BARBRI - Contracts

A workman charges their customer £5,000 for a job. The customer says that the work is defective and will cost £800 to put right. The workman says they will accept £4,500 and the customer agrees. Why is there sufficient consideration for this agreement?

Because the debt is disputed in good faith.

Beginning Performance Under a Bilateral Contract can be Acceptance

Beginning performance of a bilateral contract constitutes acceptance.

Method of Acceptance

By any reasonable manner and any medium reasonable under the circumstances. Silence is not acceptance An offer to enter into a contract can be accepted by conduct. If an offeror stipulates a particular method of acceptance, the offer can be accepted by a different method as long as that method is equally advantageous to the offeror. An offer to enter into a unilateral contract can be accepted by completing the act requested by the offeror.

Incorporation of Exclusion Clauses

By signature; By notice; Contractual Document Required (clause must have been incorporated into a document intended to have contactual effect); Timing (brought to the attention of the other part before at the time of the contract).

Implied Terms

Can be implied by: Statute (Sale of Goods (SGA) Act 1979, SGSA 1982; Consumer Rights Act 2015) The Courts; Custom and Usage; A course of dealing between parties.

Contracts by Deed have a longer Claim Period

Claims not made under a deed must be made within 6 years; for those under deed, 12 years.

What is a collateral contract?

Collateral contracts are separate and independent agreements which sit alongside a primary contractual agreement or "main contract". These are often entered into at the same time as the main contract, with the entering into of the main contract being the required consideration for the collateral contract.

Mistakes

Common or identical: Both have made the same mistake; Mutual: where the parties are mutually mistaken but about different things; Unilateral: where one party is mistaken as to the terms of the contact and the other party is aware, or ought to have been aware. Mistake as to identity: Can occur when one party believes they are contracting with a person that the other party is pretending to be.

Terms of the Contract

Conditions (fundamental) and Warranties (incidental or collateral); Terms (incorporated as facts into the contract) vs. Representations (or not); The intentions of the party will determine whether a statement is a term or not. Distinction is important because it will determine the remedy. Any breach of a term will allow damages to be claimed.

To support a contract, which of the following is correct in relation to consideration?

Consideration must move from the person to whom a promise is made (that is, from the promisee).

Capacity - Lack thereof; and Intoxication

Contracts by those who lack capacity are voidable. For those intoxicated, they will have to pay a reasonable amount for necessaries but are not bound by other contracts.

In what types of contracts will an obligation to pay a reasonable price be implied by statute if no price has been agreed and the price cannot be determined from the parties' dealings?

Contracts for goods and services supplied by businesses to consumers. Contracts for the sale of goods between business. Contracts for the supply of services by one business to another.

Reasonableness Test Criteria

Courts will consider factors including: Strength of the bargaining position of the parties; Any inducement received; Customers knew or ought reasonably to have known about the existence and extent of the therm; whether it was reasonable at the time of the contract to conduce that compliance with such a condition was practicable; and whether goods were made special order.

Courts Involvement when deciding whether to imply a term into a contract

Courts will involve themselves if they are satisfied that the parties intend to be bound by the contract, they will attempt to give effect to the intention. Commercial case where parties are familiar with the trade; Cases of future performance over a period of time, where matters will be further adjusted;

Contracts (Right of Third Parties) Act 1999 (CRTPA) Exclusions

Does not apply to employment contracts or Articles of Association. Neither does it apply if the contract say it will not. Most commercial contracts have such clauses. If a third party has a right under a contract, the parties may not agree to change the contract to the detriment of the third party without the third party's consent.

Promissory Estoppel and Consideration

Equitable principle which gives legal effect to an agreement unsupported by consideration. Must have: Clear and unequivocal promise; Promisee must have altered position in reliance of positions; Must be inequitable for promisor to go back on promise.

Exceptions to Past Payment of a Debt

Exceptions include: When debts are disputed in good faith; Unliquidated claims; Third party makes the payment; Payment made by a different method; Always look to see if there is new or different consideration; this change in performance could make payment sufficient consideration.

True or false? Generally, a defence to an exclusion clause (or any other contractual term) is that the party against whom the clause is being used didn't read the contract

False, a party who signs a contract generally is bound by it terms.

True or false? Under the Contracts (Rights of Third Parties) Act 1999, a non-party can enforce a term in a contract only if they are named in it

False: A person can also enforce rights under the CRTPA 1999 if they are a member of a class of people described in the contract as able to enforce the contract or benefiting under it

True or false? In a contract between businesses, the Supply of Goods and Services Act 1982 implies conditions that any services will be provided (1) within a reasonable time (if no time is agreed) and (2) with reasonable care and skill.

False: These terms are innominate terms implied by SGSA 1982. [Thus, the remedy available depends on the circumstances.]

True or false? Under the Contracts (Rights of Third Parties) Act 1999, a non-party can enforce a term in a contract only if the contract expressly provides the third party may enforce the term.

False: Under the CRTPA 1999, a third party may also enforce a term of a contract if the contract confers a benefit on the third party with the apparent intent to allow them to enforce it.

True or false? The courts will imply a term which overrides the express terms of the contract.

False: the courts are very unlikely to imply a term which overrides the express terms

Offer - Must be definite and certain in its essential terms

For an offer to be made, it must create a reasonable expectation that the offeror is willing to enter into a contract. An offer must contain a promise, undertaking or commitment.

Contracts that Require Writing

Guarantees; interest in land; and consumer credit agreements.

Severing Uncertain Terms

If courts cannot find sufficient certainty of terms, they may be able to sever them.

Parole Evidence Rule

If terms are written, this rule exists to help decide whether evidence of terms outside the written contract can be taken into account. General presumption is that external evidence cannot add to, subtract from, contradict or vary the terms of a written contract.

What are the innocent party's remedies if an innominate term is breached?

If the effect of the breach goes to the root of the parties' rights and obligations under the contract, the innocent party can terminate the contract and claim damages. If the effect of the breach is only incidental to the contract, the innocent party can only claim damages.

Sale of Goods and Services Act 1982 - Business to Business only

Implied terms include the seller will carry out the service within a reasonable time, and with reasonable care and skill. Unfair Contracts Terms Act 1977 also applies here.

"Time is of the Essence"

In a commercial contract, if a time for delivery has been agreed, then it is presumed that time for delivery is of the essence unless the contract states that it is not. If time for performance of an obligation is 'of the essence', on-time performance of that obligation is a condition. Late performance entitles the innocent party to terminate the contract and claim damages.

Communications which do not amount to an offer

Invitation to Treat; Advertisement; shop sales; price lists; tenders, auctions; and price quotations. Words or conduct that invite another party to make an offer. If there has been a series of communications between the parties, pay attention to the legal significance of each statement.

What is the effect of a counteroffer?

It constitutes a rejection of the original offer and creates an offer from the original offeree which the original offeror may accept or reject.

Reasonableness in Practice

It is common for exclusion clauses in a commercial setting to limit liability rather than exclude it. Under UCTA, it is whether it was reasonable to include the clause into the contract, not whether it is reasonable to rely on it. Burden of proof rests with those relying on the clause.

Why is the following not a valid offer? A buyer telephones a car dealer and tells the salesperson that he is willing to pay about £23,000 for a car.

Its terms are uncertain.

Void versus Voidable

Key thing is that void contracts are not enforceable, but an aggrieved party can elect to enforce a voidable one. In sale of goods contracts, title to goods can never pass under a void contract whereas a party who bys goods under a voidable one may be able to pass good to a third party who buys them in good faith and for value.

Formal Requirements

Must be in writing: A guarantee. Must be in writing: A contract for the sale of land. No formal requirements: A contract to buy a boat. Must be by deed: A transfer of land. Must be by deed: A promise to make a gift of £10,000.

Alex assigned his rights under his contract with Becky to Cameron. Can Cameron rely on those rights to bring a claim against Becky?

No, unless notice of the assignment has been given to Becky.

Formation of a Contract

Offer and acceptance; Intention to be legally bound; Consideration;

Which of the following are features of a unilateral contract?

Only one party is bound. Only one party makes a promise. The offer is irrevocable once performance has begun.

Who may accept an offer?

Only the person to whom an offer is addressed. Must know of offer.

Basic Principle of Contract Law

Parties must be in agreement; have intended to be legally bound; and must be supported by consideration.

Is a term likely to be incorporated into a contract by virtue of the fact that the parties have dealt on the same terms twice before?

Probably no, as three to four dealings between the parties on the same terms over a five-year period have been held to be insufficient.

Contract by Deed

Promises where nothing is received in return. A classic example is a promise to make a gift; Must be by deed: A promise to make a gift of £10,000; A conveyance of land.

Termination by Offeree

Rejection. Express. Counteroffer is a rejection. Lapse of time. Termination by Operation of Law (death, destruction, illegality or failure of conditions in the offer). Rejection of a collateral offer does not terminate the original terms.

CRA 2015 - Implied terms for Services

Service's implied terms are: Carried out with reasonable care and skill; Completed in accordance with any information which consumer relies on; Completed for a reasonable price; Completed within a reasonable time.

'Agreement to agree"

Such a term would prevent a contract from coming into existence.

What does the defence of non est factum mean in relation to terms in a contract, including exclusion clauses?

That the party relying on the defence did not understand what they were signing and thought it meant something fundamentally different.

What is implied into a contract between businesses for the sale of goods under the Sales of Goods Act 1979?

That the seller has the right to sell the goods. That the goods match any description applied by the seller. That the goods are of satisfactory quality. That the goods are fit for any purpose made known by the buyer.

Which of the following terms are implied into a contract between businesses for the sale of goods under the Sales of Goods Act 1979?

That the seller has the right to sell the goods. That the goods match any description applied by the seller. That the goods are of satisfactory quality. That the goods are fit for any purpose made known by the buyer

Consumer Protection Act 1987

The Consumer Protection Act 1987 is in place to hold manufacturers accountable for producing unsafe goods. It allows consumers to claim compensation if the defective product has caused personal injury, damage to property or death. Claims under the Act are generally brought against the product's 'producer'. The company or individual that has their name on the product is generally regarded as the producer. If the product has been imported to the UK from outside of the EU, the importer is regarded as the producer.

What remedies can a business buyer claim if goods that they have bought from another business turn out not to match the seller's description?

The buyer can terminate the contract and reject the goods unless the breach is so slight that it would be unreasonable to do so. The buyer can also claim damages.

Consideration must be sufficient but need not be adequate

The consideration flowing from each party to a contract need not be equal in value, but must have some value. Performance of an existing duty is usually not good consideration. The exception is when an existing duty confers a practical benefit/additional consideration on the party.

Mistakes - Possible Outcomes

The contract is not void for mistake: Party A enters into a contract with Party B. Party A is mistaken about Party B's identity However, Party A would have entered into the contract with Party B in any case. The contract is void for mutual mistake: The parties to a contract think they are contracting about different things. The contract is void for common mistake: The parties are both mistaken about the existence of the subject matter of the contract. The contract is void for unilateral mistake: Party C enters into a contract to buy goods from Party D. Party D has made an obvious printing error, and the goods cannot be delivered within the timescale agreed in the contract. The contract is not void for mistake: Party E agrees to buy a car from Party F. Both parties think the car is a 1.6 litre XL model. In fact it is a 1.4 litre L.

As a general rule, which of the following is true if a party to a contract is a minor?

The contract is voidable only by the minor. The contract is not voidable if the minor ratifies after reaching age 18.

A woman enters into a contract with a driving school to provide her with driving lessons. The only express terms of the contract relate to the price and the duration of the lessons. She wishes to make a claim on the driving school's insurance, but she learns that the driving school does not have the insurance that it was required by law to have. Will the woman be able to recover damages from the driving school under the contract?

The courts will imply a term into a contract if the term is necessary to make the contract work as intended (sometimes referred to as the 'business efficacy test'). Here, possession of the necessary insurance is essential for the lessons to take place, so a term requiring the driving school to take out that insurance is likely to be implied. Since the driving school did not take out such insurance, the woman may sue the school for breach of contract.

Which of the following statements are correct in relation to incorporation of a contract term - such as an exclusion clause - by notice?

The more onerous the term, the more the party relying on it must do to bring it to the other party's attention. The party relying on the term must take reasonable steps to bring the term to the other party's attention. The party relying on the term must give the other party notice of it before the contract is concluded.

What is the standard used to determine whether a term - such as an exclusion clause - will be incorporated into a contract through previous dealings?

The party attempting to rely on the term must show a regular and consistent course of dealing between the parties using the term.

UCTA 1977's Reasonableness Test

The test is whether it was reasonable to include the exclusion in the contract when it was entered into. The party relying on the exclusion must show that it is reasonable.

Which of the following is (are) true in respect of the reasonableness test under UCTA?

The test is whether it was reasonable to include the exclusion in the contract when it was entered into. The party relying on the exclusion must show that it is reasonable.

Under the Contracts (Rights of Third Parties) Act 1999, which of the following will prevent parties to a contract from varying the rights conferred on a third party in the contract?

The third party has communicated his agreement to the term benefiting him; The third party has relied on the term of the contract and the promisor is aware of that reliance. The 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.

Intentions to Create Legal Relations

There is a presumption in this situation that the parties intended to create legal relations: An agreement in a commercial context. There is a presumption in this situation that the parties did not intend to create legal relations: An agreement between family members. There is a presumption in this situation that the parties did not intend to create legal relations: An agreement which is expressed to be 'subject to contract'. There is a presumption in this situation that the parties did not intend to create legal relations: An agreement between close friends.

Statutory Exceptions under the Contracts (Right of Third Parties) Act 1999 (CRTPA)

Third party has a right to enforce terms of a contracts if: contract expressly provides the third party may enforce contract; or a term of the contract is purported to confer a benefit to the third party. Rich agrees to pay Erin $1000 to paint Paua's house and Erwin agrees.

True or false? A party who lacked mental capacity or who was intoxicated at the time a contract was made may avoid the contract only if the other party knew of the incapacity or intoxication at the time the contract was executed.

True as to both lack of mental capacity and intoxication.

True or false? The terms regarding the quality of goods and services implied by the Consumer Rights Act 2015 into a contract between a business and a consumer are similar to those implied into a contract between businesses.

True, although a few additional terms are implied by CRA 2015.

True or false? Death of either the offeror or the offeree before acceptance of the offer will terminate an offer by operation of law.

True.

True or false? Terms may be incorporated into a contract if the parties have notice of them.

True.

True or false? Undue influence is based on whether the relationship between the parties has been abused and does not require proof of bad faith or unlawful conduct.

True.

True or false? Under Consumer Rights Act 2015, a court can be asked to check any term which is not prohibited for unfairness, unless the term is excluded from the fairness test.

True. CRA 2015 potentially applies the fairness test to all terms of a contract other than those specifying the main subject-matter of the contract or relating to the price

True or false? A collateral contract can be implied between two parties where one of the parties (A) makes a promise to the other (B), and as a result B enters into another contract with a third party (C).

True: The collateral contract allows A to claim against B, even though the only express contract is between B and C.

Reliance Interest Damages

Under contract law, in a bilateral contract two or more parties owe obligations to each other. Each party acts in reliance that the other party will fulfill their respective obligation. If one party fails to respect their obligation, then the other party or parties may suffer an economic harm. Reliance damages compensate the harmed party/ies for the amount of damages they suffered for acting in reliance on the other party's contractual obligations.

Excluding Liability under SGA 1979

Unfair Contracts Terms Act 1977 make it difficult for a seller to exclude liability for breach of SGA 1979 implied statutory terms.

Which of the following statements is correct in relation to the postal rule?

Unless the offer stipulates otherwise, it is accepted when the acceptance is posted, as long as the letter containing the acceptance is properly addressed and stamped.

In what situations will there be good consideration for a promise to accept part payment of a debt?

Where it is agreed that payment will be made at a different place, or earlier, or by different means. Where a debtor is in financial difficulty and agrees to pay all their creditors agreed amounts to discharge all of their debts (that is, a composition). Where the creditor's claim is unliquidated or disputed. Where it is agreed that a smaller payment made by a third party will discharge the debt.

Which of the following does the Consumer Rights Act 2015 say must be taken into account when considering whether a term is unfair?

Whether the term is drafted in plain, intelligible language. Whether the term causes a significant imbalance to the detriment of the consumer. The need to resolve any ambiguity in favour of the consumer. Whether the term is legible.

Construction of Exclusion Clauses and Contra Proferentem Rule

Words must be clear and unambiguous and cover the loss suffered; Contra Proferentem Rule (if there is any ambiguity when interpreting an exclusion clause, the courts will interpret the ambiguity against the party seeking to rely on the clause).

A contract gives a tenant of land the option to buy the land at a price to be agreed between the parties. The contract says that the price is to be determined by an expert valuer if it cannot be agreed. Is the option binding?

Yes, the parties have agreed a mechanism to resolve any uncertainty as to the price for the land.

Exception to Past Consideration.

3 Conditions required include: Act must have been done at the promisor's request; Parties must have understood that the act was to be remunerated; and Payment must have been legally enforceable had the promise been made in advance.

Breaking Down the Consumer Protection Act 1987

A claim can't be brought if the damaged property is below £275 in value; A claim can't be brought for damage due to business products that are not ordinarily intended for personal use; The Act doesn't just cover the consumer that purchased the faulty product. Anyone who suffers damage is entitled to a claim; Consumers can begin court cases up to 3 years from the initial date of the injury; No claim can be submitted more than 10 years since the product was last sold; Should a product be declared faulty, the Act gives local authorities the right to seize unsafe goods and suspend retailers from selling them.

Entire Agreement Clause

A common term in written contracts which provides that written documents constitute the entire agreement. Purpose is to uphold the parole evidence rule by preventing any other evidence capable of being considered

What type of term are the terms as to title, description, and quality implied by the Sale of Goods Act 1979?

A condition.

Contracts may be voided or voidable

A contract may be void or voidable by reason of: Mistake (void); Duress (voidable); Undue Influence (voidable); Illegality or contravention of public policy (void); Misrepresentation (voidable).

Which are likely to be viewed as an offer to enter into a contract?

A customer taking a bag of groceries to a supermarket checkout. An advertisement in a newspaper for a competition to win a holiday.

Which of the following statements regarding contracts of minors are true?

A minor will be bound by a contract for necessaries. A minor will be bound by a contract for the acquisition of a permanent interest in property. A minor may keep property transferred to them under a contract they have voided if it is just and reasonable.

Which of the following are the general effects of the doctrine of privity of contract?

A non-party cannot acquire rights under a contract. A contract cannot impose an obligation on someone who is not a party to it.

Which of the following statements are true about voidable contracts?

A party who buys goods under a voidable contract may be able to pass good title to those goods to a third party. A party who rescinds a voidable contract can claim back money that they paid under the contract.

What are the requirements for promissory estoppel to serve as a substitute for consideration?

A person (A) must have promised clearly not to rely on their existing rights. The other party (B) must have altered their position in reliance on A's promise. It must be inequitable for A to go back on that promise.

Which of the following are correct statements about the revocation of an offer?

A promise by an offeror not to revoke their offer will be binding only if the offeree gives something in return. An offer is revoked when the offeree learns of the revocation. Revocation of an offer can be communicated by a third party.

Which of the following is executory consideration?

A promise to do something in the future. A promise not to do something in the future.

Which of the following statements is(are) true?

A promise to perform an existing obligation owed to a third party can serve as consideration. Performance of a statutory duty cannot serve as consideration.

Performance of an existing contractual duty owed to a third party

A promise to perform owed to a third party other than the promisor is sufficient consideration, i.e. promising not to sue someone allowing goods to be shipped.

In which of the following situations is there sufficient consideration for the promise?

A singer promises to sing 30 extra minutes at a club than provided in a contract, and the club owner promises to pay the singer an extra £100. A singer is upset with the acoustics in a club in which she agreed to perform, and a customer in the club offers to pay the singer an extra £100 to persuade her to sing as agreed.

In which of the following scenarios is a court more likely to enforce the promise based on promissory estoppel.

A tenant loses their job and asks their landlord if the can forgo two months' rent to pay for a training to become a qualified lorry driver. The landlord promises not to charge the tenant rent for two months and the tenant then uses the last of their savings to pay for the training.

Innominate Terms

A term in a contract which is neither clearly a condition nor clearly a warranty.

Exclusion clauses

A term of contract attempting to exclude or limit liability. Clauses must: Have been incorporated into the contract; be properly drafted so that it is construed as excluding liability; and not prohibited by statute (most relevant legislation is the UCTA 1977; and CRA 2015).

Which of the following tests will a court use to decide whether to imply a term into a contract?

A term will be implied if it is necessary to give business efficacy to the contract.

Past Consideration

Acts performed prior to the contract are not sufficient consideration. Beware of questions that use 'consideration' to refer to something already done as in 'in consideration of you have done X, I promise $1000. Exception is an implied understanding of payment.

Common Law Exceptions to Privity - Agency, Assignment and Subrogation

Agent is negotiating on behalf of the Principal; Assignment is the transfer of the contactual right to a third party. Notice must be given and only the benefit of the contract can be transferred; Subrogation pertains to insurance contracts; the 'insurer is surrogated the rights of the policyholder.

Which of the following statements are correct in relation to acceptance of an offer?

An offer to enter into a contract can be accepted by conduct. If an offeror stipulates a particular method of acceptance, the offer can be accepted by a different method as long as that method is equally advantageous to the offeror. An offer to enter into a unilateral contract can be accepted by completing the act requested by the offeror

UCTA 1977 and Exclusion Clauses

Any clause that attempts to exclude liability for death or personal injury caused by negligence will be automatically void; Any attempts to exclude liability for any other loss caused by negligence; Liability for breach to SGA 1979 or SGSA 1982; If one party contracts on its standard form terms and conditions, it cannot rely on terms that exclude liability for breach of contract; reserve right to substantially alter performance; or render no performance unless unreasonable.

Consumer Rights Act 2015 - Implied terms for Goods - Trader to Consumer

Applies to the sale of goods in a consumer setting. Requires that all goods should follow similar implied terms as SGA 1979. Liability for the implied terms cannot be excluded or limited at all.

Capacity - Minors - Minor's Contracts Act 1987; and Exceptions

As a general rule, contracts entered into by minors are voidable. Execeptions: Minors are able to enter contracts of employment provided the terms benefit them. Necessaries - Contracts for necessary goods of services at a reasonable price will be binding.