Contract tricky areas

Question 1

contract needs to have sufficient certainty for courts to enforce will of parties

Answer 1

court may fill some gaps looking at custom, previous dealings (unless unworkable as too uncertain)

• also completed by implied terms

Question 2

promissory estoppel

Answer 2

where a party who is owed a debt makes a promise to the other party (words or conduct) to forgo their legal rights. if they try to enforce the debt in full, it may be considered inequitable for them to do

–> can, on reasonable notice, resume their right to full payment

** no notice is needed if it is clear the promise was only intended to last only until a particular event happened or a particular situation came to an end

Question 3

contract with minors

Answer 3

not bound unless its a contract for necessaries (service is on whole for their benefit)

Question 4

contract made when drunk?

Answer 4

VOIDABLE if the second party knew of the drunkness

Question 5

3rd party enforcing rights?

Answer 5

privity of contract so normally no unless the contract confers a benefit and names them (expressly + expressly says they can enforce)

–> otherwise can be sued under collateral contract if they’ve given an indemnity (indemnity primary obli - dont need written contract)
(contractor X tells buyer Y that Z’s product is suitable => Y tells X to buy the product from Z based on this => Z’s product turns out to be unsuitable => Y can sue X under a collateral contract made via X’s assurance)!!!

Question 6

when are you not bound by a term,

Answer 6

a) if it has not been incorporated (eg got shown after signing)

b) clause to onerous or unusual and was not reasonably drawn to the signatory’s attention

c) UCTA (b2b) + CRA (c2b) + penalty clause

!!! if a term appears for the first time in an invoice, it will not be incorporated

Question 7

how to establish wether a term has been incorporated

Answer 7

1) ought to reasonably have known
2) party ought to have taken reasonable steps to bring it to your attention

court looks at:
- position of parties
- prominence of clause
- type/nature of clause
- basically where does the clause come from

!!! if a term appears for the first time in an invoice, it will not be incorporated

Question 8

b2b contracts

Answer 8

SGA 1982
SGSA 1982
UCTA 1977

Question 9

remedies available for breach of SGA 1982

Answer 9

if term breached is condition buyer can:
a) terminate contract
b) reject goods
c) claim damages (cost of cure basis)

BUT

if nature means unreasonable for contract to reject and repudiate, can only recover damages (breach considered as warranty)

Question 10

remedies CRA 2015

Answer 10

(both goods and service contracts)
strict liability

a) initial short term period of reject (30d)

b) if miss this period have a right to repair/replacement unless doing so would be impossible or disproportionate

c) if impossible or still don’t confirm, right to price reduction and final right to reject (full refund within 6m)

Question 11

remedies CRA 2015 for performance

Answer 11

a) right to repeat performance (reasonable time and without significant inconvenience)

b) right to price reduct if not possible/not in reasonable time

Question 12

UCTA reasonableness

Answer 12

clause will be reasonable as judged by what the parties knew or ought to have known at the time of contracting (burden is on person seeking to rely on clause to show its reasonable)

• look at bargaining power, standard form of contracts, market, financial inducement, age, experience of buyer + knowledge and understanding of clause, INSURANCE !!!, practical consequences

Question 13

CRA’s equivalent of reasonableness

Answer 13

its fairness test!!!
–> term cannot be enforced if contrary to requirement of good faith, causes significant imbalance in parties’ rights and obligations under contract in detriment of the consumer

• liability for death/PI never excluded
  -can never exclude/restrict liability for terms for goods to be: of satisfactory quality, fit for purpose, or to match description + total requirement for reasonable care and skill

(different if terms are negotiated)

Question 14

breach of condition damages

Answer 14

repudiate (terminated + released from future ob)
damages

Question 15

breach of warranty damages

Answer 15

sue for damages

Question 16

innominate terms

Answer 16

ask wether breach has deprived party of substantially whole benefit of contract (looking at effect of breach)

Question 17

test to check if its really a condition

Answer 17

objective test of what would the reasonable person think looking at contract as a whole

Question 18

how to define a misrepresentation

Answer 18

use an objective test
term that is not intended to be binding but induces the entering of the contract

–> court will look at the importance of term

Question 19

can you limit/exclude liability for misrep?

Answer 19

only in NON-consumer contracts providing UCTA (reasonableness) is satisfied

Question 20

types of misrep

Answer 20

• fraudulent (reckless or knowledge it was untrue)
• negligent (if a rep is not fraudulent will be negligent unless the maker can prove they had reasonable grounds to believe it in) (burden of proof on them) (honesty not enough must be reasonable)
• innocent (had reasonable ground to believe on the truth of the statement and so did at the time)

Question 21

remedies for misrepresentation

Answer 21

• fraudulent: tortious damages + rescission (or just one of each) (buyer must still mitigate loss) (because damages are tortious, rules of forseability do not apply)
• negligent: same as for fraudulent but can use defence of contributory neg
• innocent: either rescission or damages in lieu of rescission (can’t do damages alone) (damages are on contractual basis, can’t claim if rescission has been barred)

Question 22

bars for rescission

Answer 22

• affirmation
• lapse of time
• restitution is impossible
• innocent 3rd party acquired goods without knowledge of misrep

Question 23

types of mistake

Answer 23

• common mistake (contract void ab initio)
• mutual mistake (cross-purpose, mistake on identity of subject matter = void) (need to use objective test)
• unilateral mistake (only one party was mistaken, if mistaken as to attributes voidable, if identity and subject matter then void)
  (if mistaken as to attribute and 3rd party acquired goods = can’t void) (NO REMEDY)

Question 24

elements to consider when determining duress

Answer 24

• has there been actual/threatened breach of contract
• party acted in good faith
• other party had realistic practical alternative
• if the victim protested and if they affirmed the contract

Question 25

how to determine if duress has been affirmed

Answer 25

whether payment was needed to receive delivery (in which case making full payment isn’t affirming) or whether payment is due later (in which case making the additional payment is affirming)

Question 26

what does duress make a contract

Answer 26

voidable (the part concerned with duress)

Question 27

what is needed for undue influence

Answer 27

• Actual or presumed undue influence + transaction that calls for explanation

Question 28

what does undue influence make a contract

Answer 28

voidable
ONLY remedy is RESCISSION (no damages) (bars to rescission apply)

Question 29

what do we call a breach that allows termination

Answer 29

repudiatory breach (+ generally can also sue for losses)

Question 30

types of loss recoverable

Answer 30

a) pecuniary loss
b) non-pecuniary (physical inconvenience, more like pain and suffering)

based on either expectation loss OR reliance loss (only claiming expenses incurred by non performance)

Question 31

things to think about when assessing loss/damages

Answer 31

1) remoteness of damage (reasonable contemplation of parties at the time or known by them)

2) mitigation of loss (burden to show there has been a failure is on defendant) (court decides what steps count as reasonable)

Question 32

equitable remedies

Answer 32

1) action for agreed sum (/action in debt)(more direct than claiming damages - literally just suing for amount owed + accrued interest for late payment)

2) specific perfomance (usually only if damages are not adequate)

3) injunction

Question 33

injunction claim

Answer 33

1) legal base
2) why damages are not adequate
3) merits of the claim and balance of convenience

Question 34

when does restitutionary damages apply

Answer 34

to prevent one party from being unjustly enriched at the expense of the other (there needs to be this element of unjust enrichment)

(for example, money has been paid by one party under contract and there has been a total failure of consideration, or one party has done works for other or supplied goods and wants to be compensated for it)

Question 35

recovery of money when there has been a total failure of consideration (you pay and they never deliver)

Answer 35

restitution (eg get the money back) + also claim for damages if you had to employ someone more expensive to do work (difference in value)

Question 36

compensation where goods have been supplied/work done and the other party breaches contract (you deliver and they never pay)

Answer 36

can bring a claim in restitution for a reasonable sum for service/goods provided

ALTERNATIVE to claiming damages (you have a choice)
For example, A hires B to paint their garage. Halfway through, A decides they don’t want their garage painted anymore. B can sue for damages or bring a claim under restitution (will receive a ‘quantum meruit’ = reasonable sum for what they did)

Question 37

what can you claim when there has been part performance of contract

Answer 37

restitution (reasonable sum for work done)
OR
damages

For example, A hires B to paint their garage. Halfway through, A decides they don’t want their garage painted anymore. B can sue for damages or bring a claim under restitution (will receive a ‘quantum meruit’ = reasonable sum for what they did)

Question 38

what can you claim when you do work before the contract was even formed

Answer 38

you’re entitled to a reasonable sum for work done (restitution)

Question 39

what’s the main difference between simple damages and restitution damages

Answer 39

normal damages point is to put person in position had contract been performed properly = compensate for loss

restitution damages’ starting point is the gain made by the defendant
–> Not to be awarded if claimant has suffered clear financial loss as result of breach, even if loss is difficult to calculate (its not an alternative to conventional damages)

Question 40

assessing substantial performance

Answer 40

(finished, but slightly defective) then payment must be made, deducting the amount it will cost to remedy the defect => general rule is if fixing the issue will cost more than 1/14th of the contract price, then work has not been substantially performed + if the defect prohibits the purpose of the contract, then the contract will also not be completed

Question 41

part performance of divisible contract

Answer 41

can divide payment and pay for parts completed (any parts completed must be paid even if whole contract not supplied)

Question 42

what happens with money already paid in frustration

Answer 42

• should be repaid
  UNLESS party has spent some of that money towards performing contract (can retain part/all if court considers just) (burden is on payee to how its just for them to retain/recover money)

!! if party has received a valuable benefit, court may order sum to be repaid (sum cannot exceed value of benefit) (expenses incurred deducted)

Question 42

what does frustration make a contract

Answer 42

VOID
(make sure to check for force majeure clause –> could be subject to UCTA though)

Question 43

quirky losses

Answer 43

a) negotiating damages (only applies if no other loss has been suffered) (applies if the claimant has lost an opportunity to negotiate a fee for releasing the defendant from an obligation, eg a restrictive covenant)

b) mental distress and disappointment (only if purposes of contract is to provide please/entertainment)

c) loss of amenity: when there has been a slight breach and total damages would be disproportionately expensive

Question 44

who has the burden of showing mitigation of loss

Answer 44

the def - that the claimant did not mitigate (although claimant should show how it mitigated)

Question 45

what happens if a claimant attempts to mitigate and loss increases

Answer 45

doesnt matter - as long as they properly tried to mitigate + can claim any expenses incurred in attempt to mitigate

Question 46

causation

Answer 46

asses whether damages fairly and reasonably arise naturally from beach of contract (consider expectation loss, reliance loss, account of profit, negotiating damages, loss of amenity and mental distress)

(and then obviously have to look at remoteness) (not about extent of loss only type of loss)