Law of Contract Flashcards
(112 cards)
1
Q
What is a contract?
A
A legally binding agreement which courts will recognise and enforce
2
Q
What is an insurance policy?
A
A contract of insurance
3
Q
What is a contract of insurance?
A
A legally binding agreement to insure.
4
Q
What is a contract under seal?
A
A contract such as a deed that needs to be written, wittinessed signed sealed delivered
5
Q
What form are most contracts in?
A
Writing but can be verbal.
6
Q
Do contracts have to be in writing?
A
Not all contracts do, but some contracts have to be in writing or evidenced in writing.
7
Q
Can an oral agreement form a contract?
A
Sometimes - yes
8
Q
What is a bilateral contracty?
A
A contract between two parties where each party makes a promise to each other and it is legally binding.
9
Q
What is a unilateral contact?
A
A contract that binds only one party.
Example - a reward for a lost pet. Only the offeror is bound to a promise, legally binding.
10
Q
What is a void contract?
A
Never came into force ie. no contract at all as an element is missing. The statement is a contradiction really.
11
Q
What is a voidable contract?
A
Parties can choose to set it aside (one or possibly both)
12
Q
What are the 5 essentials for the formation of a valid contract?
A
- An agreement - offer and acceptance.
- The intention to create legal relations.
- Consideration (in the case of simple contracts)
- Agreement must be in the form required by law (if any).
- The parties must have capacity to contract.
13
Q
In English Law, how is an agreement usually established?
A
Though offer and acceptance
14
Q
What it the party who:
1. makes an offer
2. recieved an offer
refered to as?
A
- Offeror
- Offeree
15
Q
What is a true offer?
A
The offeror intends it to be immediately bound if their offer is accepted as it stands
16
Q
What is an invitation to treat offer?
A
Invitation to make an offer eg. prices in a brochure
17
Q
An offer may be made what 6 ways:
A
- in writing
- orally
- by conduct
- to one person
- to group of people
- to the public
18
Q
What happens if you found a wallet and return it to the owner. You didn’t know there was a £100 reward for finding the wallet. Are you entitled to the £100.
A
The offer must be communicated to the other party so you have no legal entitlement to is.
19
Q
An offer does not remain open indefinitely, what happens when it comes to an end?
A
It can no longer be accepted.
20
Q
How could an offer come to an end?
A
Remember it as T CARD R, TO… CARD… Regards…
Time limit
Counter offer
Acceptance
Revocation
Death
Rejection
21
Q
Acceptance must be unqualified, what does that mean?
A
Must match the terms in the offer exactly.
22
Q
What happened in the Central London Property Trust v. High Trees House 1947 case and what is it often referred to as?
A
- The High Trees’ Case
- Landlord had a block of flats, each flat leased for £2500 a year
- When a war started, tenants couldn’t afford the rent and wanted to leave
- Landlord agreed in writing to reduce the rent to £1250 a year from 1941
- Defendants continued with the lease under these circumstance
- In 1945 the claimant claimed the original rent from 1941 on the basis of no consideration had been given for their agreement to reduce it.
- Judge held that claimants full rent is due from 1945 (as stated in agreement after the war) but it would be inequitable (claimant was e-STOP-pel ) to allow them to go pack on their promise and recover the rent from 1941.
23
Q
What is a simple contract and do they need to be under seal?
A
An informal contract and it doesn’t need to be under seal
24
Q
What is the De Minum Principle?
A
It means the law does not concern itself with trifles.
If there is a trivial variation to an offer when it is accepted, it will not change the validity of the acceptance.
25
What must the manner of acceptance be?
Positive and not passive ie silent or doing nothing
26
Who needs to communicate acceptance of a contract and in what form?
The offeree
or and agent authorised by the offeree
Accepted in the form stipulated by the offeror eg. orally, written,
27
What is the exception to the normal manner of acceptance rules?
Where the offer dispenses with communication - ie accepted by carrying out the act
Postal rule - accepted when posted not received
28
What does intention to create legal relations mean?
The parties must have intended for their agreement to be legally binding.
29
What are the exceptions to the intention to create legal relations rule?
Parties expressly agreeing that something was not meant to be legally binding.
OR
Domestic/Social agreements such as between family. Unless under unusually circumstances.
30
What is consideration?
Price which supports or meets the promise.
Profit or a benefit to the promisor
AND
A detriment to the promisee.
Normally both parties gain a benefit and suffer a detriment.
31
Can a promise be enforced in law?
Not generally unless the person whom the promise is made to agrees to provide something in return.
32
What are the 5 consideration rules?
1. Must be genuine and not vague
2. Need not be adequate ie - a bad bargain
3. Must not be in the past
4. Must not be something the promisor is already bound to do eg by law
5. Must move from promisee - someone else cant provide consideration for you
33
What form can contracts be required to be in?
1. Under seal - signed witnessed etc.
2. In writing
3. Evidenced in writing by "note or memorandum" = after the contract is made
4. Written particulars are required such as terms of employment
34
Who might have restricted capacity?
1. Minors
2. Mentally ill
3. A drunk person
4. Corporations
35
Which conracts are binding for minors?
1. Necessaries ie essential goods, employment = things for the minors benefit
36
Which conracts are binding for minors?
1. Necessaries ie essential goods, employment = things for the minors benefit
37
Which contracts are binding on minors but they are able to be repudiated?
Things like leases, partnerships and shareholder agreements
38
What does repudiated mean?
They can avoid further liability by expressing they are unable to honor the contact.
39
What contracts are not binding on a minor?
Non-necessary goods, contracts to borrow money
40
When can a mentally ill or drunk person avoid a contract?
If they are confused at the time or unaware at the time and the third party knew this.
41
If someone enters into a contract drunk what happens when they are sober?
They can accept the contract when they are sober and they must pay a reasonable price for any necessaries.
42
What is a staturoty corporation and registed company?
Created in an act of parliment
OR
Registered under the Companies Act
43
What is the Ulta Virus Doctrine?
A contract is invalid if its ultra virus - beyond the powers of - the corporation.
44
What is Promissory Estoppel?
If a promise is made in a contract and the promisee relies on it.
The promisor cant go back on it.
45
What are the general rule terms of a contact?
1. The terms of a contract must be certain
2. No contract is formed if a vital term is missing
3. No contract is formed if the meaning of an essential term is uncertain
46
What is an express term?
Specifically included term ie written in the contract
47
What is a implied term both in fact, in custom and in law?
In fact: presumed to be intended by the parties
In Custom: Something that has always happened within the market/trade
In law: Automatically included as it is legal
48
What is an example of an implied term under the Marine Insurance Act 1906?
Every contract of marine insurance must have a term to the effect of "the vessel must be seaworthy"
49
What are standard terms?
A template is drawn up by one party which saves time and simplifies the creation of a contract.
50
What is the downsides to standard terms?
Things can be hidden in the small print such as exception clauses to limit/remove liability.
51
What is the common law around exception clauses in contracts?
The other party must be specifically shown the exemption clause either on a notice or signing of written documents.
52
If someone in a case wished to rely on an exemption clause what must they do?
Establish the document was a contractual one
Prove they took reasonable steps to bring the terms to the attention of the other party before or at the time of the contract.
53
What contracts does the Unfair Contract Terms Act 1977 apply to?
Buisness contracts with the exception of Insurance which is excluded
54
What does the Unfair Contract Terms Act 1977 state?
Liability for death or bodily injury arising from negligence cannot be excluded in a contract.
You cannot excluded or restrict liability for a breach of a contract.
55
What 5 things would make a contract defective?
1. Its illegal
2. Improper pressure
3. Mistake
4. Misrepresentation
5. Non-Disclosure
56
An illegal contract would make it defective. Give an example of a contract:
1.Contray to Law
2. Contrary to public body
3. Restraint of Trade
1. Contract for murder, to assault someone, to forge money
2. Contracts to preserve the course of justice
3. Restraints on businesses and employment contracts that are unreasonable
57
What does "in Pari delicto potior est defendants" mean?
Where there is equal wrongdoing, the position of the defendant is stronger.
Exceptions:
- Where parties are not in "pari delicto'
- One party repents
- Illegality arises under statue
58
What does severance mean?
Contract is illegal in part, the court may enforce the valid portion and refuse assistance on the illegal part.
59
What things can make a contract Illegal?
1. No insurable interest
2. The purpose of the contract is illegal
3. There has been unlawful use of the insured property
4. If in close connection with a crime
60
What classes an improper pressure and what does improper pressure do to a contract?
It makes a contract voidable if led into by improper pressure.
Improper pressure can be :
Duress = Threat/Force
Undue influence = dominant party taking advantage of there position and persuading the contract to be signed.
61
What mistakes would be a contact void?
Where they are fundamental and undermind the whole contract.
62
What does concensus ad idem mean?
Meeting of minds
63
How would mistakes concerning the subject matter of a contract make a contract void?
Where both parties are at cross purposes and there is no meeting of minds the policy is void.
64
How would the identities of parties make a contract void?
If one party was cheated or tricked into the contract.
EG they though the contract was with B but it was actually C and B led A to believe this.
65
How can mistakes in recording agreements make a contract void?
Where parties put a contract in writing but make an error, the courts may correct the document to reflect the true meaning. However it will be void unless corrected.
Mistake must be from both parties.
Courts with rectify the documents but not the contracts.
66
What does misrepresentation in a contract mean and how does it void a contact?
A statement made during negotiations which as intended to persuade the other to enter into the contract or accept particular terms. It voids it where there has been a false statement or fraudulent/innocent/negligent misstatement.
67
What must a misrepresentation be in order to make a contract voidable?
- One of fact
- By a party to a contract
- Induce the other party into a contract.
68
What are the claimant remedies for misrepresentation in a contracts?
1. Rescission = claimant brings action to rescind (avoid) the contract
2. Damages
3. Refusal of further performance
4. Affirmation = injured party chooses to affirm contract
69
What happens when there is non-disclosure?
In law there is no positive duty of disclosure.
70
What does "caveat emptor" mean?
Buyer Beware
71
How can you discharge a contract?
1. Performance
2. Breach
3. Frustration
4. Agreement
5. Operation of Law
72
How can you discharge a contract due to performance and what does this mean?
When each party has carried out there side of the agreement the contract can be discharged.
Liability in a contract is strict, if a party fails to perform then it is a breach.
73
How can you discharge a contract due to time and what does this mean?
If a time scale is agreed in a contract and not kept to this is a breach.
A breach allows you to repudate a contract.
Where a time is not stipulated in a contract, it should be done in a reasonable time.
74
What is a breach of a contract?
Where one party failed to perform there side of the agreement in the set time
OR
Performance was inadequate
OR
Did not complete it at all
75
What is an anticipated Breach and when can the injured party sue?
Where the party knows in advance they will be unable to fulfill there side of the contract.
The other party has a right to sue straight away?
76
What are the options of a breach for the injured party?
They can immediately claim for damages
If serious enough they can also terminate the contract.
77
How can frustration discharge a contract?
When something happens that the parties have no control over, such as a change in law, or something that makes it impossible to perform the obligations under the contract. The policy can be discharged.
78
What are the effects of frustration?
Both parties are released from there obligations under the contract automatically.
79
What is discharge by agreement and what is it called?
Where both parties release each other from there obligations, this form of release is called a waiver.
80
What is discharge by operation of law?
Merger, death or bankruptcy.
81
What is discharge of money debts?
Dept cant be discharged by the payment of a smaller amount unless there is a change such as the time of the payment and then it can discharge the contract.
82
When does a breach amount to a termination of a contract?
When it is so serious it goes to the root of the contract.
83
What is the remedies in contract for a breach and subsequent termination?
Action for damages to put the claimant back into the financial position they should have enjoyed if the contract was fulfilled.
84
What are the remedies in contract?
Main remedies:
* termination;
* an action for damages;
* an action for specific performance; and
* an action for an injunction.
85
What is the difference between a common law remedy and an equitable remedy?
Common law remedies are avalible as a right
Equitable remedies are granted only at the discretion of the court
86
How are damages calculated if:
1. you have paid the seller but never received the goods
2. you have not paid the seller but also never received the goods
3. The buyer wrongful refused to accept and pay for goods?
1. Entitled to damages based on the cost of substitute goods at the full market price.
2. Entitled to damages based on the increased cost of the goods if the market price has risen in the meantime.
3. Same general principles apply, seller is entitled to the difference between the contract price and the market price if it has fallen. If the market price has risen, no loss since the goods can now be sold for now.
87
What is the victim of a breach of a contract under a duty to do?
Minimize the loss and cannot recover damages for losses which they could have reasonably avoided.
88
Damages in contact is usually an action for unliquidated (also known as unspecified) damages - what is that?
The amount awarded is fixed by the court.
89
Does the doctrine of remotness of damages apply to the law of contracts or just the law of torts?
Both
90
What is meant by specific performance and injuction remedies?
These are remedies which compel the defendant to honour there promise to the claimant rather than simply pay compensation for breaking it.
91
What is an action for an agreed sum remedie?
This is a common law remedy which may be brought when one of the parties has broken an undertaking to pay a specified sun of money.
92
What is a remedy of restitution?
Claim for return of money which has been paid or other property transferred.
93
What is Quantum Merin?
quantum = quantity
merin = much
much quantity as they are owed
remember it this way
An action brought for as much as they have earned or deserved.
94
What are the limitation of action under the Limitation Act 1980 for:
1. Simple Contracts
2. Personal Injury
3. Specialty Contacts
4. When does the time start?
5. Does it apply to common law and equitable claims?
1. 6 years
2. 3 years
3. 12 years
4. From the time of a breach
5. Only applies to common law
95
What does the Privity of contract doctrine restrict?
The rights and duties created by a contract to the person who originally made it. IE it stipulates that only parties to a contact can sue and be sued under it.
96
What does the Contracts (rights of third party) Act 1999 do to the Privity of Contract Doctrine?
Provides as exception and allows a third party to enforce a contractual term if:
The contract provides that they may do so
OR
The contract purports to benefit the third party
97
What do insurers not like the Contracts(rights of third party) Act 1999 and what do they do because of it?
They don't like it because insurance polies often appear to cover not one but several people, or confer a benefit on persons other than the policy holder.
Insurers usually exclude the act from their policies.
98
What contracts are specifically excluded from the Contracts (Rights of Third Party) Act 1999?
Bills of exchange
Terms in contracts of employment against an exployee
Most terms in contracts for the carriage of goods by sea
99
What is assignment?
Complex area of law.
One of the original parties to the contract may assign or transfer their rights under the contract to another.
100
Is assignment of rights or of the contact?
Of Rights
101
Within assignment, what is: Chosen in action?
Intangible but valuable piece of property. It cant be seized but only enforced through an action in court.
102
Within assignment, what is: Chosen in possesion?
Tangible piece of property which can be seized or physically controlled.
103
What are the two types of assignment?
Statutory Assignment
Equitable assignment
104
What is Statutory assignment and what must it be?
Falls under the law of property act 1924. The assignment of a debt or chose in action transfers the underlying legal right to the assignee.
The assignment must be:
1. Absolute
2. in writing
3. Expressly made in writing to the trustee or debtor
105
What is Equitable assignment and how can it take place?
If an assignment doesn't comply with all requirements for a statutory assignment it can take place as an equitable one. Makes up for any gaps in statutory assignment.
Takes place:
1. The assignor informs the assignee that they transfer the chosen to them
2. The assignor instructs the debtor to discharge the obligation by payment to, or performance for, the assignee.
106
What rights cant be assigned?
Personal contracts
107
What is a personal contract?
One which is based on personal characteristics of parties to a contact.
EG motor insurance, driving history
108
What insurance contract is not deems as a personal contract?
Life policies and as such the assignment of life policies may be conditional or absolute
109
Can you assign general obligations under a contract?
You can assign them without the consent of the other parties involved and the assignee
110
Within insurance contracts, can you assign the subject matter of the contract?
It does not carry any automatic assignment.
EG if you sell your car, your insurance policy doesn't transfer to the new owner. You could cancel yours and they would take out there own.
111
Within insurance contracts, can you assign the benefit of a policy?
Yes.
EG. if your house has a fire and is damaged, the insurer may pay you for the repair work or they may pay any settlement direct to the builders.
112
Within Insurance contracts, can you assign the contract itself?
Potentially.
You need the insurers permission.
Rare as insurance is normally a personal contract.
If it happens it must occur when the property is transferred.
Most common within marine cargo policies.
