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CONTRACT LAW EXAM
1. Introduction – pg. 2
2. Offer and Acceptance – pg. 2
3. Consideration – pg. 3
4. Estoppel – pg. 3
5. Intention to Create Legal Relations - pg. 4
6. Capacity – Pg. 5
7. Contractual Terms - pg. 5
8. Breach of Contract - pg. 7
9. Duress and Undue Influence – pg. 8
10. Privity of Contract - pg. 10
11. Misrepresentation - pg. 11
12. Mistake – pg. 13
13. Frustration – pg. 14
14. Remedies – pg. 16
15. Key Statutes
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INTRODUCTION
- A Contract is a legally binding agreement enforceable by the courts. There is no general form of a
enforceable contract (exceptions: wills require writing)
- Sources of contract law come from common law (judge made laws), and it is a branch of private
law.
- Classical Theory: Contracts are the product of the will of the parties, so that it is the parties
intention to bind themselves that justifies legal recognition of enforceable contractual rights and
obligations.
o Based on mutual exchange – will theory and freedom of contract.
LJ Diplock in Photo Production Ltd v Securicor Ltd; a basic principle of contract
law is that the parties are free to determine for themselves what primary
obligations they will accept.
o Issues of Classical Theory; not a perfect model in contemporary practice.
Unilateral contracts – Carlill v Carbolic Smoke Bomb
Contracts made on printed standard terms.
- Sanctity of Contract – dominant ideologies which state that parties should be as free as possible
to make agreements on their own terms – without the interference of courts or parliament.
- The themes of modern contract aw are not so much concerned with the freedom of the parties to
contract but rather the focus has shifted towards tighter regulation of the agreement. A number of
these regulations are a response to unfair conduct which often takes place.
OFFER AND ACCEPTANCE
- Formation of contract refers to the set of rules that are given to examine whether or not parties
entered into a contract.
- Types of offers
o Bilateral Offer
o Unilateral Offer: Carlill v Carbolic Smoke Bomb
- Offer: for an offer to be valid, it must be clearly communicated, giving the offeree a chance to
accept or reject it.
o Form; Writing, oral, electronic means
- Invitation to treat: A mere declaration of willingness to enter into negotiations.
o Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd [1953]
- Revocations of an offer: A revocation of an offer must be received by the offeree in order to take
effect.
o Other means of revocation of an offer include:
o Rejection by the offeree; Lapse of time; Occurrence; Death; Insanity, incapacity,
insolvency and impossibility.
- Acceptance is one person’s compliance with the terms of an offer made by another.
- A request for information: Stevenson v McLean [1879-80]
- A Counter - offer: Hyde v Wrench [1840]
- Battle of the forms: in the law of contract, a case where the parties on their business forms
include terms saying that the contract must be governed by their own, and not the other party's,
terms and conditions.
- Material alteration of an offer is a rejection of an offer and constitutes a counter- offer.
o If a reply to the offer with additions, limitations or other modifications does not
materially alter the offer, such reply constitutes an acceptance.
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Material alterations include: Price, payment, quality and quantity of the goods,
place and time of delivery, extent of one party’s liability to the other or
settlement of disputes (CISG, Article 19).
- Communication of Acceptance
o Forms; in writing, by conduct, and silence.
o Effectiveness of an acceptance
The postal rule: if the acceptance is communicated through post or telegram. The
offer has been accepted once the letter of the acceptance has been posted.
(Adams v Lindsell [1818])
The Acceptance Rule: An acceptance takes place when it reaches the offeror.
Entores v Miles Far East Corp [1955]
Article 10(2) UN Convention on the Use of Electronic Communications in
International Contracts (2005): The time of receipt of an electronic
communication is when it becomes capable of being retrieved by the addressee at
an electronic address designated by the addressee
CONSIDERATION
- A valuable consideration… may consist either in some right, interest, profit, or benefit accruing
to one party or some forbearance, detriment, less or responsibility given, suffered or undertaken
by the other. (Currie v Misa [1875]).
- Consideration may be Executory: meaning a promise in return for a promise (bilateral)
- Consideration may be Executed: meaning an act in return for a promise (Unilateral)
- Elements of consideration:
- Consideration must be sufficient but need not be adequate.
o Chappell v Nestle
- Consideration does not include a promise to do what one was already bound to do… such as
o Public duty imposed by law – Collins v Godefroy
o Duty imposed by pre-existing contract – Stilk v Myrick (Sailors)
o Existing contractual duty owed to a third party – Shadwell v Shadwell
- Consideration must move from the promise, and need not move to the promisor (can be received
by a third party: Beswick v Beswick)
- Part Payment is not sufficient consideration, although it is sufficient if some new element is
included, Pinnels Case.
ESTOPPEL
- Many circumstances in which the common law might produce unfair results. Equity, in the form
of Promissory Estoppel, can provide a remedy for those unfair circumstances.
- There must be a clear and unambiguous statement (express or implied) that legal rights will not
be relied upon, this promise is acted on, with (probably) detriment. Promissory estoppel is a
shield only, not a sword.
- This principle of promissory estoppel may be seen to operate as a way in which the requirement
of consideration is removed altogether and instead as long as there in reliance on a promise, the
agreement can be binding. (Central London Property Trust Ltd v High Trees House Ltd [1947]
KB 130)
- Elements of Promissory Estoppel Include:
- Need for an existing legal relationship between the parties:
o Generally, promissory estoppel can only operate when there is a pre-existing legal
relationship and will not create new ones. Lord Denning, (Combe v Combe[1951] 2 KB),
confirmed this.
- There must have been a detrimental reliance on the promise:
o The test for reliance has an extremely low threshold, all one party must do it act
differently to what they would have otherwise done based on the promise. It has also
