FE-1 Law of Contract cheat sheet

Formation requires offer, acceptance, consideration, intention to create legal relations, and capacity; a contract failing any element is unenforceable or voidable depending on which element is missing.

Offer: a definite promise to be bound on specified terms. An invitation to treat (advertisements, shop displays, auction calls, tenders, price lists) is not an offer; the offer is made by the customer or bidder.

Acceptance must be unqualified, communicated by the offeree (or authorised agent), and mirror the offer. A counter-offer destroys the original offer; a mere request for information does not.

Postal acceptance rule: acceptance is complete when the letter is properly posted (correctly addressed and stamped), even if it never arrives - unless the offer excludes the rule or the parties use instantaneous communication.

Instantaneous communication (telephone, fax, email, telex): acceptance takes effect on receipt by the offeror. Email receipt is generally when it enters the offeror's server, subject to the terms of the offer.

Consideration: something of value given in exchange, must be sufficient but need not be adequate; must move from the promisee; past consideration is not good consideration.

Intention to create legal relations: presumed present in commercial agreements (rebuttable by clear words such as 'subject to contract'), presumed absent in domestic/social arrangements (rebuttable by evidence of reliance or seriousness).

Capacity: minors are bound by contracts for necessaries and beneficial contracts of employment; contracts voidable at the minor's option include those involving land or shares.

Certainty and completeness: an agreement with vague or incomplete terms (e.g., 'fair price' with no mechanism) may be void for uncertainty; an agreement to agree is unenforceable.

Terms vs representations: a statement is a term if the parties intended it to be binding; factors include timing of the statement, reduction to writing, and relative knowledge/skill of the parties.

Conditions, warranties, and innominate terms: breach of a condition allows termination plus damages; breach of a warranty allows damages only; breach of an innominate term allows termination only if the consequences substantially deprive the innocent party of the whole benefit.

Exemption clauses are incorporated by signature (bound regardless of reading, absent misrepresentation), by reasonable notice before or at the time of contracting, or by a course of dealing.

Contra proferentem: ambiguity in an exemption clause is construed against the party relying on it; liability for negligence is excluded only by clear words.

Unfair Contract Terms Act 1977 (business-to-business): liability for death or personal injury caused by negligence cannot be excluded; other negligence liability and breach of implied terms can be excluded only if reasonable.

Consumer protection: unfair terms in consumer contracts are not binding on the consumer; the 'fairness' test turns on significant imbalance in rights to the consumer's detriment, contrary to good faith.

Discharge by performance requires exact and complete performance; substantial performance allows the contract price minus the cost of remedying defects; entire obligations require full completion.

Discharge by frustration: an unforeseen event renders performance impossible or radically different; it must not be caused by the party's own act and the contract must not have allocated the risk.

Remedies: damages aim to put the claimant in the position as if the contract had been performed; remoteness follows the two limbs of reasonable contemplation at the time of contracting; mitigation is required.