Contract Law and Commercial Transactions
Contract Law and Commercial Transactions
This domain tests formation, terms, vitiating factors, discharge and remedies, plus sale of goods and consumer transactions.
Formation
- Offer must be definite; advertisements, catalogues and auction displays are usually invitations to treat. Acceptance must be communicated; the postal rule applies to letters of acceptance, not generally to email or instant messages.
- Consideration must be sufficient but need not be adequate; it must move from the promisee; past consideration is not good.
- Intention to create legal relations is presumed in commercial agreements and not in social arrangements.
Terms and vitiation
- Terms may be express, implied by statute or course of dealing. Conditions are fundamental; warranties are subsidiary.
- Exclusion clauses must be incorporated before or at contract formation, be clear, and survive statutory controls such as the Unfair Contract Terms regime.
- Misrepresentation is a false statement of fact that induces the contract; remedies include rescission and damages. Duress, undue influence and illegality may vitiate consent.
Discharge and remedies
- Discharge by performance, agreement, breach or frustration. Frustration requires an event outside the parties control that makes performance radically different.
- Damages aim to put the claimant in the position as if the contract had been performed; remoteness follows Hadley v Baxendale; mitigation is required. Specific performance and injunctions are discretionary equitable remedies.
Commercial overlay
Sale of Goods Act 1893 (as amended) implies conditions as to title, description, quality/fitness and sample in business sales. The Consumer Rights Act 2022 strengthens consumer remedies and information duties.
Worked example
A buyer signs an order after the seller quotation excludes liability once goods leave the warehouse. The clause is not incorporated because the buyer never saw it before signing. The seller cannot rely on it, even if the goods were defective.
Traps
Do not confuse a penalty with liquidated damages. The postal rule does not apply to every electronic acceptance. Affirmation or lapse can bar rescission.