FE-1 Law of Contract flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

Invitation to treat

A preliminary communication inviting offers rather than making one. Shop displays, advertisements, auction calls, and tenders are generally invitations to treat, so the customer or bidder makes the offer.

Postal acceptance rule

Acceptance by post is complete when the letter is properly posted, not when received. It applies only where post is contemplated and the offer does not exclude it.

Counter-offer effect

A counter-offer rejects and destroys the original offer, so the original offer can no longer be accepted. A mere request for information leaves the original offer alive.

Consideration definition

Something of value given in exchange for a promise. It must be sufficient in law but need not be adequate in value, and it must move from the promisee.

Past consideration

An act performed before the promise was made. It is generally not good consideration, unless the act was done at the promisor's request and payment was impliedly expected.

Intention to create legal relations

A presumption about whether parties intended legal consequences. It is presumed present in commercial deals and absent in domestic or social arrangements, and both presumptions are rebuttable.

Certainty of terms

An agreement is void if its terms are too vague or incomplete to be enforced. An agreement to agree on essential terms later is generally unenforceable for uncertainty.

Capacity of minors

Minors are bound by contracts for necessaries and beneficial contracts of employment. Other contracts are voidable at the minor's option, including those involving land or shares.

Term versus representation

A statement is a term if the parties intended it to be binding. Timing, reduction to writing, and the relative knowledge of the parties indicate the intention.

Condition in contract

A term so important that breach entitles the innocent party to terminate performance and claim damages. It is a major term going to the root of the contract.

Warranty in contract

A minor term whose breach entitles the innocent party to damages only, not termination. The contract remains in force despite the breach.

Innominate term

A term whose classification depends on the consequences of breach. Termination is allowed only if the breach substantially deprives the innocent party of the whole benefit.

Incorporation by signature

A party signing a contractual document is bound by its terms, whether or not they were read, unless the signature was induced by misrepresentation or the document was not contractual.

Incorporation by notice

Terms are incorporated if reasonable notice was given before or at the time of contracting. Late or unclear notice fails to incorporate the term.

Contra proferentem rule

Ambiguity in a contract term is construed against the party who drafted or relied on it. Exemption clauses in particular are read narrowly against the party benefiting.

UCTA 1977 negligence exclusion

In business contracts, liability for death or personal injury caused by negligence cannot be excluded. Other negligence liability can be excluded only if the term is reasonable.

UCTA reasonableness test

A term is reasonable if it was fair and reasonable to include it when the contract was made, considering bargaining strength, inducement, knowledge, and alternative sources of supply.

Consumer unfairness test

A term is unfair if it causes a significant imbalance in the parties' rights to the consumer's detriment, contrary to good faith. Unfair terms are not binding on the consumer.

Entire obligations doctrine

Where a contract requires complete performance before payment, partial performance earns nothing. The doctrine does not apply if the contract is divisible into separate stages.

Substantial performance

Where performance is nearly complete and the defects are minor, the contract price is payable minus the cost of remedying the defects. It applies only to non-entire obligations.

Frustration of contract

An unforeseen event makes performance impossible or radically different, discharging both parties. It does not apply where the contract allocated the risk or the event was self-induced.

Expectation damages

Damages that put the claimant in the position as if the contract had been performed. They cover loss of profits and the value of the promised performance.

Remoteness two limbs

Loss is recoverable if it arises naturally in the usual course of things, or if it was reasonably contemplated by both parties at the time of contracting as a serious possibility.

Duty to mitigate

A claimant must take reasonable steps to reduce loss caused by breach. Loss that could reasonably have been avoided is not recoverable, even if the claimant failed to act.

Liquidated damages clause

A clause fixing a sum payable on breach. It is enforceable if it is a genuine pre-estimate of loss; if it is a penalty (extravagant or unconscionable), it is unenforceable.

Specific performance remedy

An equitable order compelling performance of the contract. It is discretionary and generally granted only where damages are inadequate, such as for unique goods or land.

Injunction to restrain breach

An equitable order preventing a party from breaching a negative covenant. It is discretionary and refused where it would compel performance of personal services.

Rescission for misrepresentation

The remedy that sets the contract aside and restores the parties to their pre-contract positions. It is available for fraudulent, negligent, and innocent misrepresentation, subject to bars.

Misrepresentation elements

A false statement of fact, made by one party to the other, that induced the contract. It must be a statement of fact, not opinion or mere puffery, and it must be relied upon.

Duress in contract

Pressure amounting to illegitimate coercion that compels a party to enter the contract. The victim may rescind; the pressure must be a significant cause of entering.

Undue influence

Unfair pressure arising from a relationship of trust and confidence. Once the relationship is shown, the burden shifts to the other party to prove the transaction was fair.

Privity of contract

Only parties to a contract can enforce it or be bound by it. Statutory exceptions allow third parties to enforce terms intended for their benefit.

Entire agreement clause

A clause stating the written contract is the complete agreement, excluding prior representations and negotiations. Its effect on misrepresentation claims is limited by statute.