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Spring term 2019 > Law for Accounting (wk2,3,4,5,6) > Flashcards

Law for Accounting (wk2,3,4,5,6) Flashcards

1
Q

What are the 2 fundamental components of contract law?

A

Agreement

Enforceability (by law)

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2
Q

What are the 3 stages of a contract?

A

Concord
Completion
Cessation

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3
Q

Define Concord.

A

An agreement for a contract to be valid. It needs to be between at least 2 people.

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4
Q

A successful resolution of a civil dispute requires…

A

The facts to be proven (evidence).

The principles of law that provide remedy (reference to case law).

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5
Q

Contract disputes are resolved by determining…

A

There was an agreement.
Performance was appropriate.
The contract was resolved appropriately.

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6
Q

Define an Offer.

A

An explicit proposal of terms with an intention that the terms will be binding .

e.g. Would you like to buy this car for £2000?

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7
Q

What factors could make an offer valid or invalid?

A

Mistakes (offering the wrong amount is still binding)

State of Mind (validity of offer depends on knowledge of the acceptor)

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8
Q

What is an invitation to treat?

A

Treat in this context means negotiate. Someone makes an offer to the seller and they can accept or decline.

e.g. A sticker for £2000 on the window of a car is not an offer.

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9
Q

Are advertisements an offer or an invitation to treat?

A

By default they are invitations, however if the wording appears to be unilateral then this can change.

e.g. “Reward if found…” is unilateral.

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10
Q

What is the difference between a bilateral and an unilateral contract?

A

Bilateral Contract: Both parties make a promise to each other.
Unilateral Contract: Only one party promises to do something if the other fulfils criteria. Acceptance isn’t required, just simple satisfaction of the criteria.

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11
Q

In contract law, what is meant by an acceptance?

A

Explicit, final and unqualified expression of agreement to be bound by the terms in an offer. The contract is only complete when acceptance received by the offeror.

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12
Q

What is the postal rule?

A

If a letter is correctly stamped, addressed and posted then it is deemed accepted immediately. Applies in absence of any other terms (e.g. offeror must receive notice in writing).

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13
Q

Under what circumstances can an acceptance not be qualified?

A

If it is in fact a counter offer, as this in turn can be accepted or not.

e.g. I accept if…

Conceptually similar to a qualified audit report in accounting.

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14
Q

What is a conditional acceptance conceptually similar to in accounting?

A

Contingent liabilities

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15
Q

How can explicit acceptance of a contract not always be clear?

A

Ongoing negotiations
Acceptance by Conduct (shipping of goods)
Battle of the Forms

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16
Q

What is an auction?

A

A series of offers by the buyers with the auctioneer accepting the offer when the hammer is brought down.

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17
Q

How can an auction be a unilateral contract?

A

Reserves pre-empt by establishing a minimum offer that will be accepted.

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18
Q

What is a tender?

A

Typically an invitation to treat, but can be formal is worded differently.

eg. “tenders to supply 100 desks” vs “tenders to supply 100 desks, highest bidder gets the contract”

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19
Q

How can an offer be terminated before an acceptance?

A 
Withdrawal
Rejection
Lapse of Time
Death
Conditions

(Reasonable notice and communication required for most)

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20
Q

What are some of the issues surrounding certainty in a contract?

A 
Custom and Trading Usage
Reasonableness 
Duty to Resolve
Meaningless Terms
"Subject to Contract"
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21
Q

What are the presumptions of a business and commercial contract?

A

Presumption that there is an intention to enter into a contract.
If disputed it’s up to the business to prove tat they didn’t intend to enter into the contract

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22
Q

What are the presumptions of a social and domestic contract?

A

Presumption that there is not an intention to enter a contract.
If disputed, it’s up to the individual to prove that they did intend to enter into the contract.

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23
Q

What are the conditions of a contract regarding to consideration?

A

Without consideration a contract isn’t valid.
Consideration cannot of already happened.
Consideration must involve economic value in the eyes of the law.

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24
Q

What is meant by ‘Privity of Contract’?

A

Only parties to a contract have enforceable rights under it.

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25
Q

What does that the ‘Rights of Third Parties Act (1999)’ allow?

A

It allows third parties to enforce contracts that affect them if they’re “expressly identified”.

it doesn’t abolish the privity rule.

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26
Q

What is recession in contract law?

A

all parties released from obligations.
Could happen if all or one party has outstanding rights.

For example,
A delivers goods to B. B fails to pay.
If B returns the goods, then consideration has been made by both parties.
If A simply accepts that they won’t be paid, then it is no longer a contract and instead simply a ‘gratuitous promise’ from A to B.

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27
Q

What is variation in contract law?

A

A change to the obligations (variation in the consideration).

For example, If A sells goods to B worth £1000 but B only pays £800. A variation to disregard the outstanding £200 cannot be enforced as there is no consideration from B.

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28
Q

Explain ‘Promissory Estoppel’.

A

A promise that would seem to be supported with no consideration.
It can be used to defend against action, not used to instigate action. (Shield not sword)
Estoppel stops someone from going back on their word.

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29
Q

What contracts must be written in writing.

A

Deed (clearly stated as deed, signed and witnessed, action can be brought within 12 years)

Written Contrast (action can be brought within 6 years. e.g. interest in land, consumer credit agreements, contracts of guarantee)

30
Q

In terms of capacity, a contract is only valid if both parties…

A

Are 18+
Not drunk
Not a mental health patient

Implications are that the contract will either be void, voidable or non-binding.

31
Q

In contract law, what is the repugnancy rule?

A

Anything clearly contradicting the aims of the contract.

32
Q

In contract law, what is the four corners rule?

A

Exemption valid if contract performed in accordance with terms “the four corners of the contract”.

33
Q

What are the types of mistakes that can be in a contract?

A

Identical/bilateral/common (both parties make the same fundamental mistake)
Mutual (cross purposes, different mistakes by both parties)
Unilateral (one party knows the other has made a mistake)

If not rectified, contract may be void, voidable, or remain valid depending on severity and circumstance.

34
Q

Explain misrepresentation within a contract?

A

An untrue statement of fact.
Doesn’t cover “puff” or advertising.
Silence is not misrepresentation.
Parties must disclose all known facts if contract is unberrimae fidei.

35
Q

What are the 3 possible outcomes of misrepresentation within a contract?

A

Wholly Innocent
Negligent
Fraudulent

36
Q

What are resolutions that apply for both misrepresentation and illegality within a contract?

A

Damages for deceit and rescission
Damages for negligence
Rescission (i.e. cancellation of contract)

37
Q

Explain duress in terms of contract law.

A

improperly forcing a party into a contract.
Contract voidable by innocent party.
Can be “hard bargaining” or more subtle such as economic duress.

38
Q

What is an illegal performance?

A

Purpose legal, but in an illegal way.

e.g. employment cash in hand to avoid income tax

39
Q

Explain undue influence in terms of contract law.

A

Improperly persuading or coercing a party into a contract.
Contract is voidable by innocent party.
Lawyer/Client, Doctor/Patient, Lender/Borrower

40
Q

Explain unconscionable bargain in terms of contract law.

A

A very unfair contract, entered into out of desperation.
Contract not voidable but can be “set aside” or modified in court.

e.g. Payday Loans

41
Q

Explain illegality.

A

It is a vitiating factor (renders contract void from the start)

Illegal purpose: Forbidden by law (murder, etc)
Illegal performance: Purpose legal but in an illegal way

42
Q

What are the 4 ways in which a contract can be discharged?

A

Agreement
Performance
Frustration
Breach

43
Q

What are the remedies of a discharged contract?

A

Specified Performance (e.g. court forcing you to do xyz)
Injunctions
Damages (financial settlement)

44
Q

What is the difference between liquidated, unliquidated and nominal damages?

A

Liquidated: Amounts agreed explicitly in the contract
Unliquidated: The court fixed the amount
Nominal: Awarded if not actual loss incurred. Simply acknowledges the wrong and vindicated the claimant’s actions/rights. Designed to set the record straight only.

45
Q

What is Tort law?

A

Tort is a civil wrong.
Disputes with no direct relationship.

e.g.
Defamation
Trespass
Wrongful death
Negligence
Duty of Care
etc
46
Q

When does negligence occur?

A

It occurs when there is damaged caused, but there’s no contract between the parties.
Without a contract there’s no basis to sue unless the suing party can prove they were owed a duty of care.

47
Q

Explain ‘Duty of Care’.

A

Obligation to ensure safety or welfare of others.
Fundamental to the law of negligence… no duty of care, no liability.
MUST be reasonable, fair and foreseeable.
e.g. Donogue vs Stevenson (1932)

48
Q

What is the Neighbour Principle?

A

You must take reasonable care to avoid acts or omissions which you can reasonable foresee would be likely to injure your neighbour.
It has formed the basis for virtually all negligence claims.

49
Q

If a duty of care exists, what are the facts that need to be confirmed?

A
  1. That there was a breach of the duty of care
  2. That the breach caused the damage
  3. That the damage was foreseeable
  4. That there were no mitigating factors
50
Q

What is the burden of “res ipsa loquitur” regarding negligence?

A

The thing speaks for itself.
The claimant must prove the defendant was negligent, unless the facts of the case seem to be the natural explanation, in which case the defendant has to prove they weren’t negligent.

e.g Pedestrian hit by car during daylight (natural to assume a negligent driver).
Pedestrian, wearing black clothes, hit by a car at night (natural to assume driver not negligent).

51
Q

Explain ‘Vicarious Liability’ within negligence?

A

Vicarious - Acting or done for another.

Employers are vicariously liable for torts committed in the course of their employment.

“frolic of their own” - if an employee is acting outside of the employment for their own benefit, then the employer is unlikely liable (e.g. break in a pub)

52
Q

What is the Caparo Test for negligence?

A

Established in the Caparo vs Dickman (1990)

  1. Reasonably foreseeable that harm would occur
  2. Relationship of proximity
  3. Fair, just and reasonable
53
Q

What’s the difference between pecuniary and non-pecuniary losses?

A

Pecuniary Losses: Can be measured financially

Non-pecuniary Losses: Cannot be measured (pain and suffering)

54
Q

What is a consequential loss?

A

Arising from damage/harm directly related to the tort.

It is claimable.

55
Q

What is pure economic loss?

A

Future, potential and financial losses.

It isn’t claimable.

56
Q

What are provisional damages?

A

A sum agreed that can be revisited later (common in injuries affecting minors).

57
Q

When calculating loss of earnings for damages, what needs to be considered?

A

Previous earnings level
Time until expected retirement
Discount rate for probability of early death, fall in earnings, etc
Discount rate for invested lump sum

58
Q

What is Volenti non fit Injuria? (Negligence)

A

Harm can’t be done to one who is willing.

e.g. someone disassembling fireworks to make a larger one can’t sue

59
Q

What is relevant to accountants regarding tort law?

A

Determine contingent liabilities in the event of a claim. (product development, design, etc causing potential harm)
Professional Advice
Auditors (only owe a duty of care to shareholders not the public)

60
Q

What is the key difference between employment and self-employment?

A

Employment is a much more involved relationship.

Self employment is just a purchase of a service or a good.

61
Q

What is a contract FOR service?

A

You perform service X and I pay you Y.

Taxes a matter between the service provider and HMRC only.

62
Q

What is a contract OF service?

A

You work for me, you turn up everyday, I will give you work, you will do work.
I will pay you X every month and provide certain benefits

63
Q

What are the tests to determine an employee?

A 
Control Test (Control the persons work an the manner in which it is done.
Integration Test (A doctor's services are integrated into the hospital)
Economic Reality Test (What is the nature of the relationship, not just what the paperwork says. What is implied)
64
Q

What is the practical importance of determining a contractor or an employee?

A

Employees have a duty of obedience and an employer is vicariously liable for their acts.

A contract for service doesn’t require this obedience and are liable for their own acts.

65
Q

What are the key points of the Employment Rights Act 1996?

A

Provide written details of employment.
Pay rates and interval, job title, notice, etc etc
The statement isn’t a contract unless all parties agree.

66
Q

What are the implied terms of the employer by the court?

A

A duty to…
Indemnify the employee
Provide a safe system of work
Take reasonable care for employees health and safety
Give reasonable notice of termination of employment (typically 1 week per year service)

67
Q

What are the implied terms of the employee by the court?

A 
A Duty to...
Obey lawful and reasonable orders
Perform work in a reasonable manner
Provide personal service
Give honest and faithful service
68
Q

What is a wrongful dismissal and its remedies?

A

Lack of proper notice or during a fixed term.

Law action for breach of contract, within 6 years of dismissal. Claim is for payment.

69
Q

What is unfair dismissal and its remedies?

A

Termination without justification. Victimisation.

Reinstatement, re-engagement or compensation.

70
Q

What is constructive dismissal and its remedies?

A

“Forced” to resign immediately.

Usually treated the same as unfair dismissal.

Spring term 2019 (5 decks)

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