This document is my exam script for the Contract Law paper on the GDL at The University of Law, which gained a mark of 75% (Distinction).
I found that the main barrier to doing well in GDL exams was not knowing how to write in the exams, so I hope this helps :)
Each exam was three hours long,...
Contract Law – GDL EXAM SCRIPT (Questions & Answers)
QUESTION 1:
Julie
Julie runs a dance school and rents a studio from Monika for £2,500 a month, payable
on the first day of each calendar month. Julie teaches some classes herself and also
has freelance dance teachers she sometimes uses. In February, Julie injured her
Achilles tendon, and was not able to teach her usual number of classes. She had to
cancel some classes and lost profits as a result. Julie was worried she wouldn’t be able
to pay the rent on the studio, so asked Monika if she might be able to reduce the rent
until her tendon was healed and she was teaching her normal number of classes.
As a goodwill gesture, Monika agreed to allow Julie to pay £2,000 a month until she was
back to running her normal number of classes. Julie paid the reduced rent on 1 March,
1 April and 1 May. In the second week of May she saw the doctor, who said she was
completely healed and could resume all her normal activities. Julie is having a meeting
with Monika to discuss the rent and would like to know what is her position both with
respect to the payments on 1 March, 1 April and 1 May and payments going forward.
Monika
Monika owns a number of properties and is in the process of renovating an office
building which she also hopes to rent out. She needed to get the roof of the building
fixed and called Kasim, the owner of Capital Roofing Limited to enquire about this. He
said he would send out his Sales Assistant, Woody to discuss the job with Monika.
Woody met with Monika at the office building and quoted her £10,000 for the job. He
followed up by sending her the written quotation with a covering letter on Capital
Roofing Limited’s headed paper. Monika phoned Kasim to say that she would accept
the offer. Kasim was furious. He told Monika that Woody only had authority to discuss
the job and not to make offers in respect of the work. He said a job like this would cost
at least £15,000 and refused to do the job.
Monika was also interested in acquiring some office furniture for the office building. She
had heard about an auction of office furniture which was being run by a local auction
house called Better Auctions Ltd. Monika was particularly interested in a set of 4 oak
desks and matching chairs, which had been valued at £2,000, and was advertised to be
sold ‘without reserve’.
,She attended the auction and bid £300 for the set of oak desks and chairs. She was the
only bidder, but Better Auctions Ltd refused to accept the bid as they thought it was too
low.
Advise Julie in relation to her legal position with Monika.
Advise Monika in relation to her legal position with Capital Roofing Limited and
Better Auctions Ltd.
ANSWER 1:
Julie in regards to Monika
Original contract
The three elements required for a valid contract are:
a. agreement (offer and acceptance);
b. intention to create legal relations; and
c. Consideration.
Initially, there is clearly a binding contract between Julie and Monika.
There is agreement and consideration. Monika offers rent of £2500 a month with the
rent as consideration, which is accepted by Julie.
There is a presumption of intention to create legal relations given the commercial
context (Edwards v Skyways), and nothing to rebut this.
Variation - reducing rent to £2,000 a month
The issue concerns the validity of the variation where Monika initially agreed to allow
Julie to pay £2000 a month until she was running a normal number of dance classes
after injuring her foot. This raises a potential issue with consideration.
Consideration
Consideration is ‘some right, interest, profit or benefit accruing to the party or some
forbearance, detriment, loss or responsibility given, suffered or undertaken by the other’
(Currie v Misa).
, Consideration need not be adequate, but must be sufficient (Chappell & Co Ltd v Nestlé
Co Ltd). The fact that the £2000 Julie has been paying since 1 March does not reflect
the full market rental price does not automatically mean it is not good consideration.
Is the part payment of a debt good consideration for a promise by the creditor to forego
the balance?
However, the general rule is that part payment of a debt (i.e. paying the reduced
amount) is not sufficient consideration for a creditor’s promise to accept less and forgo
the balance (Foakes v Beer).
Nevertheless, part payment is good consideration if the debtor gives something different
for the creditor’s agreement to accept the lesser sum (Pinnel’s Case). This is not the
case. Julie has not provided something extra in return for Monika reducing her rent.
If Monika tries to enforce full payment, J could rely on promissory estoppel if the
following conditions apply (Denning J in Central London Property v High Trees House):
● There must be a clear promise to waive the promisor’s legal rights, which must
be intended to be acted on by the other party (Hughes v Metropolitan Railway
Company);
● The promisee must act in reliance on that promise;
● It can only be used as a defence (by the promisee or promisor) to an action to
enforce legal rights which have been waived, and cannot give rise to a cause of
action (Combe v Combe); and
● It must be inequitable for the promisor to go back on their promise and insist on
their full legal rights (D&C Builders v Rees).
Promise
Monika clearly promises to reduce Monika’s rent as a ‘goodwill gesture’.
Reliance
Julie reduces her rent in reliance on Monika’s promise. Julie does not have to have
suffered detrimental reliance, but only have altered their behaviour in some way (Ajayi v
Briscoe; Alan v El Nasr). It doesn't matter that Julie has actually benefited, i.e. she gets
to pay less rent during the agreement. This is similar to the High Trees Case, where the
tenant was held to have acted in reliance on the landlord’s promise by paying half rent.
Defence
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