Contract Flashcards
1
Q
What are the basic requirements for a contract to exist?
A
An agreement between parties intending to be legally bound, consisting of:
Offer
Acceptance
Consideration
2
Q
Which contracts must be in writing to be enforceable?
A
A guarantee
A contract for the sale of land
Consumer credit transactions
3
Q
Define consideration in contract law.
A
An act, forbearance, or promise of legal value that each party gives to support the agreement.
4
Q
What is the postal rule in contract law?
A
Acceptance by post creates a contract at the moment of posting unless:
The letter isn’t properly addressed/stamped
It wasn’t reasonable to use post
The offer specifies acceptance isn’t valid until received.
5
Q
What are the remedies for a misrepresentation in a contract?
A
Rescission (unless affirmed, delayed, or restitution is impossible).
Damages (for fraudulent and negligent misrepresentation).
6
Q
What is a unilateral contract?
A
A contract where the offeror promises something in return for the offeree’s performance of a specific act. The offer becomes irrevocable once performance begins.
7
Q
Define the doctrine of frustration in contract law.
A
A contract is discharged when unforeseen events make performance impossible or radically different from what was originally agreed.
8
Q
When is an exclusion clause valid in a contract?
A
It was incorporated into the contract.
It was brought to the other party’s attention.
It is clear and unambiguous.
9
Q
What is the postal rule in contract law?
A
Acceptance by post creates a contract at the moment of posting unless:
The letter isn’t properly addressed/stamped
It wasn’t reasonable to use post
The offer specifies acceptance isn’t valid until received.
10
Q
What is promissory estoppel?
A
A doctrine that makes a promise enforceable without consideration if:
The promisor promised not to enforce their legal rights.
The promisee relied on it detrimentally.
It would be inequitable for the promisor to retract the promise.
11
Q
What distinguishes an offer from an invitation to treat?
A
An offer shows an intention to be bound upon acceptance.
Invitations to treat are invitations for others to make an offer (e.g., advertisements, goods on display).
12
Q
Can silence constitute acceptance in a contract?
A
Generally, no. Silence cannot be deemed acceptance unless:
The offeree expressly agrees that silence will constitute acceptance.
There is a pre-existing relationship where silence has previously been used as acceptance.
13
Q
When can an offer be revoked?
A
Before acceptance, unless a collateral contract to keep it open exists.
Revocation is effective upon being communicated to the offeree.
14
Q
What are the presumptions regarding the intention to create legal relations in different contexts?
A
Domestic/Social agreements: Presumed not to intend legal relations (can be rebutted).
Commercial agreements: Presumed to intend legal relations unless expressly stated otherwise.
15
Q
What makes consideration valid in contract law?
A
Consideration must:
Have legal value (e.g., money, a promise, or an act).
Be sufficient but need not be adequate.
Not be past, unless it was requested with an implied promise of payment.
16
Q
What is the significance of promissory estoppel in consideration?
A
Promissory estoppel can make a promise enforceable without fresh consideration if:
A clear promise was made.
The promisee relied on it to their detriment.
It would be unfair for the promisor to withdraw the promise.
17
Q
When is an exclusion clause valid under the Unfair Contract Terms Act (UCTA) 1977?
A
Exclusion clauses are void if they:
Exclude liability for death or personal injury caused by negligence.
Breach the implied condition of title under
the Sale of Goods Act.
Other clauses may be void unless reasonable, such as those excluding liability for non-negligent losses.
18
Q
What are the three types of misrepresentation?
A
Fraudulent: Made knowingly, recklessly, or without belief in its truth.
Negligent: False statement made without reasonable grounds for belief.
Innocent: False statement made without fault.
19
Q
What remedies are available for misrepresentation?
A
Rescission: Restores parties to pre-contract positions.
Damages:
Full damages for fraudulent misrepresentation.
Damages for negligent misrepresentation (unless disproved).
Limited damages or discretion for innocent misrepresentation under the Misrepresentation Act.
20
Q
How can a contract be discharged?
A
Performance: Completion of all contractual obligations.
Agreement: Mutual agreement to terminate.
Frustration: Events making performance impossible or radically different.
Breach: Serious breach (e.g., of a condition).
21
Q
What is the primary goal of damages in contract law?
A
To place the innocent party in the position they would have been in had the contract been performed.
22
Q
What are the types of damages in contract law?
A
Expectation damages: Compensate for lost benefits of the contract.
Reliance damages: Reimburse expenses incurred in reliance on the contract.
Nominal damages: Token award where no actual loss is proven.
23
Q
The owner of a bicycle wrote a letter to her friend offering to sell her bicycle to him for £150. The friend received the letter on 18 January. On 19 January, he mailed a letter back saying that he was not interested in purchasing the bicycle because he had just bought a gym membership. However, the friend changed his mind on 20 January and posted a letter to the owner accepting her offer to sell the bicycle and enclosing a cheque for £150. The owner received the friend’s rejection letter on 21 January but put it aside without reading it. The next day, she received the friend’s acceptance letter, which she opened and read immediately.
Do the parties have a contract?
A
Yes, because an acceptance is effective when it is posted, whilst a rejection is effective when received.
24
Q
A man wanted to buy a car from his nephew, who worked at a car dealership. The two spoke on the phone to discuss a possible sale, and after offering to buy the car the man concluded the phone call by saying, ‘If I hear no more about the car, I consider it mine for £500’. The nephew said nothing, but moved the car from the forecourt before leaving for his lunch break. In his absence, another member of the dealership’s staff sold the car to a third party.
Was there a valid contract between the man and his nephew?
A
No. The nephew did not communicate his acceptance of the offer.
25
On 1 July, a buyer orders goods from a seller by email. The seller replies by email on 2 July, agreeing to the order, stating that its standard conditions of sale apply and supplying a copy. The buyer replies on 3 July, stating that their standard conditions of purchase apply and also supplying a copy. On 4 July, the seller replies again that its standard conditions of sale apply. The seller then delivers the goods on 5 July. The buyer unloads the goods, places them in their warehouse, and uses them.
On what day was a contract formed and which party's standard conditions apply?
5 July, the seller's because the seller's reply of 4 July was a counteroffer which the buyer accepted by unloading and using the goods.
26
Two friends enter an agreement in writing. The agreed terms are that for one friend will pay the other £50 if they stop complaining about the weather.
Would this be a valid contract?
No. The consideration in this case is not sufficient.
27
A paper manufacturer offers to sell 100 reams of copier paper to a printing business at £10 per ream. The offer is on the paper manufacturer's standard terms and conditions and states, 'You are required to email acceptance of any offer to supply to your sales associate by 5pm on the day the offer is made'. The terms and conditions go on to state that delivery will be two weeks later and that payment is required on delivery. The purchasing manager of the printing business telephones the manufacturer's main number and leaves a message on the answerphone before 5pm accepting the offer. In reliance on the contract that has been made with the manufacturer, the printing business enters into a contract to print 200 copies of a brochure for a local estate agent.
Is there a binding contract between the paper manufacturer and the printing business?
No, the method of acceptance prescribed was email, and the printing business accepted by telephone.
28
On 3 November, an investor sent an email to a dealer in precious metals: "Please quote your best price on 800 troy ounces platinum bars for immediate delivery at my bank". At 10 a.m. the next morning (4 November) the dealer replied by email, "My best price is £475 per ounce". The investor received the dealer's message later on that same day.
What is the best characterisation of the communications between the investor and the dealer?
A request for an offer and an offer.
29
Two businesses are negotiating a contract for a delivery of coal. The parties have finalised all the terms including payment and delivery, but as one of the directors of the coal supplier is going on holiday, signature of the written contract is delayed and it is marked 'subject to contract' pending her return.
Do the parties have a binding enforceable contract?
No. There is no intention to be legally bound.
The investor's communication was a request for an offer and the dealer's response was an offer. For a communication to be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms. The investor's communication does not pass the test because it is clear on its face that he did not want to be bound by whatever price the dealer came up with, but rather wanted to find out what the dealer would offer. The dealer's communication, on the other hand, passes the test. Whilst it said nothing more than the price, it was sent in response to a request containing specific delivery terms and a specific quantity. Under the circumstances, the dealer's response would have created a reasonable expectation in the investor that the dealer was willing to enter into a contract under the terms of the two communications.
30
What is an 'invitation to treat'?
An expression of willingness to negotiate, which falls short of a valid offer that is capable of acceptance.
31
On 6 December, the owner of an electronics store sent a written request to a computer manufacturer asking for the price of a certain laptop computer. The manufacturer sent a written reply with a catalogue listing the prices and descriptions of its computers. The letter stated that the terms of sale were cash within 30 days of delivery. On 14 December the store owner ordered the computer, enclosing a cheque for £4,000, the listed price. Immediately on receipt of the order and cheque, the manufacturer informed the store owner that there had been a pricing mistake in the catalogue, which should have quoted the price for that computer as £4,300. The store owner refused to pay the additional £300, arguing that his order of 14 December in which the £4,000 cheque was enclosed was a proper acceptance of the manufacturer's offer.
Will the manufacturer's claim for the extra £300 succeed?
No, because the store owner's letter of 14 December was a proper acceptance of the manufacturer's offer.
32
A carer comes into the home of an elderly lady twice a week to clean for her and do her shopping. Over time the elderly lady forges a close bond with the carer, so when the carer suggests to her that she withdraw a large chunk of her life savings and pay it into a charity of which the carer is the main beneficiary, the elderly lady agrees.
What is the effect of undue influence on the transaction that has taken place between the carer and the elderly lady?
The contract is voidable.
A contract that is found to have been entered into as a result of undue influence will be voidable, that is, the innocent party has the choice to rescind or affirm the contract. The facts of this scenario point to a presumed undue influence situation. A relationship of trust and confidence existed between the parties, and the donation calls out for an explanation based on that relationship. There is nothing in the scenario that suggests that the presumption of undue influence is rebutted. (C) is therefore the correct answer.
33
Can the singer terminate the contract and sue for damages if the concert venue burns down due to an electrical fault before the first concert?
No. The contract has been frustrated, and it is automatically discharged, meaning damages are not payable.
Explanation: The fire occurred without fault of either party, rendering the contract incapable of being performed. According to the Law Reform (Frustrated Contracts) Act 1943 (LRFCA):
All sums paid before discharge are recoverable, and all sums payable cease to be payable.
The court may allow retention of sums to cover reasonable expenses incurred.
Any valuable benefit obtained before discharge may be recoverable, and the benefiting party may need to pay for it.
34
A company and a computer supplier entered into a written contract for the design and supply of a sophisticated stock management computer system. The supplier worked for over a year on the design of the system, but it became clear that it was not going to be able to create a system which meets the company's requirements. The parties agreed to end the contract, with no further payment due from the company. There is nothing in the contract dealing with termination.
What else needs to be done to bring the contract to an end?
Nothing, because the oral agreement is sufficient to end the contract.
Nothing else needs to be done to bring the contract to an end. All that is needed is an agreement to terminate the contract. There are no formal requirements, but it would be sensible to record the detail of what has been agreed in a new written contract terminating the old one. The main problem when dealing with termination (or variation) of a contract is consideration. Here, both parties are giving up rights under the contract. The company is giving up its right to future performance, and the supplier is giving up its right to payment for that performance. So consideration is not a problem.
35
A well-known comedy double act enters into a contract with a manager under which the manager will manage the act for 10 years. One of the two members of the act is called up for military service and so can no longer perform. There are no terms in the contract dealing with this situation.
Has the contract been frustrated?
Yes, the contract is now radically different from what was agreed.
Yes, the contract has been frustrated. Frustration arises when a contract has become impossible to perform or radically different from what was envisaged. Here, performance has either become impossible (because one of the parties is not available through no fault of their own) or performance would be radically different (because the identity of the performers is an essential characteristic of a comedy double act). As a result, the contract will be discharged under the doctrine of frustration.
36
A woman contracted with a dog breeder for the purchase of a show dog. At the time of the sale, the breeder falsified the dog's pedigree records to indicate that there were several champions in the dog's bloodline. After a few weeks of enjoying the dog's companionship, the woman discovered what the breeder had done.
What is the status of the contract between the woman and the dog breeder at the time of the revelation?
The contract is voidable. The breeder has made a (fraudulent) misrepresentation, which has induced the woman to enter into the contract. A contract is voidable for misrepresentation at the election of the innocent party. Misrepresentation does not render a contract invalid
37
An antiques dealer and a customer have entered into a contract for the sale of a painting. The antiques dealer is delighted to have agreed a price of £200 for the painting which he thought was of unknown origin and has been struggling to sell. Whilst packaging up the painting to send to the customer, the antiques dealer notices a previously concealed signature, and now believes the painting to be significantly more valuable than he originally thought. The antiques dealer refuses to sell the painting to the customer.
What is the position in law?
The contract would not be void, the antiques dealer would be required to sell the painting to the customer.
38
A deep sea fishing company hires a trawler from its owner. The parties are aware that a licence is required to operate the trawler. The fishing company has four other trawlers and applies for five licences, but is granted only three. The fishing company decides to use the licences for its other trawlers.
Can the fishing company rely on the doctrine of frustration to escape the contract to hire the trawler?
No, the fishing company could have used one of the licences for the trawler that it has hired.
A contract will be discharged if performance becomes impossible or radically different than anticipated. However, if the frustration was caused by one of the parties, the contract is not discharged. This is a case of self-induced impossibility. The fishing company could have used one of its licences for the trawler that it had hired, but it chose not to. Therefore the contract is not frustrated.
39
A man and a woman enter into a contract under which the man agrees to sell the woman his 19th century cottage in a village. The man later changes his mind and refuses to go through with the sale.
What remedy is most likely to be available to the woman?
Specific performance.
As a piece of land, particularly a period cottage in a village, is likely to be unique, damages would not be an adequate remedy to compensate the woman for her loss as she would not be able to acquire another property which is exactly the same. It is therefore likely that the courts would be willing to grant the equitable remedy of specific performance to compel the man to sell her the cottage as per their contract.
40
Question
A woman is shopping online for a dress. She finds a dress that she likes for £110 on several websites. After searching some more, she finds the same dress on one seller's website for £95. She agrees with the seller to buy the dress and sends the seller £95. Two weeks later the seller notifies the woman that it will not be able to deliver the dress after all. The contract does not include any remedy terms. The woman immediately looks for a replacement but can only find the dress for £130. She waits to place another order, in case the price drops, but it rises instead. Eventually she has to pay £140 for a replacement dress.
How much can the woman claim from the seller who did not deliver?
£130
When there is a breach, the usual remedy is damages to compensate the nonbreaching party for their loss--damages sufficient to put the nonbreaching party in the position they would have been in if there had been no breach. The loss usually is measured on the date of breach. Here, if there had been no breach, on the day of the breach, the woman would have received a dress. The market price of the dress on the day of the breach was £130. Since she had already paid the original seller £95, she would need all £130 to put her in the position she would have been in had the first seller delivered (that is, in possession of a dress that cost her £95). This can be described in a more complicated way: restitution of the £95 pounds she paid plus £35 damages for the benefit of her bargain (that is, the difference between the market price on the day of delivery (£130) and the contract price (£95)
41
A private buyer is interested in buying a boat. She asks the seller whether the boat is sound. The seller says that it is, but advises the buyer to have her own survey carried out. The buyer does so. The survey report says that the boat is sound. The buyer buys the boat. It turns out to be unseaworthy.
What rights is the buyer most likely to have against the seller?
The buyer likely has no rights against the seller.
It is likely the buyer has no rights against the seller. The buyer's strongest argument would be based on misrepresentation by the seller. Under such a claim, the buyer would have to prove that the seller's statement induced her to enter into the contract. That is going to be difficult, because it appears the buyer bought the boat based on the surveyor's report rather than the seller's statement.
42
A man tells his friend that a certain plot of land would be ideally suited for grazing dairy cows, and that it would support a herd of 100, although the man has no previous experience as a cattle farmer. The friend purchases the land on the basis of the man's representations. However when he tries to graze cattle on the land, it becomes clear that it is unsuitable for grazing and that there is not adequate space for a herd of 100 cows. The friend informs the farmer that the land is not actually suitable for grazing and wishes to sell the land back to the farmer. The farmer refuses and the friend has come to your office, asking whether he can have the contract set aside for misrepresentation.
define misrepresentation.
A misrepresentation is a false statement of fact or law made by one party to another to induce that party to enter into a contract.
43
A misrepresentation is a false statement of fact or law made by one party to another to induce that party to enter into a contract.
If a misrepresentation has taken place, what effect does it have on the subsequent contract?
The contract is voidable.
44
A ship owner hires their ship to a customer for two years. It is a term of the contract that the ship be seaworthy. It becomes clear that the crew are unable to sail the ship properly due to its antiquated machinery and because they are insufficient in number. During the voyage, the ship breaks down several times and is out of service undergoing repairs for a few weeks to make it seaworthy. After it has been repaired, only 7 months remain of the original two-year contract.
Can the customer terminate the contract for breach?
No. The term requiring the ship to be seaworthy was an innominate term which only entitled the customer to sue for damages.
Where it is not clear whether a term of a contract is a condition or a warranty, the court will class it as an innominate term and look at the effect of the breach when deciding what remedy should be available to the innocent party. The court will consider whether the occurrence of the breach deprived the innocent party of substantially the whole benefit of the contract. If it did, the court will treat the term as akin to a condition and the innocent party will be entitled to terminate the contract. If it does not, then the court will treat the term like a warranty and the innocent party will only be entitled to damages. In this scenario, the requirement that the ship is seaworthy is not classified by the contract as either a condition or warranty. Unseaworthiness could cover numerous different breaches, some fundamental but others trivial, so this term is an innominate term and the court will need to consider the nature of the event to which the breach gives rise. Here, the customer had received the benefit of the contract for 17 out of 24 months, so the court is likely to hold that the breach was adequately remedied by damages.
45
What is the purpose of the Consumer Rights Act 2015 (CRA)?
The CRA provides protection for consumers in contracts with traders, ensuring goods, services, and digital content meet certain standards and offering remedies if they do not.
46
What conditions are implied under the CRA for the sale of goods?
Be of satisfactory quality (fit for general use and free from defects).
Match any description provided by the seller.
Be fit for a particular purpose if the consumer informs the trader of that purpose.
47
Can the implied terms for goods under the CRA be excluded by contract?
No, the implied terms cannot be excluded or limited. Any attempt to do so is void
48
What remedies are available to a consumer under the CRA if goods fail to meet required standards?
Right to reject: The consumer can reject goods within 30 days for a full refund.
Repair or replacement: If the goods are not rejected, the consumer can request a repair or replacement.
Price reduction or final right to reject: If repair/replacement is unsuccessful, the consumer can request a price reduction or reject the goods for a partial refund (taking into account use).
49
What is the time limit for claiming a repair or replacement for defective goods?
A consumer has six months to claim a repair or replacement unless the trader can prove the goods were not defective at the time of delivery.
50
What terms are implied into contracts for services under the CRA?
Services must:
Be carried out with reasonable care and skill.
Be performed within a reasonable time (if no time is agreed).
Be completed for a reasonable price (if no price is agreed).
51
What remedies are available for services that do not meet the required standards?
Repeat performance: The trader must re-perform the service to meet the standards.
Price reduction: If repeat performance is not possible, the consumer can request a price reduction.
52
How does the CRA regulate digital content?
Digital content (e.g., software, games, apps) must:
Be of satisfactory quality.
Match any description provided.
Be fit for a particular purpose if specified by the consumer.
53
What terms are considered unfair under the CRA?
A term is unfair if it:
Creates a significant imbalance in the rights and obligations of the parties.
Is contrary to the requirements of good faith.
54
Three friends share a flat together. One friend decides to re-decorate the living room and carries out the work herself. The other friends are so impressed with the transformation that they tell the friend doing the decorating that they will pay her £200 for the work she has done, and they even enter into a contract for payment to show their intent. Six months later, no money has been paid to the friend doing the decorating, so she sues the other friends for breach of contract.
Will the friend doing the decorating succeed in her claim?
No. The work carried out by the decorator friend was carried out before the agreement to pay her.
Consideration that is provided in the past, that is, before a contract has been agreed, is not good consideration for the promises in the contract. In this case the promise to pay the friend for the decorating was for work carried out in the past
55
What key conditions are implied under the Sale of Goods Act 1979?
The following conditions are implied:
The seller has the right to sell the goods.
The goods must match any description applied by the seller.
The goods must be of satisfactory quality and fit for the purpose for which such goods are generally used.
The goods must be fit for any special purpose the buyer has communicated to the seller.
56
Can the condition of the seller's title be excluded under the Sale of Goods Act 1979?
No, the condition of the seller's title cannot be excluded.
57
Can other implied conditions under the Sale of Goods Act 1979 be excluded?
Yes, but only if the exclusion is reasonable under the circumstances.
58
What remedies are available for breach of the implied conditions under the Sale of Goods Act 1979?
The buyer may:
Reject the goods and terminate the contract for a breach of a condition.
Claim damages for the breach.
59
What is the "battle of forms" in contract law?
The "battle of forms" occurs when parties exchange standard contract forms with conflicting terms, each seeking to impose their own terms on the contract.
60
How is the winning set of terms in a battle of forms typically determined?
The last set of terms that are not objected to before performance begins is generally considered to control the contract (the "last shot" rule).
61
What happens if no party explicitly objects to conflicting terms in the battle of forms?
If performance has begun, the terms in the last communication sent before performance will typically govern the contract.
62
Can the battle of forms lead to a lack of a contract?
Yes, if the terms of the forms are so fundamentally different that no agreement can be inferred, the court may determine that no contract was formed.
63
What approach do courts take to resolve disputes in a battle of forms?
Courts may look for:
The last shot rule (which terms were last exchanged and accepted through performance).
Reasonable terms implied by conduct.
A finding of no contract, where differences are irreconcilable.
64
Two businesses contract with each other for the sale and purchase of a piece of machinery. When corresponding about the contract, each business uses their own standard form contract, and both are clear that the contract is governed by their own standard terms and conditions.
How would the courts decide whether a contract exists and which terms govern it?
There is a valid contract which is governed by the last set of forms sent before performance of the parties' obligations under the contract began.
This is a so-called 'battle of forms' situation. Case law has shown that in circumstances such as these, the courts will find a valid contract between the parties based on the last set of terms and conditions sent before performance of the contract commenced.
65
An antiques dealer puts five pieces of Victorian furniture into an auction and the lots are listed in the auction catalogue. A collector sees them in the catalogue and travels to the auction to buy them. Before the auction takes place, the dealer changes her mind about selling the pieces of furniture, and withdraws them from the sale. The collector is angry as he was expecting to buy the furniture and has wasted a trip. He sues the antiques dealer for breach of contract.
Will he succeed in his action?
No. The auction catalogue constituted an invitation to treat. The offer is made by the bidder, which is accepted when the hammer falls.
66
What does the Contracts (Rights of Third Parties) Act 1999 allow?
It allows a third party to enforce a term of a contract if:
The contract expressly provides that they may enforce the term, or
The term confers a benefit on the third party, and it appears the parties intended the third party to enforce it.
67
Can a third party enforce a contract under the Act if they are not specifically named?
Yes, a third party can enforce a contract if they are either:
Specifically named, or
Identified as part of a class or group intended to benefit from the contract.
68
Can the parties to a contract under the Act modify or rescind it without the third party's consent?
The contract cannot be changed to the detriment of the third party if:
The third party has relied on the term, and this reliance was foreseeable, or
The third party has communicated assent to the term benefiting them.
69
What contracts are excluded from the Contracts (Rights of Third Parties) Act 1999?
The Act does not apply to:
Employment contracts, or
Articles of association in a company.
70
A heating engineer recommended a boiler for installation in a homeowner's house. The homeowner agreed to the recommendation and they signed a contract with the engineer under which the engineer will install the boiler. The boiler turned out to be inadequate to heat the house. The homeowner then discovered a clause in the contract excluding all liability for breach of all statutory implied terms. The exclusion is written in very legal language and it is in tiny print; there is no other reference to it in the document and the engineer never mentioned it.
Can the engineer rely on the exclusion?
No, because it is automatically void.
The term is automatically void under the Consumer Rights Act 2015 ('CRA'). The heating engineer is a trader and the homeowner is a consumer. The term is seeking to exclude the implied statutory requirement that the boiler be fit for a purpose expressly or impliedly made known by the consumer (in this case, the engineer will have known by implication that the boiler had to be adequate to heat the house). Exclusions of the implied statutory terms are prohibited under the CRA and therefore void.
71
A man contracted with his work colleague to sell her a painting that he owned. Both the man and his colleague believed the painting to be a Rembrandt. The colleague had admired the painting for some time, and the man eventually agreed to sell it to her. The agreed price was very high, owing to the fact that both believed the painting to be an old master. Two years after the painting was sold, the colleague had it valued and it turned out to be a modern reproduction.
Is the colleague entitled to claim that the contract is void?
No, because this is a mistake as to the subject matter of the contract. Such mistakes can invalidate a contract only in extreme circumstances.
The circumstances in which a court will find a contract void due to a common mistake as to the quality of the subject matter are very limited indeed; a contract for the sale of an old master which subsequently turns out to be a modern copy is one of the examples given by the courts of a mistake that would not render the contract void.
72
A buyer and a seller enter into a contract for the sale of a rare Chinese Ming vase for £2,000. After the contract has been formed, but before the vase has been delivered, the seller indicates to the buyer that he has had a better offer and is therefore no longer willing to sell the vase to the buyer.
What is the likely outcome if the buyer sues the seller for breach of contract?
Specific performance.
73
What is specific performance in contract law?
Specific performance is an equitable remedy that compels a party to perform their contractual obligations when monetary damages are inadequate.
74
When is specific performance most commonly granted?
It is typically granted in cases involving:
Unique goods (e.g., antiques, rare items).
Real estate (land is considered unique).
75
When will a court refuse to grant specific performance?
A court will refuse to grant specific performance if:
Damages would be an adequate remedy.
Performance would cause undue hardship to the breaching party.
The contract requires personal services (e.g., employment contracts).
Extensive court supervision would be necessary to ensure compliance.
76
How does the concept of "clean hands" affect specific performance?
Specific performance is an equitable remedy, so the claimant must have acted fairly and without misconduct ("clean hands") to be eligible for the remedy.
77
A car manufacturer contracted with a machinery supplier for the repair of a vital piece of machinery for its production line. The supplier was two months late in returning the mended piece of equipment. It was industry practice for manufacturers to keep a spare of this machinery in case of breakdowns, but the car manufacturer had not done so and sued the machinery supplier for its loss of profits for the period of time that the production line was not operational.
Will the car manufacturer be successful in its claim for loss of profit?
No. The losses suffered by the car manufacturer are too remote.
Damages for breach of contract can only be recovered for loss which arises naturally from the breach or was in the reasonable contemplation of both parties. As it was industry standard to keep a spare of the piece of machinery being repaired, it was reasonable for the machinery supplier to assume that the car manufacturer would be able to carry on with production, in the absence of any information to the contrary.
78
What is a vitiating factor in contract law?
A vitiating factor is an element or circumstance that undermines the validity of a contract, making it void or voidable. It affects the formation of the contract or the parties' consent to it.
79
What happens when a contract is rendered void due to vitiating factors?
A contract that is void has no legal effect from the moment it is created. It is as if the contract never existed, and neither party can enforce its terms.
80
What are some examples of vitiating factors that render a contract void?
Examples of factors that can render a contract void include:
Illegality: If the contract involves illegal activities, it is void.
Mistake: A common mistake (both parties are mistaken about a fundamental fact) can render a contract void.
Lack of capacity: If one party lacked the mental capacity to understand the contract (e.g., minors, those with mental disorders), the contract is void.
81
Two businessmen enter into a contract for the sale of a quantity of iron, which is required to be shipped by sea from the seller's foundry in America to the buyer's address in Liverpool. The buyer was expecting the iron on the seller's ship's January voyage, and the seller was expecting to deliver the iron on the ship's February voyage.
What is the legal position as regards the contract between the two businessmen?
Void for mutual mistake.
If the parties are mutually mistaken but are at cross-purposes, the contract may be held void for mutual mistake. The courts will apply a test of reasonableness: would a reasonable person have taken the agreement to mean what the parties thought it meant? This will be decided on a case-by-case basis,
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What does it mean when two parties are mutually mistaken in a contract?
A mutual mistake occurs when both parties are mistaken about a fundamental fact that is central to the contract. This can lead to the contract being void or voidable because there was no true agreement on the terms of the contract.
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What is meant by being at cross-purposes in a contract?
Being at cross-purposes means that each party has a different understanding or intention about the subject matter of the contract, even though they may both believe they are agreeing to the same thing. This can occur when each party thinks the contract is about different terms or goals.
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Can a contract be voided if both parties are mutually mistaken but at cross-purposes?
Yes, if both parties are mistaken about a fundamental aspect of the contract and their intentions do not align, the contract may be void due to the mutual mistake. This happens because there is no true meeting of the minds (consensus ad idem).
85
A flower supplier is aware of a large upcoming event in a local hotel, and wants to enter into a contract with a local florist to supply the flowers for it. The florist usually uses a different supplier, so the flower supplier threatens to ruin the reputation of the florist's business if the florist does not buy the supplier's flowers for use at the event, on very unfavourable terms.
What is the likely status of the contract between the supplier and the florist?
Voidable for economic duress.
Duress and undue influence are closely linked, duress being governed by the common law and undue influence being an equitable doctrine. There may be economic duress where there is illegitimate pressure on the victim as a result of which they have no practical choice but to enter into a contract (or in some cases to vary a contract). Exactly what pressure is 'illegitimate' is unclear, but a threat to commit a tort (such as slander or libel) will be sufficient. Economic duress often occurs where one party is in a stronger economic position than the other
86
Two parties enter into a contract under which one agrees to supply a quantity of timber to the other. In breach of contract, the supplier does not provide the timber despite payment having been received. The other party sues the supplier for damages for breach of contract.
What is the aim of damages for breach of contract?
To put the innocent party into the position they would have been in had the contract been performed.
87
A builder contracted to build a house for a newly married couple. The terms of the contract provided that the builder would receive the contract price when the building was fully completed. Just before the builder had completed half of the structure, a storm struck the area and demolished the building.
What is the builder entitled to recover from the couple under the contract?
Nothing.
The builder will not be able to recover anything from the couple under the contract because he has not performed his duty. The requirement for complete performance was not discharged by the destruction of the building (for example, by frustration) because construction has not been made impossible, but just more costly-the builder can rebuild it. Thus, he is not entitled to any recovery.
88
A gallery owner enters into a contract to sell a painting to an art enthusiast. The contract provides for cash on delivery two weeks later. Meanwhile, the gallery owner sells the painting to another gallery for more money.
What is the effect of the gallery owner's actions on the contract with the art enthusiast?
The gallery owner has committed an anticipatory breach and the art enthusiast can choose to terminate the contract immediately or in two weeks once performance under the contract is due.
The sale to a third party is a clear repudiatory breach of the contract, and it is an anticipatory breach because performance is not yet due (an implied anticipatory breach, as the gallery owner has not expressly notified the art enthusiast). Where there is an anticipatory breach, the innocent party has the option to bring the contract to an end immediately, or affirm the contract and wait until performance is due.
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True or false? An offer to enter into a unilateral contract is accepted when the offeree notifies the offeror that they are accepting the offer.
False: An offer to enter into a unilateral contract is accepted when the offeree completes performance of whatever the offeror has asked them to do.
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When is a revocation effective?
When received.
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What is the effect of a counteroffer?
It constitutes a rejection of the original offer and creates an offer from the original offeree which the original offeror may accept or reject.
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True or false? If a counteroffer is rejected by the person who made the original offer, the person who made the counteroffer may still accept the original offer.
False, the counteroffer terminates the original offer, so it can no longer be accepted.
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True or false? Death of either the offeror or the offeree before acceptance of the offer will terminate an offer by operation of law.
True.
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True or false? A party who lacked mental capacity or who was intoxicated at the time a contract was made may void the contract only if the other party knew of the incapacity or intoxication at the time the contract was executed.
True as to both lack of mental capacity and intoxication.
95
A workman charges their customer £5,000 for a job. The customer says that the work is defective and will cost £800 to put right. The workman says they will accept £4,500 and the customer agrees. Why is there sufficient consideration for this agreement?
Because the debt is disputed in good faith.
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True or false? Under the Contracts (Rights of Third Parties) Act 1999, a non-party can enforce a term in a contract only if the contract expressly provides the third party may enforce the term
False: Under the CRTPA 1999, a third party may also enforce a term of a contract if the contract confers a benefit on the third party with the apparent intent to allow them to enforce it.
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True or false? Under the Contracts (Rights of Third Parties) Act 1999, a non-party can enforce a term in a contract only if they are named in it.
False: A person can also enforce rights under the CRTPA 1999 if they are a member of a class of people described in the contract as able to enforce the contract or benefiting under it.
98
True or false? The Contracts (Rights of Third Parties) Act 1999 can be used to impose obligations on third parties as well as to give third parties enforceable rights under contracts.
False: The CRTPA 1999 only allows contracts to grant enforceable rights to third parties.
99
Alex assigned his rights under his contract with Becky to Cameron. Can Cameron rely on those rights to bring a claim against Becky?
No, unless notice of the assignment has been given to Becky.
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True or false? A collateral contract can be implied between two parties where one of the parties (A) makes a promise to the other (B), and as a result B enters into another contract with a third party (C).
True: The collateral contract allows A to claim against B, even though the only express contract is between B and C.
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What is a collateral contract?
A collateral contract is a secondary agreement that exists alongside a main contract, where one party makes a promise to another that induces them to enter into the main contract with a third party.
102
Can a collateral contract be implied between two parties when one party makes a promise, and the other party enters into a contract with a third party as a result?
Yes, a collateral contract can be implied if the promise induces the other party to enter into the contract with the third party.
103
Why is there sufficient consideration for the agreement where a workman reduces their claim from £5,000 to £4,500, and the customer agrees?
Because the debt is disputed in good faith. The dispute over the quality of the work and the amount owed allows for renegotiation and forms valid consideration.
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Does the Contracts (Rights of Third Parties) Act 1999 allow contracts to impose obligations on third parties as well as grant them enforceable rights?
The CRTPA 1999 only allows contracts to grant enforceable rights to third parties; it does not impose obligations on them.
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What does the Contracts (Rights of Third Parties) Act 1999 enable third parties to do?
It allows third parties to enforce a term of a contract if:
The contract explicitly states they can enforce it, or
The term benefits the third party, and the parties intended them to benefit.
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Can a collateral contract be implied between two parties where one of them (A) makes a promise to another (B), and B enters into a contract with a third party (C) as a result?
True. A collateral contract can be implied if A’s promise induces B to enter into the contract with C.
107
Question
True or false? A statement which induces someone to enter into a contract is a term of the contract.
False: A statement which induces someone to enter into a contract is a representation
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What is an innominate term?
A term in a contract which is neither clearly a condition nor clearly a warranty.
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How is the impact of a breach of an innominate term assessed?
The consequences of the breach are examined:
If the breach deprives the innocent party of substantially the whole benefit of the contract, they may terminate and claim damages.
If not, the innocent party can only claim damages
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What distinguishes an innominate term from a condition or a warranty?
Condition: A fundamental term whose breach allows termination and damages.
Warranty: A minor term whose breach allows only damages.
Innominate term: Assessed based on the seriousness of the breach and its consequences.
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What are the innocent party's remedies if an innominate term is breached?
If the effect of the breach is only incidental to the contract, the innocent party can only claim damages.
If the effect of the breach goes to the root of the parties' rights and obligations under the contract, the innocent party can terminate the contract and claim damages.
112
True or false? Terms may be incorporated into a contract if the parties have notice of them.
True
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What is the parol evidence rule?
The parol evidence rule states that external evidence (oral or written) cannot add to, subtract from, contradict, or vary the terms of a written contract intended to be the final and complete expression of the agreement.
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Why does the parol evidence rule exist?
The rule exists to preserve the integrity of written contracts by preventing parties from relying on prior or contemporaneous external agreements that are not included in the final written document.
115
Can external evidence ever be introduced under the parol evidence rule?
Yes, exceptions exist. External evidence may be introduced to:
Prove fraud, misrepresentation, mistake, duress, or illegality.
Clarify ambiguous terms in the contract.
Show that the written contract was not intended to be the final agreement (e.g., it is only part of a larger agreement).
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What type of term are the terms as to title, description, and quality implied by the Sale of Goods Act 1979?
A condition.
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What remedies can a business buyer claim if goods that they have bought from another business turn out not to match the seller's description?
The buyer can terminate the contract and reject the goods unless the breach is so slight that it would be unreasonable to do so. The buyer can also claim damages.
118
True or false? In a contract between businesses, the Supply of Goods and Services Act 1982 implies conditions that any services will be provided (1) within a reasonable time (if no time is agreed) and (2) with reasonable care and skill.
False: These terms are innominate terms implied by SGSA 1982.
119
True or false? The terms regarding the quality of goods and services implied by the Consumer Rights Act 2015 into a contract between a business and a consumer are similar to those implied into a contract between businesses.
True, although a few additional terms are implied by CRA 2015.
120
True or false? The courts will imply a term which overrides the express terms of the contract.
False: The courts are very unlikely to imply a term which overrides the express terms.
121
A contract gives a tenant of land the option to buy the land at a price to be agreed between the parties. The contract says that the price is to be determined by an expert valuer if it cannot be agreed. Is the option binding?
Yes, the parties have agreed a mechanism to resolve any uncertainty as to the price for the land
122
What is an exclusion clause?
A clause attempting to exclude or limit the liability of a party under a contract.
123
Question
True or false? Generally, a defence to an exclusion clause (or any other contractual term) is that the party against whom the clause is being used didn't read the contract.
False, a party who signs a contract generally is bound by its terms.
124
What does the defence of non est factum mean in relation to terms in a contract, including exclusion clauses?
That the party relying on the defence did not understand what they were signing and thought it meant something fundamentally different.
125
What is the standard used to determine whether a term – such as an exclusion clause – will be incorporated into a contract through previous dealings?
The party attempting to rely on the term must show a regular and consistent course of dealing between the parties using the term.
126
Is a term likely to be incorporated into a contract by virtue of the fact that the parties have dealt on the same terms twice before?
Probably no, as three to four dealings between the parties on the same terms over a five-year period have been held to be insufficient.
127
True or false? A court is unlikely to uphold an ambiguous exclusion clause.
True, it must be clear that the clause excludes the liability in question and ambiguities will be construed against the party seeking to rely on the clause.
128
Acme Accountants orders a batch of computers from a dealer, based on a description on the dealer's website which says that they have 500 Gb of storage. The computers turn out to have 250 Gb of storage. The dealer's conditions of sale exclude liability for breach of the implied term relating to satisfactory quality. Does the exclusion cover what has happened?
No, as the term that has been breached is the implied term about compliance with description.
129
What is meant by the duty to mitigate?
The innocent party must take reasonable steps to minimise their loss.
130
Is a party in breach still liable if their breach is one of two effective causes of the loss, or if the loss is partly caused by a reasonably foreseeable intervening event?
Yes, the party in breach will still be liable if the breach is one of two effective causes of the loss, or if the loss was partly caused by a reasonably foreseeable intervening event.
131
When can contributory negligence be used as a defense in contract law?
Contributory negligence can be used as a defense in contract only where the liability of the party in breach is the same in both tort and contract.
132
What does causation in contract law require?
Causation in contract law requires that the breach of contract must be a direct cause of the loss. If there are multiple causes of the loss, the breach will still be liable if it is one of the effective causes, even if other events contributed.
133
What is the effect of an intervening event in contract law?
An intervening event can still result in the party in breach being liable if the loss was partly caused by a reasonably foreseeable intervening event.
134
What are expectation interest damages in contract law?
Expectation interest damages are designed to put the innocent party in the position they would have been in if the contract had been performed as agreed, allowing them to receive the benefit of the bargain.
135
How do expectation interest damages differ from reliance interest damages?
Expectation interest damages aim to compensate the party for the benefit they expected to receive from the contract (e.g., profit or performance), while reliance interest damages aim to compensate the party for the losses they incurred in reliance on the contract being performed
136
When would a court typically award expectation interest damages?
A court would award expectation interest damages when the breach of contract results in the innocent party losing the benefit they anticipated from the contract, such as expected profits or performance.
137
Can expectation interest damages include profits?
Yes, expectation interest damages can include profits the innocent party would have earned if the contract had been performed correctly, as long as these profits are not too speculative or uncertain.
138
What are reliance interest damages in contract law?
Reliance interest damages are designed to compensate the innocent party for the losses they incurred by relying on the contract, such as expenses or investments made in preparation for the contract's performance.
139
How do reliance interest damages differ from expectation interest damages?
Reliance interest damages compensate for losses incurred due to reliance on the contract, such as costs spent preparing for performance. In contrast, expectation interest damages aim to compensate for the benefit the party expected to receive from the contract if it had been fully performed.
140
When would a court award reliance interest damages instead of expectation interest damages?
A court would award reliance interest damages when it is difficult or impossible to calculate the expected benefit of the contract (e.g., when the contract's performance would not have resulted in any profit), or when the innocent party is not seeking to profit but to recover their pre-contract expenditures.
141
Can a party claim both expectation and reliance interest damages?
A party cannot claim both expectation and reliance interest damages for the same loss, as the two remedies are mutually exclusive. They must choose which remedy best compensates them for the breach.
