Rules Of Contract Law

Question 1

What is a contract?

Answer 1

An agreement between two parties who are bound by law to carry out the obligations under the contract, which can be enforced or compensated in court

Question 2

What is breach of contract?

Answer 2

When a party fails to perform any of their obligations under the contract

Question 3

What are the 3 key parts for the formation of a contract?

Answer 3

Agreement – a valid offer and a valid acceptance of that offer

Consideration – something that is given in return for something promised, proving the agreement’s existence (usually the price paid)

Intention to create legal relations – a clear intention to be bound by the agreement

Question 4

What are terms?

Answer 4

The individual statements made by the contracting parties which form the contents or subject matter of the contract. Once agreed upon, terms are the binding part of the contract which the parties agree to perform to fulfill the contract.

Question 5

What happens if either party fails to carry out a term?

Answer 5

They will be in breach of contract and legal recourse is possible.

Question 6

What is legal recourse?

Answer 6

An action that can be taken by an individual or corporation to remedy a legal difficulty (eg breach)

Question 7

What are the types of terms?

Answer 7

• express (from parties themselves)
• implied (a presumption of agreement by the parties)
• ‘imputed’ by process of law/implied by statute eg CRA 2015

Question 8

What can terms be?

Answer 8

• conditions - go to the root of the contract
• warranties - lesser terms and are generally descriptive (secondary promise that guarantees quality, performance or fitness of goods/services)

Question 9

What are vitiating factors?

Answer 9

Defects in the contract unknown to either party, even if a contract has all of the necessary constituent parts in its formation (offer, acceptance, consideration and intention)

Question 10

What can vitiating factors do?

Answer 10

They can invalidate a contact, even if both parties are happy with the terms of the agreement at the time the contract is formed

Question 11

How can vitiating factors come into operation?

Answer 11

Through either:
- a void contract - the contract was not valid from the start
- a voidable contract - the contract becomes invalid along the way

Question 12

Facts about void contracts…

Answer 12

• unenforceable, no matter the situation
• invalid if neither parties revoke/cancel it

Question 13

Facts about voidable contracts…

Answer 13

• can only be annulled if the court sees legal reasons to do so
• remains valid until one of the parties initiates the cancellation process

Question 14

Discharge definition?

Answer 14

The ending of a contract

Question 15

What is discharge by contract?

Answer 15

When contracts are discharged when both parties complete their obligations under the contract

Question 16

What is discharge by frustration?

Answer 16

When the contract can not be performed due to events outside of the parties’ control

Question 17

When will a contract end under discharge by frustration?

Answer 17

Although there are no limits to discharge by frustration, in effect, the contract will end as soon as the intervening event occurs, eg change in law, destruction of subject matter (eg trees), outbreak of war…

Question 18

What is discharge by breach of contract?

Answer 18

If either party fails to perform one or more of their contractual terms, primary obligations (the core promises agreed) are breached and are replaced by secondary obligations (remain enforceable following the termination of the contract), eg paying for the injured party’s losses

Question 19

What are the two types of remedy for breach of contract?

Answer 19

• common law remedies
• equitable remedies

Question 20

What are damages under common law remedies?

Answer 20

A payment of money to compensate the injured party for a breach of contract/their losses

Question 21

What happens if a case of legal recourse is proven/successful?

Answer 21

Damages are the most common remedy in contract law. If proven, damages are granted as of right.

Question 22

What are the 3 basic types of damages?

Answer 22

• unliquidated
• liquidated
• quantum merit

Question 23

What are unliquidated damages?

Answer 23

Where there is no fixed amount of damages calculated/stated in the contract, the courts can fix an amount based on the actual loss

Question 24

What are liquidated damages?

Answer 24

Damages that are calculated/stated during the formation of the contract

Question 25

What is quantum merit?

Answer 25

As much as it’s worth, meaning a reasonable sum of money in respect of the good/service supplied

Question 26

When do equitable remedies come into use?

Answer 26

Where damages would not properly compensate the injured party under common law remedies, equitable remedies are at the court’s discretion but are not automatically granted.

Question 27

What are the two main types of equitable remedies?

Answer 27

• specific performance
• rescission