Law of Contract Quiz

A valid contract requires agreement (offer and acceptance), consideration, intention to create legal relations, and certainty. Offer must be clear and communicated, while acceptance must correspond exactly. Consideration must be sufficient but need not be adequate. The parties must intend legal consequences, and the terms must be sufficiently certain.

Contract law is based on freedom of contract, allowing parties autonomy. However, this is limited by inequality of bargaining power and consumer protection. The principle of fault underpins liability, as breach generally requires failure to perform obligations. Modern law balances fairness and certainty, increasingly prioritising justice over strict freedom.

In domestic agreements, there is a presumption against legal intent, rebutted where evidence shows seriousness (e.g. separation agreements). In commercial agreements, there is a presumption in favour, rebutted by clear wording (e.g. honour clauses). This ensures certainty in business while protecting informal family arrangements.

An offer is a clear willingness to contract, whereas invitations to treat are merely invitations to negotiate. Acceptance must be communicated and mirror the offer. Revocation must be communicated before acceptance. The postal rule is an exception, where acceptance is effective upon posting.

Consideration requires something of value in the eyes of the law. It must be sufficient but not adequate. Past consideration is not valid, and performing an existing duty generally is not sufficient, unless it confers a practical benefit. These rules ensure reciprocity in contracts.

Privity means only parties to a contract can enforce it. Exceptions existed at common law, such as agency and trust. The Contract (Rights of Third Parties) Act 1999 allows third parties to enforce terms if intended by the contract, significantly reforming the doctrine.

Express terms are explicitly agreed, while implied terms arise through statute, common law, or course of dealings. Incorporation occurs through signature, notice, or previous dealings. The Consumer Rights Act 2015 implies terms relating to quality and fitness in consumer contracts.

Conditions are fundamental terms allowing termination if breached. Warranties are minor terms allowing damages only. Innominate terms depend on the seriousness of the breach. This flexible approach addresses problems with rigid classification.

Exclusion clauses limit liability but must be incorporated and clearly worded. At common law, ambiguity is interpreted against the party relying on it. Statutes such as the Unfair Contract Terms Act 1977 and Consumer Rights Act 2015 restrict their use, especially in consumer contracts.

Misrepresentation is a false statement inducing a contract. Fraudulent misrepresentation allows damages in tort. Negligent misstatement allows damages under statute or common law. Innocent misrepresentation allows rescission. The Misrepresentation Act 1967 provides additional remedies.

Economic duress arises where illegitimate pressure forces agreement. Factors include the nature of the threat and lack of practical choice. The case of Pao On v Lau Yiu Long sets out criteria. Contracts may be voidable, with rescission as the main remedy.

Contracts are discharged by performance when obligations are completed. Exceptions include substantial performance and acceptance of partial performance. Tender of performance may suffice if refused. These rules prevent unfair outcomes where performance is nearly complete.

Frustration occurs where unforeseen events make performance impossible or radically different. Limits include self-induced frustration and foreseeable risks. The Law Reform (Frustrated Contracts) Act 1943 governs financial consequences, allowing recovery of payments.

Repudiatory breach allows termination and damages, while non-repudiatory breach allows damages only. Anticipatory breach occurs before performance is due, giving the innocent party a choice to terminate or affirm the contract.

Damages aim to compensate loss, subject to causation, remoteness, and mitigation. Equitable remedies include specific performance and injunctions. Under the Consumer Rights Act 2015, consumers may reject goods, request repair or replacement, or seek price reduction.