BPP - Contract (SQE - FLK1)

What are the requirements of a binding contract?

Offer, acceptance, consideration and intention to create legal relations

Which of the following best describes an ‘offeree’?

The person to whom an offer is made

What approach does the court take when determining whether an agreement exists between the offeror and offeree?

An objective approach, by considering what the reasonable person would say was the intention of the parties having regard to all the circumstances

What are the requirements of a valid offer?

The offer must be clear, certain and show an intention to be bound.

A man is showing off his rare first edition book to his neighbour when he says, ‘I might consider selling this book for a five-figure sum’. The next day, the neighbour tells the man that he accepts his offer and gives him a cheque for £10,000. Which of the following options best describes whether the man made a valid offer to his neighbour?

No, because the statement was not clear about the price, nor did it show an intention to be bound.

Which of the following is correct regarding a bilateral contract?

Each party assumes an obligation to the other party.

In which case did the court find a valid offer?

Storer v Manchester City Council

Which of the following is correct in relation to an invitation to treat?

An invitation to treat cannot be accepted to form a binding contract

The general rule that an advertisement is an invitation to treat does not apply where the advertisement amounts to a unilateral offer. What is a unilateral offer?

An offer which prescribes an act which, when performed, constitutes acceptance.

Which of the following is not an invitation to treat?

A notice on a tree offering a reward for the return of a missing cat

In which case did the court find there was an invitation to treat?

Fisher v Bell - The appeal court held that a display of goods with a price tag in a shop window was an invitation to treat.

Which of the following is not an example of how an offer can come to an end?

A request for further information

Which statement is a correct description of the difference between a counter-offer and a request for further information?

A counter-offer prevents the offeree from changing their mind and accepting the original offer but a request for further information does not.

Which of the following is not a valid means of an offer terminating?

Breach - normally relates to the non-performance or defective performance of a contractual obligation or promise.

Who can accept an offer?

The person / people to whom the offer was made?

A woman offers by email to sell her snooker table to a man for £3,500. The man replies that he is happy to pay £3,500 for the snooker table but wants the cues, balls and framed O'Sullivan picture included for that price. The woman is happy to go ahead with that suggestion. What is the effect of the man's reply?

It amounts to a counter offer. To be an effective acceptance, the acceptance must be unqualified. This is not an unqualified acceptance because the man has introduced additional terms relating to the balls etc.

What is the meaning of the rule that acceptance must be unqualified?

The acceptance must correspond with the offer, also known as the ‘mirror image rule’

A farmer telephones his neighbour on Monday and offers to sell him three ducks for £50. The neighbour responds that he will pay £40 for the ducks. Later that evening, the neighbour informs his brother of the farmer’s offer. The brother immediately telephones the farmer and informs him that he accepts the farmer’s offer. On Tuesday morning, the neighbour telephones the farmer and says he has changed his mind and he accepts the offer of £50. Is there a contract formed?

No, there is no contract between the farmer and the brother because the farmer did not accept the brother’s offer.

What is the effect of a counter-offer?

The original offer is terminated.

Which case establishes the fact that an offeror can include terms which prescribe that a particular mode of acceptance is to be used for the acceptance to be binding?

Manchester Diocesan Council for Education v Commercial and General Investments

What is the postal rule?

Where acceptance is communicated by post, the contract is formed as soon as the letter of acceptance is properly posted.

In which situation will the postal rule apply?

Where the letter accepting an offer is lost in the post.

Which case was not concerned with communication by instantaneous means?

Carlill v Carbolic Smoke Ball Co.

A binding contract requires all material terms to be certain and complete.

True

What test does the court apply to determine whether the parties have reached an agreement on all material terms?

An objective test.

The courts will readily strike down an agreement if it lacks certainty.

False, this is seen as a last resort and the courts will look to enforce the agreement, reflecting the intentions of the parties, where this is possible.

Which statement correctly describes executory consideration?

Executory consideration is consideration that has been promised but not yet provided.

Which of the following is a rule governing consideration?

Consideration must move from the promisee.

What does the rule that consideration must move from the promisee mean?

A party who has not provided consideration may not bring an action to enforce the contract.

A woman pays a cat sitter £70 to feed her cat while she and her flatmate are on holiday. Unknown to the woman, her flatmate had already paid the cat sitter £100 to feed the same cat. The woman is demanding that the cat sitter returns the £70 she paid him, but the cat sitter is refusing to return the money. Which of the following statements is most accurate?

The cat sitter is not obliged to return the money to the woman as performance of an existing obligation owed to a third party is good consideration

Which of the following is an example of good consideration?

Performance of an existing duty owed to a third party.

Which case is concerned with a promise to pay more, not a promise to accept less?

Williams v Roffey

Which rule of consideration does promissory estoppel provide an exception to?

Part payment of a debt without fresh consideration does not discharge the debt obligation.

A tenant has lost his job and he is struggling to pay his rent. Keen to help, the landlord informs the tenant that she is willing to accept half the rent due each month until he finds a new job. The tenant pays half rent for two months and uses some of the money he saved to buy new shoes to wear at interviews. The landlord is now having second thoughts. Under what circumstances can the landlord demand full rent?

The landlord can demand full rent after the expiry of reasonable notice.

Which rule of consideration does promissory estoppel provide an exception to?

Part payment of a debt without fresh consideration does not discharge the debt obligation.

A restaurant owner owes a vegetable supplier £2500. The restaurant owner knows that the supplier is experiencing financial problems. The restaurant owner gives the supplier a cheque for £1000 in full and final satisfaction of the debt owed. The supplier accepts the cheque but later sues the restaurant owner for the balance of £1500. Which of the following statements is correct?

The supplier can recover the balance of £1500 as it is not inequitable for them to go back on their promise.

Which of the following statements is correct in relation to intention to create legal relations (ICLR)?

ICLR is presumed to exist in commercial situations but presumed not to exist in domestic or social situations.

In which type of agreement is intention to create legal relations presumed to exist?

Commercial agreements

Two companies agree the sale of a house ‘subject to contract’. What does the phrase ‘subject to contract’ imply?

The companies do not intend to be bound until they sign a formal contract.

A 16 year old boy cycles to and from school every day. He no longer likes his bicycle as he thinks it is old. He tells his neighbour he is 19 years old and agrees to buy the neighbour’s motorbike for £199. After taking delivery of the motorbike, the boy refuses to pay for it. Which of the following statements is correct?

The neighbour cannot enforce the contract against the boy as he is a minor.

What does capacity to contract mean?

The ability of a person to enter a binding contract.

Which statute defines what necessaries are?

The Sale of Goods Act 1979.

In which case was the current definition of economic duress first set out?

DSND Subsea Ltd v Petroleum Geo Services ASA - Mr Justice Dyson stated that: ‘The ingredients of an actionable duress are that there must be pressure, (a) whose practical effect is that there is compulsion on, or a lack of practical choice, for the victim, (b) which is illegitimate, and (c) which is a significant cause inducing the claimant to enter into the contract…’

What is the legal effect of duress on a contract?

The contract is voidable which means the contract is formed and remains in force, but the victim of the duress may take action to have the contract set aside

What is the causation test for duress to the person?

The duress need be only one factor influencing the victim’s decision to enter the contract. There may be many reasons why the victim entered into the contract – the actual or threat of violence need only be one of the reasons.

What is the causation test for economic duress?

The illegitimate pressure must have been decisive in the making of the agreement, in other words but for the pressure, the victim would not have entered into the contract.

Which of the following is a factor for establishing economic duress?

A laok of practical choice for the party subjected to duress - this is one of the factors outlined by Dyson J in the leading test for duress, DSND Subsea v Petroleum Geo Services.

What key principle was established in the case of Huyton SA v Peter Cremer GmbH & Co?

That the causation test for economic duress is the ‘but for’ test Or in other words a significant cause of the victim entering into the contract.

The effect of the economic duress exerted by Felix was to render the variation of contract between Carillion and Felix:

Voidable

In the case of Carillion v Felix, Carillion had no viable alternative but to agree to Felix's demand. Which one of the following was NOT one of the circumstances giving rise to Carillion's lack of practical choice?

If they did not complete the main contract on time Carillion would lose out on a future contract with the main contractor.

Felix's threat to Carillion was made in:

Bad faith

A and B have a contract. A offers B more money to perform an existing contractual obligation. When does B provide legal consideration in return for the promise of extra payment?

B exceeds their contractual obligation to A. Thus providing fresh, legal consideration.

In the case of Williams v Roffey did Williams exert duress to bring about Roffey's promise to pay more?

No. The absence of duress was an element of Glidewell LJ's test in Williams v Roffey which was satisfied in this case.

The modern trend is to take a more creative approach when assessing whether consideration for a variation is present and instead test the validity of the renegotiation through the doctrine of economic duress.

True

What is the leading case on undue influence?

Royal Bank of Scotland PLC v Etridge (No. 2). The House of Lords heard 8 conjoined appeals and it took the opportunity to lay down guidelines on the law on undue influence.

Which of the following is unlikely to be a relationship of influence or ascendancy?

A relationship of sufficiency

In which of these relationships does the law presume irrebuttably that one person had influence over the other?

Guardian and ward.

Why is the case Barclays Bank plc v O’Brien significant in regard to the doctrine of undue influence?

It provided guidance for lenders concerning how they might avoid being fixed with notice of a contracting party’s undue influence.

The House of Lords in RBS v Etridge (No. 2) continued this theme and provided further guidance as to the steps a lender ought to take to satisfy itself that the charge was the product of the spouse’s free will

When will a bank be put on inquiry that a surety transaction might be tainted by undue influence?

Whenever one party in a non-commercial setting is standing as surety for the other party

What remedy will a spouse have if they are unhappy with the standard of service provided by a solicitor regarding a surety transaction?

The spouse can sue the solicitor in negligence. The solicitor has a duty to the spouse, and they can be sued in negligence if they breach that duty.

What step should a bank take to satisfy itself that that a surety transaction is not affected by undue influence?

If the bank is aware that the spouse may have been misled, the bank should tell the solicitor of this. This will enable the solicitor to advise the spouse appropriately regarding the transaction.

What remedy is available to a consumer under the Consumer Rights Act 2015 where a trader breaches the implied term that the trader must perform the services contract with reasonable care and skill?

The consumer has a right to require the trader to perform the service again to the extent necessary to complete its performance in conformity with the contract

The Consumer Rights Act 2015 regulates contracts entered into by what people?

A trader and a consumer

A university student buys an e-book from an online bookshop for £29.99. The e-book is missing several pages and the writing is blurred. Which implied term is the student likely to rely upon against the bookshop?

S.34(1) of the Consumer Rights Act 2015. The contract is between a bookshop (a trader) and a student (a consumer) therefore the Consumer Rights Act 2015 applies. An e-book is an example of digital content. S.34(1) of the 2015 Act states that ‘every contract to supply digital content is to be treated as including a term that the quality of the digital content is satisfactory.’

Under the Sale of Goods Act 1979, what is the classification of the implied term that goods will correspond with their description?

The term is classified as a condition, but it may be treated as a warranty if the breach is so slight that it would be unreasonable for the buyer to reject the goods

What is the remedy for breach of an innominate term?

The innocent party is limited to suing for damages where the consequence of the breach is minor.

The test focuses on the consequences of the breach and asks the question whether the breach has deprived the innocent party of substantially the whole benefit of the contract. Where the question is answered in the affirmative, ie the consequences of the breach are serious, the term will be treated as a condition. Where the question is answered in the negative, ie the consequences of the breach are minor, the term will be treated as a warranty.

Regarding the other options, note that the remedy of rescission is not available for breach of contract.

Which option is not available to an innocent party following breach of a condition by the other party to the contract?

The innocent party can accept the repudiatory breach, affirm the contract and sue for damages.

The right to accept the repudiatory breach is mutually exclusive to the right to affirm the contract – the innocent party either accept the repudiatory breach or they can affirm the contract. They cannot do both. Please note that whichever option the innocent party takes, they will also have the right to sue for damages for the breach.

In relation to exemption clauses and negligence, in what circumstances may the contra proferentum rule and the Canada Steamship rules be less relevant?

When an exemption clause occurs in a commercial contract between parties of equal bargaining power.

Following Persimmon Homes Ltd v Ove Arup & Partners Ltd [2017] when an exemption clause occurs in a commercial contract between parties of equal bargaining power, the contra proferentem rule and the Canada Steamshiptest might well be less useful than considering the normal meaning of the words construed in the light of the other provisions of the contract.

If a party wants to exclude their liability in negligence, the most certain way to achieve this is by:

Using the word negligence or a close synonym for negligence.

What is the meaning of the word ‘construction’ when considering whether a party can rely on an exemption clause?

Construction means interpreting the exemption clause to determine whether the clause as drafted covers the breach and loss that has occurred

Which exemption clause will be void as a result of the Unfair Contract Terms Act 1977?

A clause excluding liability for death or personal injury resulting from negligence. This is by virtue of s2(1) of the 1977 Act.

What is a term of a contract?

Statements of fact made by the parties which they intend to be binding

Which factor is not generally relevant when deciding whether the parties to a contract intended a statement to be binding?

The age of the person making the statement

What happens if a term of a contract is not fulfilled as required or at all?

The innocent party can sue for breach of contract

How can parties to a written contract reduce the possibility of a claim that there are binding oral terms alongside the written terms?

The parties can include an ‘entire agreement’ clause in their written contract

Why was the clause not enforceable against the claimant in Thornton v Shoe Lane Parking?

The claimant was not given reasonable notice of the clause either before or at the time of contracting

Which of the following is not a means by which we can ascertain the terms which the parties to a contract intend to be bound by?

Incorporation by agreement.

The terms can be ascertained where there is a signed written contract, where there is incorporation by notice, or where there is incorporation by course of dealing

Which of the following is not a basis for implying terms in fact into a contract?

Under the common law.

Terms implied at common law are not implied in fact. The grounds for implying terms in fact are to give business efficacy to a contract, where the parties have dealt with each other consistently and regularly in the past and on the grounds of trade and professional customs.

Which of the following is correct regarding a term implied by statute?

The term operates irrespective of the intention of the parties unless there is a valid exemption clause

Which of the following statute does not contain implied terms?

Unfair Contract Terms Act 1977 which regulates exemption clauses.

A property development company purchases some radiators. The radiators do not heat up properly. Which section implied by the Sale of Goods Act 1979 is most likely to have been breached?

S 14(2) - the goods are not of satisfactory quality as they are not fit for the purpose for which they are commonly supplied

A restaurant purchases 30 round tables for its business. When the tables are delivered they are rectangular. Which section of the Sale of Goods Act 1979 implied into this contract is most likely to have been breached?

S 13 - description

The Supply of Goods and Services Act 1982 does not imply terms in which type of contracts?

Contracts of sale of goods

The director of a minicab business hires a vehicle from a hire company for use in his minicab business. Which of the following implied terms is relevant to the contract between the two businesses?

S 9 of the Supply of Goods and Services Act 1982

A service that is carried out in the course of a business needs to meet what standard under the Supply of Goods and Services Act 1982?

Performed with reasonable care and skill

Which exemption clause will be void as a result of the Unfair Contract Terms Act 1977?

A clause excluding liability for death or personal injury resulting from negligence.

What is the purpose and scope of the Unfair Contract Terms Act 1977?

The Act regulates exemption clauses that seek to exclude or restrict liability where both parties are acting in the course of a business

According to the Unfair Contract Terms Act 1977, when is the requirement of reasonableness judged?

At the time the contract was made

Which of the following contracts is not regulated by the Consumer Rights Act 2015?

A contract of employment

The Consumer Rights Act 2015 regulates unfair terms in consumer contracts. How is unfairness assessed?

A term is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer

Which of the following is not correct regarding the Consumer Rights Act 2015?

The Act makes unenforceable any term which restricts liability for breach of the requirement that services are performed with reasonable care and skill

What is a representation?

A statement asserting the truth of a given state of facts

What is a material representation?

A statement that relates to an issue that would have influenced a reasonable person

Which of the following is not an ingredient for a successful action for misrepresentation?

A representation that is known to be untrue by the representee

Why was the company’s statement of future intention in Edgington v Fitzmaurice found to be a misrepresentation?

At the time the representors made the statement of future intention, they knew that they did not intend to do what they said they would do

What is a half-truth?

A statement that is technically true but misleading

Which of the following is not an exception to the general rule that silence is not a statement of fact?

Contracts of service

In what situation will a statement of opinion be elevated to a statement of fact?

Where it is proved that the opinion expressed was not one which the representor believed

What is the definition of a fraudulent misrepresentation?

A false representation that was made knowingly or without belief in its truth or recklessly

Why is negligent misrepresentation under the Misrepresentation Act 1967 an easier claim for a claimant to establish than a fraudulent misrepresentation claim?

The normal burden of proof is reversed and the defendant bears the burden of proving that they had reasonable grounds for believing their statement and that they did believe it