Week 5 - Contract Law III

Question 1

Explain what are the Terms of a Contract?

Answer 1

• are the Contents of a Contract, and State the Parties’ Legal Duties and Obligations to Each Other
• Terms may be Oral, Written or even Implied
• Failure to Comply with an Obligation could Result in the Wronged Party to Claim Damages or Treat the Contract as Ended

Question 2

Explain how Terms of a Contract Must be Certain

Answer 2

• For an Agreement to be a Binding Contract, there Must be Certainty of Terms
• Terms Agreed must Not be Too Vague or Imcomplete
• Courts will have Regard to What a Reasonable Person would Think is a Certain Term

Question 3

What are Express and Implied Terms

Answer 3

• Express Terms - those Actually Stated (Orally or in Writing
• Implied Terms - Terms May be Implied by : Statute e.g. Sale of Goods Act 1979 Stipulating Quality of Goods
  Trade Customs
  The Courts

Question 4

Explain the 3 Terms of Contract are : Condition, Warranties and Innominate Terms?

Answer 4

CONDITION - Fundamental Term of the Contract
WARRANTY - Minor Term of the Contract
INNOMINATE TERM - Terms that Cannot be Assigned into Each Category (also known as Intermediate Terms)

Question 5

Explain the POUSSARD v SPIERS (1876) Case in Relation to Condition, Warranty, Innominate Term

Answer 5

• Poussard (opera singer) was Ill for First Week of Perfomances
• Produced Hired Substitute, Refused Possard’s Services for Remaining Performances
• Verdict : Performed on Opening Night was a Condition of the Contract, Therefore Failure to Do So can be Regarded as Breach of Contract
• Breach was Significant

Question 6

Explain Innominate Term

Answer 6

Depends on the Seriousness of the Breach and How Much Benefit has been Lost as to Whether the Contract can be Ended
e.g. a Term Stating that a Car “Must be Roadworthy” can be Breached in a Multitude of Ways, Some much More Serious than Others

Question 7

What are Pre-Contractual Statements

Answer 7

• When the Parties are in the Process of Negotiating a COntract, Many Statements may be Made

they can Fall into 3 Types:
- TRADER’S Hype - No Remedy even if Claim is False
- a Representation - Remedy for Misrepresentation If Claim is False
- a Term of the Contract - Remedy for Breach of Contract if Term is Broken

Question 8

Explain how to Determine a Term From a Representation

Answer 8

• Depends on the Intention of Both Parties
• Objective Test with Factors :
  Importance of Statement to Both Parties e.g. Banner v White (1961)
• Interval of Time Between Statement and Contract : Longer = Representation
• Whether the Statement is Oral or Written : oral, perhaps less important, therefore representation
• Knowledge and Skill of the Party Making Statement ; e.g. Bentley v Smith (1965) and Chess v Williams (1957) for 2 Constrating Cases of How Knowledge affects Type of Statement

Question 9

Explain what EXEMPTION and LIMITATION Clauses are

Answer 9

• A Contract may Contain Stated Clauses that Attempt to Exclude or Limit Liabilities to the Other Party
• EXEMPTION CLAUSE - Attempt to Exclude All Legal Liability e.g. a Car Park Contract Excluding Legal Liability for Theft or Damage while Parked in the Car Park
• LIMITATION CLAUSE - Attempt to Limit Legal Liability e.g. Airline’s Contract May Limit a Claim for Lost or Damaged Baggage to £100

Question 10

What are the 3 Criteria for the Validity of Exemption Clauses?

Answer 10

• be Incorporated Into the Contract, Instead of Being Added Afterwards
• be Clear and Non-Ambigious
• Comply with Relevant Studies, Including Unfair Contract Terms Act 1977 (if a B2B contract) and Consumer Rights Act 2015 (if a B2C Contract)

Question 11

Explain Exemption Clauses being Incorporated Into the Contract

Answer 11

• can be Included in a Document that’s Signed by the Other Party
• If the Document is Signed, the Clause will Usually be Valid, Even If the Party Didn’t Read the Clause Before Signing
• can be Included in Unsigned Documents and Notices, but Reasonable Steps Have to be Made to Bring the Clause to the Attention of the Other Party
• if Written on a Document, Has to be Something that reasonably Resembles a Contractual Document
• L’Estrange v Graucob (1934)
  Claimant Purchases a Cig Vending Machine for her Cafe
  she Signed a Contract Without Reading it
  Verdict : Claimant was Bound By the Exemption Clause Regardless of the Fact she Hadn’t Read the Clause Because she has Signed it

Question 12

Explain Terms in the Contract that May be Regarded as Unfair (therefore Invalid)

Answer 12

may include:
- Terms that Excludes Liability for Death or Personal Injury
- Terms Requiring Consumer, who Fails to Fulfil their Obligations, to Pay a Disproportionately High Sum to the Trader
- a Term Making the Contract Binding on the Consumer, but Allows the Seller to Avoid the Performance

Question 13

Explain what Vitiating Factors are in a Contract and State the 5 Factors

Answer 13

Contracts May have All the Necessary Elements, But May Still Not be Binding Because it Has Invalidating Factors (Vitiating Factors)
- MISREPRESENTATION
- MISTAKE
- DURESS
- UNDUE INFLUENCE
- ILLEGALITY

Question 14

State the 4 Points that Have to Occur which Makes a Statement ‘ACTIONABLE MISREPRESENTATION’

Answer 14

• Statement is Made (could be oral, written or by conduct)
• Statement Must be False
• Statement Must be Presented As a Fact
• Statement Must be Induced the Other Party to Enter Into the Contract

Question 15

Explain the Point that Must Occur which Makes a Statement ‘Actionable Misrepresentation’ - STATEMENT Is MADE

Answer 15

• Silence Won’t Usually Amount to a False Statement
• Usually No Duty to Disclose Information, it’s Up to Each Party to Seek Out the Information they Need
• Sykes v Taylor-Rose (2004)
• “Is there any other information which you think the buyer might have a right to know

Question 16

Explain the Point that Must Occur which Makes a Statement ‘Actionable Misrepresentation’ - STATEMENT Must be FALSE

Answer 16

• Party Making the Statement may Know it to Be Untrue, But could Still be a Misrepresentation If they Don’t Know it’s Untrue
• If Facts or Circumstance Change, there Exists an Obligation to Provide this Info

With v O’Flanagan (1936)
- Doctor was Selling his Medical Practise
- Buyer Requested Information Regarding Annual Revenue which Doctor Provided
- Doctor fell ill Before the Sale, which Affected Revenue
- As Statement was False at Time of Sale, this was Judged to be Misrepresentation

Question 17

Explain the Point that Must Occur which Makes a Statement ‘Actionable Misrepresentation’ - STATEMENT MUST be PRESENTED as a FACT

Answer 17

• to Qualify as Misrepresented, it Cannot be a Mere Opinion of One of the Parties
• Statement of Opinion is Regarded as Uniformed Opinion
• Bissett v Wilkinson (1927)

Question 18

Explain the Point that Must Occur which Makes a Statement ‘Actionable Misrepresentation’ - STATEMENT MUST have INDUCED the OTHER PARTY to ENTER INTO the CONTRACT

Answer 18

• the Innocent Party Must Show that They Relied Upon that Statement and If was Significant Reason (Though Not Necessarily the Only Reason) for Entering Into the Contract

Attwood v Small
- Seller of Mine made Exaggerated Claims about Mine’s Potential Revenue
- Purchase Appointed an Expert to Check on these Claims
- the Expert’s Findings Agreed with the Claims Made by the Seller
- Verdict : This Wasn’t Actionable Misrepresentation as the Purchaser had Relied on the Expert’s Statement, Not the Seller’s Statement

Question 19

State the 3 Types of MISREPRESENTATION

Answer 19

• Fraudulent Misrepresentation
• Negligent Misrepresentation
• Innocent Misrepresentation

Question 20

What is FRAUDELENT REPRESENTATION?

Answer 20

• where the Party Makes a False Statement that They Know is Not True

Question 21

What is NEGLIGENT MISREPRESENTATION?

Answer 21

• a False Statement Made by a Person who Believes that it’s True, But has No Reasonable Grounds For that Belief

Question 22

What is INNONCENT MISPRESENTATION?

Answer 22

• a False Statement Made by a Person who has an Honest and Reasonable Belief in Its Truth.
• the Belief Must be Present When the Statement is Made Right Up to the Time of the Contract

Question 23

Explain the Vitiating Factor - MISTAKE

Answer 23

• where 1 or More of the Parties are Mistaken about an Aspect of the Contract They have Entered into
• very often this Doesn’t Validate the Contract, But If the Mistake is so Fundamental to the Contract will be Voided i.e. the Contract is Treated as If it Never Existed

Question 24

State the 3 Types of CONTRACT MISTAKES

Answer 24

1 - Common Mistake
2 - Mutual Mistake
3 - Unilateral Mistake

Question 25

Explain the Type of Contract Mistake - COMMON MISTAKE

Answer 25

• where Both Parties Make the Same Mistake
• will Only be Void If the Mistake is Fundamental To the Contract Itself

Scott v Coulson (1903)
- 2 Parties Negotiated a Contract For a Life Insurance Policy On a Person
- Both Parties Mistakenly Believed that this Person was Alive When Contract was Made
- Decision : Contract was Void as Common Mistake was Made

Question 26

Explain the Type of Contract Mistake - MUTUAL MISTAKE

Answer 26

• where the 2 Parties are At Cross Purposes Therefore have Never Truly Reached an Agreement
• will be Voided If it’s Not Possible to Reconcile the Intention Of the 2 Parties

Raffles v Wichelhaus (1864)
- 2 Ships with Same Name (SS Peerless) Left Bombay at Same Time
- Seller Thought that the Cotton was On the Ship Whilst Buyer Thought it was On Other Ship
- Decision : No Possibility of Finding a Common Ground, Therefore Contract was Void for Mistake

Question 27

Explain the Type of Contract Mistake - UNLATERAL MISTAKE

Answer 27

• where only 1 of the Parties is Mistken, But the Other Party is Aware of the Mistake
• in order For the Mistake to be Operative it Must be Essential To the Contract

Question 29

Explain the Vitiating Factor - DURESS

Answer 29

• where a Threat of Unlawful Violence or Imprisonment is Made in Order to Induce the Other Party into Entering the Contract

Question 30

What is Economic Duress

Answer 30

• where a Contract has Been Agreed to After Extortion From 1 of the Parties
  The Innoncent Party must Show that :
• Illegitimate Threats or Pressure was Applied by Other Party
• Pressure was Signifcant in Making them Agree to Contract
• they Had No Practical Choice But to Agree
• Atlas Express v Kafco (1989)

Question 31

Explain the Vitiating Factor - UNDUE INFLUENCE

Answer 31

• this Covers Situations where some Form of Improper Pressure has been Put on a Person to Enter Into a Contract
• to Prove Actual Undue Infleunce, Victim must Prove they Entered Into Contract as Result of Genuine Intimidation
• Courts Apply a Subjective Test Based on What the Victims Believes

Question 32

Explain the Vitiating Factor - ILLEGAILITY

Answer 32

Contract may be Illegal Because :
- it’s Purpose is Illegal e.g. a contract to sell contraband medicine
- or the Manner in which the Contract Is to be Manufactured is Illegal e.g. a contract to manufacture clothing using slave workers