Contract Law Spring Flashcards
(32 cards)
1
Q
What is performance in contract law?
A
- Performance refers to the fulfilment of contractual obligations by a party as agreed by a contract.
- Full, proper performance discharges a parties obligations - if both parties perform as promised, the contract is completed.
2
Q
What constitutes a breach of contract?
A
- A breach of contract occurs when one party, without lawful excuse, fails to perform or improperly forms their obligations.
- Breaches can be actual (at the time of performance) or anticipatory (before performance is due).
- The innocent party may be entitled to remedies like termination or damages.
3
Q
What are conditions in a contract? What happens when one is breached?
A
- Conditions are fundamental terms that are central to the purpose of the contract.
- Breach of a condition entitles the innocent party to terminate the contract immediately and/or claim damages.
4
Q
What are warranties in a contract? What happens when one is breached?
A
- Warranties are less important terms in a contract.
- Breach of warranties does not allow for termination of a contract, but allows for the innocent party to sue for damages.
- For example, in Bettini v Gye (1876), missing rehearsals was a breach of warranty and not condition, so there was no right to terminate the contract.
5
Q
What are innominate terms in a contract? What happens when one is breached?
A
- Innominate terms are flexible terms of a contract, where the remedy depends on the seriousness of the consequences.
- If the breach substantially deprives the innocent party of the contracts benefits, they can terminate the contract. If not only damages are available.
6
Q
What is the ‘entire obligation’ rule in contract law?
A
- The entire obligation rule states that if a contract is ‘entire’, one party must completely perform their duties before being entitled to payment. (Cutter v Powell 1795)
- Exceptions to this rule includes substantial performance (Hoenigs v Isaacs 1952), divisible contracts and acceptance of partial performance.
7
Q
What is accord and satisfaction in contract law?
A
- Accord: an agreement to vary or discharge an existing obligation.
- Satisfaction: the performance of the new agreed terms
- Together, these extinguish the original obligation.
8
Q
What is the doctrine of frustration in contract law? What happens when a contract is frustrated?
A
- The doctrine of frustration refers to an instance when an unforeseeable event, without fault of either party, renders further performance to fulfil any contractual obligations impossible, illegal or radically different to what was agreed upon.
- In common law, when a contract is frustrated, it is automatically discharged. Previously accrued rights are enforceable, but future obligations end. The Law Reform (frustrated contracts) Act 1943 allows for more equitable adjustments, such as refunds.
9
Q
How do courts decide if a case has been frustrated?
A
- Inconvenience or hardship or loss of profit is not enough (Davis Contractors Ltd v Fareham Urban District Council 1956).
- The event must destroy the foundation of the contract.
- Self induced frustration caused by one party will not be recognised (Maritime National Fish Ltd v Ocean Trawlers Ltd 1935)
- Frustration will also not apply when the event was foreseeable or contemplated by the parties.
10
Q
What is force majeure?
A
- Force majeure is a contract mechanism, where parties list specific events that excuse non-performance. It outlines specific events, such as war or illness, that might prevent parties from fulfilling their duties.
- Unlike frustration, this does not arise automatically under common law - only applies if the contract expressly includes a force majeure clause.
11
Q
What is the role of equity in providing remedies in contract law?
A
- Equity supplements the common law where damages/monetary compensation is inadequate.
- It provides discretionary remedies like specific performance and injunctions to encourage fairness and justice.
- Courts will consider conduct and whether monetary damages are sufficient.
12
Q
What is specific performance? When is it granted or rejected?
A
- Specific performance is a court order requiring a party to perform exactly what they promised under the contract.
- It is usually only granted for unique good or assets when damages are inadequate to compensate the injured party. (Beswick v Beswick 1968).
- It is usually rejected when constant supervision would be required, if the contract is vague, if the claimant acted unfairly or if hardship would fall on the defendant.
13
Q
What is an injunction?
A
- Prohibitory injunction: a court order preventing a party from doing something. (Warner Bros v Nelson 1937)
- Mandatory injunction: a court order compelling a party to do something.
- This differs from specific performance, as it is mostly used to take positive steps to undo a breach or comply with a (not necessarily contractual) duty.
14
Q
What is the purpose of damages in contract law?
A
- The purpose of damages is to put the injured party in the position they would have been in should the contract be properly performed.
- This principle comes from Robinson v Harman (1848) 1 Ex 850.
15
Q
What are the 3 types of compensatory damages?
A
- Expectation damages (loss of bargain) - the usual approach.
- Reliance damages (wasted expenditure) - if expectation damages are uncertain.
- Restitutionary damages - rare, awarded to strip gains from the breaching party (AG v Blake 2000)
16
Q
What is the doctrine of remoteness in contract law?
A
- The doctrine of remoteness states that only losses that are reasonably foreseeable can be claimed - as stated in Hadley v Baxendale (1854).
- ‘Foreseeable’ means that the loss must have been thought about by both parties when the contract was formed, and the knowledge must be actual or implied.
17
Q
What was the case of Ruxley Electronics and Constructions Ltd v Forsyth (1966)?
A
- A builder constructed a swimming pool shallower than agreed.
- The cost of building was disproportionate to the defect.
- The court awarded the loss of amenity damages (£2500) rather than the cost of reinstatement.
- This case reinforced the principle that damages should be reasonable and proportionate to the breach.
18
Q
What is a common mistake? What are the requirements for a contract to be a common mistake?
A
- A common mistake is when both parties in a contract make the same mistake about a fundamental fact.
- This mistake must render the subject matter essentially different from what was believed.
- Example - Bell v Lever Bros (1932) - Lever Bros paid Bell compensation to terminate employment even though Bell had already breached his contract. The mistake here was not fundamental enough to void a contract, and so there was no common mistake.
19
Q
What is a mutual mistake?
A
- A mutual mistake is when both parties misunderstand each other, but in different ways.
- If the misunderstanding is about a fundamental issue, there is no agreement at all, however, if a reasonable meaning can be determined, the contract can still be valid.
20
Q
What is a unilateral mistake?
A
- A unilateral mistake is when one party is mistaken about a fundamental term, and the other knows or ought to know about the mistake.
21
Q
What is the difference between mistake in law and mistake in equity? Is the latter relevant?
A
- Mistake in law - contract may be void if the mistake is fundamental.
- Mistake in equity - even if the contract is valid at law, equity may allow the contract to be rescinded if the enforcement would be unreasonable. - Solle v Butcher (1950)
- Mistake in equity is largely obsolete, as the court of appeal said that common law rules are sufficient, rejecting a separate equitable doctrine of mistake.
22
Q
What is the doctrine of non est factum?
A
- Non est factum means ‘this is not my deed’.
- This means that a party can escape a contract they signed by mistake if the document signed is fundamentally different from what they believed. This doctrine is applied very strictly.
- Saunders v Anglia Building Society (1971)
23
Q
What are the elements of actionable misrepresentation?
What does misrepresentation not include?
A
A false statement or fact made by one party or another before or at the time of contracting inducing (persuading) the other party to enter the contract.
Misrepresentation would not include:
- Puffery (sales talk)
- Statements of opinion (unless made by someone with special knowledge - Smith v Land and House Property Corp 1884)
- Statements of future intention (unless dishonest when made - Edgington v Fitzmaurice 1885)
Silence would also not amount to actionable misrepresentation, unless there are:
- Half-truths - misleading partial disclosure (Dimmock v Hallet 1886)
- Change of circumstances - must correct a previous true statement (With v O’Flanagan 1936)
24
Q
What are the different types of misrepresentation and their remedies?
A
- Fraudulent misrepresentation - knowingly or recklessly making a false statement - Derry v Peek (1889)
- Remedy: recession (cancellation), in tort for deceit.
- Negligent misrepresentation - lack of reasonable grounds for believing statement was true - Bryne v Heller - 1964; Misrepresentation Act 1967 s.2(1).
- Remedy: recession, possible damages unless the representer proves reasonable grounds for belief.
- Innocent misrepresentation - statement made with reasonable belief in its truth.
- Remedy: recession available as of right. limited recovery for expenses, court has discretion to award damages instead of recision.
25
What is duress in contract law? What are the types of duress?
- Duress occurs when one party exerts illegitimate pressure (threats, unlawful economic pressure, etc) to force another into a contract.
- If this is proven, the contract is thus voidable.
- Types of duress might include duress to person (threats of physical harm), duress to goods (threats against property) or economic duress (Atlas Express Ltd v Kafco (Importers and Distributors) Ltd (1989)
26
What is undue influence in contract law?
- Undue influence is when one party abuses a relationship of trust to gain an advantage.
- Actual undue influence shows direct evidence of coercion, whilst presumed undue influence is when there is a special relationship and a suspicious transaction, such as between a parent/child or doctor/patient.
- Presumed undue influence can be rebutted by showing that the weaker party had independent advice or the transaction was entered into freely and voluntarily.
- If undue influence can be proven, the contract is voidable.
27
What did Royal Bank of Scotland plc v Etridge (No 2) (2001) decide regarding undue influence?
- Royal Bank of Scotland plc v Etridge (No 2) [1998] clarified presumed undue influence rules:
- Confirmed that there is no automatic presumption from relationship alone - the claimant must show a relationship + suspicious transaction.
- This happened because prior case law was confusing on when undue influence would be presumed, needing clear guidelines for lenders on protecting themselves.
28
What is unconscionability?
- Unconscionability is when one party exploits the others' special disadvantage (poverty, illness, etc) to gain an unfair advantage.
- This is different from duress and undue influence, as this focuses on substantive unfairness rather than pressure/coersion
- Commercial Bank of Australia v Amadio (1983)
29
What is the privity of contract rule?
- Privity of contract means that only parties to a contract can sue or be sued under it. A third party cannot enforce the terms of the contract, even if it was meant to benefit them.
- Tweedle v Atkinson (1861)
30
What are the problems with privity as highlighted by Beswick v Beswick (1968)?
- In Beswick v Beswick, a widow could not enforce a promise made to her deceased husband, as she was not a party to the contract.
- She was only able to enforce it when acting as her husband's executor (a person named in a will who is legally responsible for managing and distributing the deceased's estate according to the will's instructions), and not in her own personal capacity.
- This highlighted the injustice of strict privity rules.
31
What are some common law exceptions to the privity rule?
- Trusts of contractual rights - Beneficiaries can sometimes enforce contracts (Les Affréteurs Réunis SA v Walford [1919])
- Agency - an agent acting on someone else's behalf.
32
What is the contracts (rights of third parties) Act 1999?
- This act is a major reform that allows third parties to enforce the terms of a contract if the contract expressly states they can or if the contract contains a benefit to them, unless the contract itself says otherwise.
- Main parties to the contract can rescind or vary the rights to any third parties only if the third party has not yet accepted the term or if the third party consents to any variation after having acceptance.
