Contract Law: Core Principles and Formation

Comprehensive vocabulary flashcards reviewing essential concepts of contract formation, terms, vitiating factors, termination, and remedies based on SQE lecture materials.

Contract

A legally enforceable agreement that gives rise to rights and obligations among the parties that agree to its terms.

Offer

An expression of willingness by one party to contract with another party on certain terms, which must be communicated, specific in terms, and demonstrate an intention to be bound.

Offeror and Offeree

The offeror is the party making the offer, while the offeree is the party to whom the offer is made.

Invitation to Treat

An invitation for offers to be made, which is not an offer itself and is not capable of acceptance (such as goods displayed in a shop or advertisements).

Unilateral Offer

An offer that involves the offeror making a promise in exchange for the offeree performing a requested act.

Mirror Image Rule

The requirement that for an acceptance to be valid, the acceptance must match the offer exactly.

Counter-offer

A response to an offer that introduces different or additional terms, replacing the original offer so it is no longer available for acceptance.

Battle of the Forms

A situation where two businesses endeavour to contract on their own standard terms and conditions, governed by the principle that the last shot wins.

Postal Rule

An exception to acceptance taking place when communicated, stating that if a letter is correctly addressed and posted, acceptance takes place on posting.

Consideration

Something of value given or promised in return for a promise, which can involve doing or refraining from doing something that benefits the promisor or causes detriment to the promisee.

Executed Consideration

Consideration where a promise is given in return for an act, becoming enforceable once the act is fully performed.

Executory Consideration

Consideration where a promise is given in exchange for another promise.

Promissory Estoppel

An equitable doctrine used as a defence to prevent a promisor from going back on a clear promise not to enforce contractual rights when the promisee has altered their position in reliance.

Necessaries

As defined under the Sale of Goods Act 1979, goods suitable to the condition in life of a minor or person lacking mental capacity and to their actual requirements at time of sale and delivery.

Privity of Contract

The doctrine providing that a person who is not a party to a contract cannot acquire rights or be made liable under it.

Collateral Contract

An additional separate contract established between a promisor and a third party that enables the third party to bring an action in contract.

Contracts (Rights of Third Parties) Act 1999

Statute allowing a third party to enforce a term of a contract if the term confers a benefit on them and the contract expressly identifies them by name, description, or class.

Parol Evidence Rule

A rule stating that external evidence should not be used to determine the terms of a written contract.

Entire Agreement Clause

A clause stating that the written version of the contract is a complete record of what the parties have agreed, causing courts to disregard prior oral warranties.

Condition

A major contractual term going to the root of the contract, breach of which entitles the innocent party to terminate the contract and claim damages.

Promissory Condition

A term under which a party promises to do something, and performance of that promise is a prerequisite (condition precedent) to the other party's obligation to perform.

Warranty

A minor term of a contract, breach of which allows the innocent party to claim damages but does not entitle them to terminate the contract.

Innominate Term

A contractual term categorized as a condition or warranty only after a breach occurs, depending on whether the breach deprives the innocent party of the substantial benefit of the contract.

Business Efficacy Test

An objective test used to imply a term in fact by assessing whether the contract requires the term to make it workable as the parties intended.

Officious Bystander Test

A test used to imply a term in fact when the term is so obvious that if an officious bystander suggested it, the parties would wholeheartedly agree it goes without saying.

Exclusion Clause

A contractual term or notice that seeks to limit or exclude a duty or liability that would otherwise exist.

Contra Proferentem Rule

The rule of construction providing that any ambiguity in an exclusion clause will be interpreted against the party relying on the clause.

Unfair Contract Terms Act 1977

Statute governing exemption clauses in business-to-business contracts, preventing the exclusion of liability for negligence resulting in death or personal injury.

Consumer Rights Act 2015

Statute regulating business-to-consumer contracts, protecting consumers against unfair terms that cause a significant imbalance in rights to their detriment.

Misrepresentation

A false statement of fact or law made during pre-contractual negotiations by one party that induces the other party to enter into the contract, causing loss.

Fraudulent Misrepresentation

A false statement made knowingly, without belief in its truth, or recklessly as to whether it is true or false.

Res Extincta

A common mistake as to the existence of the subject matter rendering a contract void ab initio because the subject matter does not exist or has ceased to exist.

Res Sua

A common mistake as to title rendering a contract void because a party agreed to acquire property that they already owned.

Non Est Factum

A defence meaning 'this is not my deed', rendering a signed document void where there is a fundamental difference between what was signed and what was believed to be signed, without carelessness.

Duress

Unfair and improper coercion—such as actual or threatened violence to a person, property, or economic pressure—that renders a contract voidable.

Economic Duress

Illegitimate pressure that results in compulsion or a lack of practical choice for the victim, serving as a significant cause for entering into a contract.

Undue Influence

Improper pressure placed on a victim through a relationship of trust, confidence, or protected status, making the resulting contract voidable.

Doctrine of Notice

Principle where a creditor is bound by a third party's undue influence if it had actual or constructive notice of the influence and failed to take reasonable protective steps.

Entire Obligation

A contractual requirement where complete performance by one party is a prerequisite to enforcing the other party's obligation to pay.

Divisible Contract

A contract consisting of severable obligations rather than one entire obligation, enabling payment upon completion of separate stages.

Substantial Performance

A doctrine applying to minor performance defects, requiring the recipient to pay the contract price minus damages for breach of warranty.

Quantum Meruit

A remedy awarding a reasonable sum in respect of the benefit conferred by partial performance when the innocent party accepts the work.

Accord and Satisfaction

Unilateral discharge of a contract by agreement without a deed, where accord is the release agreement and satisfaction is the fresh consideration.

Repudiatory Breach

A breach of condition or serious breach of an innominate term that deprives the innocent party of substantially the whole benefit, granting the right to terminate or affirm.

Anticipatory Repudiatory Breach

A clear indication by a party before performance is due that they do not intend to perform a fundamental obligation, allowing immediate termination or affirmation.

Frustration

An event occurring without fault of either party that renders a contract impossible to perform, illegal, or radically different from what was intended, automatically discharging it.

Law Reform (Frustrated Contracts) Act 1943

Statute regulating post-frustration recovery, allowing return of money paid, reimbursement of reasonable expenses at court discretion, and compensation for non-monetary benefits.

Expectation Loss

Standard method of calculating contract damages aiming to place the claimant in the position they would have been in had the contract been properly performed.

Reliance Interest

Measure of damages designed to compensate a party for expenses incurred in reliance on the contract, putting them in the position as if the contract was never made.

Liquidated Damages Clause

A contractual clause fixing a specific sum for a specified breach, enforceable if proportionate to a legitimate interest and a genuine pre-estimate of loss.

Penalty Clause

An unenforceable clause setting an inflated financial sum designed to intimidate a party into performance rather than compensate for loss.

Specific Performance

An equitable order compelling a party in breach to perform contractual obligations, granted at court discretion when damages are inadequate.

Restitution

A remedy restoring valuable benefits transferred when no valid contract exists, was void, or was discharged, preventing unjust enrichment.