CONTRACT LAW

LARGE GROUP 10
Student Guide

Consolidation

Context

You have now looked at all the topics in the Contract law module, namely formation
and variation of contracts, content of contracts (including exemption clauses),
remedies for breach, discharge by frustration, false preliminary statements, duress
and undue influence. You have also had plenty of practice at answering multiple
choice style questions and problem questions which will be in the exam.

The aim of this large group is to consolidate your understanding and knowledge of
some of the topics you have covered, to review exam technique and also to give you
some final practice at exam style questions.

Outcomes

By the end of this large group you should be able to:

1. Explain the format of the Contract Law assessment and demonstrate an

awareness of how best to tackle the sorts of questions in it.

2. Define and explain a number of different Contract law terms and principles.

3. Devise structures for answering questions.

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1. Guidance on answering questions in the Contract Law assessment

 Assessment
Two hours, open book
Part 1 Multiple Choice Questions x 10
2 marks each
Part 2 Long form questions x 4
Problem questions
Choose two
40 marks each

1.1 Multiple Choice Questions

 Read the questions carefully

 If you do not know the right answer(s) try and work it out

 Timing

Activity 1 – MCQs

1. Which ONE of the following statements is CORRECT?

A. An offer made to the public at large cannot be revoked.
B. An offer of a unilateral contract cannot be revoked once the offeror knows the
act of acceptance has started.
C. A promise to keep an offer open is always binding on the offeror.
D. Revocation of an offer must be communicated by or with the authority of the
offeror.

2. In relation to business-to-business contracts which ONE of the following

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 statements is WRONG?
A. If an exemption clause is in an unsigned document the party relying on the
clause must have brought it to the attention of the other party before the contract
is finalised.
B. If there is an ambiguity in an exemption clause it is construed contra
proferentem.
C. If the supplier of services does not use reasonable care and skill it will be in
breach of the term implied by s13 Supply of Goods and Services Act 1982. If it
has included an exemption clause in the contract s2 UCTA will apply to the
clause.
D. If the reasonableness test under UCTA applies, the onus is on the supplier to
show that the exemption was reasonable to incorporate in the contract.

3. Which ONE of the following statements is WRONG?

A. The effect of a frustrating event or change of circumstances is that the contract

automatically comes to an end.

B. For an event or change of circumstances to frustrate a contract it must have

been unforeseen, occurred without fault on the part of either party and make
performance of the contract either impossible or totally different.

C. A lease of land can never be frustrated as it is a long-term proprietary right.

D. A contract for personal services may be frustrated by illness.

4. Which ONE of the following statements is WRONG?

A. The test for deciding whether a preliminary statement was a contractual term is
the intention of the parties.
B. A misrepresentation is any false statement which induced the claimant to enter
into the contract.
C. Rescission is an equitable remedy which is potentially available for all forms of
misrepresentation.
D. Under section 2(1) Misrepresentation Act damages are assessed in the same
way as in the tort of deceit.

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 5. Which ONE of the following statements is CORRECT?
A. Rescission is the only remedy available for duress and undue influence.
B. The aim of rescission is to put the innocent party as far as possible into his pre-
contract position.
C. Performance of an existing contractual duty owed to a third party will only be
good consideration for a promise of extra money if it confers a practical benefit
and the promise to pay extra was not made under duress.
D. A past act or promise will never be consideration for a later promise of payment
as it was not done, or made, in exchange for that promise.

1.2 Problem questions (See Guidance on Answering Problem Questions Unit

2 and attached here as Document A)

Remember the mnemonic IRAC.

You should be aiming to show that you can:

 Identify the issue
Analyse a problem and identify relevant facts and issues, distinguishing
between crucial and peripheral issues.

 Rule - legal principle and authority

Define issues legally – by reference to principle and authority, distinguishing

similar factual situations, and applying relevant exceptions.

 Cite relevant Authority and Apply to the facts.

Explain and apply the relevant law to the facts, clearly and in an orderly way,
identifying facts material to the decision, and any gaps in the information
provided.

 Conclude.

Present arguable conclusions.

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1.2.1 Structure matters

 Suggested structures

1.2.2 Tips

 Do not recite the facts of the question

 Use headings

 Use abbreviations

 State the law (e.g. define important terms) then apply to the facts. Give
authorities.

 Work with the given facts

 Quality rather than quantity

 Present your answer clearly

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 Worked example - Problem question on damages
Canners Ltd (manufacturers of tin cans) decided to scrap its existing machinery and
replace it with modern equipment. It ordered new machinery from Alpha Ltd to be
delivered on 30 June. The output of the new machinery was stated to be 30%
greater than that of the old.
Alpha agreed that it would pay damages at the rate of £1,000 a day for each day
delivery was delayed. Canners accepted a highly profitable contract to provide cans
for Yeasto, the local brewers, relying on the fact that the new machinery would be
delivered on time.
Alpha did not deliver the machinery until 30 August. It refused to pay the £1,000 a
day, saying that it was too expensive. Canners tell you that because of the delay it
has lost about £7,000 in profits over the two-month period - £2,000 ordinary profits
and £5,000 on the special contract with Yeasto.

Advise Canners of its legal position in relation to Alpha.

To do this you will need to do the following:
 Identify the breach.
 Using relevant guidelines decide whether the damages specified as
being payable for breach are indeed specified damages or a penalty.
 Explain the consequences if it is specified damages or a penalty.

Points to Note
Remember, you need to analyse the problem and identify the relevant ISSUES. So
here we’re looking at a possible breach of contract and need to consider whether
the relevant clause is an agreed damages clause or a penalty clause. If it might be
a penalty clause then we also need to consider how ordinary damages would be
calculated.
RULES AND AUTHORITIES/APPLICATION

Identify the Breach of Contract

There is clearly a contract between Canners and Alpha for the machinery.
Assuming that the delivery date was a contractual term, Alpha has broken an
express term of the contract to deliver on 30 June.

Agreed Damages Clause

The parties have agreed on damages of £1,000 a day. If this is a true specified
damages clause, i.e. a genuine attempt to pre-estimate the loss, it will be binding
and Canners will be entitled to £1,000 a day even though its real loss is less than
that. However, the court may decide that the clause is a penalty, ie an attempt to
put pressure on Alpha to perform the contract, in which case it will not be binding
and the court will award damages in the normal way.

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 Guidelines were laid down by the court in Dunlop v New Garage Ltd. Two are
relevant here. First, is the £1,000 a day an extravagant amount in comparison with
the greatest possible loss Canners could suffer as a result of the breach? If so, the
clause will be a penalty. Secondly, the clause can be a specified damages clause
even if it is impossible to pre-estimate precisely the loss which may be caused by
the breach.

Looking at the amount of Canners’ loss it may well be that £1,000 a day is greater
than the greatest possible loss and the clause may well be found to be penal. If so
the court would be free to assess damages in the normal way.

Damages - Aim and Quantification

The object is to compensate Canners for the loss suffered as a result of Alpha’s
breach. When assessing the damages, the court will try to put Canners in the
position it would have been in if the contract had been properly performed
(expectation loss basis - Robinson v Harman). It does not seem that Canners could
do anything to mitigate its loss, and in any event the onus is on Alpha to prove
failure to mitigate, British Westinghouse. If the contract had been properly
performed, Canners would have received £2,000 for the loss of ordinary profit and
£5,000 for the special contract with Yeasto. However, the court will not award
damages for loss which is too remote.

Damages - Remoteness Rule

The loss suffered must not be too remote a consequence of the breach. The
remoteness rule was laid down in Hadley v Baxendale where it was said that loss
will not be too remote if it arises naturally, ie in the usual course of things from the
breach or such as may reasonably be supposed to have been in the contemplation
of both parties as the probable result of the breach of contract.

Canners have lost the ordinary profits it would have made with equipment which
has a 30% greater output. In addition, it has lost profits on the contract with Yeasto.
The loss of ordinary profit seems to be within Limb 1 of Hadley v Baxendale. Loss
of ordinary profit was not regarded as too remote in Victoria Laundry v Newman
Industries. Special profits are probably not within Limb 1 (unless the court
distinguishes Victoria Laundry on the basis that the contract is just another
business arrangement, albeit a profitable one). They may well be considered as
unusual loss and therefore too remote, unless Alpha knew of special facts to bring
the loss within its contemplation (Victoria Laundry). We do not know if Canners told
Alpha about the contract with Yeasto.

The case of Parsons v Uttley Ingham said that, provided the type of loss is within
the defendant’s contemplation, the fact that the extent is greater than anticipated is
irrelevant. This seems to go against Victoria Laundry. The court may treat ordinary
profits and special profits as different types of loss. In Brown v KMR Services
Stuart-Smith LJ said (obiter) that he did not see any difficulty in holding that loss of
ordinary business profits is different in kind from that flowing from a particular
contract which gives rise to very high profits. It is likely therefore that the court will
regard the special profits as too remote unless Alpha knew about the Yeasto
contract.

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 CONCLUSION

If Alpha did not know about the special contract with Yeasto, then it is likely that
Canners will be awarded £2,000 in damages. It does not seem that Canners could
have done anything to mitigate its loss.

2. Exam technique

2.1 Level Descriptors for the Contract Law module - Level 4

2.1.1 Knowledge and understanding

Marks Attributes

First  The work displays [outstanding] breadth and depth of knowledge and
understanding. Evidence of [detailed] analysis / application
Class
70-  Excellent knowledge and understanding demonstrating a breadth and depth of
100% substantive knowledge that is comprehensive accurate and relevant to the
learning outcomes. Evidence of reflective insight / application and ability to
select a wide range of appropriate sources, theories, and principles from
reading

Upper  Very good knowledge and understanding that is thorough, accurate and
relevant. Demonstrates an ability to analyse/apply and sustain a relevant and
Secon
d coherent argument.

60-69%
Lower  Good knowledge and understanding of related information, such as principles,
theories, evidence and techniques. Work demonstrates descriptive application
Secon
d of knowledge

50-59%  Limited evidence of ability to analyse/ apply and sustain a relevant and
coherent argument.

Third  Some relevant knowledge and understanding, sufficient to deal with

terminology, basic facts and concepts. Work is generally descriptive with
Class
limited ability to analyse / apply. Demonstration of some ability to construct an
40-49% argument but may be weak or poorly constructed and are too simplistic.

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 2.1.2 Writing.

Marks Attributes

First
 Written in a fluent style with a clear focus and structure: excellent use of
Class grammar, spelling and language conventions.
70-  Excellent demonstration of relevant skills; excellent communication, with very
100% good use of grammar, spelling and language conventions

Upper
Secon  The work is well structured and organised with good use of grammar, spelling
d and language conventions
60-69%
Lower
Secon  Reasonable use of grammar, spelling and language conventions.
d
50-59%
Third
Class  The work may display evidence of poor grammar and spelling.
40-49%

2.2 Tips – Part 2 of the assessment

 Read through all the questions

 Highlight key facts

 Make brief notes

 Answer first the question you think is the easiest

 Manage your time

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3. Statutory Extracts

Set out in Document B are brief extracts of the main statutory provisions you have
come across in this module. We suggest you use these as part of your revision.

4. Glossary of terms

Activity 2

Complete Part 1 of a glossary of terms set out below as Document C. There are
11 missing definitions that you need to complete. Where possible, add any
relevant statutory provisions or cases by way of authority.

There is a second part to the glossary which you will complete as Consolidation
for the unit and the module. You will then have a complete glossary of terms to
assist you with your revision and also for future reference.

5. Unit 10 Engage

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DOCUMENT A

GUIDANCE ON ANSWERING PROBLEM QUESTIONS - IRAC

1. Identify the ISSUES.

2. As you go through your answer always define important terms, e.g. offer,
invitation to treat, acceptance.

3. Structure your answer.

(a) Adopt a logical sequence. For example, if there are a number of

characters involved deal with them separately. In offer and acceptance
questions events tend to happen in rapid succession, so deal with the
events in chronological order (in relation to each particular character).

(b) Do not miss out important stages in your argument just because you
think they are obvious.

(c) Start with general principles before discussing exceptions to them (if
relevant). For example in offer and acceptance questions, where an
acceptance has been posted you should deal first with the general rule
that acceptance must be communicated and then go on to consider
whether any exceptions apply e.g. the postal rule.

(d) Try to give some AUTHORITY for what you say, for example a case or
a statute.

(e) Always APPLY the law to the facts of the problem.

(f) If there are two possible answers at any stage of your argument then by
all means say which you think is more likely but consider the effects of
both, e.g. it may not be clear whether the general rule as to
communication of acceptance applies or whether the postal rule
applies. You should therefore deal with both possibilities.

4. Use of cases

You can use cases in two main ways:

(a) As an authority for a legal principle, e.g.

The general rule is that acceptance must be communicated (Entores v

Miles Far East Corp).

If you are merely citing a case as authority for a general principle and
there is no similarity between the facts of the case and those of the

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 question you are answering, there is no real point in recounting the
facts.

(b) As a comparison with the facts of the problem.

Sometimes you may wish to compare the facts of the problem you are
dealing with, with the facts of a landmark case.

If the facts are the same in both instances, say so, but this will be
unlikely. If there is a difference, explain the significance of that
difference. Here you will need to mention a few of the key facts and not
just the name of the case.

5. If there is a document, or extract from a document, reproduced in a question

(as with the Preparatory Activity to Workshop 1) make sure you read it
carefully. Identify the relevant facts/issues which it raises, and APPLY them to
the facts of the question.

6. Come to a CONCLUSION if possible

Sometimes it is not possible because you may not have been given enough
facts or the law may not be clear on a particular point, in which case say so.

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DOCUMENT B

STATUTORY EXTRACTS

SALE OF GOODS (Sale of Goods Act)

S11(4) – once a buyer has ‘accepted’ goods he cannot reject them

S13- where goods are sold by description, implied condition that goods will
correspond with that description
S14(2)- implied condition that goods will be of satisfactory quality
S14(3)- implied condition that goods will be reasonably fit for their purpose
S15A – a buyer cannot reject goods if the breach is so slight it would be
unreasonable to do so
S35 – a buyer is deemed to have accepted goods if he tells the seller he accepts
them; does an act inconsistent with the seller’s ownership; or if he retains the goods
beyond a reasonable time without telling the seller he has rejected them.
S57(2)- a sale by auction is complete on the fall of the auctioneer’s hammer.

SERVICE CONTRACTS (Supply of Goods and Services Act)

S13 – implied term (innominate) that the service will be carried out with reasonable
care and skill
S14 – where a time has not been agreed for performance, an implied term that the
work will be done within a reasonable time
S15- where no price has been agreed, implied term that a reasonable price will be
charged

WORK AND MATERIAL CONTRACTS (Supply of Goods and Services Act)

WORK (Service)

S13 – implied term (innominate) that the service will be carried out with reasonable
care and skill
S14 – where a time has not been agreed for performance, an implied term that the
work will be done within a reasonable time
S15- where no price has been agreed, implied term that a reasonable price will be
charged

MATERIALS (Goods)

S3- where goods are sold by description, implied condition that goods will correspond
with that description
S4(2)- implied condition that goods will be of satisfactory quality
S4(5)- implied condition that goods will be reasonably fit for their purpose

Unfair Contract Terms Act

S 2 – cannot exclude negligence liability causing death/personal injury (includes

breach of s13 SGSA)
S3 – in standard form contracts can exclude liability for breach of an express term if
reasonable to do so

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S6 – in a sale of goods contract can exclude liability for breach of the terms implied
by ss13-14SGA if reasonable to do so
S7 – in a work and materials contract can exclude liability for breach of the terms
implied by ss3- 4 SGSA if reasonable to do so
S11 – reasonableness test. Test of reasonable incorporation.
S11(4) – with limitation clauses courts should have regard to insurance.
Sch. 2 guidelines-
Relative bargaining positions of the parties
Inducement/choice
Extent to which the party knew/ought to have known of the exemption
Where the exemption applies if a condition is not satisfied, whether it was reasonable
to expect compliance with the condition.

CONTRACTS (RIGHTS OF THIRD PARTIES) ACT

A third party (e.g. an employee) may take the benefit of an exemption clause if he is
identified as a member of a class (e.g. employees) protected by the clause.

MISREPRESENTATION ACT

S2(1) – claimant will get damages unless misrepresentor can disprove negligence.
Damages assessed in the same way as fraudulent misrep. (Royscott v Rogerson) So
all consequential losses are recoverable and measure = how much the
misrepresentee is out of pocket as a result of the misrep.

LAW REFORM (FRUSTRATED CONTRACTS) ACT

S1(2) – money paid prior to frustration should be repaid / money payable before the
frustrating event but not yet paid ceases to be payable
Proviso- if the payee had incurred expenses in performance of the contract the court
has a wide discretion (Gamerco) to allow the payee to retain/ recover out of the total
paid/payable a sum towards expenses
S1(3) – if one party has conferred a valuable benefit on the other party prior to
frustration, a just sum shall be payable for it.

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DOCUMENT C –GLOSSARY OF TERMS – PART 1
Invitation to treat- an invitation to make an Contract – for a binding contract there must
offer - Partridge v Crittenden. be agreement, consideration and intention to
create legal relations.

Offeror – a person who makes an offer to Offeree – a person to whom an offer to

enter into a contract. enter into a contract is made by the offeror.

Offer – Revocation – a withdrawal of an offer by

offeror or reliable third party source
(Dickinson v Dodds), which can be done at
any time before acceptance (Routledge v
Grant).

Lapse – the point where an offer can no Acceptance –

longer be accepted because the specified
offer period has passed or after a reasonable
time (Ramsgate Victoria Hotel).

Rejection – a refusal to accept an offer Counter-offer –

(which includes a counter-offer), resulting in
the offer being extinguished.

Request for information - Communication – actual (or deemed)

communication of the acceptance/
revocation (Entores/Byrne v Van
Tienhoven).
Deemed receipt during normal office hours-
The Brimnes

Postal rule – Agency – a relationship by which one party

(the agent) acts on behalf of another (the
principal) with power to bind the principal to
a contract with a third party.

Actual authority –the position where an Apparent authority –

agent acts within the powers conferred upon
him by his principal.

Intention to create legal relations – an Consideration –

assessment as to whether the parties
intended an agreement to be legally binding
based on rebuttable presumptions.
Merritt v Merritt/ Edwards v Skyways

Benefit – something of value, recognised as Detriment – harm or loss, recognised as

such by the courts to establish consideration. such by the courts to establish
consideration.

Promisor – a person who makes a promise. Promisee – a person to whom a promise is

made.

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 Bilateral – a contract where consideration (in Unilateral –
the form of promises) has been given by both
parties.

Sufficiency – a promise (or act) legally Adequacy –

recognised as providing contractual
consideration for the other party’s promise.
White v Bluett; Hamer v Sidway

Past consideration – Practical benefit – a benefit not directly

provided by the other party but which arises
as a result of him doing what he agreed to
do, and which can be sufficient to provide
consideration on the variation of a contract.
Williams v Roffey

Debtor - a person that owes money to Creditor – a person to whom the debtor
another. owes money.

Promissory Estoppel – Concession/downward variation – a

promise not to enforce a legal right (e.g. a
promise to accept less money than is owed
under a contract.).
Foakes v Beer/High Trees

Clear and unequivocal representation – a Reliance – acting on the strength of the

statement of sufficient precision and freedom other party’s promise or representation (e.g.
from ambiguity to ensure that the in the context of promissory estoppel,
representation will be understood in the apparent authority and misrepresentation).
sense required, so that the representee is
entitled to rely on it (in the context of
promissory estoppel).

Inequitable - unfair, unjust conduct (that can Upward variation- promise by one party the
undermine a defence of promissory other party more money to perform an
estoppel). existing contractual obligation –Stilk v
Myrick/Williams v Roffey
D & C Builders v Rees

Suspensory – a deferral of legal rights, Extinctive – an effect that permanently

which can be revived at the end of a specified ends legal rights (in the context of
period or by reasonable notice (in the context promissory estoppel).
of promissory estoppel).
High Trees; Tool Metal Manufacturing

Sword – a right to bring a legal action Shield – a right that allows a party to
against another (referred to in the context of defend a claim (referred to in the context of
promissory estoppel). promissory estoppel)-Combe v Combe

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