Contract Flashcards
(114 cards)
1
Q
Most contracts don’t need to be in writing to be enforceable with exceptions of what?
A
- a guarantee
- a contract for sale of land
- consumer credit transactions
1
Q
For contract to exist what must have?
A
An agreement between parties who intend to be legally bound = 1) an offer, 2) an acceptance and 3) consideration.
2
Q
What are the formalities of a deed?
A
- must be executed in the presence of a witness
- must be delivered to be effective
3
Q
To be an offer what must there be?
A
Express an intent to be bound in contract if the other party accepts. Terms must be definite and certain (so courts could enforce if needed).
4
Q
What are invitations to treat?
A
words/conduct that invite another party to make an offer eg adverts or goods in shop window.
5
Q
When can an offeror revoke an offer?
A
offeror is free to revoke most offers at any time before it is accepted, can revoke directly or deemed as revoked if offeree receives correct information from a reliable source of acts by the offeror that indicates the offer was revoked.
6
Q
How can an offeree terminate an offer?
A
By expressly rejecting it, this includes a counteroffer
7
Q
How can an offeree impliedly reject an offer?
A
By failure to accept within the time stated/within a reasonable time if no time stated
8
Q
How must an offer be accepted?
A
unless the offer stipulates a method of acceptance it may be accepted in any reasonable manner and by any reasonable medium.
9
Q
Who can accept the offer?
A
Usually only the person the offer was made to
10
Q
What is a unilateral contract?
A
Offer to enter a unilateral contract = advert that promises something if reader does something such as reward for returning lost dog. Is not accepted until completion of the requested act BUT the beginning of performance makes the offer irrevocable even though it doesn’t create an obligation on the offeree to complete the performance. note: performance of acts requested in offer acts as both the acceptance of the offer and the consideration by the offeree to support the contract.
11
Q
What is the postal rule?
A
Acceptance by post creates a contract at the moment of posting unless the letter isn’t properly addressed and stamped.
12
Q
If offers and acceptances are exchanged containing different terms what happens?
A
It’s usually the last set of terms that control the terms.
13
Q
What is consideration?
A
an act or forbearance from acting; or a promise to act or forbear
14
Q
What does consideration need to have to be sufficient?
A
must have some value but doesn’t have to be adequate or equivalent
15
Q
Can promise to perform a duty already owed ie an existing contractual duty or a duty required by statute be valid consideration?
A
No
16
Q
Can past consideration be valid consideration?
A
Usually not (eg since you helped me paint my house I promise to pay you £500).
17
Q
Typically a promise to accept part of a debt as full payment is not enforceable for lack of valid consideration unless what?
A
- debt was disputed in good faith
- claim was unliquidated (so uncertain)
- payment at a different place or time or by different means eg. A ring valued at £400 rather than £500 cash
- a number of creditors agree together to each take less from the debtor
18
Q
What does promissory estoppel do?
A
can make a promise enforceable when there is no valid consideration
19
Q
For promissory estoppel to apply what must there be?
A
- must be a promise not to rely on existing legal rights
- promissee must have detrimentally relied on the promise by altering their position; and
- it would be inequitable for the proprietor to go back on their promise
20
Q
For a contract to be binding what must the parties need to have intended?
A
to be legally bound by it
21
Q
In intention to create legal relations For domestic arrangements (between family members) or social situations (between close friends) what is there a rebuttable presumption of?
A
that parties did not intend to be bound by their agreements
22
Q
When will rebuttable presumption of parties not intending to be bound by their agreements in domestic or social situations be rebutted?
A
If dealings are in commercial context this will likely be enough to rebut this presumption.
23
Q
In intention to create legal relations what is presumed in commercial settings?
A
did intend to be bound unless there is a clear and unambiguous evidence otherwise ie use of words subject to contract
24
What happens if minor enters a contract?
As a general rule a contract entered by a minor (under 18) is voidable by the minor unless they ratify it once 17 – means can enforce it but not bound to it. Exceptions for employment contracts and necessary goods/services at a reasonable price.
25
What happens if lack mental capacity enters a contract?
is voidable by that person only if other party knew they lacked capacity
26
What does privity of contract prevent?
people who are not party to a contract from enforcing the contract or being obliged under a contract
27
Under Contracts (Rights of Third Parties) Act 1999 a third party may enforce a term of a contract if what?
* Contract expressly provides that the third party may enforce the term
* Contract confers a benefit on the third party with the apparent intent to allow them to enforce. Note: this doesn’t mean the obligation becomes enforceable against the third party.
The third party can be specifically named or within a described group.
28
What are excluded from Contracts (Rights of Third Parties) Act 1999
Employment contracts and articles of association of a company are excluded from this statute.
29
If the third party has rights under a contract what can't happen?
then the parties can’t change the contract to the detriment of the third party if: the third party has agreed to the term benefitting them or the third party has relied on the term benefitting them and the promisor is aware of the reliance.
30
What happens if rights under a contract are assigned to a third party?
The third party can enforce the rights assigned.
31
If a guarantor pays the debts of another under a guarantee what rights do they get?
The rights of the person whose debt they paid.
32
What is an express term of contract?
Specific terms that are usually put in writing.
33
How can terms be incorporated into a contract?
if the parties have notice of them
34
To what extent is a term that is implied into a contract binding on the parties?
will be equally binding on the parties as if it had been expressly agreed between them
35
Sale of Goods Act 1979 applies whenever goods are sold implies what terms?
* Seller has the right to sell the goods
* The goods match any description applied by the seller
* Goods are of satisfactory quality
* Goods are fit for any special purpose the buyer tells the seller they will be put
* Condition of title cannot be excluded
36
Supply of Goods and Services Act 1982 applies to contract for services supplied by a business and to goods supplied in relation to the service implies what terms?
For service contracts implies an innominate term that the supplier will carry out the service in a reasonable time and with reasonable care and skill.
Supply of goods, terms are similar to those implied under the Sale of Goods Act.
37
Consumer Rights Act 2015 implies terms between a trader (business) and consumer (someone not buying for business purposes) similar to those implied under Sale of Goods Act 1979. Such as what?
* Seller has the right to sell the goods
* The goods match any description applied by the seller
* Goods are of satisfactory quality
* Goods are fit for any special purpose the buyer tells the seller they will be put
* Condition of title cannot be excluded
38
In service contracts the Consumer Rights Act implies terms that services should be what?
* Carried out with reasonable care and skill
* Completed in accordance with any information which the consumer relies on, for example, price quotes
* Completed for a reasonable price (if not expressly agreed)
* Completed in a reasonable time (if no timescale expressly agreed)
39
Court will not generally imply a term into a contract unless it is necessary to do what?
give contract business efficacy
40
In implying terms to a contract what does Custom and usage mean?
Can have terms applied if there is an industry or market standard in field of business covered by the contract.
41
Regular and consistent course of dealings between the parties can lead to what to a contract?
terms being implied based on previous similar contracts.
42
What happens if terms are so incomplete or vague that a court cannot determine how the parties intended to be bound?
Court will not enforce a contract
43
Two categories of exemption clauses?
exclusion clauses and limitation of liability clauses
44
What is an exclusion clause?
Is a clause attempting to exclude or limit the liability of a party under a contract.
45
Can an exclusion clause be expressly incorporated into a signed contract?
Yes as is generally not a defence that the party didn’t read or understand the contract.
46
Can an exclusion clause be incorporated by notice?
Yes if took reasonable steps to bring to other party’s attention before or while the contract is being made (e.g. sign on back of hotel door wouldn’t be sufficient as contract made at desk).
47
When will an exclusion clause be enforced?
Only if it clearly and unambiguously covers the loss suffered.
48
Why is it important to differentiate between a condition or a warranty?
As the remedies differ for breach of condition vs breach or warranty.
49
In a contract what is a condition?
term so fundamental that goes to root of the contract, if condition is breached the contract does not work without it. Can terminate the contract and sue for damages if breached.
50
What happens if a condition is breached?
Can terminate the contract and sue for damages
51
In a contract what is a warranty?
Is a term which is incidental or collateral to the main terms of the contract
52
What happens if a warranty is breached?
Can sue for damages but not terminate the contract
53
In a contract what is an innominate term ?
if not clear when contract made whether is a condition or a warranty
54
What happens if an innominate is breached?
Court will look at the effect of the breach on the term to determine the appropriate damages
55
How can a contract be varied?
Varying a legally binding contract can only be done by agreement between the parties to the contract.
56
What does misrepresentation require?
a false statement of fact or law to be made by one party to another to induce them to enter into a contract.
57
What counts as a statement of fact in misrepresentation?
Relates to past or present not future events. Statement of opinion is not a statement of fact if genuinely held
58
When can silence be an actionable misstatement?
* in contracts requiring utmost faith because only one party has access to the relevant information e.g. life insurance and fails to disclose relevant health conditions
* when a partial disclosure would be misleading e.g. saying neighbours are quiet but not saying is being turned into a nightclub
* if an earlier representation has become untrue
59
What must Misrepresentation do to be actionable?
Must induce the other party to enter the contract. Not actionable if is no more than advertisers speak a reasonable person wouldn’t rely on it entering the contract (includes the best, the fastest and opinion).
60
What are the three types of misrepresentation?
1. Fraudulent misrepresentation
2. Negligent misrepresentation
3. Innocent misrepresentation
61
What is fraudulent misrepresentation?
False statement made knowingly, recklessly to truth or without belief in its truth
62
What is negligent misrepresentation?
False statement and person who made it can’t prove they had reasonable grounds for believing it when they made it (easier to prove as challenger has to prove fraudulent misrepresentation but speaker has to disprove negligence)
63
What is innocent misrepresentation?
False statement made without fault
64
What happens to the contract if there is misrepresentation?
voidable and the innocent party can rescind the contract or seek damages for the misrepresentation
65
What does rescission do in misrepresentation?
Puts parties back in position they would have been had the misrepresentation never taken place.
66
When is rescission not available in misrepresentation?
* finds out about the misrepresentation and carry’s on or say they will anyway (affirmation);
* finds out about the misrepresentation and waits so long the other party would be harmed by rescission;
* it’s impossible to restore the parties to their pre-contract position; nor
* a bona fide third-party purchaser for value has gained rights in the subject matter when they weren’t aware of the misrepresentation.
67
What damages are available in 3 types of misrepresentation?
* if innocent party can prove fraudulent misrepresentation can recover all losses
* if party who made misrepresentation can’t disprove negligence can recover similar damages
* as general rule damages aren’t available for innocent misrepresentation, however, court has discretion to award damages in lieu of rescission for innocent and negligent misrepresentation
Normal measure of damages for misrepresentation includes losses incurred as a result of entering into the contract and any incidental expenditure (different to breach).
68
What happens to contract if it’s entered into as a result of a mistake?
A contract can be void
69
What happens if common/identical mistake in contract?
is void if both parties made the same mistake when the agreement made (e.g. believing the subject matter of the contract was in existence when it had already been destroyed)
70
What happens if mutual mistake in contract?
Can be void if parties are mutually and reasonably mistaken about different things showing that the agreement was ambiguous e.g. sale of cotton on board ship peerless when two ships named Peerless and each party thinking of the other ship.
71
What happens if unilateral mistake in contract?
Can be void only if the non-mistaken party knew or should have been aware of the mistake (e.g. price seemed too good to be true)
72
What happens if mistake as to identity in contract?
Can be void if one party believes they are entering into a contract with the person the other party is pretending to be and the mistaken party would not have entered into the contract if they knew who they were dealing with.
73
Under Unfair Contract Terms Act 1977 what clauses are automatically void?
* attempts to exclude liability for death caused by negligence;
* attempts to exclude liability for breach of the implied condition under Sale of Goods Act or Supply of Goods and Services Act; or
* attempts to exclude liability for breach of obligation under Sale of Goods Act or Supply of Goods and Services Act.
74
Under Unfair Contract Terms Act 1977 what clauses are void unless reasonable?
* any clause that attempts to exclude liability for any loss (other than death caused by negligence);
* a term that:
1. excludes or restricts liability for breach of contract
2. reserves the right to render contractual performance substantially different from what was expected, or
3. to render no contractual performance at all in a contract on a party’s standard form
75
Under Consumer Rights Act 2015 what can a consumer ask the court to do?
To set aside any limitation or exclusion that is unfair other than those specifying the main subject matter of the contract or relating to the price.
76
What does duress do to a contract?
Makes contract voidable.
77
What counts as duress?
If a contract entered because of illegitimate pressure such as a physical threat. Can also be duress if one party in a much stronger economic position than the other and they use this position in an illegitimate manner and that’s a significant factor in the innocent party’s decision to enter the contract.
Threat to unlawfully retain goods (duress of goods) not typically a ground.
78
What does undue influence do to a contract?
Makes contract voidable.
79
What counts as undue influence?
Cases where an outside party’s influence prevents a party from giving true consent. Arises when an outside party blackmails the innocent party or uses a position of trust and confidence to put excess pressure on the party.
80
When can undue influence be presumed?
If the contract calls for explanation and is between: parent/child, solicitor/client, guardian/ward or medical advisor/patient
81
What is position if a contract is illegal when formed?
Neither party will acquire rights under that contract, regardless of whether there was any intention to break the law. The contract will be void and treated as if it was never entered into.
82
What does discharge of a contract do to the remaining duties of the parties under the contract?
terminates the remaining duties of the parties under the contract
83
What does full performance of the entire obligation do?
Discharge a contract
84
What happens when there is substantial performance that is less than full performance but gives the other party substantially what they bargained for?
Discharges the contract but as is a breach of warranty it gives the nonbreaching party a right to damages.
85
What causes a breach of contract?
This occurs when one of the parties doesn’t fulfil their contractual obligations when due.
86
What happens when breach of contract is a condition?
Gives the nonbreaching party the right to terminate/discharge the contract.
87
When can anticipatory breach arise?
When clear one party won’t perform when the time for their performance arises either they say they won’t or the circumstances indicate they won’t be able to perform.
88
What happens if anticipatory breach goes to a condition of the contract?
The nonbreaching party has the immediate right to sue and don’t have to wait for the time the performance was due.
Note: If chooses to wait and something happens before the performance is due to discharge the contract then they lose the right to sue.
89
When will frustration occur?
if after the contract is made an event makes performance as originally agreed either impossible or radically different to what was envisioned under the contract.
Includes if the subject matter of the contract is destroyed or becomes illegal after the contract is made or one of the parties dies or becomes ill and cannot perform the contract.
90
What happens to contract when frustration occurs?
will discharge the contract.
91
For radically different performance to be a ground for frustration what must it be?
Fundamental to the contract and not have been considered by the parties when they made their contract. Performance being more expensive or difficult than anticipated is not a ground of discharge for frustration.
92
What happens if a contract is discharged by frustration?
The parties are generally discharged from further performance and sums paid before discharge are recoverable. But if party incurred expenses the court may allow them to retain sums as reimbursement and if a party obtained a valuable non-monetary benefit before discharge then the party who benefitted may have to pay for it.
93
What doesn’t frustration apply to?
Insurance contracts, sale of goods where goods have perished or if the contract includes a force majeure clause (allows the contract to be terminated on the occurrence of an event the prevents/delays performance of the contract e.g. war or Act of God).
94
When may restitution be ordered?
If a contract has been rescinded
95
If a person has been unjustly enriched because a contract failed what may happen?
Then restitution may be sought. Must have a legitimate interest in preventing the unjust enrichment this usually as the other party has been enriched at the innocent party’s expense.
96
What is the purpose of damages and what this means?
To put innocent party in position they would have been if the contract had been performed. Compensatory so a party who has suffered no loss will receive nominal damages at most.
97
What does expectation damages do?
put in position would have been in if contract properly performed. If this too speculative can use reliance damages that covers expense incurred on reliance of the contract to put in position would have been in if never entered the contract.
98
When may nominal damages (£1) be awarded?
If a breach is established but no actual loss is proven.
99
When are damages for physical injury recoverable?
Are recoverable so long as the loss isn’t too remote from the breach of contract.
100
When are amount of damages caused by a breach usually measured?
As at the date of breach
101
What does a liquidated damages clause allow?
The innocent party to recover a specified amount for breach of contract without having to prove their loss. This is only enforceable if it was based on a genuine estimate of the damages a breach might cause.
102
What is specific performance?
This is an equitable order requiring a party to a contract to perform as promised and will be granted only if money damages would be inadequate (such as when the contract involves unique goods or land).
103
When won't specific performance be granted?
If it would:
* cause undue hardship
* order someone to work for someone else, or
* require extensive supervision by the court
As an equitable remedy it won’t be granted if the person seeking the grant:
1. unreasonably delayed seeking the remedy to the detriment of the other party (laches); or
2. engaged with unconscionable behaviour regarding the contract (unclean hands).
104
What are injunctions?
An equitable remedy granted at the discretion of the court.
Where damages would not be an adequate remedy to compensate the claimant because the claimant needs to restrain the defendant from starting or continuing a breach of a negative contractual undertaking (prohibitory injunction) or needs to compel performance of a positive contractual obligation (mandatory injunction)
105
What is duty to mitigate?
Innocent party must take reasonable steps to minimise their loss.
106
When is there no duty to mitigate?
If the claim is for a debt owed as opposed to uncertain damages
107
If contract includes an indemnity what is this?
Is a promise to accept responsibility if someone else doesn’t perform an obligation or a promise to make good the other party’s losses arising from a breach of contract.
108
If contract includes a guarantee what is this?
A promise to perform an obligation instead of the person in the primary contract performing.
109
Procedure for a guarantee?
A guarantee must be in writing to be enforceable. It will cease to have effect if the obligations under the primary contract are varied or discharged. The guarantor can rely on all the defences that are available to the primary party.
110
Under the causation what happens if the breach is one of two effective causes of the loss?
The breaching party is liable and court doesn’t need to consider this.
111
Under causation what may be a defence if the breach includes a duty to take care?
The nonbreaching party’s contributory negligence
112
Damages that are too remote are not recoverable. Damages must:
* be fairly and reasonably be considered to arise naturally from the breach; or
* have been in the reasonable contemplation of both parties to the contract as a probable result of the breach
113
When is remoteness considered?
As of the time the contract was made.
