FE-1 Law of Contract common mistakes
FE-1 Law of Contract · Understand the traps and how to avoid them.
Treating a textbook 'four corners' definition of offer and acceptance as sufficient, and answering scenario questions without first identifying which communication is the offer, which is the acceptance, and where consideration moves.
Candidates memorise definitions of offer, acceptance, consideration and intention as isolated terms, then read a problem question looking for the matching keyword rather than mapping the parties' sequence of communications onto those elements. Under time pressure the first plausible-sounding term gets selected.
What to do instead
Before evaluating any option, write a three-line skeleton: what was communicated, by whom, and when. Then label each step as invitation to treat, offer, counter-offer, acceptance or mere inquiry. Only after that skeleton exists should the options be read, so distractors that confuse an invitation to treat with an offer cannot pull the analysis off course.
Applying the postal acceptance rule to every remote communication, including email, voicemail and instant messaging, and concluding that acceptance is effective on dispatch.
The postal rule is the most memorable exception in the syllabus, so it becomes an over-generalised default. Candidates do not check whether the rule's preconditions are present: the parties must contemplate post as a means of acceptance, and the letter must be properly addressed and posted. Electronic communications are generally treated as instantaneous, so receipt governs.
What to do instead
Build a decision tree. Ask first whether the offeror prescribed or contemplated a particular mode. If post is contemplated, apply dispatch; if the mode is instantaneous, apply receipt. For email and messaging, ask whether the message reached the offeror's system and whether the offeror had stipulated receipt as a condition of acceptance. Test each option against that tree rather than against the word 'acceptance'.
Missing the 'subject to contract' signal and treating an agreement reached in negotiation as a binding contract.
Problem scenarios often contain a full set of agreed terms plus a line saying the parties will formalise matters later. Candidates see agreement on price and subject matter and stop there, forgetting that the parties' intention to be bound only on execution of a formal document defeats contractual effect.
What to do instead
Scan every fact pattern for words such as 'subject to contract', 'subject to lease', 'in principle' or 'to be documented'. Where they appear, the working assumption is no binding contract unless the facts show a clear contrary intention or part performance. Practise spotting these phrases as a first-pass reading habit.
Confusing consideration with motive, moral obligation or a conditional gift, and accepting 'I promise to pay because I feel obliged' as good consideration.
Consideration is taught as 'something in return', which is easy to state and hard to apply. Candidates then accept any recited benefit, including past acts, existing duties and emotional reasons, without asking whether the promisee has given something of value in exchange for the promisor's promise.
What to do instead
Apply a two-part test to every alleged consideration: is it requested by the promisor, and does it move from the promisee? Then run the exclusion checklist: past consideration, performance of an existing public duty, performance of an existing contractual duty owed to a third party or to the same promisor, and forbearance to sue where the claim is known to be invalid. If any exclusion applies, the promise is unenforceable unless a recognised exception such as practical benefit applies.
Treating part payment of a debt as sufficient consideration for a promise to forgo the balance, without checking for a third-party element, a composition with creditors, or a practical benefit.
The rule in Foakes v Beer is often taught as a single proposition and then contradicted by later cases on practical benefit, so candidates pick whichever sounds more modern. They also overlook that part payment by a third party, or an agreement with multiple creditors, is a distinct exception.
What to do instead
State the general rule first: part payment of a sum already due is not good consideration. Then work through the exceptions one by one: payment by a third party, a composition agreement with creditors, and the practical-benefit line of authority where the creditor obtains a genuine commercial advantage. Answer the option that fits the facts, not the option that states a rule in the abstract.
Assuming every pre-contractual statement is a term, or conversely dismissing all pre-contractual statements as mere representations, without applying the term/representation tests.
Candidates rely on a single cue such as whether the statement was written into the contract, ignoring the wider indicia: the importance of the statement to the recipient, the timing of the statement relative to formation, and whether the maker had special knowledge on which the other party relied.
What to do instead
For each statement, run four checks: was it reduced to writing; how close in time was it to formation; did the maker have specialist knowledge or was the recipient relying on their own judgment; and did the recipient make clear the statement was vital? Use those checks to classify the statement as a term, a representation, or a mere puff, then apply the separate remedies for breach of term and for misrepresentation.
Treating every exemption or limitation clause as automatically void, or automatically valid, instead of working through incorporation, construction and statutory control in that order.
Candidates conflate the three stages into one question and jump to the statutory reasonableness test without first asking whether the clause was incorporated at all, or whether its wording covers the breach that occurred. This produces the right conclusion for the wrong reason, and examiners award marks for the sequence.
What to do instead
Use a fixed three-step structure: incorporation (signature, reasonable notice, course of dealing), construction (does the wording, read contra proferentem, cover the loss and the type of breach, including negligence), and finally statutory control (does the relevant provision apply to the clause and the dealing, and is the clause reasonable or does it satisfy the relevant test). Write one sentence for each step before choosing an option.
Confusing the remedies for misrepresentation and treating rescission as always available, or treating damages as available for every type of misrepresentation.
The three categories of misrepresentation carry different consequences, and the bars to rescission are easily forgotten. Candidates remember that fraudulent misrepresentation is serious but do not track which measure of damages follows from which category, or that affirmation, lapse of time and third-party rights can extinguish rescission.
What to do instead
Build a table in memory with rows for fraudulent, negligent at common law, negligent under statute, and wholly innocent misrepresentation, and columns for rescission and for the measure of damages. Before answering, check the bars to rescission: affirmation, lapse of time, impossibility of restitution, and acquisition of rights by a third party. Note also that damages may be awarded in lieu of rescission.
Applying the doctrine of frustration too readily to events that merely make performance more expensive, more onerous or less profitable.
Frustration is a dramatic concept and candidates like to apply it. The doctrine requires the contract to be impossible, illegal or radically different from what was contemplated, and the bar is high. Self-induced events and events foreseen and provided for in the contract do not frustrate.
What to do instead
Test frustration against a strict threshold: has performance become impossible, illegal, or transformed into something radically different? Then check the exclusions: self-induced frustration, express provision for the event, and mere hardship or increased cost. If the answer is that the contract is not frustrated, identify the alternative: breach, force majeure clause, or renegotiation.
Answering questions on duress, undue influence and unconscionable bargains interchangeably, without identifying which doctrine the facts actually engage and what the remedy requires.
All three concern pressure or unfairness in formation, and all can lead to rescission, so candidates treat them as one topic. They miss that duress requires illegitimate pressure, undue influence requires a relationship of trust and confidence plus a transaction calling for explanation, and unconscionable bargain requires a special disadvantage known to the stronger party.
What to do instead
For each problem, identify the pressure or disadvantage factually, then match it to the doctrine whose elements are satisfied. Write the elements out: duress (illegitimate pressure causing the claimant to enter the contract), undue influence (relationship, transaction calling for explanation, rebuttable presumption), unconscionable bargain (special disadvantage, exploitation, knowledge). Then confirm the remedy and any bars, since rescission is the usual remedy for all three.