Contract

Question 1

Contracts that require writing

Answer 1

Guarantees (ie guarantor promises another party will perform their obligations)

Contracts for sale of/interests in land

Consumer credit agreements

Question 2

Contracts that require a deed

Answer 2

Promises where nothing is offered in return (eg promise to make a gift)

Conveyance (ie transfer) of land

Question 3

Valid contract requires

Answer 3

For the contract to be valid there must be an agreement (made up of offer and acceptance), intention to create legal relations and consideration.

Question 4

Offer

Answer 4

=> two requirements are:
1. A willingness to be bound by the proposal if it is agreed to
2. Sufficient certainty in terms of the proposal

Offer must be communicated to offeree: orally, in writing or by conduct

Offer remains open until it is terminated or accepted

Question 5

Offer v invitation to treat

Answer 5

ITT = made without intention to be bound by specific terms (ie just a preliminary statement)

eg

1. Adverts
2. Shop lists
3. Shop sales
4. Tenders
   = invitation to companies to bid for a contract (Submissions are offers)
5. Auctions
   - Bids= offers that can be withdrawn at any time before acceptance (hammer falling)
   - Call for bids = inviting offers => ITT
   - Hammer falls => accepts highest bidder (as long as reserve price is met)

Question 6

Unilateral contract

Answer 6

Ie when person making offeror promises to do something if the offeree does something in return and the offeree actually does what the offeror has asked

Question 7

Terminating offer through revocation

Answer 7

By offeror, before acceptance

Revocation effective when RECEIVED

Revocation can be indirect ie done by third party if offeree receives:
- Correct information
- From a reliable source
- Of acts of the offeror which would indicate to a reasonable person that the offeror no longer wishes to make the offer

Question 8

When can the offer be revoked?

Answer 8

General rule = an offer can be revoked at any time before acceptance even if the offeror has agreed to leave it open for a specific time

Exceptions -
1. Collateral contract ie offeree has given any consideration for the offeror keeping the offer open
2. Unilateral contract => once acceptance begun (ie by carrying out promise)
- But since still no contract until offeree has completed performance, offeree may withdraw at any time until then

Question 9

Terminating offer through rejection (by offeree)

Answer 9

Can be express or implied (eg by counteroffer)

Effective when RECEIVED

Acceptance must match exactly the terms of the offer, otherwise there will be no contract

Imp to distinguish counteroffer with mere enquiry (which doesn’t amount to rejection)

Collateral contract – agreement to keep original offer open often collateral contracts => rejection of that does not terminate original offer too

Question 10

Lapse of offer

Answer 10

Offer will lapse if there is an EXPRESS condition (=> any acceptance received outside that time limit cannot create a contract)

OR in all other cases, the offer will lapse after a REASONABLE time period – what is reasonable depends on the facts (ie how offer was made and subject matter)

Question 11

Termination of offer through operation of law

Answer 11

eg through:

1. Death of either party
2. Destruction of the proposed contract’s subject matter
3. Superveneing illegality
4. Failure of any condition contained in the offer

Question 12

Acceptance (general)

Answer 12

= ‘a final and unqualified expression of asset to the terms of an offer’

Generally only person to whom offer is addressed has power of acceptance

Offeree must know of offer

Question 13

Methods of acceptance

Answer 13

Unless method stipulated by offeror, construed as inviting acceptance in any reasonable manner and by any medium reasonable under the circs

Method stipulated – can still be considered acceptance if method is different but no less advantageous to offeror

Silence does not constitute acceptance

Question 14

Acceptance for unilateral contracts

Answer 14

Only performance of the act is necessary (completed)

But offeree does not have obligation to complete performance once started

Required to notify offeror within reasonable time after performance has completed

Question 15

When is an acceptance effective?

Answer 15

ie postal rule exemption (does not apply to email which is accepted when received)

Letter of acceptance will become binding when POSTED if (ONLY applies to acceptances):

1. It was reasonable to use post as method of communication
2. It was properly stamped, addressed and posted
3. Offeror did not exclude the postal rule impliedly/expressly

Question 16

Acceptance in battle of the forms scenarios

Answer 16

Last shot wins (ie party who fired last short before performance began wins)

=> taken as implied acceptance

Prevail clause rarely effective

Question 17

Intention to create legal relations

Answer 17

Commercial agreements (between businesses or inds and businesses)
=>Strong presumption of intention to create legal relations/be bound at law
- (Rebuttable – if there is specific wording to that effect)

Domestic agreements
=> Presumption of no intention to create legal relations
- Rebuttable – relevant factors incl:
a) Consideration involved (greater value => more likely that the parties intended legal relations)
b) Parties to agreement are not on good terms (eg couple separated)
c) If it is a formal agreement in writing
d) Parties would have intended the agreement to have legal effect

Question 18

Capacity in contracts

Answer 18

1. Minors
   - General rule = voidable by the minor (ie Can enforce contracts but not bound by them unless they ratify when they turn 18)
   - Exceptions = employment contracts and contract for necessary goods or services (at a reasonable price)
2. Lack of mental capacity
   - Voidable by the ind, but only if the other party knew they lacked capacity
   - Can ratify upon recovery
   -Exception = necessary goods or services at a reasonable price
3. Intoxication
   - As for mental capacity
4. Companies have capacity

Question 19

Consideration (general)

Answer 19

= price you pay for another’s promise

Must be sufficient but need not be adequate

Can either be a benefit to the person receiving it or a detriment to the person giving it

Consideration must move from the promisee

Question 20

Consideration in circs where performance of an existing duty

Answer 20

General rule = not good consideration

Exceptions:
- if A exceeds his duties in some way (and => confers extra practical benefit on B)
- if duty is already owed to a third party

Performance of public/legal duties? Not good consideration (unless exceeds public duty)

Question 21

Past consideration

Answer 21

General rule – no

Exception if:

1. Act was carried out at the promisor’s request; and
2. The parties understood from the beginning that the act was to be rewarded in some way (more likely in a commercial context); and
3. Payment/conferment of other benefit must have been legally enforceable had it been promised in advance ie All other requirements for a valid, binding contract exist

Question 22

Consideration re part payment of a debt

Answer 22

(ie promises to accept less)

General = no

Exceptions:

1. Debt disputed in good faith
2. Unliquidated claims (ie amount owed is uncertain)
3. Payment at different place, or earlier payment
4. 3rd party makes payment
5. Payment is by different means at the request of the party accepting the lesser amount
6. Composition with creditors

Question 23

Promissory estoppel

Answer 23

Applies where:
1. Promise not to rely on existing legal rights
2. promisee detrimentally relied on the promise by altering their position
3. would be inequitable (unfair) for the promisor to go back on their promise

NOTE: shield not a sword (ie only a defence not a cause of action)

Applies =>operates to suspend promisor’s legal rights

Question 24

Privity of contract (general)

Answer 24

Ie third party cannot enforce, acquire rights under, be liable for; a contract to which he is not a party

BUT exceptions:
1. Contracts (rights of third parties) Act
2. Variation and recission of contract
3. Agency
4. Assignment
5. Subrogation
6. Collateral contracts
7. Trusts

Question 25

Contracts (rights of third parties) Act 1999

Answer 25

Third party may enforce a contract term if either: 1. The contract expressly provides that he may 2. The term purports to confer a benefit on him AND the terms of the contract make clear the parties intended the term to be enforceable by the third party - only allows third parties to obtain benefit (not impose obligations on them) - does not apply to enployment contracts or articles of ass for a company - third party can be specifically named OR within a described group

Question 26

Variation/recission of a contract re 3rd party rights

Answer 26

If 3rd party has rights under a contract, the parties may NOT agree to change the contract to the detriment of the third party without the consent of the third party if: 1. 3rd party has agreed to term benefitting him 2. 3rd party has relied on the term and the promisor is aware of that reliance; OR 3. Promisor should have foreseen that the 3rd party would rely on the term, and the third party has in fact relied upon it

Question 27

Role of agency in privity of contract

Answer 27

ie where one person (agent) acts on behalf of another (principal) and has the power to affect the principal’s legal position with regards to a third party Agent has authoirty to act => contract formed with principle Agent does not have authoirty to act (/goes beyond authoirty) => not a valid contract

Question 28

Assigment of rights in a contract

Answer 28

Ie contractual right conferred to a third person Notice of assignment must be given to the party liable to perform the obligation Only benefit of contract can be assigned, not the burden => if want to transfer both => old and new parties need to enter into novation agreement

Question 29

Term of contract v representation

Answer 29

Reps = things not incorporated into the contract which were made to induce the other party to enter into the contract Determined by: - intentions of the parties, viewed objectively (ie from perspective of a reasonable person) having regard to the conduct of the parties - Statement not incl in written contract – likley to be a rep - fundamental importance to a party => likley to be a term - statement made long before => likley to be a rep - person making statement is an expert => likely to be a term

Question 30

Types of terms

Answer 30

Imp as changes remedy available: a) Condition (ie fundamental) => can terminate contract (or affirm) and due for damages b) Warranty (ie incidental/collateral to main contract) => can sue for damages c) Innominate term (is unclear at outset whether condition or warranty) => remedy depends on consequences of breach

Question 31

What does it mean (+ effect of) time being 'of the essence'

Answer 31

=> obligation is a condition and late performance entitles innocent party to terminate the contract Not of essence => warranty and only remedy is damages Contracts usually make it clear, but presumption in commercial contracts if a time for delivery has been agreed

Question 32

Express terms in contracts

Answer 32

Must be incorporated into contract (whether written or oral) Will be incorporated if parties have reasonable notice of it Parol evidence rule (in written contracts) - ie presumption that external evidence cannot add to, subtract from, contradict, or vary the terms of a written contract BUT exception with implied terms and collateral/secondary contract (court may find two contracts - one written and one oral)

Question 33

Entire agreement clause

Answer 33

Provides that written doc constitutes the entire agreement between parties Purpose is to uphold parol evidence rule by preventing any evidence forming part of the contract

Question 34

Implied terms (general)

Answer 34

By: 1. Statute (ie SGA, SGSA, CRA) 2. Court - ie if necessary to give business efficacy (ie work in a way that reflects parties intentions) - only implied if so obvious to a reasonable person that goes without saying (is officious bystander test) 3. Custom/usage - ie prevalent in the trade, unless that is contrary to express term of the contract 4. Based on previous course of dealings - must have been regular and consistent

Question 35

Terms implied by Sale of Goods Act

Answer 35

Only business – business transactions Incl: 1. Seller has legal right to sell goods in question 2. Goods match any description by the seller 3. Goods be satisfactory quality (ie fit for purpose for which they are generally used, free from minor defects, and safe/durable) 4. Goods be fit for any particular purpose made known to the seller by the buyer These implied terms are conditions (so can terminate contract) UNLESS breach is so slight that would be unreasonable for buyer to reject goods => breach of warranty UCTA – cannot exclude implied term as to title, and other exclusions valid only if reasonable

Question 36

Terms implied by Sale of Goods and Services Act

Answer 36

Applies to contracts for services and hire of goods Only business – business transactions Same terms as SGA, and: 1. Supplier will carry out service in reasonable time (if no time is agreed) 2. And with reasonable care and skill BUT service terms are innominate

Question 37

Terms implied by Consumer Rights Act

Answer 37

Applies to sales contracts made between trader and consumer, whether for goods or services Implied terms same as SGA BUT liability for breach of implied term cannot be excluded or limited at all Services should be: 1. Carried out with reasonable care and skill 2. Reasonable price will be paid for service/work (if not fixed) 3. Performed in reasonable time 4. Completed in accordance with any information which the consumer relies on

Question 38

Exclusion clauses (general)

Answer 38

= clause which seeks to exclude liability completely or limit liability if a breach of contract occurs or a tort is committed 3 issues: 1. Clause must be incorporated into contract 2. Clause must be interpreted as excluding liability effectively (ie 'construction') 3. Clause must not be prohibited by statute (UCTA or CRA)

Question 39

Incorporation of exclusion clasues (general)

Answer 39

By: 1. Expressly by signature 2. Notice 3. Course of dealings (requires regular and consistent dealings)

Question 40

Incorporation by signature

Answer 40

If: 1. Clause is legible and signed by C; and 2. Document is a contractual document Yes => will be binding regardless of whether C has read the contract (UNLESS oral misrep) BUT does not apply where 'non est factum' - ie if party has no understanding of doc they have signed and fundamental difference between what they signed and what they thought they had signed (high burden)

Question 41

Incoporation by notice

Answer 41

Either: - Actual notice ie the innocent party must know of the clause - Constructive notice ie the party relying on the clause must have taken ‘reasonable steps’ to bring it to the other’s notice Reasonable steps must be taken to bring to party's attention BEFORE OR WHILE contract is being made

Question 42

Construction of exclusion clauses

Answer 42

ie does the clause cover the breach and damages alleged Wording must be clear and unambiguous and cover the loss suffered Contra proferentem rule = Any ambiguity in the clause will be interpreted against the party relying on it

Question 43

Clause prohibited by statute? (UCTA)

Answer 43

In business - business transactions Automatically void: - exclusion of liability for death/PI - exclusion of implied term as to title (in SGA/SGSA) Void if unreasonable: - exclusion for loss or damage to property caused by negligence - exclusion for breach of express term (if dealing on standard etrsm of business) - exclusion of other SGA/SGSA (ie re compliance with description/quality, fitness for purpose etc) Reasonableness - consider circs known/ought to have been known to the parties, and e.g. strength of bargaining positions, any inducements whether goods specially manufactured If limitation (rather than exclusion) more likley to be found to be reasonable

Question 44

Clause prohibited by statute? (CRA)

Answer 44

Applies in trader - consumer contracts Automatically void ('prohibited terms'): - PI or death (incl as a result of negligence) - As to title, compliance with description, quality, or fitness for purpose - as to reasonable care/skill or provided in reasonable time Also void if unfair ie contrary to the requirements of good faith or causes a sig imbalabce in the parties and obligations under the contract to the detriment of the consumer Terms must also be transparent (ie in plain English and legible)

Question 45

Vitiating factors that make a contract void

Answer 45

1. Mistake (must be so fundamental as to prevent formation of the contract in the first place/make what was prev agreed between the parties fundamentally different from wat was intended) 2. Illegality or contravention of public policy (eg cojtrary to morality or the institution of marriage, or damaging to gov, or if interferes with justice)

Question 46

Vitiating factors that make a contract voidable

Answer 46

1. Duress 2. Undue influence 3. Misrep 4. Most entered by minors

Question 47

Void v voidable

Answer 47

Void => - Ie totally without any legal effect from the beginning - Cannot be enforced by either party so no remedy available for breach - Also cannot transfer title to property Voidable => 1. Operates as valid contract until a party elects to avoid (/rescind) it 2. Innocent party can choose to rescind or affirm it 3. Rescission => parties put back in place they would have been in had contract not been entered into

Question 48

Mistake as a vitiating factor

Answer 48

1. Common/identical mistake = both make same mistake (usually in rel to existence, not quality, of subject matter) 2. Mutual mistake = mistaken as to different things ie contract was ambiguous 3. Unilateral mistake = if non-mistaken party knew or should have been aware of mistake (eg as price seemed too good to be true) 4. Mistake as to identity = if identity was essential to formation of contract 5. Non est factum = no understanding of doc they signed(high burden)

Question 49

Duress

Answer 49

Ie illegitimate pressure, physical duress, duress of goods Economic duress = 1. one party in stronger economic position 2. Ues that in illegitimate manner 3. That is a sig factor in the innocent party's decision to enter the contract Burden of proving duress is on party who alleges it

Question 50

Undue influence

Answer 50

ie where one party takes advantage of a relationship of trust and confidence (so concerns whether true consent was given) ie conduct that doesn’t go far enough to amount to duress Can be: 1. Actual undeu influence - if blackmails other party into entering contract/puts excess pressure on - difficult to provie 2. Presumed undue influence if: - fidciary rel (eg parent/child, sol/client, medical adviser/patient, guardian/ward); AND - contract calls for an explanantion (not readily explicable by teh rel between the parties) Presumption rebutted (onus on D to show C exercised own free informed mind, eg if took independent advice or awae of what they were doing)

Question 51

Misrepresentation (general)

Answer 51

= 1. False statement - by conduct or words - Not silence UNLESS: a) failing to disclose change in circs that renders prev statement false b) telling half-truth c) obligation to disclose facts (eg fiduciary rel or contracts of utmost good faith eg insurance) 2. Of fact - not opinion 3. Made at the time of/before the contract 4. Made by one party to a contract to the other 5. AN (not only) inducement to representee to enter the contract - ie must be reliance - reliance must be reasonable (ie not mere sales puff eg 'the greatest'/'the fastest')

Question 52

Types of misrep

Answer 52

1. Fraudulent misrep - Ie statement was made: Knowingly, Recklessly (ie careless as to whether true or false); or Without belief in its truth - V difficult to prove 2. Negligent misrep - false statement and person who made it can't prove they had reasonable grounds for believing it when made - Burden of disproving neg on party making rep => easier claim for C to bring - cause of action for damages under MA 3. Innocent misrep - ie Maker of statement had reasonable grounds for believing statement was true

Question 53

Remedies for misrep

Answer 53

Voidable => innocent party can rescind or seek damages

Question 54

Recission where misrep

Answer 54

Equitable remedy, available for all forms of misrep (ie whether fraudulent or non-fraudulent) Effect = each party returns money/property to each other, and both are released from any future obligations (ie both returned as far as is possible to pre-contract positions) Bars to recission= 1. Innocent party affirms the contract (express or implied) 2. Undue delay from teh point teh misrep is discovered 3. Impossible to restore goods/property to the other (eg because subject matter has substantially changed) 4. An innocent purchaser acquires an interest in the property

Question 55

Damages where misrep

Answer 55

May be claimed in addition to either affirming or rescinding a contract Fraudulent misrep = can recover all losses incurred as a result of transaction Neglient misrep = as for fraudulent Innocent misrep = damages not avaible (UNLESS under misrep act, where court has discretion to award damages in lieu of recission if it would e equitable to do so)

Question 56

Damages in lieu of recisison

Answer 56

ie under MA court has discretion to award for innocent misprep and negligent misrep Usually only when false statement was abour minor matter and woudl be unjust to allow other party to rescind Not available if recission utself has been barred

Question 57

Exclusion of misrep

Answer 57

Void unless reasonable Exclusion of liability for fraudulent misrep unlikely to be reasonable

Question 58

Methods of discharging/varying a contract

Answer 58

1. Agreement 2. Performance 3. Waiver 4. Breach 5. Frustration

Question 59

Discharging contract by agreement

Answer 59

Effectively forming a new contract to end the old one (or vary it) So all parties must agree and must be consideration for new agreement All parties still have unperformed obligations => - End party will be suffering detriment/gain benefit of being excused from their obligations => that is the consideration One party has performed their obligations in full => - Agreement will need to be entered into by deed as it will be unsupported by consideration - No deed => further consideration needed

Question 60

Waiving rights under a contract

Answer 60

= Poss way around consideration If a party promises not to enforce another party’s obligations under the contract => courts may conclude that the first party has waived its rights in respect of non-performance BUT party waiving rights can reinstate the original terms by giving reasonable notice

Question 61

Discharging contract by performance

Answer 61

‘entire obligations rule’ ie only full (exact and precise) performance will discharge the contract => Partial performanec not sufficient EXCEPTIONS: 1. Substantial performance (so that any minor breaches are breached of warranty) 2. Divisible contracts => Court can subdivide the obligation into components - Eg contract to deliver goods by instalments 3. Partial performance accepted by the other party - Variation => binding only if consideration -BUT if party has no choice but to accept partial performance, that will not be enough to constitute agreement on the new terms 4. Performance is prevented - Party's conduct preventing performance may be a breach of condition (=> innocent party can terminate and claim damages) - not capable of being performed => frustrated

Question 62

Discharge by breach

Answer 62

ie one of the parties doesn't fulfil their obligations when they fall due Breach of condition => right to terminate contract (vs of warranty => only damages available) 1. Actual breach = non-performance or defective performance; vs 2. Anticipatory breach = clear one party won't perform obligation - condition => immediate right to sue for damages (don't have to wait)

Question 63

Termination v recission

Answer 63

Termination for breach => rights/obligation accrued remain and innocent party may be able to claim damages for breach Goods delivered under contract => buyer not obliged to pay for them, but must return them (and can also claim damages for failure to supply goods in conformity with the contract) Recission of voidable contract => treated as never effective (so parties put back into prev positions)

Question 64

Frustration (general)

Answer 64

Test= 1. Supervening act (ie event or change in circs between agreement and performance/after contract is made) 2. Which is unforeseen 3. Is outside the control of the parties 4. Renders the contract impossible to perform or radically different from what parties originally contemplated (does not apply if merely ore expensive) Effect = from the date of the frustrating event, all future obligations are discharge by operation of law Does not apply: - where force majeure clause - insurance contracts - contracts for sale of goods where the goods have perished

Question 65

Statutory rules – Law Reform (Frustrated Contracts) Act 1943

Answer 65

Mitigates harshness of frustration (If not excluded by contract itself) Contract frustrated => 1. Money paid before the frustrating event is recoverable 2. Money that was payable before the frustrating event cease to be payable 3. Expenses incurred before time of discharge => court may allow retention of sums paid to account for expenses incurred 4. Party obtained valuable (non-monetary) benefit before time of discharge => party who benefitted may have to pay for it

Question 66

Purpose of damages in contract

Answer 66

Purpose = to put innocent party back in position they would have been in had the contract been performed properly Compensatory (=> if no loss, party will receive nominal damages at most)

Question 67

Types of damages

Answer 67

1. Expectation interest - basic measure - ie put party in position they would ahve been in if contract proprerly performed 2. Reliance - where expectation too speculative - Puts parties in position had never entered the contract - Ie C is entitled to any expenses incurred in reliance upon the contract (look at wasted expenses) 3. Non-monetary losses - Awarded for physical injury as long as not too remote - Damages for injury to feelings (eg mental distress) not usually be awarded (exception in consumer contracts where sole purpose was enjoyment eg holiday) 4. Punitive damages - ie to punish party in breach - Not usually awarded (if misrep/other tort, may be recoverable in tort)

Question 68

Remoteness rules in contract damages

Answer 68

Party will not be able to recover loss which is too remote a consequence of the breach Damages awarded should: - 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 - Remoteness considered when contract was entered into (not when breach occurred)

Question 69

General rules re damages in contract

Answer 69

- Damages measured as at the date of breach - Must not be too remote - Causation (test = whether an 'effective cause' of the loss does not need to be only cause) - Contributory negligence may reduce damages - C must take reasonable steps to mitigate loss (not duty if for a debt owed)

Question 70

Liquidated damage clause v penalty clause

Answer 70

Liquidated damages if genuine attempt to pre-estimate the loss (=> binding) If not = penalty clause and damages will be awarded in the usual way

Question 71

Indemnity vs guarantee

Answer 71

Indemnity = promise to accept responsiblity if someone else doesn;t perform an obligation or ake good losses arising from breach Vs guarantee = promise to perform an obligation instead of the person in contract - must be in writing to be enforceable - cease to have effect if obligations under contract are varied/discharged - guarantor can rely on all defences available to primary party

Question 72

Equitable remedies

Answer 72

1 Specific performance 2. Injunction 3. Recission Defences to claim for equitable remedy if/: - Unconscionable behaviour by C (ie C does not have clean hands) - Waiver - Unreasonable delay (‘laches’ doctrine)

Question 73

Specific performance

Answer 73

ie requires a party to perform his contractual obligations Discretionary => will not be granted where: - damages is an adequate remedy - contracts involving continuous supervision by courts - contracts involving personal services or where a rel of trust is paramount Can be combined with damages (eg damages for past and SP for future)

Question 74

Injunction

Answer 74

Prohibitory (forbids a person doing a particular act) or mandatory (requires a person to put right a breach of contract) order Discretionary Injunction will not be granted if the effect would be to compel D to act in a way he could not be ordered to by an order for SP ie same restrictions regarding services contracts apply

Question 75

Restitutionary remedies

Answer 75

Goal = prevent the unjust enrichment of one party at the expense of the other Eg where: - money paid by mistake - Transfer of property under threat of pressure - undue influence - Recission of a contract when there is an outstanding sum of money remaining with the wrong party - Works/goods/services provided when there was no contract Applies => can require payment of money or the turnover of property - Services => quantum meruit (reasonable renumeration fo work undertaken) - Goods => quantum valebat (reasonable payment for value of the goods)