1
Q
What are the necessary parts of a legally enforceable contract?
A
Offer, Acceptance, Consideration by both parties, intent to creat legal relations, capacity
2
Q
What must an offer express?
A
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
3
Q
What is an invitation to treat?
A
An invitation to negotiate/make an offer.
Leading case: Fisher v Bell, flick knives in window.
4
Q
What is a unilateral offer?
A
An offer made to all the world which can be accepted by performance of a prescribed action. Leading case: Carlill v Carbolic Smoke Ball
5
Q
In a self-service shop, when is an offer made and accepted?
A
When items are brought to the cashier for checkout.
Leading case: Pharma Society vs Boots Chemist
6
Q
Is an offer objective or subjective?
A
Objective. Can’t read in terms that aren’t present.
Leading case: Smith v Hughes
7
Q
What are the three steps of the offer objectivity test?
A
1) Detached objectivity - fly on a wall
2) Promisee objectivity - what’s reasonably understood by the offeree
3) Promisor objectivity - was the offer reasonable?
8
Q
Can an offer be accepted if the accepting party knows the offering party made a mistake?
A
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.
9
Q
List the 7 requirements of acceptance
A
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
10
Q
How does one communicate acceptance?
A
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.
11
Q
What is the Postal Rule?
A
Acceptance occurs at the moment of proper posting of communication. Case: Adams and Others against Lindsell and Another.
12
Q
What happens if acceptance was intended to be communicated but never received?
A
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.
13
Q
What happens if an accepting action was performed for reasons unrelated to an offer?
A
Offer was not accepted. Acceptance must be in response to the offer. Case: Williams v Cowardine, deathbed confession
14
Q
How does an offer end?
A
1) Acceptance - becomes a contract
2) Rejection - including counteroffers
3) Lapse - if a time limit was specified
4) Revocation
15
Q
What is a counteroffer?
A
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
16
Q
When can an offer be revoked?
A
Any time before acceptance - Payne v Cave
17
Q
When can a unilateral offer be revoked?
A
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.
18
Q
What is a “Battle of Forms”?
A
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
19
Q
When trading redlines, which form prevails?
A
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
20
Q
What is consideration?
A
Something a party gets or gives up, i.e. price of a promise.
21
Q
Is consideration an act or a promise to act?
A
Consideration treats actions and promises to act equally. Case: Pao On v Lau Yiu Long.
22
Q
What are the rules of good consideration?
A
1) Consideration must not be past, i.e. the act can’t have come before consideration
2) Consideration must move from the promisee
3) Consideration must be sufficient, but not necessarily adequate
4) Not covered by an exception or promissory estoppel
23
Q
What is the past consideration test?
A
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?
24
Q
What can count as consideration?
A
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)
25
What are the exceptions to good consideration?
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).
26
Is there consideration when agreeing to accept a partial payment of a debt?
Normally, no. Part payment doesn't settle a debt - Foakes v Beer.
27
When can part payment settle a debt?
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.
28
Can a third party payment clear a debt?
Yes - Welby v Drake.
29
What is promissory estoppel?
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.
30
What are the four rules of promissory estoppel?
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)
31
What is the rule of privity?
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).
32
What are the exceptions to privity?
1) Tort
2) Agency
3) Collateral contract
4) Assignment of obligations
4) Exceptions granted under the Contracts (Rights of Third Parties) Act 1999
33
When can agency be claimed?
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
34
What are the types of duress?
1) Duress to person
2) Duress to goods
3) Economic duress
35
What is the test for economic duress?
1) Economic pressure
2) Lack of practical choice for victim
3) Illegitimate pressure
4) Did the pressure duly relate to the contract?
36
How does one determine illegitimate pressure?
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)?
37
What is ICLR?
Intention to Create Legal Relations
38
How does one determine the existence of ICLR?
Objective test, with the added assumptions that commercial situations presume ICLR, and non-commercial (social/domestic) situations presume no ICLR. Case: Balfour v Balfour
39
What is misrepresentation?
When two parties entered into a contract based on what is now known to be incorrect information, which was not a mistake.
40
Misrepresentation can be ______ or _______
Words or conduct
41
What does not count as a representation?
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
42
What is the difference between mere puff and opinion?
Mere puff is an assertion that a reasonable person would not take seriously.
Opinion is something reasonable, with regard to context and specificity.
43
What are the types of misrepresentation?
1) Fraudulent
2) Negligent
3) Innocent
Honourable mention: Negligent misstatement
44
What are the steps for determining if a misrepresentation is actionable?
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 caused a loss
45
How does silence factor into misrepresentation?
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.
46
How does one determine if a misrepresentation induced a contract?
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
47
When does a misrep not induce a contract?
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)
48
Rules on misrep and investigations?
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)
49
What is a fraudulent misrepresentation?
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
50
Where does the burden of proof lie for fraudulent misrepresentation?
Burden of proof is on claimant, so only claim if you have good evidence.
51
What are the remedies for fraudulent misrepresentation?
1) Rescission, and
2) Damages - all losses flowing from transaction, including loss of anticipated profits (East vs Maurer), and
3) Indemnity, if relevant.
52
What is a negligent misrep?
A false statement made with no reasonable grounds to believe its truth. (Misrepresentation Act 1967)
53
Where is the burden of proof for negligent misrep?
Burden of proof is on the defendant to show reasonable grounds for belief (Howard Marine v Ogden)
54
How does special knowledge/expertise factor into misrepresentation?
If defendant had special knowledge/expertise, then more likely to be negligent misrep. (Esso v Mardon)
55
What are the remedies for negligent misrep?
Rescission; OR damages in lieu of rescission and indemnity (if relevant).
56
What is contributory negligence (reg misrep)?
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.
57
What is innocent misrepresentation?
A false statement where the defendant had sufficient evidence of reasonable grounds for belief.
58
What are the remedies for innocent misrep?
Rescission; OR Damages + Indemnity (if relevant). Damages would not be substantive.
59
What is rescission?
An equitable remedy, applied at the discretion of the court, which renders the contract voidable.
60
What are the bars to rescission?
TAIL:
Third Party Rights - Phillips v Brooks
Affirmation - Long v Lloyd
Impossibility - Clarke v Dickson
Lapse of Time - Leaf v International Galleries
61
When can one claim mistake?
When, at the time of entering into the contract, there was an operative mistake having an effect on a fundamental quality of the contract.
62
Can one claim both misrep and mistake?
Yes
63
What is the effect of a mistaken contract?
It is void ab initio, i.e. there was never a contract
64
What are the types of mistake?
Mutual mistake
Common mistake
Unilateral mistake
65
What is a mutual mistake?
When the two parties have a difference of interpretation, and the contract is ambiguous enough to support both/neither. (the Peerless)
66
What is a common mistake?
When both parties make the same mistake (e.g. Courturier v Hastie).
67
What is a res extincta mistake?
A mistake of subject matter (e.g. Courturier v Hastie). Affected by the Sale of Goods Act 1979 where it relates to spoiled goods.
68
What is a res sua mistake?
A mistake of ownership (Cooper v Phibbs)
69
What is a unilateral mistake?
One party is wrong about the contract and the other party is correct. (e.g. Hartog v Collin & Shields)
70
What is the non est factum defence?
When a signatory of a contract argues that the contract is invalid because they were mistaken about the character of the document itself.
71
When does the non est factum defence work and not work?
Works: Incapacity to understand (Thoroughgood's Case) and Fraud (Foster vs MacKinnon)
Doesn't work: Negligence (L'Estrange v Graucob)
72
What is a unilateral mistake of identity?
Normally a con where someone misrepresents themselves as someone rich to obtain an asset on credit. e.g. Shogun Finance v Hudson
73
What is the rule for mistake of identity with distance sales?
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).
74
What is the rule for mistake of identity with face-to-face sales?
You are contracting with the person in front of you (Phillips v Brooks) unless you investigate their identity (Ingram v Little).
75
When a customer approaches the till in a shop, who is the offeror and the offered?
The customer makes the offer to buy the goods at the displayed price, and the till person accepts or rejects the offer.
76
At an auction, who is the offeror/offeree?
The bidder makes an offer which the auctioneer has the authority to accept, finalised when the hammer falls.
77
How can an offeror circumvent the Postal Rule in the wording of their offer?
- Specifying a specific form of acceptance
- Specifying a legitimate requirement for a prompt acceptance (e.g. goods will spoil)
- Specifying that acceptance must be **received** by the expiration date
78
When can an advert be an offer (as opposed to an invitation to treat)?
If the stock is unlimited
79
Is the maker of an invitation to tender obliged to accept the most competitive bid?
No, unless the invitation to tender expressly contained an undertaking to accept the highest/lowest bid. In which case, it would be a unilateral contract.
80
What obligation does an invitation to tender create?
An obligation to consider all bids which fulfill the criteria, subject to three conditions:
1) Tenders were solicited from specific parties known to the requestor
2) Absolute deadline for submission
3) Requestor laid down absoliute and non-negotiable conditions for submission
81
What collateral contracts are made by an auction without reserve price, and what is their effect?
1) Bilateral contract: bidder offers price and auctioneer accepts or rejects
2) Unilateral contract: Auction organisers contract to attendees that the goods will go to the highest bidder or, if withdrawn, bidder is entitled to damages.
Effect: Highest bid must be accepted, otherwise damages.
82
When does the Postal Rule not apply?
- If not contemplateed post would be used
- If manifestly inconvenient/absurd
- To letters revoking offers
- If incorrectly addressed
- If disapplied by offeror
83
When does acceptance by email occur?
When the email is received by offeror's email server (does not need to be opened/read).
84
When acceptance is communication by instantaneous means, when is the contract created?
When notice of acceptance is received by offeror during office hours.
85
What is the result of acceptance communicated but not received?
If offeree at fault = no contract
If offeror at fault = contract formed
If nobody is at fault = no contract
86
When is an extra payment to perform an existing contractual obligation binding (and performing party is not exceeding their contractual duty)?
- Existing contract between parties
-Paying party has reason to doubt performing party is willing/able to complete
-Paying party promises an extra payment to ensure completion
-Paying party gains a practical benefit/obviation of disbenefit
- Extra payment is not result of duress
87
Who carries the burden of proof when a commercial party alleges no ICLR?
The party claiming no ICLR. Heavy burden to rebut the commercial presumption.
88
Best way to signal a commercial agreement has no ICLR?
Clear, unambiguous wording that there is no intention to be legally binding, e.g. "subject to contract"
89
What is the contractual requirement for certainty?
For a contract to be binding, all material items must be certain and complete to be enforceable. Ruling contracts unenforceable due to a lack of certainty is a last resort.
90
Who has full contractual capacity?
Person over 18 of sound mind, not suffering from a temporary lack of capacity (e.g. drunkenness).
91
Is a minor normally bound by a contract?
Normally, no.
92
If a 17-yr-old entered a contract, then has a birthday during the term of the contract, is the contract binding?
No - capacity is assessed when the contract was entered into.
93
If you enter a contract with someone who says they're 19 but are actually 16, is it binding?
No - capacity is not affected by knowledge of the minor's age.
94
Which types of contracts with minors are binding?
Contracts to supply necessaries for the minor's benefit
Contracts of employment, apprenticeship, or education
95
What is a contract for necessaries?
Food, medicine, accommodation, etc
Not strictly "essentials" - includes items for the minor's real use, provided not products or services for comfort/pleasure only
"Necessary" depends on minor's age and actual requirements
96
When is a contract for necessaries binding on a minor?
Contract is otherwise valid
Contract is to supply necessaries to the minor
Contract is for the minor’s benefit
Such contract will be enforced so that the minor must pay a ‘reasonable price’ for the necessaries, not the actual cost of those supplied.
97
When is an employment/apprenticeship/educational contract not binding on a minor?
When not to their benefit, i.e. terms are onerous, freedom is restricted, payment is at the employer's will, etc
98
What is the standard of mental capacity required for contracting?
Capacity requires the individual is able to:
Understand the relevant information
Retain the relevant information
Use the relevant information
Communicate a decision
99
Re: contractual capacity, what is the "relevant information"?
“Relevant information” = reasonably foreseeable consequences of:
Deciding one way or another; or
Failing to make a decision
100
Can someone have capacity for some contracts/decisions and not others?
Yes
Court of Protection can make declarations for specific situations
101
What is the result of a contract where one party lacks capacity?
It is voidable if the party claiming incapacity can establish both:
1) Didn't understand what they were doing, and
2) The other party knew that to be the case
102
Are contracts for necessaries voidable for incapacity?
Party without capacity is still liable to pay reasonable sums.
103
When can a third party enforce a term of a contract under statute?
A third party can enforce a term if:
1) The contract expressly provides they can, or
2) The term confers a benefit to them
AND
3) The third party is expressly identified in the contract by name, as a member of a class, or fitting a particular description. Does not need to be part of the class/meet the description/exist when the contract is entered into.
104
Do parties need to intend for their contract to be enforceable by third parties?
Conferring a benefit to a third party creates a rebuttable presumption of their enforcement rights, which is difficult to rebut.
105
What is the effect of an enforceable third party term/what remedies are available to them?
Same remedies as if they were a party, and the benefit of any exemption or limitation clause.
106
If a contract confers a benefit to a third party, can the party's alter the contract to extinguish that benefit?
Requires the third party's consent if:
Third party has communicated their assent to the term to the promisor;
Promisor is aware the third party has relied on the term; OR,
Promisor can reasonably be expected to have foreseen that the third party would rely on the term and the third party has in fact relied on it.
107
How does specialist knowledge affect whether a statement made during negotiations is a term of the contract?
If the statement-maker had specialist knowledge AND the other party relied on it, then likely a term.
108
If a statement is made during contract negotiations but does not appear in the resulting written contract, is it a term of the contract?
Usually, no.
Can be if it was made by someone with specialist knowledge and the other party relied on it.
109
Aside from the Postal Rule, when will an offeror be bound by an acceptance that does not reach them?
If the acceptor reasonably believes they have communicated their acceptance and the acceptance was not received because of the fault of the offeror (or something under their control, e.g. error on their email server).
110
What are the requirements for the St Martins Property exception to privity of contract to operate?
- Commercial context
- Party A owns property that will be transferred to Party C
- Party A engaged Party B to improve the property
- Party B knows the property will be transferred to Party C (i.e. in contemplation of both A and B)
- It is the intetnion of A and B that A is entering the contract for the benefit of those who may acquire an interest in the property (C)
111
What is the effect of the St Martins Property exception to privity of contract?
The party who commissioned the work (A) can sue the performing party (B) for the current property owner's (C) loss, despite A having suffered no direct loss.
112
What happens if a party enters into an agreement with a company in good faith, but the contract terms conflict with the constitutional documents of the company?
The company is still bound.
113
Factors determining whether a pre-contractual statement is a term or a representation
- Representor's intention to be bound, assessed objectively
- Written terms, if any (parol evidence)
- Time between statement and contract (less time = more likely a term)
- Special knowledge/expertise of representor
- Importance - did representor know that representee would not otherwise enter the contract?
- Assumption of responsibility by Representor
- Representor advises representee to check (if so, less likely a term)
114
What is the officious bystander test?
Test for whether a contract term was implied in fact
If an officious bystander was observing the process and suggested the term, the parties in negotiation would agree wholeheartedly.
115
What is the business efficacy test?
Test for whether a contract term was implied in fact.
If the contract could not function as the parties must have objectively intended it to without the term, then it is implied.
116
What elements are required for the non est factum defence against enforcement of a contract to work?
1) Signer did not understand the document through no fault of their own, AND
2) The difference between the actual document and what they believed they were signing was radical/very substantial
Interpreted restrictively.
117
Requirements to void a contract for unilateral mistake
Mistaken party must show:
- Other party knew, or ought to have known, of the mistake
- Mistake was in respect of a term of the contract, not a collateral matter
- Mistaken party was not at fault/negligent in reaching mistaken conclusion
118
What are the types of illegality that may render a contract void or voidable?
- Contracts illegal under statute (e.g. unapproved loan to a director is voidable under CA 2006)
- Agreements contrary to public policy (e.g. agreements to commit a crime)
- Agreements in restraint of trade (if unreasonable/contrary to public interest)
119
What is the effect of choice on owing payment for partial completion of a contract?
If the non-breaching party can choose to accept or not accept part performance, then choosing to accept means they owe the performing party on a quantum meruit basis.
If the choice does not arise (e.g. other party leaves without saying anything), then the entire obligations rule applies and payment is not owed.
120
Are contractual damages calculated based on the date of breach or the date the claim is decided?
Generally, date of breach
SQE1 - FLK1
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