Contract law Flashcards
(236 cards)
1
Q
What are the three elements required for a customary term to be implied into a contract?
A
- certain
- notorious
- reasonable
For a term to be implied it must be customary in that it may be customary that there is a local factory shutdown in a point of time and it must be customary that employees summary holidays are taken during the shutdown
2
Q
What is an exclusion clause?
A
A clause in a contract or a term in a notice which appears to exclude or restrict a liability or a legal duty
3
Q
What must be shown for an exclusion clause to be enforceable at common law?
A
- incorporation
- clarity of terms
- no legal reason against application
4
Q
What is required for incorporation of an exclusion clause by signature?
A
The document containing the clause must be signed by the party
5
Q
True or False: A term can be part of a contract unless presented before signing.
A
False
6
Q
What is the contra proferentem rule?
A
Ambiguity in exclusion clauses is interpreted against the person relying on the clause - this means that if there is doubt about what the exclusion clause means, the court will decide with the other party.
If a company writes a contract and includes a vague clause about cancellation terms, and a dispute arises over what that clause means, a court may interpret the clause in favor of the other party (the one who didn’t write the contract).
To protect the weaker party (usually the one with less bargaining power).
To encourage clear drafting of contracts.
To avoid unfair advantage by the party who had the chance to clarify the terms but didn’t.
7
Q
What is the purpose of the Unfair Contract Terms Act 1977 (UCTA)?
A
To determine the effectiveness of exemption clauses based on reasonableness
8
Q
Under UCTA s 2(1), what type of liability cannot be excluded?
A
Liability for death or personal injury
9
Q
What does the Consumer Rights Act 2015 (CRA) provide for consumer contracts?
A
- Exclusions of liability for negligence are automatically ineffective
- Certain unfair terms are ineffective
- Contracts must be in clear language
- Implies terms protecting consumers
10
Q
What defines a consumer under the CRA?
A
An individual acting for purposes that are wholly or mainly outside their trade, business, craft or profession
11
Q
What constitutes an unfair term under CRA s 62(4)?
A
A term that causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer
12
Q
What is meant by ‘good faith’ in the context of the CRA?
A
The term did not cause a significant imbalance in the parties’ rights and obligations
13
Q
What is the significance of transparency in consumer contracts under the CRA?
A
Core terms must be expressed clearly and legibly to be excluded from fairness tests
14
Q
What are the implications if a term is found to be unfair under the CRA?
A
The term will be deleted from the contract
15
Q
What sections of the CRA deal with excluding or restricting liability?
A
- Section 31
- Section 47
- Section 57
16
Q
What type of liability cannot be excluded under CRA s 65?
A
Liability for death, personal injury, or negligence
17
Q
What is the effectiveness of exclusion clauses limited by?
A
- Misrepresentation
- Overriding oral assurance
- Collateral contracts
- Third parties
18
Q
Fill in the blank: An exclusion clause must be _______ and unequivocal.
A
[clear]
19
Q
What must onerous terms do to be enforceable?
A
Be drawn to the attention of the party affected
20
Q
What is the test for the reasonableness of exemption clauses under UCTA?
A
The clause must pass the reasonableness test outlined in Schedule 2
21
Q
What is required for incorporation by reasonable notice?
A
Adequate notice of the clause must be given before or at the time the contract is entered into
22
Q
True or False: A contract term can be enforced if the affected party was unaware of its existence.
A
True
23
Q
What is Section 31 of the CRA about?
A
It covers liability that cannot be restricted or excluded in a consumer contract.
24
Q
What are the types of liability a consumer is not bound by under Section 31(1)?
Section 31 of the CRA covers liability that cannot be restricted or excluded in a consumer
contract. A consumer is not bound by a contract term purporting to exclude or restrict liability for
(s 31(1)):
A
- goods to be of satisfactory quality
- goods to be fit for particular purpose
- goods to be as described
- other pre-contract information included in contract
- goods to match a sample
- goods to match a model seen or examined
- installation as part of conformity of the goods with the contract
- goods not conforming to contract if digital content does not conform
- trader to have right to supply the goods
- delivery of goods
- passing of risk
25
Can a consumer contract exclude liability for goods not being of satisfactory quality?
No.
26
What must occur for parties to make changes to a contract?
There must be a valid agreement between the parties and some form of consideration.
27
True or False: A mere notification by one party is enough to change a contract.
False.
28
What can variation of contract terms lead to?
Discharge of the contract by agreement.
29
Fill in the blank: Variation of a contract must be supported by _______.
[some form of consideration]
30
What is required for a variation to be effective?
A valid agreement between the parties.
31
What types of changes might parties wish to make to a contract?
* increase or reduce work
* change timescales
32
Summary of key principles
* Incorporation of terms: contract does not have to be in writing. Is it a term or
representation?
* The interpretation of terms (conditions, warranties and innominate terms) can have an
impact on remedies. With innominate terms, if the substantial benefit been lost, it will be a
condition.
* Express terms: is there a written contract? Evidenced in writing?
* Implied terms: there are four types of implied term – by statute, in law, in fact and by
custom.
* Exclusion clauses: traders cannot exclude liability for death or personal injury. To exclude
or limit liability, the trader must show incorporation by signature, notice or course of
dealing, construction and effectiveness.
* Unfair terms are governed by statute for both business-to-business and consumer
contracts. Business to business contracts are covered by UCTA. Business to consumer
contracts are covered by the CRA.
* Common law allows for a written contract to be changed or varied by subsequent mutual
agreement of the parties, whether oral or written.
33
What is a misrepresentation?
A misrepresentation is the making of a false statement of fact during pre-contractual negotiations by one party, which induces the other party to enter into the contract and, as a result of which, the other suffers loss.
34
What happens if a misrepresentation is actionable?
An actionable misrepresentation renders the contract voidable, meaning the contract is legally binding, but the innocent party has the option to set it aside.
35
What test do courts apply to determine if a statement is a term of the contract?
Courts apply an objective test to determine what a reasonable person would understand to be the intention of the parties.
36
What must be present for a misrepresentation to be actionable?
All elements of an actionable misrepresentation must be present.
37
What constitutes a false statement of fact?
A false statement of fact is one that is not 'substantially correct' and must relate to an existing fact.
38
What types of statements do not constitute a misrepresentation?
Statements of intention, future actions, opinions (unless by an expert), and false statements of law (unless misstatements of the law's effect) do not constitute misrepresentation.
39
Does silence amount to a misrepresentation?
Silence does not amount to a misrepresentation unless a true statement is made during negotiations that later becomes false, requiring disclosure.
40
What is the duty of disclosure in contracts of utmost good faith?
In contracts described as 'uberrimae fidei', there is a duty of disclosure, such as in insurance contracts.
41
What must be shown for a misrepresentation action to succeed?
It must be shown that the party to whom the statement was made relied on it and was induced to enter into the contract because of it.
42
What are the three categories of misrepresentation?
The three categories of misrepresentation are fraudulent, negligent, and innocent.
43
What defines a fraudulent misrepresentation?
A fraudulent misrepresentation involves a false statement made knowingly, without belief in its truth, or recklessly.
44
What is required to prove negligent misrepresentation?
To prove negligent misrepresentation, one must show the existence of a special relationship, a duty of care, a breach of that duty, and foreseeable loss.
45
What does the Misrepresentation Act 1967 s 2(1) state?
Under the Misrepresentation Act 1967 s 2(1), if a misrepresentation causes loss, the person making the representation is liable unless they prove reasonable grounds for believing it was true.
46
What characterizes an innocent misrepresentation?
An innocent misrepresentation occurs when the person making the statement believes it to be true and has reasonable grounds for that belief.
47
What are the two types of contracts?
A contract can be a simple contract (oral or written) or a contract by deed (in writing).
48
What are the two types of simple contracts?
Simple contracts can be either bilateral, involving an exchange of promises, or unilateral, involving a promise to pay for performance of a specified act.
49
What are the core elements of a contract?
The core elements of a contract are offer, acceptance, intention to create legal relations, and consideration.
50
What is an offer?
An offer needs to be specific, comprehensive, and capable of acceptance. The person making the offer is called the offeror, and the person to whom the offer is made is called the offeree.
51
What is an invitation to treat?
An invitation to treat is not an offer and is not capable of acceptance. Examples include adverts or displays of goods in a shop.
52
How do adverts relate to offers?
Adverts are usually an invitation to treat, but they can occasionally be unilateral offers if all other elements to form a contract are present.
53
What happens in an auction regarding offers?
An advert for an auction is an invitation to treat. Offers to buy are made by bidders, and acceptance occurs when the gavel falls.
54
What is a tender?
A tender is a written or formal invitation to supply goods or services, and the offer is made by the person responding to the tender.
55
What is a counter-offer?
A counter-offer is created if an offer is made in response to the original offer, which destroys the original offer.
56
How can you distinguish between a counter offer and a request for information in contract law?
A request for information is not a counter-offer. It occurs when the offeree asks a question about the terms of the offer (e.g., “Would you take cash or a bank transfer?”), rather than proposing new terms. Context is key in determining whether the response is a genuine inquiry or a rejection of the original offer.
57
58
59
What is the 'mirror image' rule?
The acceptance must match the offer exactly.
60
When does acceptance take place?
When it is communicated, unless it is by post.
61
True or False: Receipt of an acceptance automatically means it has been communicated.
False.
62
How can acceptance be communicated?
By words or conduct.
63
What is the 'battle of the forms'?
A situation where two businesses try to contract on their own terms and conditions.
64
What principle applies in a 'battle of the forms'?
The last shot wins.
65
What happens if one company's terms are agreed to last in a battle of the forms?
Those terms govern the contract.
66
What is a potential issue in a battle of the forms?
Terms may differ between contracts, such as price escalation clauses.
67
What is the postal rule?
Acceptance takes place on posting if a letter is correctly addressed and posted.
68
Why was the postal rule developed?
When the post was very reliable with multiple deliveries of post a day.
69
What is the postal rule in contract law?
The postal rule states that acceptance is effective when the letter is posted, even if it does not arrive.
70
When can the postal rule be displaced?
The postal rule can be displaced if there is a requirement for 'notice in writing' for acceptance.
71
Can silence constitute acceptance?
Silence cannot constitute acceptance where notice in writing of acceptance is required.
72
What is the difference between communication and receipt of acceptance?
Acceptance may be communicated when sent, but it may not be received or seen by the offeror immediately.
73
What is a telex?
A telex is a communication device that combines a telephone with a printer, allowing typed messages to be printed at the receiving end.
74
Why is the communication of acceptance important?
It determines under which jurisdiction a contract has been made.
75
When is revocation of an offer effective?
Revocation is effective when it is communicated to the offeree.
76
Can an offer be revoked before the end date if it is stated to be open for a set period?
Yes, an offer can be revoked before the end date as long as the revocation is communicated.
77
Who can communicate a revocation?
Revocation can be communicated by the offeror or a reliable third party.
78
What happens if revocation is received during normal office hours?
If revocation is received during normal office hours, it is effective from the time it is received.
79
How can revocation be communicated?
Revocation can be communicated in a similar manner to how the offer was made.
80
What happens to a unilateral offer once the offeree has started performance?
The unilateral offer cannot be revoked once the offeree has started performance.
81
What is the default position regarding the time limit for accepting an offer?
If no time limit is set, the offer should be accepted within a reasonable time.
82
What happens to an offer if the offeree dies before acceptance?
The offer ceases to be capable of acceptance if the offeree dies.
83
Does the death of the offeror terminate the offer?
No, the offer may still be accepted if the offeree is unaware of the offeror's death.
84
What is the reasoning behind allowing acceptance after the offeror's death?
The executors or administrators of the estate may act to perform the contract.
85
What is the definition of consideration according to Currie v Misa?
Consideration is defined as 'some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.'
## Footnote
This definition highlights both burdens and benefits involved in a contract.
86
What are the two main forms of consideration?
* Executed consideration
* Executory consideration
87
What is executed consideration?
Executed consideration is an act in return for a promise.
88
What is executory consideration?
Executory consideration is a promise for a promise.
89
What is meant by 'sufficient' consideration?
Sufficient consideration must have some value, though it need not be significant, and must be legal.
90
True or False: Adequate consideration means the same as sufficient consideration.
False
91
What is past consideration and why is it significant?
Past consideration refers to acts done before a contract is concluded and is not considered valid consideration.
92
List the exceptions to the past consideration rule.
* The act was done at the request of the promisor
* The parties understood the act was to be remunerated
* The payment or benefit would have been legally enforceable if promised in advance
93
What is the rule regarding existing public duty as consideration?
Carrying out an existing public duty usually does not provide good consideration unless the claimant goes beyond that duty.
94
What is an example of going beyond an existing public duty?
Providing policing services for a football match could be beyond the normal legal obligation.
95
Does merely complying with legal duties constitute good consideration?
No, going beyond legal duties is required for it to be good consideration.
96
What happens if a promisee is already under a contractual duty?
If they are offered more money, there would not be fresh consideration unless the duty becomes substantially different.
97
What is required for a variation to a contract?
Any variation requires fresh consideration, which does not always have to be monetary.
98
Fill in the blank: Part payment of a debt on the date full payment is due cannot be regarded as a _______.
[satisfaction of the whole debt]
99
List the exceptions regarding part payment of a debt.
* The creditor asks for a chattel instead of money
* The creditor states they will accept smaller payment earlier
* The creditor accepts a smaller amount at a different location
100
What is promissory estoppel?
Promissory estoppel is a promise not to enforce contractual rights without consideration.
101
What conditions must be met for promissory estoppel to apply?
* Clear representation or promise
* Can only be used as a defense
* Promise intended to be binding
* Alteration of position in reliance
* Must act equitably
102
True or False: Promissory estoppel can be used as a basis for an action.
False
103
What is the final element needed to make a binding contract?
Intention to create legal relations
## Footnote
Without this intention, an agreement has no legal force.
104
What is the rebuttable presumption regarding social/domestic agreements?
They are presumed not to be legally binding
## Footnote
Evidence can be provided to disprove this presumption.
105
In commercial agreements, what is an ex-gratia payment?
A non-contractual payment
## Footnote
It may be binding under certain conditions.
106
What does an 'honourable pledge' clause indicate in a contract?
It makes the agreement non-enforceable
## Footnote
Similar to a 'TINALEA' clause.
107
What is the requirement for certainty in a contract?
An offer must be specific, comprehensive, and capable of acceptance
## Footnote
Acceptance must mirror the offer.
108
What are simple contracts?
Contracts that do not have to be in any particular format
## Footnote
Most contracts fall under this category.
109
What must a contract be described as to be recognized as a deed?
It must be clear that it is intended to be a deed
## Footnote
It must also be in writing and correctly executed.
110
What are the requirements for executing a deed?
Signature, attestation, and delivery
## Footnote
Witnesses must attest in the presence of the signatories.
111
Which contracts must be in writing according to the Law of Property (Miscellaneous Provisions) Act 1989?
Contracts relating to land, share transfers, and some consumer credit agreements
## Footnote
All terms must be incorporated in one document.
112
What does 'incorporated' mean in the context of contracts?
Terms can be contained in another document and referenced
## Footnote
Under section 2(2) of the Law of Property Act.
113
What is the difference between contracts that must be in writing and those that must be evidenced in writing?
The former requires the contract to be written, while the latter requires a note or memo covering material terms
## Footnote
This distinction dates back to the Statute of Frauds 1677.
114
What is a contract of guarantee as defined under the Statute of Frauds 1677?
A promise to answer for the debt default or misfortunes of another person
## Footnote
This falls under contracts that must be evidenced in writing.
115
What legal recognition do electronic signatures have?
They are legally recognized and allow contracts to be formed via email
## Footnote
Under the Electronic Communications Act 2000.
116
What constitutes an electronic signature?
Data in electronic form attached to or logically associated with other data used to sign
## Footnote
This can include typed names, scanned signatures, or clicking an acceptance button.
117
Give examples of forms an electronic signature can take.
* Typing name or initials
* Scanned handwritten signature
* Clicking 'I accept' or 'I agree'
* Signing via touchscreen with a stylus or finger
118
What is necessary for a contract to be valid?
Capacity
## Footnote
Capacity refers to the legal ability of an individual to enter into a contract.
119
Who are considered minors in contract law?
Individuals under 18 years old
## Footnote
Minors typically have limited capacity to contract.
120
What is the basic principle regarding minors and contracts?
Minors are not bound by contracts they enter
## Footnote
However, there are exceptions for certain types of contracts.
121
What types of contracts are binding for minors?
Contracts for necessaries and contracts for the minor's benefit
## Footnote
Necessaries can include goods or services suitable for the minor's condition in life.
122
Define 'necessaries' according to the Sale of Goods Act 1979.
Goods suitable to the condition in life of the minor and to his actual requirements
## Footnote
Necessaries extend beyond absolute essentials based on the minor's social status.
123
What happens if a minor enters into a voidable contract?
The minor can repudiate the contract before reaching majority or within a reasonable time afterwards
## Footnote
There is no further liability upon repudiation.
124
What does the Minors' Contract Act 1987 state regarding guarantees?
A guarantee of a minor's obligations is enforceable
## Footnote
This is specified in section 2 of the Act.
125
Under what conditions can a contract be voidable for substance abusers?
If the person is not aware of what they are doing and the other party knows this
## Footnote
The contract is voidable in such cases.
126
What is the definition of mental incapacity under the Mental Capacity Act 2005?
Inability to make a decision for oneself regarding the contract at the time it was made
## Footnote
This includes both permanent and temporary impairments.
127
How are contracts for necessaries treated for individuals with mental incapacity?
Similar to minors, focusing on whether the goods or services are suitable to the person's condition of life and requirements
## Footnote
Refer to Nash v Inman for context.
128
What is the common law rule regarding third parties and contracts?
A third party cannot acquire rights under a contract nor be made liable under it
## Footnote
This is due to absence of consideration and no direct promise from a contracting party.
129
What is a collateral contract?
A separate contract arising between the promisor and the third party
## Footnote
This allows the third party to bring an action in contract.
130
What does the Contracts (Rights of Third Parties) Act 1999 allow?
A third party to enforce a term of a contract under which they benefit
## Footnote
This applies if the third party has been identified in the contract.
131
What are the core elements of a contract?
Offer, acceptance, intention to create legal relations, consideration
## Footnote
These are fundamental to the formation of a valid contract.
132
What distinguishes an offer from an invitation to treat?
An offer is specific, comprehensive, and capable of acceptance
## Footnote
An invitation to treat, like an advert, does not constitute an offer.
133
What is required for acceptance to be valid?
It must match the offer exactly (mirror image rule)
## Footnote
This ensures that the acceptance aligns with the terms of the offer.
134
What types of consideration exist in contract law?
Executed and executory consideration
## Footnote
Executed consideration involves an act in return for a promise; executory is a promise for a promise.
135
What must consideration have to be valid?
Sufficient value and must not be past consideration, unless an exception applies
## Footnote
Consideration is essential for the enforceability of a contract.
136
What is the difference between a term of a contract and a mere representation?
A term is binding on both sides and remedies for breach are available, while a mere representation induces entry into a contract and remedies are under misrepresentation.
137
What is the starting point for determining the nature of a statement made in negotiations?
Deciding whether the statement is a term of the contract or a mere representation.
138
What is the significance of the terms contained in writing in a contract?
If statements made beforehand are not included, the court may treat the contract as the entire agreement.
139
What test is applied to determine the importance of a statement in a contract?
Whether the statement was so important that the contract would not have been entered into without it.
140
How does timing affect the classification of a statement in contract negotiations?
The closer in time to the point at which the contract was made, the more likely the representation will become a term.
141
What factor is considered regarding the skill and knowledge of the maker of a statement?
Whether the maker had particular expertise relevant to the contract.
142
What does the parol evidence rule state?
External evidence should not be used to determine the terms of a contract.
143
What is an entire agreement clause?
It means the written version of the contract is a complete record of what the parties have agreed.
144
What are the three groups of terms in a contract?
* Conditions (major terms)
* Warranties (minor terms)
* Innominate terms (undetermined until breached)
145
What is a condition in the context of a contract?
A major term breach of which is so fundamental that it ends the contract and allows for damages.
146
What is a promissory condition?
A term under which a party promises to perform an act, and failure to do so is a breach of contract.
147
What is a condition precedent?
It means the contractual obligation will not come into existence until a specified event has happened.
148
What is a condition subsequent?
It operates such that if a specified event occurs, it ends an existing contractual obligation.
149
What must occur for a term described as a 'condition' to be recognized as such by a court?
* Performance of that term 'goes to the root' of the contract
* Certain terms regarded as conditions due to 'industry standard'
150
What does it mean to make time of the essence in a contract?
It means that timely performance is critical, and breach of a time-related term is a breach of condition.
151
In what situations can an innocent party give notice to make time of the essence?
* The innocent party was ready and willing to complete
* The other party has been guilty of unreasonable delay
* A reasonable period within which completion must occur
152
What are the consequences of breaching a warranty?
It does not end the contract but allows the innocent party to claim damages.
153
What is an innominate term?
A term not categorized as a condition or warranty until after it has been breached.
154
How do courts determine if an innominate term is a condition or warranty?
By assessing whether the 'substantial benefit' of the contract has been lost.
155
What is an implied term in a contract?
A term not expressly stated but which the courts are willing or required by statute to imply.
156
What are the ways terms can be implied in a contract?
* By statute
* In law
* In fact
* By custom
157
What damages may be recoverable for negligent misstatement causing financial loss?
Damages may be recoverable in tort if there is a special relationship between the parties and a duty of care exists
## Footnote
Liability arises when the maker of the statement possesses knowledge and skill related to the subject matter and can foresee reliance on the statement.
158
What are the four elements that must be proved to win an action under negligent misstatement?
* Existence of special relationship
* Existence of a duty of care
* Breach of duty of care
* Loss which was foreseeable
159
What does the Misrepresentation Act 1967 s 2(1) state regarding misrepresentation?
A person may recover damages for misrepresentation if the representation would be liable to damages if made fraudulently, unless they prove reasonable grounds to believe it was true
160
What is innocent misrepresentation?
When the person making the statement believes it to be true and has reasonable grounds for that belief
161
What remedy is available for all types of misrepresentation?
The remedy of rescission, which makes the contract voidable
162
What conditions can lead to the loss of the right to rescind a contract?
* The innocent party affirms the contract
* A lapse of time may indicate an intention to affirm
* Parties cannot be restored to original positions
163
How are damages calculated in cases of misrepresentation?
Damages are designed to put the claimant in the position they would have been in had the misrepresentation not been made, typically the difference between the contract price and the true market value
164
What options does an injured party have in cases of negligent misrepresentation?
* Damages under Hedley Byrne
* Damages under Misrepresentation Act 1967 s 2(1)
* Damages under Misrepresentation Act 1967 s 2(2)
165
Under what circumstances are attempts to exclude liability for misrepresentation invalid?
Attempts are invalid unless they satisfy the reasonableness test set out in the Unfair Contract Terms Act 1977 s 11(1)
166
What is the definition of 'mistake' in contract law?
Mistake is a common law doctrine indicating no genuine consent to the agreement, rendering the contract void ab initio
167
What are the three categories of mistake?
* Common mistake
* Mutual mistake
* Unilateral mistake
168
What is a common mistake?
A mistake where both parties make the same error regarding a fundamental fact
169
What are the subcategories of common mistake?
* Mistake as to existence of the subject matter
* Mistake as to title
* Mistake as to quality of the subject matter
170
What is the outcome if both parties are mistaken about the existence of the subject matter?
The contract is void if the subject matter does not exist (res extincta)
171
What is a mutual mistake?
A situation where both parties are mistaken but about different things
172
What is a unilateral mistake?
A mistake made by one party regarding a fundamental term of the contract
173
What are the two subsets of unilateral mistake?
* Mistake as to terms
* Mistake as to identity
174
What is 'non est factum'?
A claim that a person is not bound by a document they signed because it is fundamentally different from what they believed they were signing
175
What are the criteria for rectifying a document due to a mistake?
* There must be a concluded antecedent agreement
* The document failed to reflect the agreement
* The document failed to express the common intention
176
What types of contracts are considered illegal at common law?
* Contracts that impede the administration of justice
* Contracts to commit a fraud, tort, or crime
* Contracts to defraud the revenue
177
What are restraint of trade clauses?
Clauses that limit an individual's ability to work or run a business, which may contravene public policy if unreasonable
178
What is duress in contract law?
A situation where a contract is made under unfair and improper pressure, allowing it to be set aside
179
What are the types of duress?
* Duress to the person
* Duress to property
* Economic duress
180
What constitutes economic duress?
When one party takes advantage of the other's financial difficulties to negotiate or renegotiate contract terms
181
What is duress?
Duress is pressure which means there is either compulsion or a lack of practical choice for the victim.
182
What are the three main types of duress?
* duress to the person
* duress to goods
* economic duress
183
What is coercion of will in the context of economic duress?
Coercion of will is usually present in economic duress.
184
What factors do courts examine to assess coercion?
* Did the party protest at the time?
* Did the party have an alternative option at the time?
* Was the party independently advised?
* After the contract was made, did the party take any steps to avoid it or not?
185
What is illegitimate pressure?
Illegitimate pressure refers to pressure that is not lawful and is a significant cause of the claimant entering the contract.
186
What does the term 'undue influence' refer to?
Undue influence refers to subtle pressure placed on a victim due to the relationship between the victim and the perpetrator.
187
What are the three categories of undue influence?
* actual undue influence
* presumed undue influence with protected relationships
* presumed undue influence without established relationships of trust and confidence
188
What is actual undue influence?
Actual undue influence is defined as overt acts of improper pressure or coercion.
189
What relationships fall under the category of presumed undue influence?
* solicitor/client
* doctor/patient
* religious adviser/disciple
* parent/child
190
What is the doctrine of notice in the context of undue influence?
A creditor will be put on notice if one spouse offers to stand surety for their spouse’s debt, necessitating a private meeting with the innocent party.
191
What must innocent parties be advised of during the private meeting regarding undue influence?
* The decision to proceed is theirs
* What the documents are
* The consequences of signing those documents
* The seriousness of the risks
192
What is the remedy for a party who has been unduly influenced?
The remedy is rescission, meaning the contract is voidable.
193
Under what conditions might rescission not be possible?
* Where the contract is affirmed after the undue influence has ceased
* A lapse of time may amount to affirmation
* If third-party rights have intervened
194
What happens if a third party acquires rights without notice of undue influence?
Rescission is not possible against purchasers for value with notice and against persons who acquired rights without consideration.
195
True or False: The existence of a relationship of trust and confidence must be established for 'other relationships' to give rise to undue influence.
True
196
What is the significance of independent advice in cases of undue influence?
Independent advice can help rebut the presumption of undue influence but is not conclusive.
197
Summary of key terms of vitating terms
A misrepresentation is the making of a false statement of fact during pre-contractual
negotiations by one party which induces the other party to enter into the contract and, as a
result of which, the other suffers loss.
* For an action for misrepresentation to be successful, it must be shown that the party to
whom the statement was made relied on it and was induced to enter into the contract
because of it.
* The test for deciding whether there has been a false statement of fact is whether the
statement made is “substantially correct”.
* Fraudulent misrepresentation: there must be a false statement made either knowingly,
without belief in its truth or recklessly.
* Negligent misrepresentation: there must be the existence of special relationship, existence
of a duty of care, breach of duty of care and loss which was foreseeable. Also note the
Misrepresentation Act 1967 s 2(1).
* Innocent misrepresentation: the person making the statement believes what they are
saying is true and has reasonable grounds for believing the statement is true.
* The remedy of rescission is available for all types of misrepresentation, except where the
innocent party affirms the contract, there is a time lapse or the parties cannot be restored
to the original positions.
* Damages are also available under common and statutory law.
* Common mistake: both parties make the same mistake as to existence or quality of the
subject matter or title.
* Mutual mistake: both parties make a mistake but it may be about different matters.
* Unilateral mistake: mistake made as to terms or identity.
* Note the categories of contracts that are illegal at common law, prohibited by statute or
contravene public policy.
* Duress and undue influence both allow a contract to be set aside if one party has been
subjected to unfair and improper pressure by the other.
* Duress can be to the person, property or economic duress.
* Undue influence can be actual or presumed (protected relationships or presumption of
influence where a relationship of trust and confidence can be proved). The remedy for a
party who has been unduly influenced is rescission.
Assessment tips
* Misrepresentation: make sure all the elements of an actionable misrepresentation are
present. Check the type of misrepresentation, as it has an effect on the remedies
available. Look out for misrepresentation where there is no loss.
* Mistake: what type of mistake is it? Remember that unilateral mistake is not just about
mistake of identity. Look out for mistakes in prices of goods.
* Illegality: is the contract illegal under statute or common law? If it is a restraint of trade,
is it reasonable?
* Duress: does duress actually occur? Is it just commercial pressure?
* Undue influence: three different types of undue influence and three different
approaches. Remember the importance of the lender being put on notice and the steps
that need to be taken. Look carefully at relationships. Is it a protected relationship or
not?
* Third-party rights are key across all of these topics as they will bar rescission.
198
What are the four main ways a contract may be discharged?
* by performance
* by agreement
* by breach
* by frustration
## Footnote
These are the primary methods by which contractual obligations can be ended.
199
What is the general rule at common law regarding discharge by performance?
A party is not discharged from liability unless their performance is precise and exact.
## Footnote
This means that payment cannot be enforced if the performance does not meet the contract terms.
200
Define 'entire contracts'.
Contracts that require the whole contract to be performed.
## Footnote
In most cases, substantial performance may suffice, but minimal deviations can lead to rejection.
201
What distinguishes divisible contracts from entire contracts?
Divisible contracts consist of a number of severable obligations instead of one entire obligation.
## Footnote
This distinction often depends on the parties' intention and is usually expressed in the contract.
202
What is substantial performance?
Performance that is not exact but allows the innocent party to claim damages for breach of warranty.
## Footnote
The compensation depends on how substantial the performance was.
203
What does partial performance mean?
Efforts to perform obligations that are so poor they cannot be considered substantial performance.
## Footnote
The innocent party must have the choice to accept or reject partial performance.
204
What is the right of a party in case of late performance?
Late performance is acceptable unless time is of the essence of the contract.
## Footnote
If time is essential, failure to meet the deadline gives the right to repudiate.
205
What is the difference between bilateral and unilateral discharge by agreement?
* Bilateral: Both parties mutually release each other from obligations.
* Unilateral: One party has performed and agrees to release the other, requiring consideration or a deed.
## Footnote
The agreement of unilateral discharge is known as accord and satisfaction.
206
What is a condition precedent in contract law?
An event specified in the contract that must occur for the contract to be discharged.
## Footnote
This event is often outside the control of either party.
207
What happens when there is a breach of contract?
The innocent party has the right to damages and may also have the right to repudiate the contract.
## Footnote
This applies particularly if there is a breach of condition or an intermediate term.
208
What is anticipatory breach?
A breach that occurs before performance is due, where one party indicates they will not perform.
## Footnote
The innocent party can choose to accept the breach or wait until the due date.
209
What is frustration in contract law?
When a contract becomes impossible to perform or fundamentally different from what was intended, without fault of either party.
## Footnote
This releases the parties from future obligations.
210
List examples of frustration.
* Destruction of the subject matter
* Impossibility of performance
* Illegality of the contract
* Non-occurrence of a central event
## Footnote
Frustration must be due to events beyond the control of the parties.
211
What is the Law Reform (Frustrated Contracts) Act 1943?
An Act that determines how funds are allocated if a contract is frustrated, allowing for reasonable expenses to be reimbursed.
## Footnote
It applies to all contracts governed by English and Welsh law, with certain exceptions.
212
What is the significance of 'just sum of benefit' in the context of frustrated contracts?
It refers to the compensation calculated for any valuable non-monetary benefit received by a party before the frustrating event.
## Footnote
The courts determine the value of this benefit.
213
Summary terms of termination
A contract may be discharged in four main ways:
* by performance (precise and exact). Note definitions for substantial performance, part
performance and late performance
* by agreement (either bilateral or unilateral)
* by breach (actual or anticipatory), or
* by frustration (destruction or unavailability of the subject matter, impossibility illegality or
non-occurrence of a central event).
Assessment tips
* Performance must be precise and exact. Late performance is still good, unless time is
of the essence. Be aware of a situation where substantial performance is really part
performance.
* Agreement: is there genuine agreement? Bilateral or unilateral? Is there accord and
satisfaction?
* Breach: is there actual breach or is it anticipatory? Can it be rectified? Breach of
condition or warranty? Remedies?
* Frustration: is it frustration or simply a more expensive or onerous way of carrying out
the contract?
* It is better to claim under the Law Reform (Frustrated Contacts) Act 1943 than common
law. Recovery is easier and usually fairer.
214
What are the different types of remedies available in the event of a breach of contract?
* Common law remedies – damages
* Equitable remedies – specific performance, injunction, rescission, rectification
* Restitution
215
What is the primary purpose of damages in contract law?
To place the claimant in the position they would have been in had the contract been performed properly
216
What are nominal damages?
Damages awarded for an infringement of legal right where no loss has arisen
217
What does 'remoteness of loss' refer to in the context of damages?
Only compensating for losses that are not too remote from the breach
218
What types of losses are considered not too remote?
* Normal loss - arises naturally
* Abnormal loss - within the contemplation of both parties
219
What is required for a claimant to recover damages?
The claimant must prove causation
220
What is expectation interest in the context of damages?
Compensation for the loss of bargain, placing the claimant in the position they would have been in had the contract been performed
221
What is the cost of cure in relation to damages?
The cost to put things right when goods or work delivered are defective, recoverable when reasonable
222
What are reliance interest damages?
Damages that place the claimant in the position they would have been in had the contract never been entered into
223
What principle applies if a party has made a bad bargain?
Caveat emptor - the courts do not protect those who make a bad bargain
224
Can compensation be claimed for loss of a chance?
Yes, if the lost chance is quantifiable in monetary terms and the event would likely have happened
225
Are damages for disappointment or injured feelings usually recoverable?
No, unless the contract's object is to provide a service leading to a pleasurable experience
226
What is the usual outcome when claiming damages for loss caused to third parties?
Typically, only nominal damages are recoverable
227
What is the duty to mitigate loss?
A duty where reasonable steps must be taken to reduce the loss
228
What happens if a claimant fails to mitigate their loss?
They may not receive compensation for losses that could have been avoided
229
What is the difference between liquidated damages and penalty clauses?
Liquidated damages specify a predetermined amount for breaches, while penalty clauses impose an unreasonable amount to intimidate performance
230
What is an indemnity clause?
A clause where one party agrees to reimburse the other for losses arising under the contract
231
What is a guarantee in contract law?
A contract where the guarantor agrees to pay if a third party fails to meet their obligations
232
What is specific performance?
An order compelling a party in breach to perform their contractual obligations
233
Under what conditions will specific performance not be granted?
* If damages are deemed adequate
* In contracts of employment
234
What is an injunction?
An order telling someone to stop doing something or to compel them to do something
235
What is restitution?
Restoration of benefits conferred when there is no contract or the contract is void
236
Summary of Key Principles of Remedies
Damages are the most common remedy for a party who suffers breach of contract and aim
to place the claimant in the position they would have been in had the contract been
performed properly.
* To recover damages, the claimant must prove causation (not too remote from breach).
* There is a duty to mitigate loss where it is reasonable to do so.
Liquidated sums and penalties: keep in mind the difference between a genuine pre-
estimate of loss and trying to compel performance by a draconian financial punishment.
* Indemnities are a way of making sure that losses are covered and agreed between the
parties.
* Under a guarantee, a third party promises to pay for a party’s default.
* The equitable remedies available at the discretion of the court are specific performance
(which compels the party in breach to perform their contractual obligations), injunction
(which tells somebody to stop doing something or compels them to do something),
rescission and rectification.
* Restitution ensures that a party is not unjustly enriched by keeping a valuable benefit
where a contract has not been performed.
Assessment tips
* Look at what the parties know if it is a question of recovery and there is an issue of
remoteness.
* Causation and remoteness: note the difference between normal and abnormal loss.
What was in the reasonable contemplation of the parties?
* Be aware that there are several bases on which a party could recover. It might not
always be expectation. It could be reliance or cost of cure, for example.
