1.02 Contract Law

Front 1

What is a contract?

Back 1

An agreement recognised in law. Because of this the parties to the contract will have their respective rights and obligations under the contract recognised, and if necessary enforced by the law.

Front 2

What are invitiations to treat?

Back 2

Treat means 'to negotiate'. So a property advert is actually not an offer to accept a specified price but an invitation to treat/negotiate.

Front 3

What are the essential elements of a contract?

Back 3

~ An offer
~ An acceptance of the offer
~ Some payment (legal term -consideration)
~ An intention to create a legal relationship
~ Capacity (the parties must be capable)
~ Freedom of consent i.e. No force used
~ Freedom of illegality (it can not conflict with common law, statute or public policy)

Front 4

What is an Offer?

Back 4

An intention to be bound on certain specified terms, knowing that if the offer is accepted, a binding contract will come into existance.

An offer and any subsequent contract can be spoken, written or implied by the conduct of the parties.

Front 5

Carlill v Carbolic Smoke Ball Co [1893]

Back 5

To do with Contract Law - Acceptance of Offer
Here the courts deemed that an offer was made to the whole world.

An advertisement by Carbolic Smoke Ball Co indicated that they would pay £100 to anyone contracting influenza after using their smoke ball as directed. This was held as a offer to the whole world by the court of appeal rather than an invitation to treat as in most adverts.

Front 6

Fisher v Bell [1961]

Back 6

Case relating to acceptance/rejection of Invitation to Treat.

The display of a knife in a shop window was held to be an invitation to treat which meant inviting customers to come forward and make an offer which the shop keeper could then decide whether to accept or reject.

It is a misconception that customers can demand to buy goods at the price displayed if there is a mistake on pricing.

Front 7

How can offers be terminated?

Back 7

~ Express rejection i.e. a statement that the offer is not accepted.
~ A counter offer.
~ Revocation - an offer can be revoked at any time before acceptance but must be communicated to the person it was made.
~Lapse in time - stated in offer/reasonable time.
~ Death
~ Failure of condition - if made on basis of fulfillment of condition i.e. references.

Front 8

Dickinson v Dodds [1876]

Back 8

Example of good revokation:
The offer had been revoked as Dodds in deciding to sell to another party, had communicated this to Dickinson by a reliable third party.

Front 9

What is acceptance (of an Offer)

Back 9

An acceptance may be defined as the 'unqualified assent to all the terms of an offer'.
Just as the offer has to be communicated to the person whom it was directed, so the acceptance has to be communicated to the person who made the offer.

As before can be spoken, written or communicated through the conduct of the parties.

Front 10

What is consideration?

Back 10

MEANS - Payment.
It can be defined as the price of the promise made in the agreement. Each party must promise the other for consideration. The promise for a promise (quid pro quo) is essential as one sided promises are not enforcable. It does not have to be money or even refelct fair value.
The payment must be agreed and known about before the act giving rise to the payment is performed.

Front 11

How can a contract be ended?

Back 11

~ AGREEMENT clauses in contracts where either party may bring a contract to an end i.e. notice period.
~ PERFORMANCE fulfilling the contract after consideration.
~ BREACH one party breaks the terms of the contract.
~ FRUSTRATION usually when something occurs which is the fault of neither party and the conduct can not be fulfilled i.e. death

Front 12

What are the remedies for breach of contract?

Back 12

CONTRACT LAW IS CIVIL LAW
~ Damages (Under common law)
~ Specific Performance (Under Equity)
~ Injunction (Under Equity)

The aim of all remedies is to put the parties back into the same position as they would have been if there had not been a breach in contract.

Front 13

What are the time limits imposed to bring action in breach of contract?

Back 13

The limits are set by the
LIMITATION ACT 1980
Which states the action can not be brought after six years from the date the action arose under the contract.
If the case relates to personal injury then the time limit is usually three years.

Front 14

What are the additional special rules which apply to land and property contracts?

Back 14

~ The contract MUST be in writing.
~ All the terms of the contract must be on one document and signed by both parties.
~ The contract MUST include the address/description of the land or property, the price, the names of both parties. This is also known as the three P's!

Unless these terms are met, a contract will not exist and not be enforcable.

Front 15

What is the Postal Rule?

Back 15

Where offers and acceptances in CONTRACT LAW are sent by post:
~ The offer is effective when it actually arrives with the person for whom it is intended.
~ An acceptance is effective as soon as it is posted, as long as it is stamped and addressed properly.

Front 16

What are contractual terms?

Back 16

~ An obligation contained within an agreement.
They can either be expressed or implied.
EXPRESSED TERMS - Those which have been specifically included within the agreement.
IMPLIED TERMS - Those which may be assumed to be present in the light of the parties intention, trade practice or custom, previous dealings, the common law or statute.

The terms found within and agreement will be one of the following terms:
CONDITION / WARRENTY / INNOMINATE TERM

Front 17

Define Condition, Warrenty and Innominate Terms...of a contract

Back 17

A CONDITION is an important term that goes to the very root of the contract, if the condition is breached the aggrevied party can take action. e.g. Payment of rent

A WARRENTY is a term of lesser importance, but is significant, if breached the aggrevied party has a right to damages. e.g. mowing the lawn.

An INNOMINATE TERM is neither of the above. If breached the remedy afforded will depend on the effects of the breach.

Front 18

What Acts have given way to implied terms put into contractual agreements?

Back 18

SALE OF GOODS ACT 1979
contains provisions set out for all agreements e.g. LL to repair externally and provide services as given by Section 11 of the Landlord and Tenant Act 1985.

UNFAIR CONTRACT TERMS ACT 1977 - ensures that the implied terms of the Sales of Goods Act can not be excluded and other exclusion clauses.

SUPPLY OF GOODS AND SERVICES ACT 1994 - introduced a requirement of satisfactory quality.

Front 19

Can statutory requirements be overridden in a lease?

Back 19

Parties can agree to any terms of a contact they like however they can not override statutory provisions in Acts which apply to the contract they have signed.
e.g. Statutory requirements as to the lengths of notice period can not be over ridden by a clause in a lease.

Front 20

What circumstances will void a contract?

Back 20

~ DURESS
~ UNDUE INFLUENCE
~ MISREPRESENTATION
~ MISTAKE
~ ILLEGALITY

Front 21

Describe the term of DURESS...

Back 21

DURESS common law principle, party may have suffered actual violence, threats or coercion.

Front 22

What is UNDUE INFLUENCE?

Back 22

UNDUE INFLUENCE where A party without suffering threats of violence is encouraged to enter into an agreement giving a marked and unfair advantage TO the other INFLUENCING party.

CASE OF: National Westminister Bank v Morgan [1985], one party had been victimised by another and the HOL set the contract aside.

Front 23

What is Misrepresentation?

Back 23

Untrue statement of fact made by one party to another inducing the party into a contract.

Front 24

What is Mistake?

Back 24

Generally speaking, if a contract is signed the parties will be bound by its terms, however if there is a mistake it may be possible that the contract could be declared void. Ther MUST be a fundamental or redical difference between the document actually signed and what the person signing thought they were signing.

Grist v Bailey [1967]
Value of property £2250, thought the property subject to a Rents Act tenancy bringing the value to £850, so this price was agreed. In fact the tenancy did not fall within the Rent Act tenancy, so the court felt the contract was voidable for Mistake and set the contract aside, but that the slae could still proceed at market value.

Front 25

What is Illegality?

Back 25

A contract generally deemed illegal if it is prohibited by statute or is contrary to public policy. Contracts with criminal intenet would fall into this category.

Front 26

What is Misrepresentation?

Back 26

As stated before it is the making of UNTRUE statements of fact. This can be inwriting or orally. Silence or failure to qualify a statement can also be misrepresentation.
Misrepresentation can relate to: descriptions in property details, locality and amenities / statements made during negotiations about the property or lease.

Misrepresentation is a Common Law Concept and action can be brought under Common Law and Equity.

Front 27

What are the three categories of misrepresentation when it occurs?

Back 27

~ FRAULDULENT misrep occurs when a statement is made knowing it to be untrue or being reckless in making the statement.
~ NEGLIGENT misrep occurs when one of the parties possesses a special skill over and above the other, e.g. in negotioations as a Letting Agent with a prospective tenant you make a careless statement that encourages a tenant to sign a tenancy agreement.
~ INNOCENT misrep occurs where a representation is made in good faith but turns out to be false.

Front 28

What are the remedies for misrepresentation?

Back 28

CIVIL OFFENCE
Recission - this is the setting asside of the contract
Damages - the award of payment to compensate the harmed party for any losses.

Innocent misrep the likely award would be recission.

Front 29

What are the two Acts called in relation to letting agents and misdescriptions?

Back 29

Property Misdescriptions Act 1991 - apply to letting agents IF they are also selling property for Landlords.

The Trade Descriptions Act 1968 will apply to any other descriptions that are given in the course of trade.

Both of these Acts state that it is a criminal offence to make a false or misleading statement. It does not matter if there was any intent, nor does there have to be any harm done or loss incurred. The offence is one of strict liability and will be prosecuted by the Trading Standards Authority.