Principles

Question 1

What are the necessary parts of a legally enforceable contract?

Answer 1

Offer, Acceptance, Consideration by both parties, intent to creat legal relations

Question 2

What must an offer express?

Answer 2

1) Willingness to contract
2) Specific terms
3) Intent to be legally binding upon acceptance (i.e. clear, certain, and final upon acceptance)
Leading case: Gibson v Manchester City Council

Question 3

What is an invitation to treat?

Answer 3

An invitation to negotiate/make an offer.
Leading case: Fisher v Bell, flick knives in window.

Question 4

What is a unilateral offer?

Answer 4

An offer made to all the world which can be accepted by performance of a prescribed action. Leading case: Carlill v Carbolic Smoke Ball

Question 5

In a self-service shop, when is an offer made and accepted?

Answer 5

When items are brought to the cashier for checkout.
Leading case: Pharma Society vs Boots Chemist

Question 6

Is an offer objective or subjective?

Answer 6

Objective. Can’t read in terms that aren’t present.
Leading case: Smith v Hughes

Question 7

What are the three steps of the offer objectivity test?

Answer 7

1) Detached objectivity - fly on a wall
2) Promisee objectivity - what’s reasonably understood by the offeree
3) Promisor objectivity - was the offer reasonable?

Question 8

Can an offer be accepted if the accepting party knows the offering party made a mistake?

Answer 8

No, can’t snatch a bargain - Hartog v Collins & Shields.
However, mistake must relate to the terms of the contract - Statoil ASA v Louis Dreyfus.

Question 9

List the 7 requirements of acceptance

Answer 9

1) Unqualified
2) Communicated by an authorized person (unless offer is unilateral)
3) Made while the offer is valid
4) Mirror image of the offer
5) Accepted by the offeree
6) Accepted in response to the offer
7) Based on actions, not intentions

Question 10

How does one communicate acceptance?

Answer 10

Verbal, written, by action, but cannot be silent acceptance. Case: Paul Felthouse v Bindley
Specific communication method can be stipulated as a term of the offer, but must be clear that it’s a condition not a preference.

Question 11

What is the Postal Rule?

Answer 11

Acceptance occurs at the moment of proper posting of communication. Case: Adams and Others against Lindsell and Another.

Question 12

What happens if acceptance was intended to be communicated but never received?

Answer 12

If not received due to fault of offeree or third party, then no contract. Exception: Postal Rule.
If not received due to fault of offeror, then they can’t deny acceptance. Case: Entores v Miles Far East Corporation.

Question 13

What happens if an accepting action was performed for reasons unrelated to an offer?

Answer 13

Offer was not accepted. Acceptance must be in response to the offer. Case: Williams v Cowardine, deathbed confession

Question 14

How does an offer end?

Answer 14

1) Acceptance - becomes a contract
2) Rejection - including counteroffers
3) Lapse - if a time limit was specified
4) Revocation

Question 15

What is a counteroffer?

Answer 15

A rejection of the initial offer and proposal of a new offer. Case: Hyde v Wrench
Request for further information is not a counteroffer: Stevenson Jaques v McLean

Question 16

When can an offer be revoked?

Answer 16

Any time before acceptance - Payne v Cave

Question 17

When can a unilateral offer be revoked?

Answer 17

Prior to acceptance if not all conditions have yet been met: Great Northern Railway v Witham
However, if performance of accepting actions has begun and it would be inequitable to revoke, then the offeree must be given the opportunity to complete acceptance: Errington v Errington & Woods.

Question 18

What is a “Battle of Forms”?

Answer 18

Phrase used to describe each party insisting on using their own paper, or trading redlines. Each turn is a rejection of the previous offer and forms a counteroffer (if it would be final upon acceptance). Case: Butler Machines v Ex-Cell-O Corp

Question 19

When trading redlines, which form prevails?

Answer 19

The most recent (Butler v Ex-Cell-O); unless a form is introduced after an offer was already accepted, in which case it’s unenforceable: TRW Ltd v Panasonic Industry

Question 20

What is consideration?

Answer 20

Something a party gets or gives up, i.e. price of a promise.

Question 21

Is consideration an act or a promise to act?

Answer 21

Consideration treats actions and promises to act equally. Case: Pao On v Lau Yiu Long.

Question 22

What are the rules of good consideration?

Answer 22

1) Consideration must not be past, i.e. the act can’t have come before consideration (Eastwood v Kenyon)
2) Consideration can’t move from the promisee (Dunlop v Selfridge)
3) Consideration must be sufficient, but not necessarily adequate (Chapelle v Nestle; Pao On v Lau Yiu Long)
4) Not covered by an exception or promissory estoppel

Question 23

What is the past consideration test?

Answer 23

1) Was the act done on the request of the promissor?
2) Was there are understanding of payment, implicit or explicit?
3) Otherwise, would the contract be enforceable?

Question 24

What can count as consideration?

Answer 24

1) Anything the promissor asked for, regardless of intrinsic value (Chapelle v Nestle)
2) May not relate to a specific value (Pao On)
3) Can include avoidance of penalty or other undesirable outcome (Williams v Roffey Bros)

Question 25

What are the exceptions to good consideration?

Answer 25

1) Can't have been doing the act anyways of your own volition (essentially past consideration - Eastwood v Kenyon) 2) No consideration if it was in performance of a public duty, however there could be consideration if you went above and beyond (Collins v Godefray) 3) No consideration if it was a pre-existing duty to a third party (i.e. redundant contracts) - Scotson v Pegg 4) The duty already existed in the current form of the contract (Stilk v Myrick). Doesn't apply if there's new additional effort required not contemplated by original contract (Hartley v Ponsonby).

Question 26

Is there consideration when agreeing to accept a partial payment of a debt?

Answer 26

Normally, no. Part payment doesn't settle a debt - Foakes v Beer.

Question 27

When can part payment settle a debt?

Answer 27

1) Part payment plus something else can settle a debt - Pinnel's Case. 2) If there was consideration regarding the part payment, and the additional "something else" was the avoidance of a penalty or some other undesirable situation, such as with Williams v Roffey Bros. Money has a time-based value.

Question 28

Can a third party payment clear a debt?

Answer 28

Yes - Welby v Drake.

Question 29

What is promissory estoppel?

Answer 29

The principle that you can't go back on a promise made and relied upon if it would be inequitable to do so. Leading case: Central London Property Trust v Higher Trees House.

Question 30

What are the four rules of promissory estoppel?

Answer 30

1) There must be an express or implied promise to suspend an otherwise enforceable contract 2) The promisee must have relied on the promise, directly leading to a change in position (positive or negative) 3) Shield not a sword - only defends against enforcement of a contract, can't be used to force action 4) Must be fair/equitable to reneg on the promise, i.e. legal right is only suspended while it would be inequitable to enforce the promise. (MWB v Rock, Central London Property v Higher Trees House)

Question 31

What is the rule of privity?

Answer 31

A third party should not be burdened by a contract (Dunlop v Selfridge) nor can they take the benefit of a contract (Tweddle v Atkinson).

Question 32

What are the exceptions to privity?

Answer 32

1) Tort 2) Agency 3) Collateral contract 4) Assignment of obligations 4) Exceptions granted under the Contracts (Rights of Third Parties) Act 1999

Question 33

When can agency be claimed?

Answer 33

1) Principal was intended to be protected 2) Contracting party was named as, or granted power to be, agent 3) Contracting party was granted authority by Principal 4) Principal had consideration

Question 34

What are the types of duress?

Answer 34

1) Duress to person 2) Duress to goods 3) Economic duress

Question 35

What is the test for economic duress?

Answer 35

1) Economic pressure 2) Lack of practical choice for victim 3) Illegitimate pressure 4) Did the pressure duly relate to the contract?

Question 36

How does one determine illegitimate pressure?

Answer 36

1) Did they threaten to breach the contract? 2) Was the pressure in good or bad faith? 3) Did the pressuring party have the right to make the demand? 4) Did the victim protest? 5) Did the victim affirm the contract (express or implied)?

Question 37

What is ICLR?

Answer 37

Intention to Create Legal Relations

Question 38

How does one determine the existence of ICLR?

Answer 38

Objective test, with the added assumptions that commercial situations presume ICLR, and non-commercial (social/domestic) situations presume no ICLR. Case: Balfour v Balfour

Question 39

What is misrepresentation?

Answer 39

When two parties entered into a contract based on what is now known to be incorrect information, which was not a mistake.

Question 40

Misrepresentation can be ______ or _______

Answer 40

Words or conduct

Question 41

What does not count as a representation?

Answer 41

1) Mere puff - Dimmock v Hallett 2) Terms of the contract (however a term can additionally be a representation) - J Evans v Merzario 3) Opinion - Bisset v Wilkinson

Question 42

What is the difference between mere puff and opinion?

Answer 42

Mere puff is an assertion that a reasonable person would not take seriously. Opinion is something reasonable, with regard to context and specificity.

Question 43

What are the types of misrepresentation?

Answer 43

1) Fraudulent 2) Negligent 3) Innocent Honourable mention: Negligent misstatement

Question 44

What are the steps for determining actionability of a misrepresentation?

Answer 44

1) Statement must be unambiguous 2) Statement must be false 3) Must have been a statement of fact or law 4) Statement must be addressed to the claimant (directly or indirectly) 5) Statement must induce the contract 6) Must have resulted in a loss

Question 45

How does silence factor into misrepresentation?

Answer 45

1) Silence alone is not normally misrepresentation. Claimant must ask the question, and defendant has the right to not answer. 2) Half truths, which are strictly true but give a false impression, are misrepresentation. 3) A continuing representation left uncorrected is misrepresentation. 4) There is a duty to disclose even if unasked with fiduciary relationships.

Question 46

How does one determine if a misrepresentation induced a contract?

Answer 46

1) Statement has to have had an effect on the actions of the other party (subjective). 2) The difference between the truth and the misrepresentation must be material. General question: Would the contract have been made on the same terms if not for the misrepresentation? Case: SK Shipping v Capital VLCC

Question 47

When does a misrep not induce a contract?

Answer 47

1) If claimant didn't perceive the misrepresentation (Horsfall v Thomas) 2) If buyer relied on their own investigation rather than the misrep. (Attword v Small)

Question 48

Rules on misrep and investigations?

Answer 48

1) No general duty on buyer to investigate statements unless it's a commercial situation (Smith v Bush) 2) No inducement if buyer relied solely on their own investigation (Attwood v Small) 3) If there was partial reliance on the statement, then there can still be misrep regardless of investigation (Edgington v Fitzmaurice) 4) Existence of an investigation is nullified if the misrep was fraudulent. (S Pearson v Dublin Corp)

Question 49

What is a fraudulent misrepresentation?

Answer 49

According to test set out in Derry v Peak, a misrepresentation is fraudulent if the defendant made the statement: 1) Knowing it was untrue, 2) Without belief in its truth, or 3) With recklessness as to its truth

Question 50

Where does the burden of proof lie for fraudulent misrepresentation?

Answer 50

Burden of proof is on claimant, so only claim if you have good evidence.

Question 51

What are the remedies for fraudulent misrepresentation?

Answer 51

1) Rescission, and 2) Damages - all losses flowing from transaction, including loss of anticipated profits (East vs Maurer), and 3) Indemnity, if relevant.

Question 52

What is a negligent misrep?

Answer 52

A false statement made with no reasonable grounds to believe its truth. (Misrepresentation Act 1967)

Question 53

Where is the burden of proof for negligent misrep?

Answer 53

Burden of proof is on the defendant to show reasonable grounds for belief (Howard Marine v Ogden)

Question 54

How does special knowledge/expertise factor into misrepresentation?

Answer 54

If defendant had special knowledge/expertise, then more likely to be negligent misrep. (Esso v Mardon)

Question 55

What are the remedies for negligent misrep?

Answer 55

Rescission; OR damages in lieu of rescission and indemnity (if relevant).

Question 56

What is contributory negligence (reg misrep)?

Answer 56

A claimant contributes to the negligence if they didn't take reasonable steps to validate the statement. Under S2(2) of the Misrep Act 1967, this can reduce the awarded damages.

Question 57

What is innocent misrepresentation?

Answer 57

A false statement where the defendant had sufficient evidence of reasonable grounds for belief.

Question 58

What are the remedies for innocent misrep?

Answer 58

Rescission; OR Damages + Indemnity (if relevant). Damages would not be substantive.

Question 59

What is rescission?

Answer 59

An equitable remedy, applied at the discretion of the court, which renders the contract voidable.

Question 60

What are the bars to rescission?

Answer 60

TAIL: Third Party Rights - Phillips v Brooks Affirmation - Long v Lloyd Impossibility - Clarke v Dickson Lapse of Time - Leaf v International Galleries

Question 61

When can one claim mistake?

Answer 61

When, at the time of entering into the contract, there was an operative mistake having an effect on a fundamental quality of the contract.

Question 62

Can one claim both misrep and mistake?

Answer 62

Yes

Question 63

What is the effect of a mistaken contract?

Answer 63

It is void ab initio, i.e. there was never a contract

Question 64

What are the types of mistake?

Answer 64

Mutual mistake Common mistake Unilateral mistake

Question 65

What is a mutual mistake?

Answer 65

When the two parties have a difference of interpretation, and the contract is ambiguous enough to support both/neither. (the Peerless)

Question 66

What is a common mistake?

Answer 66

When both parties make the same mistake (e.g. Courturier v Hastie).

Question 67

What is a res extincta mistake?

Answer 67

A mistake of subject matter (e.g. Courturier v Hastie). Affected by the Sale of Goods Act 1979 where it relates to spoiled goods.

Question 68

What is a res sua mistake?

Answer 68

A mistake of ownership (Cooper v Phibbs)

Question 69

What is a unilateral mistake?

Answer 69

One party is wrong about the contract and the other party is correct. (e.g. Hartog v Collin & Shields)

Question 70

What is the non est factum defence?

Answer 70

When a signatory of a contract argues that the contract is invalid because they were mistaken about the character of the document itself.

Question 71

When does the non est factum defence work and not work?

Answer 71

Works: Incapacity to understand (Thoroughgood's Case) and Fraud (Foster vs MacKinnon) Doesn't work: Negligence (L'Estrange v Graucob)

Question 72

What is a unilateral mistake of identity?

Answer 72

Normally a con where someone misrepresents themselves as someone rich to obtain an asset on credit. e.g. Shogun Finance v Hudson

Question 73

What is the rule for mistake of identity with distance sales?

Answer 73

You are entitled to believe you're dealing with the person identified by the documents (Cundy v Lindsay) IF identity is fundamental to the contract (King's Norton Metal v Edridge).

Question 74

What is the rule for mistake of identity with face-to-face sales?

Answer 74

You are contracting with the person in front of you (Phillips v Brooks) unless you investigate their identity (Ingram v Little).