Unit 2: Consideration, Contractual Intention and Agency Flashcards
Which ONE of the following cases can be used to illustrate the rule that consideration need not be adequate?
A) Lampleigh v Brathwait
B) Re Casey’s Patents, Stewart v Casey
C) Chappell and Co v Nestle Ltd
D) Roscorla v Thomas
CORRECT ANSWER C:
All of the other cases are concerned with past consideration.
While Ramandeep was away on holiday, a storm damaged tiles on her roof. Her neighbour, Dan, a builder, repaired the roof. When Ramandeep returned she thanked Dan and promised to give him £100 for all of his trouble.
Which ONE of the following is CORRECT?
A) Dan has provided consideration for Ramandeep’s promise to pay the £100 by mending her roof.
B) Dan has not provided consideration as he did not mend the roof in return for Ramandeep’s promise. His consideration is past.
C) Dan’s consideration is past but the exception in Re Casey’s Patents applies.
CORRECT ANSWER B:
The exception to the past consideration rule does not apply, as Dan did not repair the roof at Ramandeep’s request.
Peter owes Dent & Co £2,000. Peter asks Dent & Co if they will accept £1,500 in full settlement. Dent & Co agree and Peter hands over the £1,500.
Is the following statement TRUE or FALSE?
Dent & Co can sue Peter for the balance relying on promissory estoppel.
FALSE - Dent & Co. will not be relying on promissory estoppel. Dent & Co. can sue for the balance relying on the contract and the rule in Foakes v Beer - it is Peter who may then try to rely on promissory estoppel as a defence.
On 1 April Ken bought an antique desk from Sumi for £2,000. At the time of the contract Sumi agreed that Ken could pay on 1 June. On 15 April Sumi telephoned Ken and said she needed the money straight away to pay for a holiday. She told Ken that if he would pay £1,500 immediately she would let him off the balance. Ken agreed and paid the £1,500. Six weeks later Sumi wrote to Ken claiming the final £500.
Which ONE of the following is CORRECT?
A) Sumi is entitled to be paid the final £500 because of the rule in Foakes v Beer
B) Sumi would have to give Ken reasonable notice and then she would be entitled to the final £500.
C) If Sumi sued for the £500 Ken could rely on the case of Williams v Roffey as a defence
D) If Sumi sued for the £500 Ken could rely on the exception in Pinnel’s case as a defence.
CORRECT ANSWER D:
– if Sumi sued for the £500 Ken could rely on the exception to Foakes v Beer in Pinnel’s case. Pinnel’s case provides that if “different” consideration is provided then the creditor’s promise to accept a reduced sum will be binding. Here Ken provided “different” consideration by making an earlier payment in order to help Sumi.
The case of Williams v Roffey does not apply to a simple part payment of a debt where there is no additional benefit.
In which one of the following cases did the Court of Appeal suggest that part payment of a debt per se could not be a practical benefit for the purpose of satisfying the principle laid down in Williams v Roffey ?
A) Pinnel’s Case
B) Tool Metal Manufacturing v Tungsten
C) Re Selectmove
D) D & C Builders v Rees
CORRECT ANSWER C:
In the case of Re Selectmove the C.A. said obiter that part payment of a debt per se could not be a practical benefit for the purpose of satisfying the principle laid down in Williams v Roffey.
In general if the doctrine of promissory estoppel applies it will only suspend rights.
Which one of the following cases added the proviso that the promise will be irrevocable if the promisee cannot resume his original position?
A) D & C Builders v Rees
B) Tool Metal Manufacturing v Tungsten
C) Ajayi v Briscoe
D) Combe v Combe
CORRECT ANSWER C:
The P.C. added the proviso in the case of Ajayi v Briscoe.
Yvonne rents a flat from Phil at a rent of £1,500 per month. Yvonne lost her job and found it difficult to pay the full rent; she asked Phil if she could pay just £1,000 per month for a while. Phil agreed.
Which ONE of the following is WRONG?
A) Yvonne has not provided any consideration for Phil’s agreement to accept just £1,000 per month.
B) If Phil goes back on his promise and claims full rent for the future and for the past three months Yvonne may be able to rely on promissory estoppel as a defence.
C) For promissory estoppel to succeed it must be inequitable for Phil to go back on his promise.
D) If promissory estoppel applies then Phil’s right to full rent for both the past and future is extinguished.
E) Promissory estoppel generally operates only to suspend rights.
CORRECT ANSWER D
If promissory estoppel applies then Phil’s right to full rent for the future would only be extinguished if Yvonne was unable to resume her original position and there is no indication of this on the facts.
Which ONE of the following statements is CORRECT?
A)
A principal will never be bound by a contract unless the agent had authority at the time the contract was negotiated.
B) A principal will be estopped from denying an agent had authority if the agent represented they had authority and the third party acted in reliance on it.
C) Where an agent enters a contract purportedly on behalf of the principal but has no authority neither the agent nor the principal will be bound by the contract.
D) Where an agent purports to contract on its own behalf a principal can never enforce the contract because the principal was not privy to it.
CORRECT ANSWER C:
The agent would be liable to the third party for breach of warranty of authority or in the tort of deceit.
Statement A is wrong as a principal may ratify an unauthorised act if certain conditions are satisfied.
Statement B is wrong because apparent/ostensible authority only arises where the principal has falsely represented the agent had authority.
Statement D is wrong because the doctrine of the undisclosed principal may operate.
TRUE OR FALSE?
An agent cannot bind a principal to a contract unless the agent had authority and purported to act as an agent i.e. the agency was disclosed.
FALSE : If an agent has actual authority but the agency is not disclosed, the doctrine of the undisclosed principal will apply if the contract is consistent with the agent acting as agent and had the third party known the principal’s identity it would have been prepared to contract with him.
TRUE OR FALSE?:
A principal may give retrospective authority to an agent’s unauthorised act if certain conditions are satisfied.
TRUE: A principal may ratify provided the agency was disclosed;the contract is capable of ratification (e.g. not void); ratification takes place within a reasonable time; and the principal is in existence and has capacity at the time of ratification.
A client decided to buy a half-completed housing development.
He employed a particular construction company (the Company) to complete the work as it had already been employed on the site. The client and the Company agreed the work should be completed by the end of April, at a price of £140,000 including £20,000 to complete the roofing of the houses
The client knew the Company had already been paid £30,000 for the roofing but the client was concerned that the original site owner might not now care whether the Company did the work.
The development was completed on time, but the client refused to pay for the roofing on the basis the Company had been paid for it by the original site owners.
Which one of the following statements best describes the legal position?
A) The Company had given no consideration for the extra money as it had simply performed an existing contractual duty.
B) The Company had given consideration for the extra money as it had conferred a practical benefit and there was no economic duress.
C) Performance of an existing duty owed to a third party is good consideration: the Company would be entitled to the extra money.
D) As a matter of public policy the Company would not be entitled to the extra money.
E) If the Company sued for the extra money the client would be prevented from going back on its promise because it would be inequitable to do so.
CORRECT ANSWER C:
Performance of an existing duty owed to a third party is consideration for a promise of extra money. This explains why Statements D and E are wrong. With Statements A and B they relate to performance of an existing contractual duty owed to the other party (Stilk v Myrick and Williams v Roffey).
Which of the following statements best sums up legal principles that govern intention to create legal relations?
A) With commercial agreements there is a non-rebuttable presumption of intention to create legal relations; whereas with domestic agreements there is no intention to create legal relations.
B) With domestic agreements there is a strong presumption of no intention to create legal relations which is difficult to rebut unless very clear words are used.
C) With all agreements involving individuals the presumption is that they did not intend to create legal relations; whereas in business-to-business contracts there is a very strong presumption the parties intended legal relations.
D) In a commercial context there is a strong presumption that the parties intended legal relations but it may be rebutted if the agreement is stated to be ‘binding in honour only’.
E) With domestic agreements it is irrebuttably presumed the parties did not intend legal consequences.
CORRECT ANSWER D:
Commercial agreements do not just cover business-to-business contracts. They cover all agreements that are not made between family and friends. This is why C is wrong. Both presumptions are rebuttable hence why A and E are wrong. The commercial presumption is very strong and difficult to rebut unless clear words are used. The presumption in relation to domestic agreements may be rebutted by a number of factors including how close is the parties’ relationship and the amount of money at stake – hence why B is wrong.
A client, a manufacturer of goods, appointed a company (the ‘Company’) as its selling agent and told all its customers to deal with the Company.
The client had a dispute with the Company and ended the agency. The client did not notify its customers.
The Company negotiated and concluded one further sale to a long-standing customer. The Company then disappeared and did not account to the client for the proceeds of sale.
Which one of the following statements best describes the client’s legal position?
A) The client is entitled to sue the customer for the price as the Company had no authority to bind the client to the contract.
B) The customer is bound to pay the client for the goods as it should have checked whether, or not, the Company had authority.
C) The client can sue the Company for the price of the goods, but not the customer as the Company had apparent authority.
D) The customer is bound to pay the client for the goods as the Company had implied actual authority to receive the price and so should have accounted for it to the client.
E) If the client sues the customer for the price, the customer will be estopped from denying the Company had authority.
CORRECT ANSWER C:
The Company breached its actual authority but it had apparent authority as the client had not told customers it had ended the Company’s authority. By not doing that it was giving the distinct but false impression the Company still had authority and the customer relied on that representation. This also explains why Statement A is wrong.
The Company had no actual authority to conclude the deal and so Statement D is wrong.
With apparent authority (authority by estoppel) it is the principal who is estopped from denying the agent had authority: hence why Statement E is wrong.
A retailer client appointed an agent to buy goods on its behalf up to a maximum of £4,000. The agent purporting to act as the client’s agent entered in to a contract to buy goods for £4,500.
Which of the following statements best describes the legal position?
A) The seller of the goods can sue the agent for the price as the agent did not have authority to bind the client.
B) The seller can sue either the client or the agent for the price as the agent had ostensible authority.
C) If the seller does not deliver the goods the client may be able to ratify the contract and sue the seller for breach.
D) If the seller does not deliver the goods the client can sue for breach as the agent had apparent authority.
E) If the seller does not deliver the goods the agent can sue for breach, but not the client as the agent did not have authority.
CORRECT ANSWER C:
If certain conditions are satisfied the client may be able to ratify the deal ie. give retrospective authority to it.
Statements A, B and E are wrong. The agent purported to act as agent and so can have no personal liability or rights under the contract.
Statement D -if the agent may have had apparent authority but that simply stops the principal denying the agent’s authority if the principal is sued by the third party.
A client owns a car dealership and sells high value, nearly new cars to business customers looking to purchase company cars. The Sales Manager can agree to sell a maximum of three cars in any transaction. Any larger transaction must first be approved by the Finance Officer. Last week, the Sales Manager agreed to sell five sports cars to a valued customer with delivery agreed to be made next week. The client has now been informed of the transaction by the Finance Officer, who found out about it yesterday and had not approved it.
Which of the following statements best describes whether the client will be in breach of contract if it does not perform the contract?
A) No, because the Sales Manager did not have authority to enter the contract
B) No, because the contract has not yet been completed and can be revoked.
C) Yes, because the Sales Manager had actual authority to enter the contract.
D) Yes, because the client represented to the customer that the Sales Manager had authority to enter the contract.
E) Yes, because the Sales Manager represented to the customer that he had authority to enter the contract
CORRECT ANSWER D: The Sales Manager (SM) is likely to have apparent authority to act as the client’s agent. There is a representation that the client (as principal) has made to the customer that the SM had authority to agree the sale of the five cars. It is likely this is created by the SM being in charge at the showroom and the customer having made previous purchases there. The customer has relied on this representation believing the SM had authority to enter the contract and the customer has altered his position by entering in to the contract to buy the cars.
It must be the principal who makes the representation, not the agent, so E is wrong.
A is wrong as apparent authority is likely to exist here and C is wrong as the actual authority to sell this number of cars has not been given to the SM on the facts.
B is wrong as the contract is already formed so the client will be in breach if the client does not perform it.
