Contract

Question 1

What are the essential elements of a valid contract?

Answer 1

A valid contract requires:
* Offer
* Acceptance
* Consideration (Gegenleistung)
* Intention to create legal relations
* Certainty of terms
* Capacity (Rechtsfähigkeit) of the parties

These elements are crucial for enforceability in contract law.

Question 2

Define ‘offer’ in contract law.

Answer 2

An offer is a definite promise to be bound on specific terms that is capable of acceptance.

It must be distinguished from an ‘invitation to treat’ (Aufforderung zur Angebotsabgabe).

Question 3

What is an ‘invitation to treat’?

Answer 3

An invitation to treat is not an offer but an indication of willingness to negotiate.

Examples include shop displays, advertisements, and auctions.

Question 4

Explain the postal rule in acceptance.

Answer 4

The postal rule states that acceptance takes effect when posted, not when received.

Exceptions apply for instantaneous communications and when the offeror stipulates that acceptance must be received.

Question 5

What constitutes valid consideration?

Answer 5

Consideration (Gegenleistung) must have economic value, move from the promisee, and be sufficient but need not be adequate.

Past consideration is generally not valid except under specific exceptions.

Question 6

Define ‘promissory estoppel’ and its limitations.

Answer 6

Promissory estoppel (Rechtsverwirkung durch Vertrauensschutz) prevents a person from going back on a promise even without consideration when it would be inequitable.

It is a shield, not a sword, and generally suspends rather than extinguishes rights.

Question 7

What is the difference between express and implied terms?

Answer 7

Express terms are explicitly agreed upon by the parties. Implied terms are not stated but incorporated by custom, statute, or by court.

Examples include the Sale of Goods Act.

Question 8

How does the ‘officious bystander’ test work?

Answer 8

The ‘officious bystander’ test asks whether, if a term had been suggested by a bystander during negotiation, both parties would have immediately agreed ‘of course’ to its inclusion.

Question 9

What is the ‘parol evidence rule’?

Answer 9

The parol evidence rule (Regel des mündlichen Beweisausschlusses) states that where a contract is in writing, oral evidence cannot be admitted to add to, vary or contradict the written terms.

Question 10

When is a contract void for uncertainty?

Answer 10

A contract is void for uncertainty when essential terms are missing or too vague to be enforced.

Mere difficulty in interpretation doesn’t make it void.

Question 11

Explain ‘misrepresentation’ and its types.

Answer 11

Misrepresentation (falsche Darstellung) is a false statement of fact that induces contract entry. Types:
* Fraudulent (knowingly false)
* Negligent (careless without reasonable grounds)
* Innocent (honest but false).

Question 12

What remedies are available for misrepresentation?

Answer 12

Remedies for misrepresentation include:
* Rescission (Rückabwicklung) of the contract
* Damages under Misrepresentation Act 1967
* Damages for fraud
* Indemnity for expenses incurred.

Question 13

Define ‘duress’ in contract law.

Answer 13

Duress (Zwang) is unlawful pressure that coerces a party to enter a contract.

It can be physical or economic, making a contract voidable.

Question 14

What is ‘undue influence’?

Answer 14

Undue influence (unzulässige Beeinflussung) occurs when one party exploits a position of power to impair the other’s free will.

Question 15

Explain ‘unconscionable bargains’.

Answer 15

Unconscionable bargains arise when one party exploits the other’s vulnerability to create a grossly unfair agreement.

Question 16

What is the ‘doctrine of frustration’?

Answer 16

The doctrine of frustration (Lehre von der Unmöglichkeit) occurs when an unforeseen event makes performance impossible, illegal, or radically different, automatically terminating the contract.

Question 17

How does the Law Reform (Frustrated Contracts) Act 1943 operate?

Answer 17

The Act provides for recovery of money paid before frustration, compensation for valuable benefits conferred before frustration, and allows courts to apportion expenses incurred.

Question 18

What constitutes anticipatory breach?

Answer 18

Anticipatory breach (vorzeitige Vertragsverletzung) occurs when a party clearly indicates they will not perform their contractual obligations before the time for performance.

Question 19

Explain the difference between conditions, warranties, and innominate terms.

Answer 19

Conditions are essential terms where breach permits termination and damages. Warranties are minor terms where breach only permits damages. Innominate terms are classified based on breach severity.

Question 20

What remedies are available for breach of contract?

Answer 20

Remedies include:
* Damages (compensation)
* Specific performance
* Injunction
* Rectification
* Rescission for misrepresentation.

Question 21

Explain ‘liquidated damages’ versus ‘penalty clauses’.

Answer 21

Liquidated damages (pauschalisierter Schadenersatz) are genuine pre-estimates of loss and enforceable. Penalty clauses (Strafklauseln) are unenforceable.

Question 22

What is the ‘remoteness of damage’ rule in Hadley v Baxendale?

Answer 22

Damages are recoverable if they:
* Arise naturally from the breach
* Were within reasonable contemplation of both parties at contract formation.

Question 23

Explain the ‘mitigation of loss’ principle.

Answer 23

A claimant must take reasonable steps to minimize their loss after breach.

Failure to mitigate may reduce damages.

Question 24

What is ‘specific performance’?

Answer 24

Specific performance (Erfüllung in Natur) is an equitable remedy ordering the defendant to perform their contractual obligations.

Question 25

When would a court grant an injunction for breach of contract?

Answer 25

Courts may grant injunctions (Unterlassungsverfügungen) to prevent breach of negative obligations when damages would be inadequate.

Question 26

Define 'privity of contract' and its exceptions.

Answer 26

Privity of contract (Relativität des Schuldverhältnisses) means only parties to a contract can enforce it. ## Footnote Exceptions include Contracts (Rights of Third Parties) Act 1999.

Question 27

How does the Contracts (Rights of Third Parties) Act 1999 modify privity?

Answer 27

The Act allows third parties to enforce terms that either expressly provide for enforcement by them or purport to confer a benefit on them.

Question 28

What constitutes a valid assignment of contractual rights?

Answer 28

A valid legal assignment requires: * Written notice to the debtor * Assignment of the whole debt/legal right * Absolute assignment * Signed writing.

Question 29

Explain 'novation' in contract law.

Answer 29

Novation (Schuldumschaffung) is the replacement of an original contract with a new one, requiring consent of all parties involved.

Question 30

What is 'capacity' and who lacks it?

Answer 30

Capacity (Rechtsfähigkeit) is the legal ability to enter contracts. Those who may lack full capacity include: * Minors (under 18) * Mentally incapacitated persons * Intoxicated persons.

Question 31

How does the law treat contracts with minors?

Answer 31

Contracts with minors are generally voidable except for necessaries and beneficial contracts of service.

Question 32

What are 'necessaries' in relation to minors' contracts?

Answer 32

Necessaries (Lebensnotwendigkeiten) are goods or services suitable to the minor's condition in life and actual requirements.

Question 33

How does mental incapacity affect contracts?

Answer 33

Contracts made by mentally incapacitated persons may be voidable if they were incapable of understanding the transaction.

Question 34

What is the impact of intoxication on contractual capacity?

Answer 34

Contracts made while intoxicated may be voidable if the person was so intoxicated they didn't understand what they were doing.

Question 35

Define 'statutory illegality' in contracts.

Answer 35

Statutory illegality (gesetzliche Rechtswidrigkeit) occurs when a contract violates statute law, rendering contracts void or unenforceable.

Question 36

What is 'common law illegality'?

Answer 36

Common law illegality occurs when contracts harm public safety/order or interfere with justice administration.

Question 37

Explain the doctrine of 'restraint of trade'.

Answer 37

Restraint of trade (Wettbewerbsbeschränkung) clauses limit a person's freedom to work or trade and are presumed void unless they protect a legitimate interest.

Question 38

What is 'severance' in relation to illegal terms?

Answer 38

Severance (Abtrennbarkeit) allows courts to remove illegal parts of a contract while enforcing the remainder, provided it doesn't change the contract's nature.

Question 39

How does the Consumer Rights Act 2015 affect unfair terms?

Answer 39

The CRA 2015 protects consumers from unfair terms that cause significant imbalance to their detriment.

Question 40

What constitutes a 'consumer' under the Consumer Rights Act 2015?

Answer 40

A consumer is an individual acting wholly or mainly outside their trade, business, craft or profession.

Question 41

Define 'unfair terms' under consumer protection legislation.

Answer 41

Unfair terms are those which cause a significant imbalance in parties' rights and obligations to the consumer's detriment.

Question 42

What is the 'transparency requirement' in consumer contracts?

Answer 42

Written terms must be transparent: expressed in plain, intelligible language and, if written, legible.

Question 43

How does the Consumer Rights Act protect against exemption clauses?

Answer 43

The CRA prevents businesses from excluding liability for: * Death/personal injury from negligence * Faulty/misdescribed goods * Breach of consumer's statutory rights.

Question 44

What are 'grey list' terms under consumer protection?

Answer 44

'Grey list' terms (graue Liste) are presumed unfair unless proven otherwise.

Question 45

Explain the 'reasonableness test' under UCTA 1977.

Answer 45

The reasonableness test considers: * Bargaining strength * Alternative choices * Knowledge of the term.

Question 46

What is an 'incorporation of terms' and how is it achieved?

Answer 46

Incorporation means making terms part of the contract. ## Footnote Methods include signature, reasonable notice, previous dealings, or custom.

Question 47

How do the 'red hand rule' and unusual terms affect incorporation?

Answer 47

The 'red hand rule' states that particularly onerous or unusual terms require special, prominent notice to be incorporated.

Question 48

What is the 'battle of the forms' and how is it resolved?

Answer 48

The 'battle of the forms' occurs when parties exchange conflicting standard terms. Generally resolved by the 'last shot' doctrine.

Question 49

Define 'entire agreement clauses' and their effect.

Answer 49

Entire agreement clauses (Vollständigkeitsklauseln) state that the written document contains all terms agreed between parties.

Question 50

What are 'exemption clauses' and how are they regulated?

Answer 50

Exemption clauses (Haftungsausschlussklauseln) exclude or limit liability and are regulated by common law and specific Acts.

Question 51

Explain the 'contra proferentem' rule.

Answer 51

The contra proferentem (gegen den Verwender) rule states that ambiguous terms are interpreted against the party who proposed/drafted them.

Question 52

What is the difference between 'invitation to treat' and 'offer'?

Answer 52

An invitation to treat invites offers but cannot be accepted to form a contract. An offer is a definite promise capable of acceptance.

Question 53

How does consideration differ from motive?

Answer 53

Consideration (Gegenleistung) is something of value exchanged as part of the bargain and is legally required. Motive is the reason for entering the contract but has no legal significance.

Question 54

What is 'past consideration' and why is it problematic?

Answer 54

Past consideration (vergangene Gegenleistung) is something already done before a promise is made and is generally invalid as consideration.

Question 55

Explain the rule in Pinnel's Case and the exception in Williams v Roffey.

Answer 55

Pinnel's Case established that part payment of a debt is not good consideration for discharge of the whole debt. Williams v Roffey created an exception where the creditor receives a practical benefit.

Question 56

What is a 'unilateral contract'?

Answer 56

A unilateral contract (einseitiger Vertrag) is formed when one party promises to do something in return for an act by another.

Question 57

Define 'lapse of offer' and its causes.

Answer 57

An offer lapses and cannot be accepted when: * A specified time period expires * A reasonable time elapses * Either party dies.

Question 58

What is a 'counter-offer' and its effect?

Answer 58

A counter-offer (Gegenangebot) is a rejection of the original offer and the proposal of new terms, terminating the original offer.

Question 59

How does 'silence' generally work in acceptance?

Answer 59

Silence generally cannot constitute acceptance, even if the offeror stipulates it will.

Question 60

Explain the concept of 'fundamental breach'.

Answer 60

Fundamental breach (wesentliche Vertragsverletzung) is a breach that deprives the innocent party of the benefit of the contract.

Question 61

Can silence constitute acceptance?

Answer 61

Silence generally cannot constitute acceptance, even if the offeror stipulates it will. Exceptions exist for: * previous dealings, where acceptance by silence was agreed * where services are rendered/benefits accepted ## Footnote Silence may be interpreted differently based on the context of the relationship between the parties involved.

Question 62

What is the 'battle of forms'?

Answer 62

The 'battle of forms' occurs when businesses exchange documents containing conflicting standard terms. Courts typically apply the 'last shot' doctrine: the last set of terms before performance prevails. ## Footnote This doctrine emphasizes the importance of the last set of terms communicated prior to the execution of the contract.

Question 63

Define 'fundamental breach'.

Answer 63

Fundamental breach (wesentliche Vertragsverletzung) is a breach so serious it goes to the root of the contract, entitling the innocent party to terminate and claim damages. ## Footnote Historically, there were limited exemption clauses associated with fundamental breaches.

Question 64

What is 'quantum meruit'?

Answer 64

Quantum meruit (soviel wie verdient) is a claim for reasonable payment for services when no price was agreed or the contract has been discharged. ## Footnote It is available where services were requested or freely accepted.

Question 65

Define 'repudiatory breach'.

Answer 65

Repudiatory breach (vertragsablehnende Verletzung) is so serious it entitles the innocent party to: * Treat the contract as discharged and claim damages * Affirm the contract and claim damages while continuing performance ## Footnote The choice depends on the innocent party's preference and the circumstances surrounding the breach.

Question 66

What is 'affirmation' after a breach?

Answer 66

Affirmation (Bestätigung) occurs when, with knowledge of a repudiatory breach, the innocent party chooses to continue with the contract rather than terminate. ## Footnote It waives the right to terminate but not to claim damages.

Question 67

Explain 'force majeure' clauses.

Answer 67

'Force majeure' (höhere Gewalt) clauses excuse non-performance due to specified events beyond parties' control. ## Footnote They must be expressly included and carefully drafted, as courts interpret them strictly.

Question 68

What is the difference between void and voidable contracts?

Answer 68

Void contracts have no legal effect from the beginning. Voidable contracts are valid until set aside by a party with the right to do so. ## Footnote Examples include contracts induced by misrepresentation, duress, or undue influence.

Question 69

How does 'mistake' affect contract validity?

Answer 69

Mistake may void a contract if: * Both parties make the same mistake about a fundamental fact (common mistake) * One party is mistaken and the other knows this (unilateral mistake) * Parties are at cross-purposes (mutual mistake) ## Footnote These distinctions highlight the various ways a misunderstanding can influence contractual obligations.

Question 70

Define 'common mistake'.

Answer 70

Common mistake (gemeinsamer Irrtum) occurs when both parties make the same mistake. It voids contracts only if the mistake relates to: * the existence/ownership of subject matter * renders performance impossible ## Footnote This emphasizes the significance of shared understandings in contract formation.

Question 71

What is 'unilateral mistake'?

Answer 71

Unilateral mistake (einseitiger Irrtum) occurs when one party is mistaken about terms/identity and the other knows (or should know) of this mistake. ## Footnote It may void the contract if the non-mistaken party tries to take advantage.

Question 72

Explain 'mutual mistake' in contract law.

Answer 72

Mutual mistake (gegenseitiger Irrtum) occurs when parties are at cross-purposes, each mistaken about what the other intends. ## Footnote If fundamental, no consensus ad idem (meeting of minds) exists and no contract forms.

Question 73

What is 'non est factum'?

Answer 73

'Non est factum' ('it is not my deed') is a defense where a person signs a document fundamentally different from what they thought. ## Footnote Limited to those with disability/illiteracy and requires absence of negligence.

Question 74

Define 'specific performance'.

Answer 74

Specific performance (Erfüllung in Natur) is an equitable remedy ordering contract performance. ## Footnote Granted when: * Damages inadequate * Contract has mutuality * Court can supervise execution * Claimant has 'clean hands'.

Question 75

What is 'rectification' in contract law?

Answer 75

Rectification (Berichtigung) is an equitable remedy correcting written contracts to reflect true agreement. ## Footnote Available when the written document doesn't reflect parties' actual agreement due to common mistake or unilateral mistake known to the other party.

Question 76

Explain 'injunction' in contractual context.

Answer 76

An injunction (Unterlassungsverfügung) is a court order preventing breach of negative obligations. ## Footnote Available when damages inadequate and enforcement practical. Mandatory injunctions compel positive action.

Question 77

What is the 'clean hands doctrine'?

Answer 77

The clean hands doctrine (Grundsatz der sauberen Hände) states that equitable remedies are unavailable to those who have acted unethically or in bad faith regarding the contract. ## Footnote This principle ensures that only parties with clean hands can seek equitable relief.

Question 78

Define 'consideration' in contract law.

Answer 78

Consideration (Gegenleistung) is something of value given in exchange for a promise. It must have some value, move from the promisee, and be part of the bargain. ## Footnote Past consideration is not valid.

Question 79

What are 'implied terms'?

Answer 79

Implied terms (stillschweigende Bedingungen) are not expressly stated but incorporated via: * Statute (e.g., Sale of Goods Act) * Custom * Business efficacy * Obviousness ('officious bystander' test) ## Footnote These terms are essential for the operation of contracts.

Question 80

Explain 'promissory estoppel'.

Answer 80

Promissory estoppel prevents a person from going back on a promise even without consideration. Requirements include: * Clear promise * Reliance by promisee * Inequitable to go back on promise * Existing legal relationship ## Footnote It serves to protect reliance interests.

Question 81

What is 'vicarious performance'?

Answer 81

Vicarious performance (stellvertretende Erfüllung) allows a party to delegate performance to another person unless the contract requires personal performance or involves special skill/trust. ## Footnote The delegating party remains liable for performance.

Question 82

Define 'delegation' versus 'assignment'.

Answer 82

Delegation transfers duties (the delegator remains liable) while assignment transfers rights (the assignor typically loses rights after assignment). ## Footnote Delegation often requires consent; many rights can be assigned without consent.

Question 83

What is 'waiver by election'?

Answer 83

Waiver by election (Verzicht durch Wahl) occurs when a party, knowing of a breach, chooses to continue the contract. ## Footnote It permanently waives the right to terminate for that specific breach but not the right to damages.

Question 84

Explain 'waiver by estoppel' in contracts.

Answer 84

Waiver by estoppel occurs when a party represents they won't enforce a right, the other party relies on this, and it would be inequitable to go back on the representation. ## Footnote Unlike election, it can be withdrawn with reasonable notice.

Question 85

What are 'innominate terms'?

Answer 85

Innominate terms (unbestimmte Bedingungen) are classified based on breach consequences rather than being preset. ## Footnote If breach consequences are serious, they're treated as conditions; if minor, as warranties.

Question 86

Define 'representations' versus 'terms'.

Answer 86

Representations (Zusicherungen) are statements inducing contract entry but not part of it. Terms (Vertragsbedingungen) are contractual promises. ## Footnote Breach of representation may allow rescission/damages; breach of term allows contractual remedies.

Question 87

What factors determine if a statement is a term or representation?

Answer 87

Factors include: * Timing (statements closer to contract formation more likely terms) * Importance to recipient * Special knowledge of statement maker * Written confirmation * Inclusion in final document ## Footnote These factors help in interpreting the intention behind statements made during negotiations.

Question 88

Explain the 'reasonable person test'.

Answer 88

The reasonable person test asks how a reasonable person in the position of the parties would have understood the contract terms at the time of formation. ## Footnote This test considers the contract's language, context, and business common sense.

Question 89

What is the 'parole evidence rule'?

Answer 89

The parole evidence rule (Regel des mündlichen Beweisausschlusses) prevents oral evidence contradicting written contracts. ## Footnote Exceptions include rectification, collateral contracts, condition precedent, ambiguity, custom, implied terms, and misrepresentation.

Question 90

Define 'frustration' in contract law.

Answer 90

Frustration (Unmöglichkeit) automatically terminates contracts when an unforeseen event makes performance impossible or radically different. ## Footnote This differs from force majeure, which relies on specific contractual provisions.

Question 91

What is the 'but for' test in causation of damages?

Answer 91

The 'but for' test asks whether the claimant would have suffered the loss 'but for' the defendant's breach. ## Footnote It establishes factual causation but must be combined with remoteness principles for recovery.

Question 92

Explain the difference between 'expectation' and 'reliance' damages.

Answer 92

Expectation damages (Erfüllungsinteresse) put claimants in the position as if the contract had been performed. Reliance damages (Vertrauensinteresse) compensate expenses incurred in reliance on the contract. ## Footnote This distinction helps courts determine appropriate remedies based on the claimant's situation.

Question 93

What is 'restitutionary damages'?

Answer 93

Restitutionary damages (Bereicherungsausgleich) aim to strip defendants of benefits obtained through breach rather than compensating claimant's loss. ## Footnote Awarded rarely, mainly for 'skimped performance' or when the defendant profits from wrongdoing.

Question 94

Define 'nominal damages'.

Answer 94

Nominal damages (symbolischer Schadenersatz) are token sums awarded when a breach occurred but caused no actual loss. ## Footnote They recognize the infringement of legal rights even absent financial harm.

Question 95

What is the 'loss of chance' doctrine?

Answer 95

Loss of chance (Verlust einer Chance) compensates for the lost opportunity to obtain a benefit or avoid harm. ## Footnote Valued according to the chance's probability and potential value, recognized in specific commercial contexts.

Question 96

Explain 'restitution' in contract law.

Answer 96

Restitution (Rückerstattung) is the return of benefits conferred under void or voidable contracts or after termination for breach. ## Footnote Based on unjust enrichment principles rather than contractual obligations.

Question 97

What is the difference between liquidated damages and penalties?

Answer 97

Liquidated damages (pauschalisierter Schadenersatz) are genuine pre-estimates of loss and enforceable. Penalties (Vertragsstrafen) aim to deter breach rather than compensate and are unenforceable. ## Footnote This distinction is crucial for determining enforceability.

Question 98

Define 'agency' in contract law.

Answer 98

Agency (Vertretung) is a relationship where one person (agent) has authority to affect legal relations of another (principal) with third parties. ## Footnote Created by agreement, ratification, necessity, or estoppel.

Question 99

What is 'ratification' in agency relationships?

Answer 99

Ratification (Genehmigung) occurs when a principal adopts an unauthorized act performed by someone purporting to act as their agent. ## Footnote It has retrospective effect, making the act binding from when it was done.

Question 100

Explain the 'agency of necessity'.

Answer 100

Agency of necessity (Geschäftsführung ohne Auftrag) arises when someone acts on another's behalf in an emergency without prior authority. ## Footnote Requires: * Genuine emergency * Impossible to communicate with principal * Acting in principal's best interest.

Question 101

What is an agent's 'authority'?

Answer 101

Agent's authority (Vertretungsmacht) is their power to bind the principal. Types include: * Actual authority (express/implied) * Apparent authority (created by representation) * Usual authority (based on agent's position) ## Footnote Understanding these types is essential for assessing the validity of agent actions.

Question 102

Define 'privity of contract'.

Answer 102

Privity of contract (Relativität des Schuldverhältnisses) means only parties to a contract can enforce it. ## Footnote Important because it protects parties from unexpected liabilities and maintains contractual certainty, though exceptions now exist.