CAP 1 Law - Contract law

Are the following statements true or false?

A letter of revocation is effective when posted.

A. True

B. False

If an offer states that it will remain open for three months, the offeror cannot

revoke it before three months have passed.

C. True

D. False

B False. The postal rule applies to acceptance only and not to revocation.

D False. The offeror may still revoke the offer within that three-month period,

unless they have bound themselves to keep it open by a separate contract.

On 3 April, Mary writes to Cara and offers to sell her all her old accountancy

study manuals for €40. On 7 April Cara posts a letter, together with a cheque

for €40, saying that she will pick them up on 9 April. However, on 8 April, Mary

discovers that she has failed two of her papers and so sends a letter to Cara

saying that the books are no longer for sale. On 9 April, each receives the

other’s letter.

Does the letter of revocation take effect on 8 April?

A. Yes

B. No

Does Cara’s acceptance take effect on 9 April?

C. Yes

D. No

B No. The ’postal rule’ does not apply to revocation.

D No. The acceptance takes effect when it is posted on 7 April (assuming

postal acceptance was within the contemplation of the parties) with the

result that there is a binding contract at that point.

Are the following statements true or false?

Acceptance must always be communicated to the offeror for it to be effective.

A. True

B. False

Acceptance may be express or inferred from conduct.

C. True

D. False

B False. The offeror may waive the requirement for acceptance to be

communicated (either expressly or by implication).

C True.

Can the following constitute valid consideration?

A promise by Elaine to not pursue an action against Bella for breach of contract

providing Bella agrees to do Elaine’s accounts for her for 12 months without

charge.

A. Yes

B. No

The payment of €1 per year as rent for a house.

C. Yes

D. No

A Yes. This is valid consideration.

C Yes. Such a rent may not be adequate, but it is sufficient, which makes it

valid consideration.

On Tuesday, William advertised his car for sale for €3,500 in a local newspaper.

Robert saw the advertisement and telephoned William offering him €3,000 for

the car. William eventually offered to sell the car to Robert for €3,300. Robert

replied that he would need to test-drive the car before he could agree such a

price. Robert then agreed a time to meet at William’s house the following

weekend for the test drive. On Friday, William sold the car to his neighbour

Joanna for €3,000.

Are the following statements true or false?

Robert has no right of action against William because no acceptance took

place.

A. True

B. False

William’s advertisement in the newspaper is purely an invitation to treat and as

such is incapable of acceptance and forming a legally binding contract.

C. True

D. False

A True. No contract is formed without agreement between the parties (usually

in the form of an offer and an acceptance).

C True. As a general rule, an advertisement in a newspaper is an invitation to

treat which, unlike an offer, cannot be accepted to form a legally binding

contract.

Sarah agrees to let her flat to Kevin for one day for the purpose of viewing a

carnival. Kevin pays her a €50 deposit with €80 due to be paid at the end of the

carnival. Due to civil unrest, the government prohibits all street entertainment

and the carnival is cancelled just before Kevin is due to travel to the flat. Neither

party has incurred any costs (save for payment of the deposit) in performance

of the contract. Applying the law in relation to the frustration of contracts, which

of the following statements is correct?

A. Sarah can keep the deposit and Kevin must pay an additional €15 so that

each party bears an equal loss

B. Sarah must pay back the deposit and Kevin need not pay the balance

C. Sarah can keep the deposit and Kevin is liable to pay the balance

D. Sarah can keep the deposit but cannot claim the balance

B Where a frustrating event occurs, the loss lies where it falls, except where

there is “total failure of consideration”, which is the case in this scenario.

Payments made prior to the frustrating event can then be recovered.

Jonas employs Markus to plan and build a Go-Kart course on his field, which

he intends to open to the public on 1 June. His viability and market research

studies lead him to expect that he will earn €300 per day in the first three months

of business. Markus contracts to construct the course and surrounding areas

according to certain plans and specifications and to complete the work by no

later than 30 April for a contract price of €10,000. The contract provides that

Markus will be liable to pay Jonas €150 for every day work overruns the

scheduled completion date. Which of the following best describes the legal

position?

A. The provision is void because it states a sum in excess of 1% of the total

contract price

B. The provision is for unliquidated damages and is valid because it is less

than the anticipated loss

C. The provision is for liquidated damages and is valid because the figure is

not penal in nature and protects Jonas’ legitimate interest

D. The provision is likely to be void because the same amount is payable

regardless of the actual loss

C The amount of €150 when compared against the contract price is only 1.5%

per day and would not be thought of as excessive. It is intended to protect

Jonas’s legitimate interest of ensuring the work is completed on schedule

and is therefore a valid liquidated damages clause.

Which of the following statements in relation to contractual remedies is

incorrect?

A. Specific performance is likely to be more appropriate than damages in a

contract involving personal services

B. Specific performance is likely to be awarded in a contract for the sale of land

C. A mandatory injunction often has the same result as specific performance

but is less common

D. Specific performance is awarded at the discretion of the court where

damages would not be an adequate remedy

A Specific performance is unlikely to be ordered in such a case because of the

difficulties in supervising compliance with the award.

Georgina contracts with Martin to perform a solo dancing routine for seven

consecutive nights beginning on 15 July. On 5 July Georgina tells Martin that

she has had a better offer elsewhere and will no longer be available to perform

as agreed. Are the following statements true or false?

Martin can obtain an order for specific performance from the court compelling

Georgina to perform on the agreed dates.

A. True

B. False

Georgina’s actions amount to an express anticipatory breach of contract.

C. True

D. False

B False. Georgina will not be compelled to perform, as specific performance is

not granted in relation to contracts for personal services.

C True. This breach is anticipatory as it arises before performance is due.

Elizabeth arranged a weekend holiday for the members of the Amateur

Dramatics Society, of which she was a member. The Society was going to see

a Gilbert & Sullivan production in Galway. Elizabeth booked all 35 members of

the group into the River View Hotel. However, the night before the society was

due to travel the River View Hotel was burned down. Following the fire, the hotel

contacted Elizabeth and informed her that it would not be refunding the booking

deposit and that it is under no further obligation to the Society because the

contract had been discharged by frustration.

Has the contract been discharged by frustration?

A. Yes

B. No

As a general rule, where a contract is discharged by frustration should any

deposit received be repaid?

C. Yes

D. No

A Yes. Destruction of the subject matter of a contract is a frustrating event if

neither party is responsible for such destruction.

D No. It should only be repaid where there is a total failure of consideration,

otherwise the loss lies where it falls.

Fred, who operates a vehicle transporter, agreed to deliver a new van to Alastair

who runs a business delivering refrigerated foods to households in a remote

corner of North Wales. Fred has mechanical problems with the transporter and

ends up being 15 days late reaching Alastair. Alastair sues Fred for:

(1) the loss of a special contract that he had entered into with a local food supply

company to store 50kg of fresh lobster over the four days when he would

not be using the van. He was particularly cross about losing this contract,

which he had expressly told Fred all about, because he felt there was

potential for more business with the company in the future;

(2) the loss of earnings from his inability to make his usual deliveries; and

(3) distress caused to Alastair by letting down his regular customers.

What can Alastair recover in damages?

A. (2) only

B. (1) and (2) only

C. (1), (2) and (3)

D. (1) and (3) only

B Even if the damages at (1) were considered exceptional or abnormal, they

would still be recoverable because Fred knew about the special contract.

The damages at (3), however, will be considered too remote.

With regard to damages for breach of contract, are the following statements

true or false:

The burden of proof is on the claimant to show that they took reasonable steps

to mitigate their loss.

A. True

B. False

Damages for pure economic loss are generally not recoverable in the absence

of other losses.

C. True

D. False

B False. The burden of proof is on the defendant to show that the claimant

failed to do so.

C True. Normally economic loss can only be recovered where other losses may

be recoverable. In exceptional circumstances, however, they can be

recovered, such as where there is a special relationship between the parties

and evidence of knowledge of potential economic loss.

Cool Cookies Ltd agreed to sell its factory to Crunch Ltd for €675,000, but after

contracts were exchanged the market value increased considerably and Cool

Cookies Ltd sold the factory to Krisp plc for €800,000. There was no other

available property that was comparable.

Is the court likely to grant a remedy of specific performance in this situation?

A. Yes

B. No

In the event that the court award damages to Crunch Ltd, are these likely to be

in the region of:

C. €125,000

D. €675,000

B As the property has already been sold to a third party, it is highly unlikely

that specific performance will be awarded in this situation.

C €125,000 is the difference between the contract price and the market value

of the property.

As a general rule, will an exclusion clause be incorporated into:

A signed document which the other party has not read?

A. Yes

B. No

An unsigned contract, even if the other party has not read the clause, when the

party seeking to rely on the clause has given reasonable notice of its existence

before the contract is made?

C. Yes

D. No

A Yes.

C Yes. Provided no misleading explanation has been given of its effect.

Are the following statements true or false?

The provisions of the Consumer Rights Act 2022 which deal with unfair contract

terms apply to all contracts.

A. True

B. False

The courts will interpret any ambiguity in an exclusion clause in favour of the

party not seeking to rely on it.

C. True

D. False

B False. This regulation requires that one of the parties to the contract is a

consumer.

C True.

Are the following statements true or false?

Expectation losses can be defined as the innocent party’s loss of a bargain,

such as the profits that they would have expected to receive had the contract

been performed, less the costs they would have incurred to earn that profit.

A. True

B. False

In a claim for contractual damages, in exceptional circumstances the court has

the ability to award damages greater than the loss suffered by the claimant, in

order to punish the defendant and prevent them earning a profit as a

consequence of their breach of contract.

C. True

D. False

A True. These losses are recoverable based on loss of bargain.

C True. This award is known as punitive damages and is only awarded in

exceptional circumstances.

Where a commercial contract is created by family members, the presumption

is that it is a social contract and lacks the intention to create a legally binding

agreement. Is this statement:

A. True

B. False

As a general rule, the presumption is that social agreements lack the intention

to create legally binding contracts. Is this statement:

C. True

D. False

B False. Commercial agreements between family members are still

considered commercial agreements and are automatically presumed to be

legally binding.

C True.

Are the following statements true or false?

An offer can be made to the world at large.

A. True

B. False

An advertisement in a newspaper can never constitute a valid offer as it is

merely an invitation to treat.

C. True

D. False

A True. This was established in the case of Carlill v. Carbolic Smoke Ball Co.

D False. Although this is normally the case there may be exceptions. The

advertisement in Carlill v. Carbolic Smoke Ball Co. was held to be an offer,

for example.

Dave offers to buy Ken's trailer tent for €750. Ken says that he's keen to sell

but that he will not accept anything less than €800 in any circumstances. Which

of the following best describes the status of Ken's reply?

A. It is an acceptance

B. It is a counter-offer

C. It is a request for information

D. It is a revocation of the offer

B The original offer from Dave is terminated and this reply from Ken constitutes

a new offer that can be accepted or rejected by Dave.

With regard to the revocation of an offer:

To be valid, must a revocation be made by the offeror only?

A. Yes

B. No

As a general rule, is revocation sent by letter effective on posting?

C. Yes

D. No

B No. A revocation may be made by the offeror, by action, or by a reliable third

party

D No. Revocation must be communicated to the offeree. The 'postal rule'

applies only to acceptance, not revocation.

Harold wrote to Sylvia offering to buy her tandem for €135 and, sure that she

would accept his offer, said "If I don't hear from you, I'll consider it mine." Sylvia

meant to write back to Harold to say that she was willing to accept his offer but

never got round to it. Which of the following is incorrect?

A. Acceptance may be inferred from conduct

B. Acceptance may be made by the offeree or their authorised agent

C. Silence cannot constitute acceptance

D. There is an implied acceptance because Sylvia does not reject Harold's

offer

D There must be some positive act which can be construed as acceptance.

On 10 March, Jane offered to sell her flute to Claire for €250. Claire said she'd

pay €225 for it. Jane said she'd take €235 and that Claire should let her know

(in writing) by lunchtime Friday 14 March if she agreed to that price because

she was attending an orchestra rehearsal on the Friday evening and, if Claire

didn't want it, she might sell it there. Claire posted her reply along with a cheque

for €235 in the 7am post on Friday. On Friday evening, Jane sold the flute to

Lynn. The next day, Jane receives Claire's cheque. Which of the following best

describes the legal position?

A. There is no valid contract because Jane impliedly revokes her offer when

she sells the flute to Lynn

B. There is no valid contract because Claire does not effect a valid acceptance

of it while the offer remains open and capable of acceptance

C. A valid contract exists at 7am on Friday when Claire posts her acceptance

of Jane's offer

D. A valid contract exists on Saturday when Jane receives Claire's cheque and

Jane is in breach of contract

B Jane required written notice to have reached her by lunchtime on Friday.

This means that the postal rule is not effective to render the acceptance valid

when posted. By the time Claire's 'acceptance' is communicated, the offer

has lapsed.

With regard to communication of acceptance:

If the offeror sends an offer by letter but does not prescribe a particular method

for communicating acceptance, is the offeree obliged to reply by the same

method, i.e. by letter?

A. Yes

B. No

Can the offeror impliedly waive the need for acceptance to be communicated

to them?

C. Yes

D. No

B No. The offeree may choose any reasonable method.

C Yes. As was the case in Carlill v. Carbolic Smoke Ball Co. where acceptance

was made by conduct.

Rose offered to sell Laura her tenor saxophone for the bargain price of €280.

However, she told Laura that someone else was also interested so if Laura

wanted it she must leave a message on Rose’s mother's answerphone that

evening, since she (Rose) was staying there overnight en route to the airport.

Laura was unable to find the number of Rose's mother, so she posted a letter

accepting the offer to Rose’s mother’s address instead. Rose did not receive

this letter from Laura as she had flown to France for a performance, and before

she left she asked her mother to sell the saxophone on her behalf while she

was away. Which of the following best describes the legal position?

A. There is a valid contract because Laura's acceptance by post means that

acceptance took place at the time of posting

B. There is a valid contract because it was reasonable for Laura to post

acceptance of the offer

C. There is no valid contract because Rose prescribed a method of acceptance

in very particular terms and Laura's failure to comply with it means that her

acceptance was ineffective

D. There is a valid contract because it was unreasonable for Rose to be so

particular about how acceptance was to be communicated, especially since

the telephone number given was not her own

C Provided a prescribed means of communication is sufficiently particular,

acceptance must comply with it to be effective. If the offeree chooses to reply

by another method, they do so at their own risk if it in fact turns out to be

disadvantageous to the offeror.

John owed Brian €800. Brian said that he would accept a cheque.

If John were to offer €700 in cash instead of a cheque, would that constitute

valid consideration?

A. Yes

B. No

If Caleb were to offer to pay €700 on behalf of John, would that constitute valid

consideration for Brian's promise to release John from his original debt?

C. Yes

D. No

B No. Paying cash instead of cheque is not sufficient to support the waiver of

debt by Brian.

C Yes. The promise of payment from a third party, against whom the creditor

previously had no claim, is sufficient.

Which ONE of the following is a term used to describe damages awarded by

the court to punish the wrongdoer for their egregious behaviour, rather than to

compensate the victim for their actual losses arising from a breach of contract?

A. Unliquidated damages

B. Liquidated damages

C. Punitive damages

D. Aggravated damages

C These are also known as exemplary damages.

Are the following statements true or false under the doctrine of discharge by

frustration?

If a contract is entered into between two parties and one party dies before they

are able to fulfil their side of the contract, a court can rule that the contract has

been frustrated.

A. True

B. False

Where a contract has been frustrated and B has derived no benefit from it, A

may nonetheless retain a part of any deposit paid by B, in order to cover the

cost of any expenses incurred in performance of the contract up to the time the

contract was frustrated.

C. True

D. False

A True.

D False. This is known as a total failure of consideration.

Theo agrees to advertise the services provided by Marney’s business, The Full

Service Ltd, in appropriate publications over a period of 24 months. It is agreed

that Theo would be liable to pay a sum of €100 in respect of any advertising

error or missed deadline. Marney estimates that his business could lose

thousands of euros each month arising from such advertising error or missed

deadline. Which of the following describes this contractual provision?

A. An exclusion clause

B. A liquidated damages clause

C. An unliquidated damages clause

D. A penalty clause

B The sum of €100 is likely to be regarded a valid liquidated damages clause.

Florence goes shopping in her local village store. Tulips are on display priced

at €4 a bunch. Florence has €8 in her purse and takes two bunches to the

counter to pay.

Does the display of clearly priced bunches of tulips constitute an offer which

Florence accepts when she picks up the bunches of tulips?

A. Yes

B. No

Can the shopkeeper refuse to sell the tulips to Florence?

C. Yes

D. No

B No. The display constitutes an invitation to treat only.

C Yes. An offer is made by Florence when she takes the bunches of tulips to

the till and proffers €8. The shopkeeper is free to accept or reject that offer.

Are the following statements true or false?

Where an innocent party elects to treat a contract as discharged, they waive

the right to claim damages from the party in default.

A. True

B. False

Anticipatory breach may be implied from conduct and need not be explicit.

C. True

D. False

B False. He may treat the contract as discharged and sue for damages.

C True.

Are the following statements true or false?

The claimant is required to take all reasonable steps to mitigate their loss arising

as a consequence of a breach of contract.

A. True

B. False

Damages for breach of contract are primarily intended to restore the injured

party to the same position they were in had the contract been performed.

C. True

D. False

A True. The claimant is required to take only reasonable steps, not ones that

carry undue risk or that are discreditable.

C True. Damages are intended to put the party in the position they would have

been in had the contract been performed.

Elizabeth arranged a weekend holiday for the members of the Amateur

Dramatics Society, of which she was a member. The Society was going to see

a Gilbert & Sullivan production in Galway. Elizabeth booked all 35 members of

the group into the River View Hotel. However, the night before the society was

due to travel the River View Hotel was burned down. Following the fire, the hotel

contacted Elizabeth and informed her that it would not be refunding the booking

deposit and that it is under no further obligation to the Society because the

contract had been discharged by frustration.

Has the contract been discharged by frustration?

A. Yes

B. No

As a general rule, where a contract is discharged by frustration should any

deposit received be repaid?

C. Yes

D. No

A Yes. Destruction of the subject matter of a contract is a frustrating event if

neither party is responsible for such destruction.

D No. It should only be repaid where there is a total failure of consideration,

otherwise the loss lies where it falls.

Samantha knows that Quentin, a violinist in the Cork Symphony Orchestra, has

been looking to buy a violin crafted by the French violin maker, Jean-Paul

Marchais, for many years. Samantha inherits her mother's violin and offers to

sell it to Quentin for €10,000. Quentin tells Samantha that he thinks €10,000 is

too much for the violin but that he is happy to pay €9,000. Samantha says that

she will consider this and agrees to contact Quentin the next day. Later that

evening Quentin is out for dinner with his orchestra colleagues and is told by a

fellow violinist that he has just purchased a Marchais violin from Samantha for

€9,500. Quentin is appalled by this and telephones Samantha. The call is

unanswered and Quentin leaves a message on her answer-machine agreeing

to buy the violin for €10,000. In the context of contract formation, which one of

the following best describes the legal position?

A. There is a contract as the fellow violinist is not a reliable third party for the

purpose of the law on revocation and therefore the offer by Samantha was

still open to be accepted by Quentin

B. There is no contract between Quentin and Samantha, as Quentin could not

accept an offer to purchase the violin when he was aware that the offer had

been revoked

C. There is a contract as Samantha offered to sell Quentin the violin for

€10,000 and Quentin accepted this offer

D. There is no contract between Quentin and Samantha, as Quentin made a

counter-offer to purchase the violin for €9,000 and this offer was never

accepted by Samantha

D Quentin made a counter-offer, therefore the original offer was no longer

available to accept.

Ruth tells Abi that she will sell Abi her stallion on 10 October for €2,500, unless

it wins a horse breeder's competition on 9 October, in which case the price will

be €3,500, or if it comes second, in which case the price will be €3,000. Which

of the following is correct? Ruth's communication is:

A. A mere supply of information

B. A statement of intention

C. An invitation to treat

D. An offer

D Although the price is not definite, it is sufficiently clear or ascertainable to be

accepted by Abi.

Are the following statements true or false?

In the event of a dispute about whether or not a contract is supported by

consideration, the courts will determine if the alleged consideration is sufficient.

A. True

B. False

In the event of a dispute about whether or not a contract is supported by

consideration, the courts will determine if the alleged consideration is adequate.

C. True

D. False

A True. This means that it must have some identifiable value.

D False. Consideration does not need to be adequate, meaning that it does not

need to equal or exceed the value of the consideration received in return.

Are the following statements true or false?

Breach of a contractual representation will result in a claim for breach of

contract.

A. True

B. False

A contract may be entered into electronically.

C. True

D. False

B False. Breach of a representation will result in a claim for misrepresentation.

C True. Under the Electronic Communications Act 2000, an electronic

signature can constitute evidence of a valid contract in the same way as a

signature written in the normal way.