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Contract Flashcards

1
Q

What is the definition of consideration in contract law?

A

Consideration is ‘the price of a promise.’

Consideration can be either executed (already given) or executory (to be given in the future).

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2
Q

What is required for a valid acceptance of an offer?

A

Acceptance must be:
* in response to an offer
* unqualified
* communicated

Acceptance can be communicated by words or conduct, not silence.

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3
Q

What is the postal rule in contract law?

A

Acceptance takes effect as soon as it is properly posted to the offeree.

This applies even if the letter is delayed or lost.

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4
Q

True or False: Silence can be considered acceptance in a contract.

A

False.

Silence is not enough for acceptance unless specific exceptions apply.

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5
Q

What are the two types of auctions mentioned?

A
  • Auction with reserve
  • Auction without reserve

In an auction with reserve, the seller can keep the goods if the minimum price is not reached.

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6
Q

What must be present for consideration to be valid?

A

Consideration must not be past, must move from the promisee, and must be sufficient.

Past consideration is not valid for a new contract.

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7
Q

What is the significance of ‘intention to create legal relations’ (ICLR) in contract law?

A

There must be a general intention to create a legally binding agreement.

This is an objective test, with different presumptions in commercial versus domestic contexts.

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8
Q

Fill in the blank: An invitation to treat is _______.

A

[not a binding contract]

It becomes binding only if it amounts to a unilateral offer.

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9
Q

What is a counter-offer?

A

A counter-offer is a final rejection of the original offer.

It changes the terms of the original offer and creates a new offer.

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10
Q

What are the requirements for a valid unilateral contract?

A
  • Offer and actual performance
  • Consideration
  • Intention to create legal relations (ICLR)
  • Certainty
  • Capacity

Actual performance is enough for acceptance in unilateral contracts.

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11
Q

What does ‘capacity’ refer to in contract law?

A

Capacity refers to the ability of parties to enter into a contract legally.

Minors and mentally incapacitated individuals generally lack capacity.

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12
Q

What is promissory estoppel?

A

Promissory estoppel suspends a right but does not extinguish it.

It requires a clear promise, intention to rely, actual reliance, and detriment.

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13
Q

What are the exceptions to the rule that past consideration is not valid?

A
  • Implied assumpsit
  • Performance of a pre-existing duty owed to a third party

These exceptions allow certain past actions to be considered valid consideration.

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14
Q

What does ‘subject to contract’ imply?

A

The agreement is prima facie NOT binding and subject to further discussions.

This indicates that a final contract is to be established later.

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15
Q

Fill in the blank: A minor can only enforce contracts for _______.

A

[necessaries]

This includes contracts for employment, apprenticeship, and education, provided they benefit the minor.

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16
Q

What are the requirements for a contract to be binding regarding certainty?

A

All material terms must be certain and complete.

Courts prefer to uphold agreements unless there is a lack of certainty.

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17
Q

True or False: A minor has to pay consideration when entering into a contract.

A

True, but only a ‘reasonable price.’

This applies to contracts for necessaries.

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18
Q

What is the test for determining if consideration is sufficient?

A

Consideration must be worth something, e.g., even a nominal amount like a peppercorn.

Intangible benefits are not sufficient.

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19
Q

What happens if a unilateral contract is revoked?

A

Revocation is valid as long as it occurs before the offeree’s performance begins.

The offeror must communicate revocation to the offeree.

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20
Q

What is a contract for necessaries?

A

A contract made by a minor for essential goods or services.

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21
Q

What must a minor do regarding a contract when they become an adult?

A

Ratify the contract.

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22
Q

Does a minor have to pay consideration for necessaries?

A

Yes, but only a reasonable price.

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23
Q

What are the four questions to determine capacity in complex situations?

A
  • Can the person understand the relevant information?
  • Can the person retain the relevant information?
  • Can the person use the relevant information?
  • Can the person communicate a decision?
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24
Q

What is the legal effect of duress on a contract?

A

The contract becomes voidable.

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25
What is the exception to the effect of duress on a contract?
If the contract is affirmed by the parties involved despite duress.
26
What must be demonstrated to prove economic duress?
* Pressure * That the pressure was illegitimate * That duress was the significant cause of entering the agreement.
27
What are strong indicators of economic duress?
* Lack of a practical choice * Bad faith * If it went beyond mere commercial negotiation * Signs of protest.
28
What is the effect of undue influence on a contract?
The contract is voidable and open to rescission.
29
What is the test for undue influence?
Undue influence has to be one factor in entering the agreement.
30
What are the three categories of relationships that may create a presumption of undue influence?
* Irrebuttable presumption * Mere presumption * No presumption.
31
What constitutes a suspicious transaction in the context of undue influence?
A transaction that should be reasonably accounted for.
32
What are the obligations of third parties under the Etridge Protocols?
* Set up a private meeting with the potential victim * Nominate a solicitor for legal advice * Provide independent advice on financial impact.
33
What is an entire agreement clause?
A clause stating that a set of documents constitutes the entire agreement and supersedes previous understandings.
34
What is the test for determining if a statement is a term of a contract?
Anything intended to induce the parties to enter the contract is a binding term.
35
What are mere puffs in contract law?
Statements of no legal significance.
36
What is the objective observer test used for?
To ascertain the express terms of a contract.
37
What is the significance of incorporation by notice?
Terms can be incorporated if reasonable steps are taken to bring them to the other party's attention.
38
What is the principle of business efficacy?
The court must guide business efficacy to an agreement or it would be unworkable.
39
What does the Sales of Goods Act cover?
Commercial contracts for the sale from trader to trader.
40
What is the primary remedy under the Consumer Rights Act for goods?
Right to reject the goods within 30 days.
41
What distinguishes conditions from warranties in contract law?
Conditions allow for repudiation, while warranties only allow for general damages.
42
What section of the Sales of Goods Act relates to satisfactory quality?
Section 14(2).
43
What does the term 'caveat emptor' mean?
Let the buyer beware; the buyer must inspect goods before purchase.
44
Fill in the blank: A contract made by a minor for essential goods is known as a _______.
[contract for necessaries]
45
True or False: The minor is not required to pay for necessaries.
False.
46
Fill in the blank: The contract becomes voidable for _______.
[duress]
47
What are conditions in contract law?
Conditions are terms that go to the root of the contract and give rise to the right of repudiation. ## Footnote Statutory protections for conditions are primarily found in sections 12-15.
48
What are warranties in contract law?
Warranties are terms that are less important than conditions and do not go to the root of the contract, allowing only for general damages. ## Footnote Warranties do not provide a right of repudiation.
49
What are innominate terms?
Innominate terms are terms that can be classified as either conditions or warranties depending on their effect on the contract. ## Footnote A key test is whether the party would be deprived of substantially the whole benefit of the contract.
50
What is the significance of the Hong Kong Fir Case regarding innominate terms?
The Hong Kong Fir Case established that an innominate term can be re-classified as a condition if the party would be deprived of substantially the whole benefit of the contract. ## Footnote This case is often cited in discussions of innominate terms.
51
What does the term 'exemption' refer to in contract law?
Exemption refers to the steps taken to exclude or limit liability in contracts, including incorporation rules and statutory control. ## Footnote It covers various methods to limit liability.
52
List the methods of exemption by incorporation.
* By a signed written contract * By notice * Orally * By trade custom & precedent * By business efficacy principles * By course of dealing ## Footnote If these methods fail to incorporate the term properly, the clause will be excluded.
53
What principle does 'contra proferentem' represent?
Contra proferentem is the principle that any ambiguity in a contract will be construed against the party seeking to rely on that clause. ## Footnote This principle favors consumers in contract disputes.
54
What is required for an exclusion clause to be valid under UCTA?
Exclusion clauses are valid if they are 'fair and reasonable' as judged at the time the contract was made. ## Footnote This applies to both express and implied terms.
55
What is the test for unfair terms under the CRA?
The test is that exclusions are valid as long as they are 'not unfair', which means there is a significant imbalance in the parties' rights or obligations to the consumer's detriment. ## Footnote This applies specifically to contracts involving consumers.
56
Define misrepresentation.
Misrepresentation is an unambiguous false statement of fact or law that entitles the wronged party to a remedy, making the contract voidable. ## Footnote It can be actionable based on various criteria.
57
What are the elements of actionable misrepresentation?
* Unambiguous * False * Statement of fact or law * Addressed to the claimant * Induces the claimant to contract ## Footnote Each element must be satisfied for a misrepresentation claim.
58
What are the defenses to misrepresentation?
* Contributory negligence * Profit made from misrepresentation * Exemption clauses & non-reliance clauses ## Footnote Defenses may not apply in cases of fraud.
59
What distinguishes fraudulent misrepresentation from negligent misrepresentation?
Fraudulent misrepresentation involves a flagrant disregard for truth, while negligent misrepresentation involves a failure to exercise reasonable care. ## Footnote Both can lead to rescission and damages.
60
What is the traditional meaning of privity in contract law?
Privity means that third parties (TPs) do not have rights or obligations under a contract unless they are a party to it. ## Footnote This principle is fundamental to contract law.
61
What is required for a collateral contract to exist?
A collateral contract exists when a separate agreement is made that supports the main contract, allowing a third party to enforce it. ## Footnote This circumvents the privity doctrine.
62
What are the statutory exceptions to the doctrine of privity?
* s.1(1)(a) - Expressly states enforceability against TPs * s.1(1)(b) - Purports to confer a benefit intended to be enforceable ## Footnote These exceptions allow TPs to benefit from the contract.
63
What is the defense of illegality in contract law?
Illegality denies a claim based on whether denying the claim enhances the underlying purpose of the prohibition, aligns with public policy, and is a proportionate response. ## Footnote This is a discretionary test applied by the courts.
64
What types of operative mistakes make a contract void?
* Common Mistake * Mutual Mistake * Unilateral Mistake ## Footnote Each type has specific criteria for determining if a contract is void.
65
What is the 'non est factum' defense?
The 'non est factum' defense applies when a party claims they did not understand the nature of the document they signed, making it voidable. ## Footnote Justifications may include fraud, mental incapacity, or illiteracy.
66
What presumption arises when there is a written contract?
Raises the presumption of invalidity based on the intention to deal only with the named person in the contract
67
What is 'non est factum'?
'It is not my deed'; a defense used when a party claims they did not understand the document they signed
68
Which factors can justify making a signed document voidable?
* Fraud * Senility * Blindness * Illiteracy
69
What is the legal position concerning mistakes related to identity in a contract?
Mistakes about attributes do not constitute an operative mistake; the contract may be voidable but not void
70
What happens when goods are sold to innocent third parties?
Acts as a defense for the seller, as the third party is not at fault
71
What are the good ways to discharge contracts?
* Performance * Agreement
72
What are the bad ways to discharge contracts?
* Breach * Frustration
73
What is the rule regarding performance of contracts?
Contracts are discharged when the terms are complete
74
What is a defense for failure to perform as a characteristic performer?
If repeatedly refused the opportunity to perform, the party is not liable
75
What is an entire obligation clause?
An agreement that withholds payment until performance is complete
76
What is substantial performance?
When a party has performed enough of the contract to warrant some payment despite not completing it
77
What is a quantum meruit?
Entitlement to payment for partial performance accepted voluntarily
78
What does 'accord and satisfaction' refer to?
An agreement to terminate a contract in exchange for alternative performance
79
What is the test for frustration of a contract?
Is the contract 'radically different' due to impossibility, illegality, or failure of common purpose?
80
What does the Law Reform (Frustrated Contracts) Act 1943 state about future obligations?
No future obligations are enforceable after frustration
81
What is the primary method of assessing damages in contracts?
Expectation measure: putting parties in the position they would have been in had the contract been performed
82
What is the reliance measure in assessing damages?
Restores the parties to their original position before entering the contract
83
What are the two factors that restrict the award of damages?
* Factual causation * Legal causation
84
What is the duty on the claimant regarding losses?
Claimant must mitigate losses; they cannot recover losses attributable to their failure to do so
85
What is the test for loss of chance?
Was the opportunity forgone 'real and substantial' and more than 50% likely?
86
Are damages for mental stress generally recoverable?
No, unless the contract's major purpose is for pleasure, relaxation, or peace of mind
87
What is a liquidated damages clause?
A clause that includes specific damages which are lawful in the UK
88
What is the effect of finding a clause to be penal?
The court reassesses the damages on its own; it does not refuse any award
89
What is a liquidated damage clause?
A clause that includes specific damages which are the only type of lawful liquidated damages in the UK ## Footnote It encompasses both specific damage and penalty clauses, but only specific damages are lawful.
90
What are specific damages?
A fixed sum payable on a particular breach, representing a primary obligation ## Footnote They are lawful under liquidated damages clauses.
91
What defines a penalty clause?
An excessive sum that imposes a detriment out of all proportion, making it unlawful ## Footnote It is typically a secondary obligation.
92
What is the test to determine if a clause is a penalty clause?
Whether the sum is exorbitant, excessive, extravagant, or unconscionable ## Footnote This assessment is crucial to distinguish between primary and secondary obligations.
93
What is the difference between a primary obligation and a secondary obligation?
Primary obligation concerns specific damages; secondary obligation relates to remedial consequences triggered upon breach ## Footnote Primary obligations will not engage the penalty rule.
94
Is a bonus for delivery on time considered a penalty clause?
No, it is a primary obligation, not a penalty clause ## Footnote Late delivery results in loss of the bonus, not a penalty.
95
What is an injunction?
A court-ordered remedy to prevent or require a party to act under contract terms ## Footnote It is discretionary and equitable, considering all relevant circumstances.
96
What conditions might prevent a specific performance order?
Absence of consideration, contracts of employment, menial tasks, supervision required, minors, undue hardship, breakdown of trust ## Footnote Specific performance cannot be granted if subjective opinions are required.
97
What is a guarantee?
A promise by a third party to ensure that the defendant fulfills obligations, acting as a secondary obligation ## Footnote Guarantees require signed writing and are narrower than indemnities.
98
What triggers a guarantee?
An obligation of the defendant ## Footnote If the defendant is released, the third party’s obligations also end.
99
What is an indemnity?
A promise by a third party to reimburse the claimant if the defendant defaults, acting as a primary obligation ## Footnote Indemnities concern payments of money and can be broader than guarantees.
100
What conditions apply to indemnities?
Third party's obligations endure irrespective of the defendant's status ## Footnote The type of loss must be covered by the indemnity's scope.
101
Can the same person be under both a guarantee and an indemnity?
Yes, it is plausible for the same person to be a party to both ## Footnote This is not applicable to guarantees due to the nature of the agreement.

My Revision SQE FLK (5 decks)

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