Contract Law Autumn Flashcards
(30 cards)
1
Q
What is meant by a contract? What are the elements of a valid contract?
A
- A contract refers to a legally binding agreement between two parties that is enforceable by law.
- The elements of a valid contract might include: Offer, Acceptance, Consideration, Intention to create legal relations, Capacity and Legality.
2
Q
Are contract written?
A
- Not all contracts must be written. Oral contracts can be valid unless the law requires writing.
- Examples of non-written contracts might include buying something from a store or agreeing to shovel snow for a neighbour for money.
- Examples of written contracts might include employment or loan agreements.
3
Q
What is freedom of contract and sanctity of contract?
A
- Freedom of contract refers to the principle that individuals are free to negotiate the terms of their agreements without government interference, so long as they do not break the law.
- Sanctity of contract refers to the idea that once parties have freely entered into a contract, it must be honoured and enforced as written.
4
Q
What is a standard form contract?
A
- A standard form contract is a pre-prepared contract repeatedly used without negotiations between the parties.
- This is usually used in one-sided terms or mass transactions, such as airline ticket terms or mobile phone plans.
5
Q
What is classical contract law theory?
A
- Classical contract law theory views contracts as expressions of individual autonomy. It emphasises elements of contracts such as freedom and sanctity of contract, objective interpretation and minimal judicial intervention.
6
Q
What is an offer?
A
- An offer refers to a definite, clear and unconditional promise to be bound by specific terms, made with the intention that it will become binding as soon as it is accepted by the other party.
7
Q
What is the difference between an offer in a unilateral contract and in a bilateral contract?
A
- Unilateral: A promise made in exchange for an act. The offeror is only bound once the offeree performs the act.
- For example, when giving a reward for returning a lost dog, the contract is only formed when the dog is returned.
- Bilateral: A promise made by one party in exchange for a promise by another. Both parties are immediately bound upon exchange of promises.
- For example, agreeing to sell and buy a car for £5000 - both parties are in a contract.
8
Q
What is the difference between an offer and an invitation to treat?
A
- An offer is a promise, whereas an invitation to treat is an invitation to others to make offers or negotiate - it isn’t an offer in itself.
- For example, goods on display in a shop window is an invitation to treat, and not an offer, as established by Fisher v Bell (1961)
9
Q
What was the case of Carill v Carbolic Smokeball Company (1893)? What was its significance?
A
- In Carill v Carbolic Smokeball Company (1893), the Claimant Mrs Carill sued the defendant Carbolic Smokeball Company, who sold medicinal products. The case was heard in the Court of Appeal.
- In this case, the Carbolic Smokeball Company advertised that if customers used their product, a smoke-emitting ball, and still contracted influenza, the company would pay out £100. Ms Carill used the ball as intended and still contracted influenza, so she sued for the £100 reward.
- The Court of Appeal ruled in her favour, stating that the advertisement was a unilateral offer to the world, accepted by performing the conditions. Consideration existed due to Ms Carill’s use of the product.
- This case established that a unilateral offer can be made to the world at large, and there is no need for communication before acceptance in unilateral contracts.
10
Q
What is acceptance?
A
- Treitel defines offer as an ‘unqualified expression of assent to the terms of an offer’.
- In Entores v Miles Far East Corporation (1955), it was stated that communication of acceptance must be received to be accepted in instant communications.
11
Q
What’s the difference between a counteroffer and acceptance?
A
- Where an acceptance is a mirror of the offeror’s terms, a counteroffer is a rejection of the original offer and a proposal of new terms, which an offeror can either accept or reject.
- One example of this was in the case of Hyde v Wrench (1840). Wrench offered to sell a farm for £1000, where Hyde proposed a counteroffer of £950. Hyde then tried to accept the original £1000 offer, however, since the counteroffer terminated the original one, he couldn’t accept it.
12
Q
How does the law treat acceptance by post? How does this differ from acceptance by instant communication?
A
- The postal rule states that acceptance is effective when the letter is posted, and not when it is received, provided that both parties are aware of the postal communication (Adams v Lindsell (1818)).
- This prevents offerors from unfairly withdrawing offers while the acceptance is still en route.
- The postal rule does not apply to instant communication (Entores v Miles East Corporation (1955), Brinkibon Ltd v Stahag Stahl (1983)). Acceptance is effective when received, not sent.
13
Q
What are formalities in contract law?
A
- Formalities are the certain requirements about how certain types of contracts must be made to be legally enforceable.
- Most contracts do not require writing or formalities - oral contracts are valid. The exceptions to this include sales of land and contracts of guarantees.
14
Q
Why does contract law require an intention to create legal relations?
A
- An intent to create legal relations helps to separate serious agreements that should be legally enforceable to casual promises or social arrangements that shouldn’t be legally enforceable.
15
Q
What factors did the court consider important regarding contractual intention in Balfour v Balfour (1919)?
A
- In Balfour v Balfour, a husband promised to pay his wife maintenance while he worked abroad. The marriage later broke down, and the wife sued, however, the court held that no contract existed as this was a domestic agreement.
- Therefore, this case established that agreements between spouses living together are presumed to not have legal intention, as domestic arrangements are generally based on mutual trust, and not enforceable promises.
16
Q
What does Sadler v Reynolds (2005) say about the intention to create legal relations?
A
- In Sadler v Reynolds, the claimant argued that he had a deal with a businessman to ghostwrite his autobiography, but the court needed evidence that this was more than an informal discussion.
- This established that there was a grey area between business and social arrangements, and when there is ambiguity, the burden of proof lies with the claimant to show that there was an intention.
- The courts also need to look carefully at the context, and determine whether it was social or business.
17
Q
What happened in Blue v Ashley (2017)? Was a contract made?
A
- In Blue v Ashley (2017), Mr Blue alleged that Mike Ashley, owner of Sports Direct, promised him £15 million if he raised the company’s share price to £8. Mr Blue raised the share price, but Ashley refused to pay.
- The court held that there was no binding contract here, as the conversation was informal and drunken, lacking serious intent to create legal relations.
18
Q
What is meant by consideration?
A
- Consideration refers to something of value given in exchange for a promise.
- In Currie v Misa (1875), it is defined as ‘some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other.
19
Q
Why does the law require consideration for an enforceable promise?
A
- In the law, consideration acts as a badge of enforceability, showing that both sides are serious and committed.
- It prevents enforcing gratuitous promises unless formalised, and aligns with the idea of reciprocity - a promise must be supported by something in return to justify enforcement by law.
20
Q
What is past consideration?
Is past consideration valid?
A
- Past consideration is something that is already done before a promise is made. It cannot be bargained for because it has already occurred, there is no exchange at the time of the promise.
Past consideration is usually invalid unless:
- The act was done at the promisor’s request.
- There was an understanding that the act would be rewarded (implied promise)
- The promise would’ve been enforceable if made in advance.
- This was established in Pao On v Lau Yiu Long (1980).
21
Q
What did Williams v Roffey Bros (1990) establish about consideration?
A
- In Williams v Roffey Bros (1990), the Roffey Bros promised Williams extra payment to complete work on time to avoid penalty clauses. The court held that Roffey Bros received a practical benefit and thus, the agreement was enforceable.
- Therefore, this case established that practical benefit to the offeror can constitute good consideration.
22
Q
What is promissory estoppel?
A
- Promissory estoppel is the idea that if one party makes a clear promise to waive their legal rights and the other relies on it, the promisor may be prevented (estopped) from going back on their word.
- This was established in Central London Property Trust Ltd v High Trees House Ltd.
- There are some limits to this as established in D and C Builders v Rees (1966) - promissory estoppel requires clean hands; if a party uses pressure, duress or unfair conduct to extract a concession, they cannot rely on estoppel.
23
Q
What are the differences between a term and a representation?
A
- Term - a promise forming part of the contract, breach leads to contractual remedies.
- Representation - a statement made during negotiations - if false, may give rise to misrepresentation remedies, not breach of contract.
24
Q
What is the difference between express and implied terms?
A
- Express terms are clearly stated by the parties, whether written or oral.
- Implied terms are terms that are not expressly stated, but are read into the contract by courts, custom or statute.
- Implied terms can be implied into a contract by the parties’ custom, common law or statute.
25
What is a condition, warranty and innominate item? What are the effects of breaching these?
- Condition - a fundamental term that goes to the root of the contract. If breached, the injured party can terminate the contract and claim damages.
- Warranty - a minor term not central to the contract. If breached, only damages can be claimed, the contract cannot be terminated.
- Innominate term - an intermediate term - consequences of the breach determines the remedy. If there is a serious breach, the contract is terminated and damages are claimed. If there is a minor breach, only damages can be claimed.
26
What is an exemption clause?
- An exemption clause (exclusion/limitation) is a clause in a contract that seeks to exclude or limit liability for certain breaches, losses or damages.
- An exclusion clause tries to completely remove liability, whereas a limitation clause tries to cap or limit the amount of liability.
- The purpose of these is to allocate risk between parties and limit financial exposure for businesses, bringing certainty to the scope of liability.
- An example of this is a parking ticket claiming no responsibility for loss or damage to vehicles.
27
What are the 3 rules for exemption clauses?
1. They must be properly incorporated into the contract by either signature (L'Estrange v Gracious (1934)), reasonable notice (Parker v South Eastern Railway (1877)) or consistent course of dealing (Spurling v Bradshaw (1956)).
2. Construction - the clause must clearly cover the event it tries to exclude.
3. Contra proferentum rule - ambiguities are interpreted against the party relying on the cause. (Andrew Bros v Singer (1934)).
28
What is the reasonable notice rule for exemption clauses?
- Reasonable steps must be taken to bring the exemption clause to the attention of the other party.
- The more onerous the term, the greater the notice required (Thornton v Shoe Lane Parking (1971)),
29
When does the Unfair Contract Terms Act (1977) apply?
- This act applies mainly to business-business contracts.
- Certain exclusions are prohibited, such as exclusion of liability for death or personal injury due to negligence.
- Other terms must pass the reasonableness test.
30
When does the Consumer Rights Act (2015) apply?
- This act applies mainly to business-consumer contracts.
- The terms must be transparent and fair - unfair terms are not binding on the consumer.
