Chapter 7-10

Question 1

What are exemption clauses?

Answer 1

Contract terms used by commercial suppliers to limit or exclude liability for loss or damage.

Question 2

How are buyers protected from unfair exemption clauses?

Answer 2

Through common law rules and statutory controls.

Question 3

What are the two main legal tests for exemption clauses at common law?

Answer 3

Incorporation and construction.

Question 4

What does incorporation test?

Answer 4

Whether the exemption clause is actually part of the contract.

Question 5

What does construction determine?

Answer 5

Whether the clause covers the particular breach or loss that occurred.

Question 6

How are ambiguous exemption clauses interpreted?

Answer 6

Against the party relying on the clause (contra proferentem).

Question 7

How must negligence be excluded in a clause?

Answer 7

It must be clearly and explicitly stated.

Question 8

What does “Cars parked at owner’s risk” exclude?

Answer 8

Liability for damage to cars, not personal injury.

Question 9

Which statute governs B2B exemption clauses?

Answer 9

Unfair Contract Terms Act (UCTA) 1977.

Question 10

Which statute governs B2C exemption clauses?

Answer 10

Consumer Rights Act (CRA) 2015.

Question 11

What is the purpose of UCTA 1977?

Answer 11

To restrict the effectiveness of certain exemption clauses in business contracts.

Question 12

When is an exemption clause automatically void under UCTA?

Answer 12

For death or personal injury caused by negligence (s2(1)) and implied title (s6, s7).

Question 13

When may an exemption clause be valid under UCTA?

Answer 13

If it is freely negotiated or passes the reasonableness test.

Question 14

When does the reasonableness test apply?

Answer 14

To most B2B exemption clauses.

Question 15

Which losses from negligence are subject to the reasonableness test?

Answer 15

Loss or damage other than death or personal injury (s2(2)).

Question 16

What implied terms are covered by the reasonableness test?

Answer 16

Description, quality, and fitness for purpose (s6 & s7).

Question 17

When is a clause assessed for reasonableness?

Answer 17

At the time the contract is made.

Question 18

What factors are considered under Schedule 2 UCTA?

Answer 18

• Relative bargaining power
• Inducements and alternatives
• Knowledge of the clause
• Practicality of compliance
• Defendant’s resources and insurance (for limitation clauses)

Question 19

What does the CRA 2015 regulate?

Answer 19

Exemption clauses in business-to-consumer contracts.

Question 20

Which rights cannot be excluded in sales contracts (s31)?

Answer 20

• Satisfactory quality (s9)
• Fitness for purpose (s10)
• Goods as described (s11)

Question 21

Which rights cannot be excluded in service contracts (s57)?

Answer 21

• Reasonable care and skill (s49)
• Reasonable price (s51)
• Reasonable time (s52)

Question 22

What is the general rule on exemption clauses and third parties?

Answer 22

They do not protect non-parties due to privity of contract.

Question 23

What is the exception to this rule?

Answer 23

Contracts (Rights of Third Parties) Act 1999.

Question 24

What is the purpose of damages?

Answer 24

To compensate for loss caused by breach of contract.

Question 25

What must be shown to recover damages?

Answer 25

The loss was caused by the specific breach.

Question 26

What is expectation loss?

Answer 26

Loss of bargain – the difference between actual position and position if contract performed.

Question 27

What is reliance loss?

Answer 27

Compensation for wasted expenditure incurred relying on the contract.

Question 28

When is reliance loss used?

Answer 28

When expectation loss is too speculative.

Question 29

What case illustrates reliance loss?

Answer 29

*Anglia TV v Reed*.

Question 30

What are pecuniary losses?

Answer 30

Financial losses such as lost profits or property damage.

Question 31

When are non-pecuniary losses recoverable?

Answer 31

When the contract’s purpose includes pleasure, comfort, or peace of mind.

Question 32

Which case awarded damages for a disappointing holiday?

Answer 32

*Jarvis v Swans Tours*.

Question 33

What is the test for remoteness?

Answer 33

Loss must be reasonably foreseeable at the time of contracting.

Question 34

Does the extent of loss matter?

Answer 34

No, if the type of loss was foreseeable.

Question 35

What duty does a claimant have regarding loss?

Answer 35

To take reasonable steps to mitigate their loss.

Question 36

Who bears the burden of proving failure to mitigate?

Answer 36

The defendant.

Question 37

Can a claimant recover losses if mitigation fails?

Answer 37

Yes, if the attempts were reasonable.

Question 38

How are damages assessed for defective work?

Answer 38

Cost of cure or reinstatement.

Question 39

How are damages assessed for defective goods?

Answer 39

Difference in value between expected and actual condition.

Question 40

What is loss of amenity?

Answer 40

Loss of enjoyment where the contract provided pleasure or amenity.

Question 41

What are liquidated damages?

Answer 41

Pre-agreed sums payable on breach.

Question 42

When are liquidated damages enforceable?

Answer 42

When they are a genuine pre-estimate of loss.

Question 43

What is a penalty clause?

Answer 43

A clause imposing an extravagant or disproportionate sum.

Question 44

Are penalty clauses enforceable?

Answer 44

No.

Question 45

What case redefined penalties?

Answer 45

*ParkingEye v Beavis*.

Question 46

What is an action for an agreed sum?

Answer 46

A claim for a fixed amount due under the contract.

Question 47

When is specific performance granted?

Answer 47

When damages are inadequate.

Question 48

Why is specific performance rare in employment contracts?

Answer 48

Due to trust and confidence issues.

Question 49

What is an injunction?

Answer 49

An order restraining a party from doing something.

Question 50

What is restitution?

Answer 50

A remedy preventing unjust enrichment.

Question 51

When can money be recovered for total failure of consideration?

Answer 51

When the other party performs nothing at all.

Question 52

What is quantum meruit?

Answer 52

A reasonable payment for work done or goods supplied.

Question 53

What are restitutionary damages?

Answer 53

Damages based on the defendant’s gain, not the claimant’s loss.

Question 54

Which case awarded profits from a book?

Answer 54

*Attorney-General v Blake*.

Question 55

What is a guarantee?

Answer 55

A secondary promise to pay if the debtor defaults.

Question 56

What form must a guarantee take?

Answer 56

It must be in writing and signed.

Question 57

What is an indemnity?

Answer 57

A primary obligation to reimburse losses pound-for-pound.

Question 58

Do indemnities need to be in writing?

Answer 58

No.

Question 59

When does the right to terminate arise?

Answer 59

For repudiatory breaches.

Question 60

What are repudiatory breaches?

Answer 60

Breach of a condition or a serious breach of an innominate term.

Question 61

What choices does the innocent party have?

Answer 61

Affirm the contract or terminate it.

Question 62

What effect does termination have?

Answer 62

It ends future obligations only.

Question 63

What is frustration?

Answer 63

Automatic termination due to an unforeseen event beyond the parties’ control.

Question 64

What must be shown for frustration?

Answer 64

Impossibility or radical difference, unexpected event, and no party control.

Question 65

What events may cause frustration?

Answer 65

* Government intervention * Illegality * Destruction of subject matter * Non-occurrence of fundamental event

Question 66

What case illustrates self-induced frustration?

Answer 66

*The Super Servant Two*.

Question 67

What statute governs the consequences of frustration?

Answer 67

Law Reform (Frustrated Contracts) Act 1943.

Question 68

What happens to money paid before frustration?

Answer 68

It is recoverable, subject to court discretion.

Question 69

What is the general rule for performance?

Answer 69

Performance must be complete and exact.

Question 70

What is substantial performance?

Answer 70

Performance that is mostly complete, allowing payment minus defect costs.

Question 71

What is wrongful prevention?

Answer 71

When one party prevents the other from completing performance.

Question 72

What is voluntary acceptance of part performance?

Answer 72

Accepting incomplete performance and paying a reasonable sum.