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Contract Law

Gemma Lannon 7 questions

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Questions in this quiz (7)

  1. 1Contract
    = an [blank_start]agreement[blank_end] giving rise to [blank_start]obligations[blank_end] which are enforced or recognised by [blank_start]law[blank_end]
    The agreement can be made verbally, through conduct or a signature.
    Silence does not constitute [blank_start]acceptance[blank_end].
    [blank_start]Rejection[blank_end] cannot be changed to acceptation at a later date.

    [blank_start]Free market economy[blank_end] = everyone can buy and sell at whatever price they want.
    This means promises must be binding, to ensure profit is made along a supply chain, and the contract is evidence of the agreement.

    Bound to a contract is a judicial precedent of the L’Estrange v Graucob (1934) case. Defendant [blank_start]didn’t read the contract[blank_end], hence could not claim for faulty item.

    Judicial Precedent:
    • Pharmaceutical society v Boots (1953): Sales of drugs must be under pharmacist supervision – hence contract is formed at the [blank_start]cashier[blank_end], not at the [blank_start]shelf[blank_end].
    • Fisher v Bell (1961)

    Allows the seller to say ‘no’ eg drunk man in pub, underage drinker, out of stock at restaurant, incorrectly labelled price
    Written Contracts
    Some contracts must be formal (in writing, incorporating all terms):
    • Sale/transfer of [blank_start]land[blank_end]/[blank_start]property[blank_end] (Law of Property Act 1989)
    • [blank_start]Consumer credit[blank_end] agreements and [blank_start]hire[blank_end]: Credit is extended to an individual eg ‘Get now, pay later’
    • [blank_start]Copyright[blank_end] agreements
    • [blank_start]Bills of exchange[blank_end]: “an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer.”

    Contracts of [blank_start]guarantee[blank_end] (3rd party assumes secondary liability) require evidence in writing.
    [blank_start]Indemnity[blank_end] (3rd party assumes primary liability) does not require evidence in writing.

    Deeds
    An instrument is only valid as a deed if the instrument is:
    1. Signed in front of a [blank_start]witness[blank_end] by the individual or a nominated other
    2. [blank_start]Delivered[blank_end] as a deed by the individual or an authorised other

    1. Aagreement
    2. Bobligations
    3. Claw
    4. Dacceptance
    5. ERejection
    6. FFree market economy
    7. Gdidn’t read the contract
    8. Hcashier
    9. Ishelf
    10. Jland
    11. Kproperty
    12. LConsumer credit
    13. Mhire
    14. NCopyright
    15. OBills of exchange
    16. Pguarantee
    17. QIndemnity
    18. Rwitness
    19. SDelivered
  2. 2Essentials of a contract

    [blank_start]Agreement[blank_end]
    = [blank_start]Offer[blank_end] (from offeror) and [blank_start]Acceptance[blank_end] (by offeree) OR ‘Historical course of Dealing’
    Offer: Proposal of a set of terms with the [blank_start]intention[blank_end] for it to be [blank_start]legally binding[blank_end] upon acceptance. (must be clear and certain) [blank_start]Revocation[blank_end] (withdrawal) of an offer must be before acceptance aka ‘putting in a tender’
    Invitation to [blank_start]treat[blank_end]: invitation for others to make offers or negotiate. (eg Objects with price tags in stores) aka ‘consider tenders’
    Acceptance consists of agreeing to all terms
    [blank_start]Effect[blank_end]: Once an offer is accepted it will bring the contract into existence.

    [blank_start]Bilateral[blank_end] contract = each party has to perform their promise, acceptance must be communicated and received
    [blank_start]Unilateral[blank_end] contract = only one party has to perform their promise. ‘if’ contracts. The offeree cannot accept by promising to do the act, but only by actually doing it, and it is sufficient that they only know about the offer before the action is complete. An offer can only be revoked before the offeree begins the action.

    Postal rule: acceptance occurs as soon as it is [blank_start]posted[blank_end].
    For revoking an offer, revocation is effective as soon as it is [blank_start]received[blank_end].

    End of offer: [blank_start]Acceptance[blank_end], [blank_start]rejected[blank_end], receival of [blank_start]revoke[blank_end] (withdrawn), failure of [blank_start]precondition[blank_end] or [blank_start]lapse of time[blank_end] (either stated or reasonable for case)
    Requesting addition information does not terminate an offer.
    [blank_start]Counter[blank_end] offer; a response proposing an alteration to the terms, immediately revokes the initial offer.
    [blank_start]Standing[blank_end] offer: tender lasting for a whole period of time
    Offerees can still accept from dead offerors (unless personal service), but a dead offeree’s representatives are unlikely to be able to accept an offer.

    Machines
    Offer = proprietor of the machine holds it out as being ready to receive
    Acceptance = customer puts money into the machine
    Auctions
    Bidders make offers, which are accepted by the auctioneer with the bang of his hammer.
    Reserve price = minimum bid acceptable
    ‘without reserve’ means the seller does not reserve the right to bid for the lot, so a unilateral contract is formed where the agreement is made once a buyer places the highest bid, where the auctioneer is then liable to provide the lot (the goods)

    Advertisements
    Mostly invitations to treat, but there are occasions where the advertiser must follow through
    To revoke a unilateral contract to multiple people, the revocation must be advertised in the same way that the offer was.

    Internet
    Email: Courts will objectively decide if it was an offer or invitation to treat, and whether it was accepted.
    There is no universal rule for deciding when the contract is effective. It requires understanding of the intensions, sound business practise and risk judgement.
    Websites: Mostly invitations to treat. Effective once the customer is informed of offer acceptance.
    Ebay makes unilateral contracts, where sellers promise to sell to the highest bidder.

    Internet service providers must provide information before recipients can make offers:
    1. Steps to conclude contract
    2. Whether the contract will be filed and accessible
    3. Technical means of correcting errors
    4. Languages offered for conclusion of the contract
    5. Terms and conditions
    Intention to be legally bound
    • Depends on language used and circumstances
    • Business and commercial contexts - presume intension
    • Social and domestic contexts - presume no intension
    • Both cases can be rebutted by express evidence eg Merrit v Merrit [1970]
    • Most advertisement claims do not amount to contractual promises
    • An ‘Honourable Pledge Clause’ is used to state if there is no intension for a contract.
    • ‘Letters of comfort’ are used to share intensions regarding a 3rd party. They may or may not lead to a guarantee or contract.

    [blank_start]Privity[blank_end] of contract: Only the parties in the contract can sue.
    Unless stated otherwise in the contract (Contract (Rights of 3rd parties) Act 1999).
    Exceptions:
    • [blank_start]Assignment[blank_end] can transfer the benefit of the contract
    • [blank_start]Agency[blank_end] allows a 3rd party to make the contract on behalf of another
    • Law of [blank_start]trusts[blank_end]: beneficiaries under a trust are entitled to sue
    • If the term purports to [blank_start]confer a benefit[blank_end] to a 3rd party (must be intended in contract)
    Promisor and promise

    [blank_start]Consideration[blank_end]
    Promise from each party to do something. Either giving of a benefit, or suffering of a loss (often both)
    • [blank_start]Executory[blank_end] consideration: promise for future action
    • [blank_start]Executed[blank_end] consideration: action makes the contract effective
    • [blank_start]Past[blank_end] consideration (past action) [blank_start]does not count[blank_end] as consideration. Unless the act was requested by the promiser and both parties contemplated payment at the time of the act.
    Must be [blank_start]sufficient[blank_end] (of economic value), but need not be [blank_start]adequate[blank_end] (of equal value).

    Performing an existing duty:
    • A promise to do something already obliged by the law does not amount to good consideration. (But exceeding the law does)
    • The same consideration can form 2 contracts with different people.
    • A consideration from a previous contract may account to good consideration (definitely if exceeded)

    [blank_start]Part[blank_end] payment:
    Payment of a lesser sum cannot be consideration for the greater sum of money owed, if paid on the due day. Since money is quantifiable in monetary value. (Pinnel’s case 1602)
    [blank_start]Composition[blank_end] Agreement = Legally binding agreement between debtor in financial difficulty and creditors who accept their debts will be settled at equal reduced rate.
    Consideration from the debtor may be seen as promising not to file for bankruptcy.

    Promissory Estoppel
    Prevents claimants on insisting on legal rights, even if no consideration is offered. (used as a defence to being sued, not used to sue someone) Provided:
    1. Existing legal relationship between parties
    2. Claimant had promised not to insist on legal rights, with legal intension
    3. Claimant knew the promise would be acted upon
    4. Defendant acted on the promise
    5. Inequitable for defendant to break promise and revert to legal rights
    Estoppel by representation = when a party relies on a fact represented by the other
    Estoppel by convention = when a party mistakenly assumes a fact and the other accepts it
    Estoppel by acquiescence (reluctant acceptance) = when a party assumes agreement, the other must either declare dispute or will be taken to have acquiesced

    [blank_start]Capacity[blank_end]
    Minors:
    • Required to pay a reasonable price for necessary goods and services.
    • Can form employment contracts if beneficial to minor
    • Partnership, shares and land contracts are voidable by minors
    • Other contracts are void – non-binding on a minor.
    Drunkards and Mental health patients:
    • Other than goods and services, contracts made when drunk or mentally ill with capacity, when the other knew so, will be voidable.
    • If no mental capacity, the Mental Capacity Act 2005 allows the court to control property and void attempted disposal.
    1. AAgreement
    2. BOffer
    3. CAcceptance
    4. Dintention
    5. Elegally binding
    6. FRevocation
    7. Gtreat
    8. HEffect
    9. IBilateral
    10. JUnilateral
    11. Kposted
    12. Lreceived
    13. MAcceptance
    14. Nrejected
    15. Orevoke
    16. Pprecondition
    17. Qlapse of time
    18. RCounter
    19. SStanding
    20. TPrivity
    21. UAssignment
    22. VAgency
    23. Wtrusts
    24. Xconfer a benefit
    25. YConsideration
    26. ZExecutory
    27. AAExecuted
    28. ABPast
    29. ACdoes not count
    30. ADsufficient
    31. AEadequate
    32. AFPart
    33. AGComposition
    34. AHCapacity
  3. 3Certainty of terms
    • [blank_start]Express[blank_end] terms (agreed by parties)
    • [blank_start]Implied[blank_end] terms (determined by the [blank_start]courts[blank_end] or [blank_start]statute[blank_end])
    o [blank_start]Officious bystander[blank_end] test: so obvious it goes without saying
    o Courts will not make or improve a contract for the parties.
    o [blank_start]Customary[blank_end] terms can be implied in particular trades, localities or parties
    o Terms can be implied from a previous course of dealing between the same parties
    o Terms implied by [blank_start]court[blank_end] can be excluded, [blank_start]statutes[blank_end] cannot
    • A [blank_start]representation[blank_end] is a non-binding promise or statement made during negotiation

    Identifying which terms are express, implied or representations, depends on:
    • [blank_start]Knowledge[blank_end] of parties (statements from knowledgeable parties assumed to be terms, statements from less-knowledgeable parties assumed to be representations)
    • [blank_start]Reliance[blank_end] on statements when agreeing to contract
    • The [blank_start]strength[blank_end] of the statement
    • The [blank_start]timing[blank_end] of the statement: the shorter the time between the statement and contract agreement, the more likely it is a term.
    • Written Contracts: [blank_start]Parol evidence[blank_end] rule prevents extrinsic evidence from being used to add to are vary what was written, hence above doesn’t apply, unless:
    o Written contract incorrectly recorded oral contract
    o Evidence proves contract invalid
    o Evidence proves that there were conditions required for agreement
    o Breach is made to a collateral oral contract (a co-existing side contract)
    • Statements of opinion can rarely give rise to a [blank_start]term[blank_end]
    • Statements of ‘entire agreement’ and ‘anti-variation’, state the written contract cannot be varied orally. This is over-ruled if evidence of the variation can be provided.

    Classification:
    o [blank_start]Conditions[blank_end] = major terms, remedies are damages and/or repudiation (terminate contract)
    o [blank_start]Warranties[blank_end] = minor terms, remedies are damages only
    o [blank_start]Innominate[blank_end] terms = intermediate
    [blank_start]Damage[blank_end] test – has the party been substantially deprived of the whole benefit of the contract?
    Yes – treat like [blank_start]conditions[blank_end], No – treat like [blank_start]warranties[blank_end]

     Meaningless terms can often be ignored
     Terms yet to be agreed may mean the contract cannot be formed

    Obligation to use best/reasonable endeavours can be used if the objective and reasonable actions is clear. If a term is so vague that a court cannot objectively decide whether it had been honoured, then it is unenforceable.
    1. AExpress
    2. BImplied
    3. Ccourts
    4. Dstatute
    5. EOfficious bystander
    6. FCustomary
    7. Gcourt
    8. Hstatutes
    9. Irepresentation
    10. JKnowledge
    11. KReliance
    12. Lstrength
    13. Mtiming
    14. NParol evidence
    15. Oterm
    16. PConditions
    17. QWarranties
    18. RInnominate
    19. SDamage
    20. Tconditions
    21. Uwarranties
  4. 4Exemption Clauses
    Signing a contract containing exemption clause means it will form part of the contract and thus you are [blank_start]bound[blank_end] by the terms. - L'Estrange vs. Graucob [1934]
    • [blank_start]Exclusion[blank_end] Clauses - a clause which excludes a party of all liability for breach of contract
    • [blank_start]Limitation[blank_end] Clauses – a clause which limits a party’s liability for a breach of contract

    It is not permissible to make a contract on the basis that it will be exempt from the jurisdiction of the courts.

    Benefits:
     Doctrine of Freedom of Contract
     Accounts for lack of control
     Minimises risk
     Eg Not liable for personal property left at owner’s risk.
    Issues:
     Reality is exclusion clauses are inserted by party with greater bargaining power
     Potential to be abused – hence must be monitored.
    1. Abound
    2. BExclusion
    3. CLimitation
  5. 5Methods of control:
    1. [blank_start]Statutes[blank_end]
    o [blank_start]Unfair Contracts[blank_end] Act 1977
    Does not include consumer contracts
     S. 1(1) negligence includes the breach of obligations to take reasonable care arising from expressed or implied contractual terms or common law duties
     S. 2(1) A person cannot exclude or restrict his liability for death or personal injury resulting from negligence
     S 2(2) A person exclude or restrict his liability other loss or damage resulting from negligence, except in so far as the term satisfies the Act’s requirement for reasonableness
     S 2 (3) defendants cannot rely on volenti non fit injuria
     S 3 protects those who deal on the other party’s written standard terms of business
     S 6&7 details which terms in the SGA can be excluded/restricted or not.
     S 8 prevents exclusion of liability for misrepresentation
    o The requirement for reasonableness considers:
     Bargaining positions
     Receival of inducements (persuasion)
     Knowledge of term’s existence and extent
     Reliance on condition compliance
     Customised orders
    o The [blank_start]Consumer Rights[blank_end] Act 2015
     S. 62(1) An unfair term is not binding on the customer
     s.31 (goods) s. 57 (services) – a trader cannot exclude, limit or undermine its liability for any of the relevant terms in consumer contracts
    Does not include consumer-to-consumer contracts (eg car boot sale)
     s. 65(1) – A person cannot exclude or restrict his liability for death or personal injury resulting from negligence
     s. 65(2) knowing about a term that attempts to exclude liability does not mean a consumer has voluntarily accepted risk
     s. 65(4) negligence includes the breach of obligations to take reasonable care arising from expressed or implied contractual terms or common law duties
     s. 67 if an unfair term is not binding, the contract continues where practical
     Consumer Rights (Payment Surcharges) Regulations 2012 prevents trader charging surcharges (checkout fees) unless they represent actual processing costs
    2. [blank_start]Judicial[blank_end] Control
    o The exemption must be incorporated into the contract before the contract is agreed. Requires identification of which documents would be reasonably considered as contractual documents.
    Olley vs. Marlbrough Court Ldt [1949] Hotel claimed not liable for valuables unless left in reception, as shared in the room, but not in the contract, hence liable.
    o The effect of the contract must not be misrepresented
    o Oral agreement that the exception will not be enforced overrules the written contract
    1. AStatutes
    2. BUnfair Contracts
    3. CConsumer Rights
    4. DJudicial
  6. 6Consumer Law
    The Consumer Rights Act 2015
    Applies to contracts between a [blank_start]trader[blank_end] and a [blank_start]consumer[blank_end] (S 61(1)), under which a trader agrees to supply goods, digital content or services in exchange for money.
    Trader = person acting for purposes of their [blank_start]business[blank_end], either personally or through another/on behalf (ss 2.2)
    Consumer = individual acting for purposes mainly [blank_start]outside[blank_end] of their business (ss 2.3)

    [blank_start]Goods[blank_end] = tangible, movable items or gas, water and electricity
    Digital content = data in digital form

    Conditions implied are contained in ss.9-18 ([blank_start]goods[blank_end] in the course of business) and ss. 49-52 ([blank_start]services[blank_end])
    Section 9: [blank_start]Satisfactory quality[blank_end]
     Requires the goods meet the standard that a [blank_start]reasonable[blank_end] person would consider satisfactory
     Considering description, price, fitness for all purposes for which that good is commonly supplied, appearance and finish, freedom from minor defects, safety and durability.
     Gives minimum protection: Darren Egan v Motor Services (Bath) Ltd [2007] – purchase of Audi, satisfactory quality for reasonable person but not for claimant – not liable
    Section 10: [blank_start]Fit for purchase[blank_end]
     Requires that the goods are fit for [blank_start]original[blank_end] purpose and any other particular purpose [blank_start]made known[blank_end] to the trader
     It must be reasonable to rely on the trader’s judgement
     Frost v Aylesbury Dairy Co. [1905] – Off milk not fit for purpose
    Section 11: [blank_start]Description[blank_end]
     Requires that the goods will correspond to the description
     The description must be [blank_start]relied upon[blank_end] for agreement
     Harlingdon & Leinster Enterprises Ltd. v Christopher Hull Fine Art Ltd. [1991] – Painting not a genuine article, but claimants relied on expert’s advice not the seller’s description, hence not liable.
    Section 14: [blank_start]Model[blank_end]
     Goods must match any model previously [blank_start]shown[blank_end] to the consumer or [blank_start]examined[blank_end] by the consumer
    Section 15: [blank_start]Installation[blank_end]
     Installation of goods by trader must be [blank_start]installed correctly[blank_end] by the trader
     e.g. new washing machine incorrectly fitted by trader, even if machine satisfactory quality, the buyer is entitled to reject the goods
    Section 16: [blank_start]Digital[blank_end]
     Any goods with digital material will not conform to the contract if the digital content does not [blank_start]conform[blank_end].
    Section 17: [blank_start]Legal ownership[blank_end]
     Title - implies a term that the trader has the legal right to [blank_start]sell[blank_end] or [blank_start]transfer[blank_end] the goods.
     Means that the trader has the right to transfer possession of goods in a hire contract and the right to transfer ownership (title) in a sales contract

    Remedies: (s.31: A trader cannot exclude, limit or undermine its liability)
    1. Short term right to [blank_start]reject[blank_end] (30 days)
    2. [blank_start]Repair[blank_end]
    3. [blank_start]Replacement[blank_end]
    4. Price [blank_start]reduction[blank_end] or final right to [blank_start]reject[blank_end]

    Many traders offer remedies for non-faulty goods (eg don’t like it) to give good custom, but they are not legally bound to do so.

    Consumer Protection Act 1987
    Form of [blank_start]strict civil liability[blank_end] (no fault required, trader automatically liable)
    Claimant injured by unsafe/defective product may sue the manufacturer for:
    • [blank_start]Death[blank_end]
    • Personal [blank_start]injury[blank_end]
    • [blank_start]Property damage[blank_end] in excess of £275
    • The product that caused the damage was unsafe
    • The damage was done to something privately owned (not business owned)
    1. Atrader
    2. Bconsumer
    3. Cbusiness
    4. Doutside
    5. EGoods
    6. Fgoods
    7. Gservices
    8. HSatisfactory quality
    9. Ireasonable
    10. JFit for purchase
    11. KDescription
    12. Lrelied upon
    13. Moriginal
    14. Nmade known
    15. OModel
    16. Pshown
    17. Qexamined
    18. RInstallation
    19. Sinstalled correctly
    20. TDigital
    21. Uconform
    22. VLegal ownership
    23. Wsell
    24. Xtransfer
    25. Yreject
    26. ZRepair
    27. AAReplacement
    28. ABreduction
    29. ACreject
    30. ADstrict civil liability
    31. AEDeath
    32. AFinjury
    33. AGProperty damage
  7. 7Termination of a contract
    Contractual duties of the parties can be discharged by:
    • [blank_start]Performance[blank_end]: parties must perform [blank_start]precisely[blank_end] all the terms of the contract in order to discharge their obligations.
    • Cutter v Powell [1795] Sailor died half way through journey but wife could not claim for a quantum meruit payment (partial performance), as the contract was made on the term of getting all the way to Liverpool.
    o Partial performance may be accepted for [blank_start]divisible[blank_end]/[blank_start]severable[blank_end] contracts or for parties who have [blank_start]substantially[blank_end] performed the full term – [blank_start]Quantum meruit[blank_end] ‘What one has earned’
    Employment contracts paid weekly/monthly or sales of goods contracts paid per unit/weight suggest they are [blank_start]divisible[blank_end].
    The claimant may accept a partial performance, hence [blank_start]replacing[blank_end] the initial contract with a new one.
    Hoenig v Isaacs [1952] – agreed refurbishment of apartment for £750. £400 had been paid. However, the owner, i.e. the defendant, refused to pay the final instalment because he was not satisfied with some of the furnishings. The cost to correct the defect was assessed at £56.
    Held: contractual obligation had been substantially performed by the claimant, therefore the defendant had to pay the claimant the contractually agreed price minus the cost of the defect i.e. £350 - £56 = £319
    o [blank_start]Prevention[blank_end] of performance from one party allows the other to claim for quantum meruit.
    o [blank_start]Time[blank_end] of performance may be agreed as [blank_start]of the essence[blank_end]. In sale of goods: time of delivery is a condition; time of payment is a warranty.
    • [blank_start]Agreement[blank_end]: There must be agreement ([blank_start]accord[blank_end]) and consideration ([blank_start]satisfaction[blank_end]) eg agreeing to release the other from their outstanding contractual obligations under the contract.
    [blank_start]Waiver[blank_end] = one party releases the other’s obligation without returned [blank_start]consideration[blank_end]
    Some contracts provide that it is discharged after a certain time or event eg hire/employment
    • [blank_start]Frustration[blank_end]: Contract becomes illegal, impossible or radically different. (Last resort)
    o Supervening impossibility [blank_start]unforeseen[blank_end] by the parties
    o Law [blank_start]Reform[blank_end] (Frustrated Contracts) Act 1943 – aims to [blank_start]fairly distribute[blank_end] loss
    Examples;
     Subject matter ceases to exist: Taylor v Caldwell [1863] Concert hall burnt, hence impossible to provide the venue.
     Person is unavailable (dead/permanently incapable) to personally perform terms
     Event central to contract has not occurred
     Contract cannot be performed in manner specified
     Contract becomes illegal
    • [blank_start]Breach[blank_end]: Breach of a [blank_start]condition[blank_end] (major term) provides the injured party with the option of [blank_start]repudiating[blank_end] the contract (must be prompt) as well as claiming [blank_start]damages[blank_end].
    o [blank_start]Liquidated[blank_end] Damages – Agreed in contract
    Exceptions if in ‘terroram’ (penalty clauses) – too severe, or is unfair (Unfair Contract Terms Act)
    o [blank_start]Unliquidated[blank_end] Damages – Decided by judge
    Restores injured party to position if contract had been completed
    o [blank_start]Nominal[blank_end] Damages – if no loss, but suffered disappointment/sadness. Very small remedy
    Jarvis v Swans Tours Ltd. [1973] – remedy for disappointing holiday
    Claimant expected to reasonably mitigate their loss
    1. APerformance
    2. Bprecisely
    3. Cdivisible
    4. Dseverable
    5. EQuantum meruit
    6. Fdivisible
    7. Greplacing
    8. HPrevention
    9. ITime
    10. Jof the essence
    11. KAgreement
    12. Laccord
    13. Msatisfaction
    14. NWaiver
    15. OFrustration
    16. PBreach
    17. Qcondition
    18. Rrepudiating
    19. Sdamages
    20. TLiquidated
    21. UUnliquidated
    22. VNominal
    23. Wunforeseen
    24. XReform
    25. Yfairly distribute
    26. Zconsideration
    27. AAsubstantially

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Description
Law Quiz on Contract Law, created by Gemma Lannon on 25/11/2020.
Language
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