

What is the remedy for breach of an innominate term?

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

B) The innocent party has a statutory right to terminate the contract and sue for damages in all situations

C) The innocent party can rescind the contract and sue for damages where the consequences of the breach are serious

D) The innocent party can treat the contract as repudiated and sue for damages where the consequences of the breach are minor

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)

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83
Q

Which option is not available to an innocent party following breach of a condition by the other party to the contract?

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

B) The innocent party can terminate the contract and sue for damages

C) The innocent party has the right to treat the contract as repudiated and sue for damages

D) The innocent party can waive the right to repudiate, affirm the contract and sue for damages

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.)

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84
Q

What is the meaning of the word ‘construction’ when considering whether a party can rely on an exemption clause?

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

B) Construction means modifying the liability of the party in breach of contract by excluding or limiting his liability

C) Construction means determining whether the exemption clause is part of the contract

D) Construction means drafting the exemption clause to exclude or limit the party’s liability in the event of a breach

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)

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85
Q

If a party wants to exclude their liability in negligence, the most certain way to achieve this is by:

A) Use broad words that are wide enough to include negligence

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

A

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

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86
Q

In relation to exemption clauses and negligence, in what circumstances may the contra proferentum rule and the Canada Steamship rules be less relevant?

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

B) When an exemption clause occurs in a commercial contract where the parties are not of equal bargaining power

C) When an exemption clause occurs in a consumer contract where the parties are not of equal bargaining power

D) When an exemption clause occurs in a standard form contract where the parties are not of equal bargaining power

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)

87
Q

Which exemption clause will be void as a result of the Unfair Contract Terms Act 1977?

A) A clause excluding liability for damage to personal property

B) A clause excluding liability for breach of contract

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

D) A clause excluding liability for breach of the statutory implied term about quality of goods

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)

88
Q

What is the purpose and scope of the Unfair Contract Terms Act 1977?

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

B) The Act regulates exemption clauses that seek to exclude or restrict liability where one party is acting in the course of a business and the other party is not

C) The Act regulates exemption clauses that seek to exclude or restrict liability where neither party is acting in the course of a business

D) The Act regulates contracts between businesses and consumers ensuring that contractual terms are fair and reasonable

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))

89
Q

According to the Unfair Contract Terms Act 1977, when is the requirement of reasonableness judged?

A) At the time the contract was made

B) At the time of the relevant breach

C) At the time the term is considered by the Court

D) At the time the parties seek legal advice

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)

90
Q

Which of the following contracts is not regulated by the Consumer Rights Act 2015?

A) A contract for the supply of a service to a consumer

B) A contract of employment

C) A contract for the supply of goods to a consumer

D) A contract for the supply of digital content to a consumer

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)

91
Q

The Consumer Rights Act 2015 regulates unfair terms in consumer contracts. How is unfairness assessed?

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

B) A term is unfair if it is expressed in plain and intelligible language

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

D) A term is unfair if it does not expressly fix the time for the service to be performed

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.’)

92
Q

Which of the following is not correct regarding the Consumer Rights Act 2015?

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

B) A customer is not bound by a term that attempts to exclude or restrict the trader’s liability for breach of the requirement that goods are fit for their particular purpose

C) The Act regulates unfair terms generally

D) The Act is concerned with contracts between businesses and consumers

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)

93
Q

What is a representation?

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

B) An undertaking to do or not to do something

C) A statement that causes the recipient of the statement loss

D) A statement that has been incorporated into a contract

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)

94
Q

Which of the following is a statement of fact?

A) Conduct

B) A statement of opinion

C) A statement of future intention

D) Silence

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)

95
Q

Which of the following is not an ingredient for a successful action for misrepresentation?

A) A representation that causes the claimant to enter into the contract with the statement maker

B) A representation that is addressed to the claimant by the representor

C) A representation that unambiguously has the meaning put forward by the representee

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

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)

96
Q

What is a material representation?

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

B) A representation that relates to the subject matter of a contract

C) A representation that is made to the claimant

D) A statement that is incorporated into a contract

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)

97
Q

What is a half-truth?

A) An incomplete statement

B) A statement that is marginally correct

C) An opinion that is held by the representor only

D) A statement that is technically true but misleading

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)

98
Q

Which of the following is not an exception to the general rule that silence is not a statement of fact?

A) Half-truths

B) Continuing representations

C) Contracts of service

D) Contracts uberrimae fidei

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)

99
Q

In what situation will a statement of opinion be elevated to a statement of fact?

A) Where the facts expressed by the representor are equally well known by the representee

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

C) Where the representor makes a promise regarding a future intention

D) Where the representee has expert knowledge of the subject matter compared to the representor

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)

100
Q

Why was the company’s statement of future intention in Edgington v Fitzmaurice found to be a misrepresentation?

A) The representors made a continuing representation which became false and they did not disclose the change of circumstances to the representees

B) The representors were under a duty to disclose material facts to the representees and they failed to do so

C) The representors made statements that were technically true but misleading

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

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)

101
Q

What is the definition of a fraudulent misrepresentation?

A) A representation that was false

B) A false representation that was made with an intention to cheat or injure

C) A false representation that was made for a criminal purpose

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

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)

102
Q

Where is the definition of an innocent misrepresentation to be found?

A) Derry v Peek

B) Thomas Witter Ltd v TBP Industries Ltd

C) s2(1) Misrepresentation Act 1967

D) Howard Marine and Dredging Co v Ogden

A

C) s2(1) Misrepresentation Act 1967

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

103
Q

Why is negligent misrepresentation under the Misrepresentation Act 1967 an easier claim for a claimant to establish than a fraudulent misrepresentation claim?

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

B) The claimant bears the burden of proof in a claim for negligent misrepresentation

C) Negligent misrepresentation is an easier claim because it is based on statute

D) Fraudulent misrepresentation applies the criminal standard of beyond reasonable doubt

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)

104
Q

What remedies are potentially available for an innocent misrepresentation?

A) Rescission, damages, indemnity

B) Rescission, damages in lieu of rescission and indemnity

C) Damages in lieu of rescission, damages, indemnity

D) Rescission, damages in lieu of rescission and damages

A

B) Rescission, damages in lieu of rescission and indemnity

105
Q

Is it possible for a representor to exclude or restrict their liability for misrepresentation?

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

B) Yes, but only in respect of fraudulent misrepresentations

C) No, it is not possible to exclude or restrict one’s liability for misrepresentation

D) Yes, so long as they are not using written standard terms of business

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)

106
Q

For which category or categories of misrepresentation is contributory negligence available as a defence?

A) Negligent misrepresentation

B) Negligent and Innocent misrepresentations

C) Fraudulent and negligent misrepresentations

D) Fraudulent misrepresentation

A

A) Negligent misrepresentation

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

107
Q

A representation which is false is incorporated into a contract as a term gives rise to which potential claim/s?

A) Misrepresentation and breach of contract

B) Breach of contract

C) Misrepresentation and negligent misstatement

D) Misrepresentation

E) Negligent misstatement
Correct
Correct. If all the elements of misrepresentation are satisfied and the term is breached then these two possible actions are available.

A

A) Misrepresentation and breach of contract

108
Q

An accountancy firm provides negligent advice to a client. The advice induces the client to enter into a contract to purchase a business. The client suffers a significant loss as a consequence of entering into this contract. What claim/s may be brought against the accountancy firm by the client?

A) Negligent misrepresentation

B) Negligent misstatement

C) Negligent misstatement and negligent misrepresentation.

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)

109
Q

A contract which is void (in contrast to voidable) is….

A) …of no legal effect from the outset

B) …able to lead to the transfer of property unless and until voided.

C) …terminable by either party without notice

D) …liable to be set aside by the court

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)

110
Q

Which of the following is not one of the three categories of mistake that can amount to an operative mistake?

A) Mutual mistake

B) Fundamental mistake

C) Common mistake

D) Unilateral mistake

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)

111
Q

What is the legal status of the contract where there is a unilateral mistake as to identity in a face to face setting?

A) The contract will be void if the seller can show that they asked the buyer to verify their identify before the sale

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

C) The contract will be void as the seller’s mistake will affect the nature and value of the contract

D) The contract will be voidable as the reasonable person would have made the same mistake

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)

112
Q

In what type of transaction is a finding of unilateral mistake of identity more likely?

A) A distance selling transaction

B) A transaction conducted face to face

A

A) A distance selling transaction

(This is the correct answer, well done)

113
Q

In which of the following situations will title to the goods pass to an innocent third party?

A) In a distance selling transaction where there is a unilateral mistake as to the identity of the buyer

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

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)

114
Q

The defence of illegality is also known as:

A) Volenti non fit injuria

B) Ex turpi causa non oritur actio

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)

115
Q

Which of the following best expresses the first part of the two-part approach that we recommend in considering the defence of illegality?

A) Has the claimant committed an illegal act?

B) Has the defendant committed a tort?

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

D) Has the claimant committed a tort?

E) Has the defendant committed an illegal (or grossly immoral) act?

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)

116
Q

If the claimant has committed an illegal (or grossly immoral) act, the next part of the test is to consider the three considerations identified in Patel v Mirza in order to determine whether allowing the claim would harm the integrity of the legal system. Which of the following is not one of the three considerations as set out in that case?

A) Whether denial of the claim would be a proportionate response to the illegality

B) Any other relevant public policy on which the denial of the claim may have an impact

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

D) The underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim

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)

117
Q

What is the general rule in the doctrine of privity of contract?

A) A contract is a private relationship between the parties

B) A person who is neither a party to a contract nor has provided consideration can enforce a term of the contract if the contract was entered into for their benefit

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.

D) A party who is not a party to a contract cannot be sued in respect of that contract

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)

118
Q

What rule of consideration is closely related to the doctrine of privity of contract?

A) Consideration must be sufficient.

B) Consideration must move from the promisee

C) Performance of a pre-existing duty owed to a third party is sufficient consideration

D) Consideration must not be past

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)

119
Q

Which statute introduced a limited exception to the doctrine of privity of contract?

A) Contracts (Rights of Third Parties) Act 1999

B) Consumer Rights Act 2015

C) Unfair Contract Terms Act 1977

D) Human Rights Act 1998

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)

120
Q

Which case below is concerned with the doctrine of privity of contract?

A) Williams v Roffey Bros & Nicholls (Contractors) Ltd

B) Chappell & Co. v Nestle

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

D) Dunlop Pneumatic Tyre Co. Ltd. v New Garage & Motor Co. Ltd

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)

121
Q

In which case did the court find a collateral contract between the promisor and the third party to provide an exception to the doctrine of privity?

A) Woodar v Wimpey

B) Linden Gardens Trust v Lenesta Sludge Disposals Ltd

C) Donoghue v Stevenson

D) Shanklin Pier v Detel Products

A

D) Shanklin Pier v Detel Products

122
Q

Which of the following is not a common law method of circumventing privity of contract?

A) Actions in tort

B) Assignment

C) Restitution

D) Agency

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)

123
Q

A husband buys a car from a car dealer for his wife. The wife is involved in an accident because the car’s brakes were defectively installed by the manufacturer of the car. Can the wife sue the manufacturer of the car for breach of contract?

A) No. The wife should sue the car dealer in the tort of negligence

B) Yes. The wife can sue the car manufacturer for breach of contract

C) No. The wife should sue the car dealer for breach of contract

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

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)

124
Q

How do the remedies available to third parties under the Contracts (Rights of Third Parties) Act 1999 compare to the remedies available to parties to a contract?

A) A third party has fewer remedies available to them compared to the parties to the contract

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

C) The remedies available to a third party under the Act are at the discretion of the court

D) A third party has available to them more remedies under the Act compared to the parties to the contract

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)

125
Q

A contract contains the following clause: ‘In a contract between the insurer and the insured, on the death of the insured, the insurer guarantees to pay £10,000 to the wife of the insured, or to the dependents of the insured if the wife predeceases him.’ Under what section(s) of the Contracts (Rights of Third Parties) Act 1999 would a third party enforce the contract?

A) The wife can enforce the contract under s1(1)(a) and s1(3)

B) The children can enforce the contract under s1(2)

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

D) The children can enforce the contract under s1(1)(a) and s1(3)

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))

126
Q

Under what circumstances does the Contracts (Rights of Third Parties) Act 1999 enable a third party in their own right to enforce a term of a contract to which they are not a party?

A) Where the contract is to be of benefit to the third party

B) Where the contract expressly provides that they may

C) Where the third party is expressly identified as a member of a class

D) Where the third party is expressly identified in the contract by name

A

B) Where the contract expressly provides that they may

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

127
Q

Which of the following is not a way in which a contract might be discharged?

A) Discharge by frustration

B) Discharge by mistake

C) Discharge by performance

D) Discharge by agreement

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)

128
Q

Which of the following is an exception to the entire obligations rule?

A) Quantum meruit

B) Substantial performance

C) Complete performance

D) Partial performance

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)

129
Q

What is the meaning of the entire obligations rule?

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

B) A valid contract is made up of several obligations that make up the complete agreement and these obligations are binding

C) A contract must clearly state all the obligations that the parties have agreed to undertake in order for the contract to be enforceable

D) By entering into a contract, the parties commit to performing all the obligations under the contract, and defective performance of an obligation is a breach of the entire contract

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)

130
Q

Which of the following is a way by which a contract can be discharged by agreement?

A) By performance of the contractual obligations

B) By a subsequent binding contract between the parties

C) By operation of statute

D) By repudiatory breach of contract

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)

131
Q

A dress maker agrees to sew a dress for a customer. The customer pays the dress maker a deposit of half the contract price. The dress maker starts sewing, but when she has sewn a third of the dress, she falls down the stairs and breaks both her arms. What is the best way to terminate the contract amicably?

A) The dress maker and customer can bring their contract to an amicable end if the dress maker refunds the deposit to the customer

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

C) There is no amicable way to end the contract. The customer should sue the dress maker for breach of contract

D) The dress maker and customer can enter a new contract in which the customer agrees to release the dress maker from her obligation to complete sewing the dress

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)

132
Q

What is the meaning of a condition precedent?

A) It is a term in the contract providing for the termination of the contract and the discharge of obligations outstanding under the contract

B) It is a term in the contract that sets out the order in which documents take precedence in the event of an inconsistency

C) It is a condition in a contract that must be fulfilled by the innocent party before he can sue the party who is in breach of contract

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

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)

133
Q

What is repudiatory breach?

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

B) This is where a party indicates that he will not perform his contractual obligations in advance of the date of performance

C) This is the stipulation of a situation that will cause existing contractual obligations to terminate

D) This is where one party breaches a term of the contract which is a warranty

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)

134
Q

Which of the following statements is correct regarding termination following a repudiatory breach?

A) The innocent party can sue for the loss of the contract caused by the termination of the contract as a whole and he is not required to mitigate the loss

B) Any rights and obligations which accrued before termination are brought to an end and are not enforceable

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

D) The primary obligations of both parties that have not been performed remain unchanged and enforceable

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)

135
Q

Which of the following is not a consequence of opting to affirm the contract following a repudiatory breach?

A) The innocent party can claim the whole contract price after performing their obligations

B) The innocent party is entitled to damages for the breach

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

D) All the obligations of both contracting parties remain and must be performed

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)

136
Q

Which of the following situations is unlikely to make performance of the contract radically different from that contracted for?

A) The common purpose of the contract can no longer be carried out

B) Performance of the contract is illegal

C) Performance of the contract is more expensive

D) Performance of the contract is impossible

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)

137
Q

A dressmaker agrees to sew a wedding dress for a bride for a wedding in 3 months. The bride pays the dressmaker the full contract price and the dressmaker starts sewing the dress. However, when the dressmaker has sewn half the dress, she falls down the stairs and breaks both her arms. The dressmaker is unable to sew with broken arms and her arms will take at least six months to mend. The bride sues the dressmaker for breach of contract. What is the dressmaker’s best response to the action?

A) The dressmaker should defend the action on the ground that the common purpose of the contract has been frustrated

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

C) The dressmaker should defend the action on the ground that the contract has been frustrated as it is more onerous to perform

D) The dressmaker should defend the action on the ground that the contract has been frustrated as performance of the contract is illegal

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)

138
Q

Which of the following is not a limitation on the doctrine of frustration?

A) An act which has been declared illegal

B) An event which was within the contemplation of the parties at the time they entered into the contract

C) An event whose occurrence the parties have made express provision for in their contract

D) An event which is brought about through a party’s own conduct

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)

139
Q

Which of the statements below regarding the consequences of frustration is correct?

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

B) Under s 1(2) Law Reform (Frustrated Contracts) Act 1943 if the supplier has expenses exceeding the amount of the advance payment it may still recover them

C) The Law Reform (Frustrated Contracts) Act 1943 deals with the situations that will lead to a contract becoming frustrated

D) The recovery of advance payments under s.1(2) Law Reform (Frustrated Contracts) Act 1943 requires that money that should have been paid before the frustrating event should still be paid.

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)

140
Q

Which of the following provides the best summary of the decision in Gamerco SA v ICM/Fair Warning (Agency) Ltd?

A) The decision clarified the meaning of ‘benefit’ under s 1(3) Law Reform (Frustrated Contracts) Act 1943

B) The decision clarified that when determining how much to allow the payee to retain or recover to account for his expenses under s 1(2) Law Reform (Frustrated Contracts) Act 1943, the amount will not be limited to the actual expenses incurred or the sums paid or payable under the contract

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

D) The decision clarified that the task of the court when applying s 1(2) is firstly to identify and value the benefit conferred and then secondly to assess the just sum that should be awarded

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)

141
Q

What is the leading case on s.1(3) of the Law Reform (Frustrated Contracts) Act 1943?

A) Taylor v Caldwell

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

C) Appleby v Myers

D) Gamerco SA v ICM/Fair Warning (Agency) Ltd

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)

142
Q

Which of the following is not a mechanism for calculating expectation interest?

A) Loss of amenity

B) Diminution of value

C) Cost of cure

D) Loss of reputation

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)

143
Q

What is the aim of an award of damages based on the expectation interest in contract law?

A) It is aimed at putting the innocent party in the position they would have been in had they not entered into a contract with the party in breach of contract

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

C) It is aimed at compelling actual performance of the primary obligations under the contract

D) It is aimed at depriving the party in breach of contract of a gain that they have made at the innocent party’s expense

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)

144
Q

What is the leading case on reliance interest?

A) Ruxley Electronics and Construction Ltd v Forsyth

B) Anglia Television Ltd v Reed

C) Robinson v Harman

C) Regus (UK) Ltd v Epcot Solutions Ltd

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)

145
Q

What is the aim of an award of damages for breach of contract?

A) An award of damages is aimed at avenging the innocent party for the other party’s breach of contract

B) An award of damages is aimed at punishing the party who is in breach of contract

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

D) An award of damages is aimed at correcting the party who is in breach of contract

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)

146
Q

In what circumstances will damages for loss of chance be awarded?

A) An award of damages is aimed at correcting the party who is in breach of contract

B) Damages for loss of chance will be awarded if the defendant has acted in an unreasonable and unconscionable manner

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

D) Damages for loss of chance will be awarded where the likelihood of the opportunity being realised is greater than fifty percent

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)

147
Q

Why is the case of Farley v Skinner (No. 2) important?

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

B) The House of Lords confirmed the general rule that damages will not be awarded for loss of reputation

C) The House of Lords reversed the decision in Addis v Gramophone Co Ltd regarding the unavailability of damages for mental distress

D) The House of Lords confirmed the general rule that damages will not be awarded for mental distress in any circumstances

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)

148
Q

What is the test for factual causation in contract law?

A) The test is whether the defendant’s actions were foreseeable

B) The test is whether the defendant’s actions were the only reason for the loss

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

D) The test is whether the defendant’s actions were likely to happen

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)

149
Q

Which of the following is the most accurate summary of the description of damages which are not too remote, as per Hadley v Baxendale?

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

B) The damages which the party in breach should reasonably have contemplated as arising from a breach of contract, and those damages which both parties understood would flow from a breach at the time the contract was entered into

C) The damages which the contract made clear would flow from a breach, or which were known to probably flow from a breach at the time the contract was entered into

D) Those damages which were reasonably foreseeable

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)

150
Q

What happens if a claimant fails to mitigate their losses following a breach of contract by the other party?

A) The claimant will not be able to recover any of the losses they have suffered

B) By failing to mitigate their losses, the claimant will themselves be in breach of contract thus liable to pay damages to the defendant

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

D) The amount of damages that the claimant can recover for the breach of contract will be reduced on account of their failure to mitigate

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)

151
Q

What principle emerged from the court’s decision in C & P Haulage v Middleton regarding reliance interest?

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

B) Reliance interest puts the innocent party in a better position than he would have been in had the contract been performed

C) Reliance losses are incurred as a result of the breach of contract

D) Reliance interest is awarded to compensate an innocent party for losses resulting from having made a bad bargain

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)

152
Q

Under what circumstances will a remedy of an account of profits be awarded for a breach of contract?

A) Where the defendant breaches a duty of confidentiality

B) In exceptional circumstances where traditional remedies are inadequate

C) Where the breach puts the claimant in a worse financial position compared to if there had been no breach

D) Where the breach has enabled the defendant to enter into a contract elsewhere

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)

153
Q

What is the time limit under the Consumer Rights Act 2015 for exercising the short-term right to reject goods that are non-conforming?

A) 30 days

B) 14 days

C) 60 days

D) 28 days

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)

154
Q

Which of the following is not a remedy available to a consumer under the Consumer Rights Act 2015 where the goods supplied are non-conforming?

A) The right to repeat performance

B) The short-term right to reject

C) The right to a price reduction or the final right to reject

D) The right to repair or replacement

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)

155
Q

What remedy is available to a consumer under the Consumer Rights Act 2015 where the digital content supplied is non-conforming and it is impossible to replace it?

A) The consumer has a right to a price reduction

B) The consumer has a right to reject the digital content

C) The consumer has a right to require repeat performance

D) The consumer has a right to repair of the digital content

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)

156
Q

What is a liquidated damages clause?

A) A clause commonly used in the hospitality industry which sets out the amount of damages that a court should award an innocent party in the event of breach of contract

B) A clause which deprives an innocent party of compensation when the breach of contract is minor

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

D) A clause that stipulates the payment of an exorbitant sum of money by a party who is in breach of contract

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)

157
Q

What happens if a court finds that a liquidated damages clause is a penalty?

A) The liquidated damages clause will be struck down and the court will substitute a valid liquidated damages clause in its place

B) The claimant will be entitled to enforce the penalty against the party that is in breach of contract

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

D) The contract will be rescinded, and the parties will have to re-negotiate terms that meet the requirements of the law

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)

158
Q

What is a secondary obligation in the context of the judgment in Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis?

A) It is a contractual obligation that is agreed early in the negotiations between the parties

B) It is a contractual obligation that is unenforceable because it is extravagant or unconscionable

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

D) It is a contractual obligation that has minor significance

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)

159
Q

What is an advantage of obtaining a court order for specific performance?

A) The respondent is prevented from doing things that were forbidden in the contract

B) An order for specific performance can be obtained in addition to an award of damages

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

D) An order for specific performance can be used to enforce a promise that is unsupported by consideration

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)

160
Q

What is a prohibitory injunction?

A) It is an order restraining a party from entering into a contract with a certain other party

B) It is an order compelling a party to perform a certain act

C) It is an order granted to stop a party from doing something in the future that will cause the applicant harm

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

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)

161
Q

Which of the following statements is not correct regarding an order for specific performance?

A) It is granted in order to compel a party to do something

B) Breach of an order for specific performance can be treated as contempt of court and lead to imprisonment

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

D) It is granted at the discretion of the court

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)

162
Q

Which of the following is the best definition of a guarantee?

A) Where Party X gives a guarantee to Party Y, Party X is promising that if Party Y suffers a stated loss, Party X will cover the cost of that loss

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

C) Where Party X gives a guarantee to Party Y, Party X is promising that if Party Y suffers a stated loss, Party X will cover the cost of that loss, provided that loss is caused by a stated Party (Party Z)

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

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)

163
Q

Which of the following is the best definition of an indemnity?

A) Party X promises Party Y that Party Z will carry out its obligations, and/or promises to fulfil those obligations itself if Party Z does not do so

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

C) 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

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

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)

164
Q

A man has lost his dog. He puts up signs around the local neighbourhood with his address and a picture of his dog, reading “£50 reward for anyone who returns this dog to me”. Has the man made an offer capable of acceptance?

A) The man has made an offer which is accepted by someone looking for the dog

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

C) The man has not made an offer to contract because it is possible that the dog will never be found

D) The man has made an offer which is accepted by someone finding the dog

E) The man has not made an offer to contract because a very large number of people might read the notice and search for the dog

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)

165
Q

On 1 February, a Council places a notice on public display which reads: “For sale, (used) printers, £85 each, contact Council Estates Division”. On 5 February, a woman writes to the Council Estates Division ‘I am happy to pay £85 for one of your printers identified in your notice dated 1 February’. On 11 February, the Council writes back ‘thank you for your letter dated 5 February. We are happy to go ahead. Please contact us by telephone to arrange delivery’. Which one of the following best explains the legal position?

A) The notice constitutes an offer which was rejected by the woman’s counter-offer in her letter dated 5 February. The Council’s letter of 11 February is a request for further information

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

C) The notice constitutes an offer which was accepted by the woman’s letter dated 5 February. The council’s letter of 11 February is a request for further information

D) The notice constitutes an invitation to treat which was rejected by the woman’s counter-offer in her letter dated 5 February. The Council’s letter of 11 February is an acceptance

E) The notice constitutes an offer which was rejected by the woman’s counter-offer in her letter dated 5 February. The Council’s letter of 11 February is an acceptance

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

166
Q

To promote a new sports club, the venue owner puts an advert in a newspaper advertising an open day for potential members. The advert includes the following statement, ‘Shoot ten netball goals in a row at our open day and you will receive a £50 club token to spend on fitness classes’. A woman sees the advert and immediately phones the club to state that she accepts the challenge and will be attending the fun day. The woman is the first person to shoot ten goals. A man sees the advert and is the second person to shoot ten goals

Which one of the following statements best explains the legal position?

A) The advert is an invitation to treat. By contacting the club, the woman has formed a bilateral contract with the sports club and is entitled to a token

B) The advert is an invitation to treat. Consequently, none of the participants are entitled to a token

C) The advert is a unilateral offer. Consequently, it will be construed to entitle the first person to shoot ten goals to be entitled a token. Only the woman is entitled to a token

D) The woman is the only participant who is entitled to a token as she was the only participant who communicated her intention to accept prior to completion of the prescribed act

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

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

167
Q

An antique collector visits a local auction house. The auction includes a rare antique table like the one the antique collector is looking for and the auction is stated to be ‘without reserve’. The auctioneer invites bids. The antique collector bids £500. Although the antique collector is the only person in the room to bid, the auctioneer refuses to accept his bid, stating that it is too low

What advice would you give the antique collector?

A) There is no contract between the parties and the antique collector is entitled to nothing

B) The auctioneer is in breach of a bilateral contract and the antique collector is entitled to buy the table for £500

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

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

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

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))

168
Q

The owner of a campervan sends an email to an interested buyer. Her email states, ‘I will sell my campervan to you for £15,000.’ The interested buyer responds, ‘I want to go ahead if your campervan has a full-service history.’

Which one of the following statements best describes the legal position?

A) The campervan owner’s email is an invitation to treat. The interested buyer’s response is an offer

B) The interested buyer’s response is a conditional acceptance. The parties will have a contract for the sale of the campervan provided it has a full-service history

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

D) The interested buyer’s response is a counter offer. The campervan owner’s offer is extinguished

E) The interested buyer’s response is a request for further information. The campervan owner’s offer is extinguished

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))

169
Q

A tenant rents a warehouse from which to operate its business. The rent is £12,000 per month. The tenant is struggling financially. It is considering (lawfully) terminating the lease. It asks the landlord to accept £7,500 per month instead. The landlord agrees. This allows the tenant to carry on trading and to not terminate the lease. After 6 months, the tenant recovers from its financial difficulties. The landlord indicates that in 3 months’ time he will put the rent back up to £12,000. After the 3 months’ notice expires (so after 9 months of reduced rent), the tenant continues to pay only £7,500 per month. Which one of the following statements best describes the legal position?

A) The landlord is likely to be entitled to £12,000 going forward, and to recover £4,500 for each of the 9 months when the tenant only paid £7,500, and to recover interest on each instalment of £4,500

B) The landlord is likely to be entitled to £12,000 going forward, and to recover £4,500 for each of the 9 months when the tenant only paid £7,500

C) The landlord is now bound to accept £7,500 per month for as long as the lease continues, and cannot recover £4,500 for each of the 9 months when the tenant only paid £7,500

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

E) The landlord is now bound to accept £7,500 per month for as long as the lease continues, but he can recover £4,500 for each of the 9 months when the tenant only paid £7,500

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)

170
Q

A 16-year-old girl agrees to hire some gardening equipment, with a view to providing gardening services to local residents over the summer holidays. She later refuses to pay for the equipment, despite having started to use it. Can the supplier of the equipment enforce the contract against the girl?

A) Yes, the contract is enforceable against the girl as the gardening equipment can be regarded as a ‘necessary’

B) Yes, because the contract is for her benefit

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

D) No, the contract is not enforceable against the girl as it is in her best interests not to be bound by the agreement

E) No, the contract is not enforceable because contracts are never enforceable against minors

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

171
Q

A gardener has carried out gardening works in return for payment for a client over a period of five years. The client asks the gardener to cut his hedge when she is carrying out other works in the local area. The gardener and client do not discuss payment before the work is carried out. When the hedge is cut the client refuses to pay the gardener’s invoice for £40. Which of the following statements best explains the gardener’s legal position?

A) The gardener is not entitled to payment. The court will not determine the adequacy of consideration, and so cannot decide the amount to be paid in return for services if it was not agreed by the parties in advance of the service being carried out

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

C) The gardener is not entitled to payment as payment was not discussed prior to the service being carried and so the act of cutting the hedge is past consideration

D) The gardener is entitled to payment. Consideration must be sufficient. As the gardener has carried out a commercial service, the client must pay sufficient consideration

E) The gardener is entitled to payment. The gardener has exceeded previous obligations owed to the client and so has provided fresh consideration to support payment

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)

172
Q

The owner of a holiday park agrees to pay a contractor £20,000 to cover the ground and trees in the holiday village with fake snow. When the contractor is half way through laying the snow, he realises he has made an error in his calculations and he will need double the amount of snow than he allowed for under the terms of the fixed price contract. The holiday park owner agrees to pay the £10,000 extra requested by the contractor as he has promised hundreds of guests a ‘snow covered magical village’. The contractor also recognises that the original contract had been under-priced. Which one of the following statements best explains the legal position?

A) The contractor will not be entitled to the extra £10,000 as the £20,000 in the original contract is adequate consideration

B) The contractor will not be entitled to the extra £10,000 as he has simply performed his existing contractual obligations

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

D) The contractor is entitled to the extra £10,000 as it has provided consideration by going over and above its existing contractual obligations by laying the additional snow

E) The contractor will be able to rely on promissory estoppel as a defence if the holiday park owner sues him for the additional £10,000

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)

173
Q

On Monday, A man emails his friend and says, ‘Are you still interested in buying my car? I will sell it to you for £5,000. Let me know by end of day Friday.’ On Friday morning the friend emails the man and says, ‘I will buy your car for £5,000.’ The man responds, ‘Sorry, I sold it to a garage yesterday.’ The man and the friend are no longer friends. Which one of the following statements best describes the legal position?

A) The friend’s acceptance of the man’s offer was not legally binding as the car has been sold to a third party

B) As the man and the friend are no longer friends this will be treated as a commercial transaction and will be legally binding as the presumption that the parties intended to create legal relations would be applied

C) As the friend accepted the man’s offer when they were friends this will not be legally binding as there is no intention to create legal relations

D) As the man and the friend are no longer friends this will rebut the presumption usually applied to social agreements and this promise will be binding as there is an intention to create legal relations

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

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

174
Q

A man is approached by a ticket seller outside a concert who offers to sell him a ticket. The man likes the band, but saw them recently so hesitates. The seller holds a knife to the man and says “Buy the ticket now or I’ll cut you.” The man buys the ticket. Whilst queuing later, he sees the seller being arrested. He goes over and asks for his money back.

Was the contract entered into under duress?

A) Yes. The man had no practical alternative but to enter into the contract

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

C) Yes, but only if the man can prove that the threat of force was more influential on his decision than his desire to see the band

D) No. The man had a reason other than the threat of force to enter into the contract (he liked the band), so there is no duress

E) Yes. The physical threat was a significant cause of the man’s decision to contract

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)

175
Q

A builder agrees to build a house for a landlady, due for completion on 1 February, for £100,000. The landlady agrees with a third party to rent the property from 2 February, at a premium rate. On 20 January a labour shortage occurs and the builder, knowing the landlady will not find another builder, threatens to stop work unless he is paid an extra £10,000. The landlady protests, but pays the extra £10,000. The house is completed on 1 February. The landlady waits until the third party begins renting the property and then seeks the return of the £10,000.

Which of the following statements best describes the legal position in relation to the landlady’s potential claim for economic duress?

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

B) The builder was acting in bad faith and that suffices for economic duress

C) The landlady was presented with no viable alternative but to agree to the builder’s demand, and that suffices for economic duress

D) The landlady affirmed the contract, so a claim of economic duress will likely fail

E) The builder’s threat was a significant cause of the landlady paying the extra £10,000, and that suffices for economic duress

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)

176
Q

A publisher contracts to sell 100 books to a shop, with a 14-day credit facility. The books are stored at a warehouse which floods, destroying the books. The publisher knows the books were still its responsibility, but falsely tells the shop it believes the books were their responsibility and unless the shop pays for them, threatens to revoke the credit facility. The shop knows it is not liable for the books, but decides that paying is better than losing the credit facility.

Was the publisher’s threat to remove the credit facility “illegitimate pressure”, for the purposes of establishing economic duress?

A) Possibly. It depends on whether the shop had access to another credit facility with a third party

B) No. The shop should have had the courage of its convictions that the books were the publisher’s responsibility

C) No. Until a court decides that the books were still the publisher’s responsibility, it cannot be said the publisher’s threat was improper

D) No. The shop took a commercial decision that it was better to pay for the 100 books and the court will uphold the principle of freedom of contract

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

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)

177
Q

An adult daughter acts as her elderly mother’s carer. The daughter asks the mother for a loan to support a new business venture. The mother is reluctant as it is for a very large amount. The daughter is furious and asks her mother why she will not support her given how much she has done for her. The mother reluctantly agrees to the loan as she does not want to upset her daughter as she is so reliant upon her. The daughter’s business fails, and she does not repay the loan. The mother is now in residential care and wants to her money back. Identify the most appropriate cause of action for the mother.

A) Duress to goods

B) Undue influence

C) Duress to the person

D) Economic duress

E) Lack of consideration

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)

178
Q

A high end restaurant is being reviewed by an influential food critic and the head chef wants to make a dish requiring rare truffle oil. It contracts to buy some for £100 from the only UK supplier. The supplier later learns of why the restaurant wants the truffle oil and states that it will now only sell the oil for £1000. The restaurant agrees, but on receipt of the invoice refuses to pay more than £100.

Which of the following statements best describes the legal position in relation to the restaurant’s potential claim for economic duress?

A) The restaurant has no practical choice to source the truffle oil elsewhere, meaning there is duress. Expecting the restaurant to make an alternative meal is not a viable practical alternative

B) By agreeing without protest to pay to the supplier’s demand of an additional £900 the restaurant has affirmed the amendment to the contract and will not be able to set the contract aside for duress

C) This is not duress because the supplier has not threatened to breach its contract with the restaurant

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

E) This is not duress as the supplier’s demand of an additional £900 was not a threat made in bad faith

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))

179
Q

The owner of a construction company (‘company owner’) purchases a forklift truck from an online retailer. After the forklift truck is delivered, he notices a dent at the front. The company owner decides to use the forklift truck anyway. One month later, the company owner decides that he wants to get a different forklift truck from a different shop. He telephones the online retailer and says that he wants to return the forklift truck and get a refund but the online retailer refuses. Which one of the following statements best explains the legal position?

A) The online retailer has not breached any terms implied by the Sale of Goods Act 1979 as the forklift truck was still usable for its intended purpose. Consequently, the company owner cannot return the forklift truck and get a refund

B) The online retailer has breached the term implied term under the Sale of Goods Act 1979 to provide goods of satisfactory quality. The implied term is a condition which means that Company owner can still return the forklift truck and get a refund

C) Since the company owner affirmed the contract by accepting delivery of the forklift truck, the online retailer has not breached any implied terms. Consequently, the company owner cannot return the forklift truck and get a refund

D) The online retailer has breached an implied term under the Sale of Goods Act 1979 to provide goods of satisfactory quality. As the purchase was made online the company owner can still return the forklift truck and get a refund

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

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)

180
Q

A mother wants to buy a pony for her daughter. She visits the owner of a stable yard who is selling a pony. The mother says, ‘I only want the pony if she is happy to be petted.’ As she says this, she goes over to try and stroke the pony. The stable yard owner stands in her way and says ‘she’s happy to be petted. No need to check! You can have her for £500.’ The mother agrees to buy the pony the same day. When the pony arrives at her new home it is obvious that she is not happy to be petted. Which one of the following statements best explains the legal position?

A) Since the stable yard owner’s statement that the pony is happy to be petted was not written down, it will be a representation

B) The stable yard owner’s statement that the pony is happy to be petted is likely to be a representation. It was unreasonable for the mother to rely on the expertise of the stable yard owner as she is best placed to know what pony would be suitable for daughter

C) Since there was some delay between the statement that the pony is happy to be petted being made and the mother agreeing to buy the horse, it will be a representation. In order to be a term, a statement must be made immediately prior to contracting

D) Despite The stable yard owner’s protestations, the mother should have checked whether the pony was happy to be petted. The failure to check will result in the stable yard owner’s statement being a representation

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

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)

181
Q

A homeowner enters into a contract with a tree surgery company (‘the company’), for it to cut down two trees in her garden. The contract is in writing, and records the work to be carried out, when it will be carried out, and a price. No other terms are agreed. The company fails to take any steps to control the way in which the trees fall when cut, and one tree crashes through the homeowner’s conservatory, causing significant loss and damage. Which of the following is the clearest legal argument for the homeowner to advance?

A) The company has breached the implied term under the Consumer Rights Act 2015 that in a contract to supply goods, goods must be of satisfactory quality.

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

C) The company has breached the implied term under the Supply of Goods and Services Act 1982 that a service must be performed with reasonable care and skill

D) The company has breached the implied term under the Consumer Rights Act 2015 that a service must be performed within a reasonable time

E) The company has breached the implied term under the Sale of Goods Act 1979 that in a contract to supply goods, goods must be of satisfactory quality

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)

182
Q

A customer buys a rechargeable lawnmower online from a retailer which operates a website selling gardening equipment to consumers throughout the UK for £170. The website describes the lawnmower as capable of operating for 90 minutes without needing to be recharged. In fact, it only operates for 35 minutes before needing to be charged. The customer wishes to bring a claim on the basis that the contract has failed to comply with the implied term that the goods would comply with their description. Which ONE of the following statements best describes the situation in relation to remedies available / not available to John?

A) This breach entitles the customer to terminate the contact

B) This breach entitles the customer to damages, but not to terminate the contract

C) The remedies available to the customer as a result of this breach depend on the consequences of the breach in accordance with the case of Hong Kong Fir v Kawasaki

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

E) The customer will not have any remedy for this breach

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)

183
Q

A road maintenance company hires a van from vehicle hire company at a cost of £270. The van is wholly unreliable and causes the maintenance company significant losses. Under the contract between the two parties, the maintenance company has to return the van in the same condition as at the start of the hire period. On returning the van to the hire company’s yard, the hire company inspects the van, and presents the maintenance company with a sheet of A4 paper, marked “Record of vehicle condition at end of hire period”. The paper has a diagrammatic representation of a car split into various areas. Next to each area is written “no damage”. The hire company signs this sheet, and asks the maintenance company’s representative to sign it, which he does. At the foot of the page are various terms and conditions, in small print, which the maintenance company’s representative does not read. One of these terms (the ‘Term’) provides that the hire company’s liability for losses during the hire period is limited to £300. The maintenance company seeks to recover its losses caused by the van being unreliable, which exceed this sum, and the hire company seeks to rely on the Term to limit any liability. Which ONE of the following statements is most likely to be correct?

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

B) The Term was incorporated into the parties’ contract because the maintenance company signed the document

C) The Term was incorporated into the parties’ contract because this is a reasonable term to include in the contract

D) Whether or not the Term was incorporated into the parties’ contract depends on the extent of the maintenance company’s losses

E) The Term was not incorporated into the parties’ contract because the maintenance company did not read it

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)

184
Q

A hairdressing salon purchases 10 hairdryers from a supplier. Before purchasing the hairdryers, the salon is asked to sign a fifteen-page document. Had the salon owner read the document, she would have seen the following clause at the top of the first page: ‘The supplier accepts no liability for any loss to property or injury to persons.’ The salon owner signs the document without reading it. On the first day of use, one of the hairdryers catches fire causing damage to the property of the salon. Fortunately, no one was injured.

Which one of the following statements best explains the legal position?

A) The supplier has breached an implied term under the Consumer Rights Act 2015 as the hairdryer was not of satisfactory quality. Although, the exemption clause was incorporated by signature, the Consumer Rights Act 2015 states that this term will not bind the salon

B) The supplier has breached an implied term of the Sale of Goods Act 1979 as the hairdryer was not of satisfactory quality. The exemption clause has not been incorporated by signature as it was an onerous clause

C) The supplier has breached an implied term of the Consumer Rights Act 2015 as the hairdryer was not of satisfactory quality. The exemption clause has not been incorporated by signature as it was an onerous clause

D) The supplier has breached an implied term of the Sale of Goods Act 1979 as the hairdryer was not of satisfactory quality. The exemption clause was incorporated by signature. The exemption clause will be effective as the Unfair Contract Terms Act 1977 only prevents exclusion of liability for death or personal injury

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

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)

185
Q

A student joins a kayaking course with an adventure company. Her instructor on the course negligently takes her into rapids far too dangerous for someone of her ability and experience. She capsizes and collides with several rocks, causing facial injuries. The contract she signed when she registered for the course included a clause (the ‘Clause’) which stated that the adventure company would not be liable for any facial injuries or disfigurements caused during the kayaking and would only be liable for broken limbs and fingers. Which one of the following is correct?

A) The Clause will be effective to exclude liability for the student’s injuries if it passes the test of fairness under the Consumer Rights Act 2015

B) The Clause will be effective to exclude liability for the student’s injuries

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

D) The Clause will be effective to exclude liability the student’s injuries depending on the severity of the personal injuries

E) The Clause will be effective to exclude liability for the student’s injuries if it passes the test of reasonableness under the Unfair Contract Terms Act 1977

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)

186
Q

A carpenter contracts with a company to carry out plumbing services. At the time of contracting an agent of the company signs a form, without reading it, containing the following clause, ‘Our total liability to you, including but not limited to our liability in negligence, shall not exceed £500’. The carpenter carries out the services with a lack of reasonable care and skill causing damage to company property. Which one of the following statements best explains the legal position?

A) The carpenter has breached an implied term of the Consumer Rights Act 2015 by failing to carry out the service with reasonable care and skill. The exemption clause limits liability for negligence at common law, however the company will not be taken to have voluntarily accepted any risk merely because he agreed to or knew about the exemption clause

B) 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 would be void under the Unfair Contract Terms Act 1977 as it attempts to limit liability caused by negligence

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

D) 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 will not be construed to cover the carpenter’s breach

E) The carpenter has breached an implied term of the Consumer Rights Act 2015 by failing to carry out the service with reasonable care and skill. The carpenter cannot rely on the clause because it has not been read by the agent of the company

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)

187
Q

A customer orders a mountain bike from a bike shop. A bike is ‘made to order’ - the customer chooses various parts and the bike is assembled in accordance with that choice and later delivered. The customer agrees to pay £1,200 on delivery. The customer discovers that the combination of parts he has chosen is actually readily available as a pre-assembled bike with numerous retailers for only £800. The customer no longer wants to pay the sum of £1,200 for the bike. Which of the following correctly summarises the situation as to whether the bike shop can enforce the payment obligation?

A) The clause is enforceable only to the extent that the customer can be required to pay £800

B) This clause is enforceable

C) The court would determine whether the clause satisfies the test of reasonableness in order to determine whether it is enforceable

D) The clause is unenforceable

E) The court would determine whether the clause causes a significant imbalance in the parties’ rights and obligations to the detriment of the customer in order to determine whether it is enforceable

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)

188
Q

A homeowner engages a professional decorator to decorate her house. She signs a written contract provided by the decorator which includes terms that: [clause A] the decorator’s liability for any injury caused by a failure to perform the service with reasonable care and skill will be limited to £5,000 [clause B] Nothing in clause restricts liability for death / personal injury resulting from negligence.

The decorator carries out the work carelessly, causing damage to the homeowner’s house in excess of £10,000.

Which of the following best summarises the legal situation in relation to the clauses referred to above?

A) The clause will be effective only so far as it satisfies the requirements of reasonableness

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

C) The clause will be ineffective because the decorator is not permitted to exclude or restrict liability for death or personal injury resulting from negligence

D) The clause will be ineffective because it has not been incorporated

E) The clause will be effective because it is a limitation rather than exclusion of liability

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)

189
Q

A hairdresser wishes to purchase a salon. She visits a salon which is advertised for sale and asks the seller about their future plans. The seller responds, ‘don’t worry I won’t open a rival business close by, I am planning to move out of the area.’ The hairdresser is reassured by this and purchases the salon. In fact, the seller was already in discussions to purchase a new salon two streets away. One month after the hairdresser’s purchase is completed the seller opens their rival business and the hairdresser loses the vast majority of her clients as a result. Which of the following most accurately applies the law of misrepresentation?

A) The seller’s statement about future plans is unlikely to be actionable as it is a statement of intention

B) The seller’s statement about future plans is likely to be an actionable misrepresentation which is innocent

C) The seller’s statement about future plans is unlikely to be material and is unlikely to induce the contract

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

E) The seller’s statement about future plans is unlikely to be actionable as it is a statement of intention and immaterial

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)

190
Q

A hotelier is selling his hotel. During pre-contractual discussions with the buyer the hotelier tells the buyer that the hotel has its own car park that is let out to a tenant. The buyer expresses a desire to terminate the tenancy and expand the hotel onto that land. The hotelier tells the buyer that the tenancy is on a contractual licence, terminable on a month’s notice. After the sale of the hotel is completed the buyer finds out that the car park is in fact occupied under a protected business tenancy pursuant to statute.

What advice would you give the buyer?

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

B) The hotelier’s statement about the contractual licence is a statement of opinion

C) The hotelier’s statement about the contractual licence is not an actionable misrepresentation

D) The seller’s statement about the contractual licence maybe an actionable misrepresentation as a statement of opinion elevated to a statement of fact.

E) The seller’s statement about the contractual license is advertising hyperbole.

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’)

191
Q

A representor makes a material fraudulent misrepresentation when selling her business to the representee. The representee carries out his own cursory investigation before buying the business. If the representee had carried out this investigation more thoroughly he would have discovered that the representor’s statement was false. When carrying out his own investigations the representee finds out further information about the business that he was not told by the representor. This new information influences the representee’s decision to purchase the business. A week later, the representee discovers that representor’s fraud. The representee wants to rescind the contract for misrepresentation.

Which of the following most accurately applies the law of misrepresentation?

A) The representee will not be able to set the contract aside for misrepresentation as the week delay will act as a bar to rescission

B) The representee will be able to set aside the contract for misrepresentation but his damages will be reduced as a reasonable investigation would have revealed the representor’s statement to be untrue

C) The representee will not be able to set aside the contract for misrepresentation as a reasonable investigation would have revealed the representor’s statement to be untrue

D) The representee will not be able to set aside the contract for misrepresentation as he will not be able to show he was induced by the representor as he made his own independent check

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

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))

192
Q

A caravan owner is selling his caravan. The caravan owner paints a stain stopping paint to cover up some damp in the bathroom. The buyer looks around the caravan but does not go into the bathroom. After the sale the buyer discovers the damp and wants to sue the caravan owner for misrepresentation.

Which one of the following statements best explains the legal position?

A) The caravan owner’s conduct in hiding the damp will amount to a fraudulent misrepresentation and consequently the court will disregard inducement

B) The caravan owner’s conduct in hiding the damp will amount to an actionable misrepresentation by conduct. It is likely to be a fraudulent misrepresentation

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

D) 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, it is likely to be an innocent misrepresentation

E) The caravan owner’s conduct in hiding the damp will amount to an actionable misrepresentation by conduct. It is likely to be a negligent misrepresentation

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)

193
Q

A cake shop owner is selling her shop. She tells the buyer what profit her shop makes each month. After this and before the sale the cake shop’s monthly profit halves. The cake shop owner knows that the buyer has relied on her earlier statement and would want this new information, but she does not know whether she needs to tell him. The sale completes without the cake shop owner advising the buyer of the changed circumstances.

Which of the following most accurately applies the law of misrepresentation?

A) The cake shop owner will not be liable in misrepresentation as this is a commercial transaction and the buyer should have investigated the monthly takings himself

B) The cake shop owner has not made an actionable misrepresentation as the only statement she made was true and there is no duty of disclosure

C) The cake shop owner has made an actionable misrepresentation. This will be a fraudulent misrepresentation

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

E) The cake shop owner has made an actionable misrepresentation. This will be an innocent misrepresentation

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)

194
Q

A man goes into a motorbike showroom pretending to be a well-known snooker player from the 1990’s. He looks a lot like the snooker player. He hands over a cheque for a new motorbike which is accepted by the seller. He rides off with the motorbike. When the seller tries to cash the cheque, it is returned by the bank uncashed because the man writing the cheque had insufficient funds in his account.

The shopkeeper wishes to set the contract aside through mistake. Which statement is the most accurate in relation to whether the contract is void / voidable / valid and why?

A) This is likely not a mistake as to identity but one as to attributes and the contract may be rendered void if shown

B) This is likely not a mistake as to identity but one of attributes and therefore the contract will likely be rendered voidable

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

D) This is likely a mistake as to identity and the contract may be rendered void as a result

E) This is likely a mistake as to identity and the contract may be rendered voidable as a result

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)

195
Q

A (as buyer) enters into a contract with B for the manufacture of 100 personal computers should be sourced from C. C had previously assured A that its processors lasted on average 6 years, without any loss in speed. B duly contracts with C .The computers were built and within 2 years the speed of the machines is significantly slower and the processors are clearly not of the quality C had stated. Which statement is the most accurate in assessing whether A can bring proceedings against C for breach of contract?

A) Only B can bring proceedings against C as there is no privity of contract as between A and C with all sums awarded being held in Trust for B

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

C) Only B can bring proceedings against C as there is no privity of contract as between A and C, but A could claim from C in the tort of negligence

D) Only B can bring proceedings against C as there is no privity of contract as between A and C

E) Only B can bring proceedings against C as there is no privity of contract as between A and C , but A could claim from C as agent for B

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)

196
Q

Stan, a retailer, sells high quality watches from his shop on 5 Beck High Street. On Monday morning a man walks into a shop. He introduced himself to Stan as the famous singer, Vick Vegger. He said that he had heard that the shop was selling top quality watches and that he would like to buy some. Stan recommended two handmade watches, at a price of £10,000 each. Vick agreed to buy them and gave Stan a cheque. On Wednesday morning Stan tried to cash the cheque. The bank informed him that the cheque is a forgery and that it will not be honoured. On Wednesday afternoon Stan informed the police that he had been conned by a rogue impersonating Vick Vegger. The police have found the watches. The rogue had already sold them to a respectable retired man named Jacob, on Tuesday morning. Which of the following might be the most likely outcome based on the above facts?

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

B) The contract between Stan and the impersonator of Vick Vegger is void on the grounds of mistake as to identity and Stan will be able to get his watches back

C) The contract between Stan and the impersonator of Vick Vegger is void on the grounds of misrepresentation as to identity and Stan will be able to get his watches back

D) The contract between Stan and the impersonator of Vick Vegger is voidable on the grounds of misrepresentation as to identity and Stan will be able to get his watches back

E) The contract between Stan and the impersonator of Vick Vegger is voidable on the grounds of mistake as to identity and Stan will be able to get his watches back

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)

197
Q

A telecommunications company is expanding its business overseas and needs to enter into lots of different contracts in all the different countries that it wishes to operate in. It wishes to be a named party in each contract and wants to get them signed as soon as possible.

What is the best solution for getting these contracts negotiated and signed quickly?

A) The telecommunications company can travel to the different countries to negotiate and sign the contracts

B) The telecommunications company can authorise a principal to negotiate and sign the contracts on its behalf

C) The telecommunications company can authorise a negotiator to act as an agent for them and then the telecommunications company can sign once the contract is agreed

D) The telecommunications company can authorise a third party to sign the contract twice; once on behalf of the client and once on behalf of itself

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

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)

198
Q

A buyer is shopping for a wedding dress when she sees a dress by a famous designer on sale for £100. The seller had made a mistake when writing the price tag and it should have been on sale for £1000. The buyer knows that the dress has been mispriced and she quickly buys the dress.

Which of the following statements is correct as to whether or not the contract is valid / void / voidable, and why?

A) The contract for sale is voidable by the seller when they realise their mistake

B) The contract for sale is voidable because there is no agreement

C) The contract for sale is valid because there was a valid offer and acceptance

D) The contract for sale is void because the seller was mistaken about the value of the dress

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

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)

199
Q

An advertising company sells advertising space. A retailer agrees to buy advertising space for three months from the advertising company for £1,000. It provides the advertising company with an advert to use for the three-month period. Before the advert is posted the retailer changes its mind and refuses to pay the £1,000.

Which one of the following statements best explains the legal position?

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

B) Provided the advertising company can prove that it had a legitimate interest in performing the contract, the advertising company can affirm the contract, perform its obligations and claim the contract price

C) The advertising company cannot affirm the contract and claim the contract price as they are required to take reasonable steps to mitigate their loss

D) The advertising company cannot affirm the contract as the retailer’s cooperation is required to pay the contract price

E) The advertising company cannot affirm the contract as it is only in extreme cases that it would be reasonable for the innocent party to affirm the contract

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)

200
Q

A builder contracts with a homeowner to build a swimming pool by the summer of the year. A nationwide shortage of skilled tilers means that the contract will not be completed by the summer and will now take until the winter of that year to complete at significantly greater cost to the builder, as tilers from Europe will need to be brought in. The builder argues the contract to be frustrated.

Which of the following statements as to whether the contract has been frustrated is the most accurate?

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

B) On the basis that the contract is now significantly different in time and cost than first agreed, the contract is frustrated

C) The contract is frustrated on the basis of impossibility

D) The contract is frustrated on the basis of unforseeability

E) The contract now being substantially more difficult to perform will render the contract frustrated

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)

201
Q

A builder agrees to build a yoga studio for a hotel. The contract stipulates that £15,000 is payable once the foundations are built, £15,000 is payable once the roof is built and the final £15,000 is payable three months after completion. The builder walks away from the contract after the foundations have been built.

On what basis is it most likely that the builder can enforce payment under the contract?

A) The builder is entitled to £15,000 as voluntary acceptance of partial performance has occurred

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

C) The builder is entitled to £15,000 as substantial performance of the contract has taken place

D) The builder is entitled to £15,000 on a quantum meruit basis

E) The builder is entitled to £15,000 as partial performance has taken place

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.

202
Q

A dental surgery contracted with a small company to install new lighting in the surgery. After the work was completed, the dental surgery explained to the company that it was in financial difficulties and asked if the company would accept a lesser sum than the amount due under the contract in exchange for a free dental check-up for the company’s employees. The company agreed.

Which statement best describes whether this agreement is binding?

A) The agreement is not binding because the entire obligations rule applies

B) The agreement is binding because of accord and satisfaction

C) The agreement is not binding as payment of a lesser sum cannot discharge a contractual obligation to pay a greater sum

D) The agreement is binding as there was a mutual waiver of obligations

E) The agreement is binding because there has been voluntary acceptance of partial performance

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)

203
Q

An electrician agreed to install light fittings in a hotel at a cost of £10,000. A deposit of £2,000 was paid at the time of contracting with the balance being payable upon completion. The hotel was destroyed by a typhoon two weeks prior to the work being fully completed.

Under the Law Reform (Frustrated Contracts) Act 1943 what is the most likely outcome should the electrician wish to enforce the contract?

A) The contract if substantially fulfilled will entitle the electrician to the entire payment with an adjustment for the incomplete work

B) The contract is not fulfilled, and the electrician is entitled to a minimum of £1,000 in relation to the expenses incurred prior to the frustrating event

C) The contract, if substantially fulfilled, will entitle the electrician to payment upon a quantum meruit basis

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

E) The contract has been frustrated by impossibility and the electrician is therefore entitled to nothing

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))

204
Q

A printing press decided to expand its business and ordered a large printer from a specialist retailer. Unfortunately when the printer arrived, it was faulty and Kate had to wait 3 months for a replacement. Kate would like to claim for (i) the loss of the extra printing business that she could have taken on with immediate use of the new printer; and (ii) the loss of a number of highly lucrative printing contracts which she could have obtained. What advice would you give the printing press?

A) The printing press cannot recover for the ordinary printing business or the lucrative printing contracts as they are not losses which arise naturally

B) The printing press can recover for both the ordinary extra printing business that they would have taken on and the lucrative printing contracts as the retailer has imputed knowledge of both

C) The printing press cannot recover for the lucrative printing contracts as it is not a loss which arises naturally

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

E) The printing press cannot recover for the ordinary extra printing business as the retailer did not have actual knowledge of it

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)

205
Q

A garden centre with a large supply of Christmas trees pays a local magazine to advertise their company in the November edition of the publication. A full-page colour advert is designed for the magazine. Shortly before the release date the magazine informs the Garden Centre that the advert will not go into the November edition as a rival Garden Centre has offered them twice the price to advertise their Company instead. Which of the following statements best describes the basis of the assessment of damages the Garden Centre is likely to obtain from the court for breach of contract by the magazine?

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

B) The Garden Centre is likely to obtain an award on a restitutionary basis, because the magazine has contracted with a more lucrative customer

C) The Garden Centre is unlikely to receive anything as the Garden Centre has been advised that the advert will not appear before the due date for its publication and the Garden Centre has taken no steps to mitigate its loss.

D) The Garden Centre is unlikely to receive anything as they have been advised that the advert will not appear before the due date for its publication.

E) The Garden Centre is likely to obtain an award for the expectation interest, being the loss in profit suffered as a result of the shortfall in Christmas tree sales

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)

206
Q

A dealer supplied a defective cooker to a cafe owner. The cafe owner discovered the defect but went on to use the cooker knowing that it was unsafe to do so. The cooker caught fire resulting in personal injury to the café owner and damage to his property. Which one of the following statements best describes the legal position in relation to the damages recoverable by the café owner in a claim against the dealer for breach of contract (assuming a breach of contract is established)?

A) The café owner will not be able to recover damages for their personal injury or property damage because the dealer’s breach was not the effective cause of the fire

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

C) The café owner will be able to recover damages for their personal injury and property damage

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

E) The café owner will not be able to recover damages for their personal injury or property damage because the losses are too remote

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))

207
Q

A leisure company engages a construction company to build a swimming pool that is 50 metres in length for £100,000. When the pool is finished it’s found to be 49 metres long – a breach of contract. The leisure company needs the swimming pool length to be rectified as the current length is unsuitable for swimming competitions. It will cost £110,000 to rectify the issue.

Which one of the following statements best explains the legal position in relation to the measure of recoverable damages?

A) The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to damages for the diminution in value of the pool

B) The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to damages for its reliance loss

C) The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to nominal damages

D) The leisure company will not be able to claim the £110,000 as such a claim would be unreasonable as it is more than the original contract price. Instead, it will be entitled to damages for the loss of amenity

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

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)

208
Q

A printing press, decided to expand its business and ordered a large printer from a specialist retailer. Unfortunately when the printer arrived, it was faulty and Kate had to wait 3 months for a replacement. Kate would like to claim for (i) the loss of the extra printing business that she could have taken on with immediate use of the new printer; and (ii) the loss of a number of highly lucrative printing contracts which she could have obtained. What advice would you give the printing press?

A) The printing press cannot recover for the lucrative printing contracts as it is not a loss which arises naturally

B) The printing press can recover for both the ordinary extra printing business that they would have taken on and the lucrative printing contracts as the retailer has imputed knowledge of both

C) The printing press cannot recover for the ordinary extra printing business as the retailer did not have actual knowledge of it.

D) The printing press cannot recover for the ordinary printing business or the lucrative printing contracts as they are not losses which arise naturally

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

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)

209
Q

A caterer contracts with a wholesale food supplier to supply and deliver the ingredients she requires to cater for an event. The caterer will make £800 profit from from the event. The event organiser has told the caterer that if the event goes well, she would use the caterer for five future contracts which would generate £5,000 profit for the caterer. The caterer has not told this to anyone. In breach of contract the wholesale food retailer does not deliver any of the ingredients to the caterer on the day of the event as agreed. At such short notice the caterer does not have time to source alternative fresh ingredients and prepare the food. The event organiser refuses to go ahead with the event (this is justified in accordance with the terms of the contract) and awards the five future contracts to a different caterer. Which one of the following statements best explains the likely position as to the damages the caterer can recover from the wholesale food supplier?

A) The caterer can claim both the £800 and the £5,000 in damages

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

C) The caterer cannot claim either the £800 or the £5,000 in damages as both are too remote

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

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

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)

210
Q

A homeowner has built a ‘garden of tranquility.’ There are currently building works next to the garden and the homeowner has offered to pay the building contractor £100 a week if they do not use heavy machinery between the hours of 7-10am and 3-6pm. The building contractor agrees to this, and the arrangement works well for the first month but after that the heavy machinery is used during the prohibited times and the homeowner s very upset about this. The homeowner tries to reason with the contractors but then gives up. Six months later, the homeowner becomes aware of the possibility of seeking an injunction and has now applied to the court for a prohibitory injunction. How likely is the court to grant this injunction?

A) The court is likely to grant the injunction because the homeowner has acted in accordance with all the equitable maxims

B) The court is likely to grant an injunction, despite the delay, as it will use its discretion to grant one where it appears to be just and convenient to do so

C) The court is unlikely to grant the injunction because the homeowner’s conduct has been poor (they have failed to come to court ‘with clean hands’)

D) The court is likely to grant the injunction because an award of financial compensation is not an adequate remedy

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

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)

211
Q

A delivery company enters into an agreeement to hire six vans from a company which has a fleet of vans for a period of 3 months. In breach of contract, the company with the fleet of vans fails to make any vans available on the agreed date. What remedy is the court likely to grant the delivery company?

A) A mandatory injunction

B) Specific performance

C) A prohibitory injunction

D) No remedy

E) Damages

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.)

212
Q

A game’s manufacturer’s long-awaited computer game is to be released on 10 September. The manufacturer agrees to sell 10,000 games to a retailer at a wholesale cost of £20 each. As the retailer is anticipating large queues and a high volume of sales on the day of advertised release, they have agreed that the games must be delivered on 9 September. Clause one of the contract between the parties (which both parties have signed) indicates in small print that, in the event of late delivery, the manufacturer must pay the retailer £500 every day until delivery is made. The manufacturer delivers the games 2 days late. Based on the above information, which of the following most accurately describes the remedy available to the retailer?

A) Clause one has not been incorporated into the contract. The retailer is likely to be awarded nominal damages

B) Clause one has been incorporated into the contract but it is likely to be an unenforceable penalty clause because it does not protect a legitimate business interest. The retailer is likely to be awarded nominal damages

C) Clause one has been incorporated into the contract but it is likely to be an unenforceable penalty clause because it provides for a disproportionate sum to be paid. The retailer is likely to be awarded nominal damages

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

E) Clause one has been incorporated into the contract but it is void in accordance with the Unfair Contract Terms Act 1977

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)

213
Q

A recruitment company agrees with a web-design company that the web-design company will pay £4,500 to the recruitment company if it engages an IT developer introduced to it by the recruitment company. The terms agreed between the parties provide that the web-design company must tell the recruitment company before it engages the IT developer, and that if it fails to do so, it must pay a sum of £13,500 instead. The web-design company engages the IT developer without telling the recruitment company. How is the court likely to determine the sum to be paid by way of damages?

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

B) The court is likely to award damages of £13,500 on the basis that the clause providing for payment of that sum is a primary obligation rather than a secondary obligation

C) The court is likely to refuse to award damages on the basis that the clause providing for payment of £13,500 is a penalty clause and it is not possible to predict what would have happened if the web-design company had told the recruitment company before engaging the IT developer

D) The court is likely to refuse to award damages on the basis that the clause providing for payment of £13,500 is a penalty clause

E) The court is likely to award damages of £13,500 on the basis that the clause providing for payment of that sum is a lawful liquidated damages clause

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)

214
Q

A man rents out a room in his flat to a student. The man also lives in the flat. The man hosts loud parties in the flat every week from Thursday to Monday. On 31 March, the student pays the owner of the flat £500 in return for the owner’s promise not to have any parties in the flat on any day during April and May. On 25 May, the owner of the flat starts making preparations to host a party in their flat on 31 May. Which of the following statements best describes how the student might in principle enforce the owner of the flat’s promise?

A) The student can ask the police to enforce the contract

B) The student can enforce the owner of the flat’s promise by seeking to recover the £500 paid in advance to the owner of the flat

C) The student can ask the local authority to enforce the contract

D) The student can enforce the owner of the flat’s promise through an order for damages for breach of contract

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

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))