CILEX Professional Qualification (CPQ) Foundation Stage: Contract Law Flashcards

24 sample cards from the Foundation Stage: Contract Law deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. What must be shown to establish economic duress?

   (1) Illegitimate pressure (e.g. a threatened breach of contract); (2) which is a significant cause inducing the contract; and (3) the victim had no realistic practical alternative but to submit; coupled with prompt protest/avoidance after the pressure is lifted.

2. Distinguish actual undue influence from presumed undue influence.

   Actual undue influence: the claimant proves overt pressure/improper influence was actually exerted. Presumed undue influence: arises from a relationship of trust and confidence plus a transaction calling for explanation; the burden shifts to the dominant party to rebut the presumption (Royal Bank of Scotland v Etridge).

3. What is the effect of illegality on a contract?

   A contract may be void and unenforceable if it is illegal as formed (e.g. to commit a crime/tort) or contrary to public policy. Generally neither party can enforce it or recover money/property transferred (ex turpi causa non oritur actio), subject to limited exceptions.

4. Give examples of contracts void as contrary to public policy.

   Contracts in unreasonable restraint of trade, contracts to oust the jurisdiction of the courts, contracts prejudicial to the administration of justice, contracts to commit a crime/tort/fraud, and contracts prejudicial to public safety or sexually immoral.

5. What is the test for the validity of a restraint of trade clause?

   A restraint is prima facie void but enforceable if it (1) protects a legitimate proprietary interest (trade secrets, customer connection), (2) is reasonable between the parties in scope, area and duration, and (3) is not contrary to the public interest (Nordenfelt v Maxim).

6. What are the four main methods by which a contract may be discharged?

   (1) Performance, (2) Agreement, (3) Frustration, and (4) Breach.

7. State the general rule on discharge by performance and its main exceptions.

   General rule: performance must be complete and precise/entire (Cutter v Powell). Exceptions allowing partial payment: divisible/severable obligations, substantial performance (Hoenig v Isaacs), acceptance of partial performance, wrongful prevention of completion by the other party, and tender of performance properly rejected.

8. How may a contract be discharged by agreement, and what is the consideration issue?

   By a new agreement to release the obligations. If both parties have outstanding obligations there is bilateral discharge (each provides consideration by giving up rights — accord). If only one party has performed, fresh consideration or a deed is needed (accord and satisfaction).

9. Define discharge by frustration and state the test.

   Frustration occurs where, after formation and without fault of either party, an unforeseen event makes performance impossible, illegal, or radically different from what was undertaken (Davis Contractors v Fareham). It automatically discharges the contract from the date of the frustrating event.

10. Give examples of frustrating events.

    Destruction of subject matter (Taylor v Caldwell), supervening illegality, death/incapacity in personal-service contracts, non-occurrence of the contract's foundation event (Krell v Henry), and government intervention/requisition. Note: increased difficulty or expense alone does NOT frustrate.

11. Identify three situations where frustration will NOT be available.

    (1) Self-induced frustration (caused by a party's own choice/breach — Maritime National Fish v Ocean Trawlers); (2) the event was foreseen or expressly provided for (force majeure clause); (3) performance is merely more onerous or expensive, not radically different.

12. What does the Law Reform (Frustrated Contracts) Act 1943 provide?

    s.1(2): money paid before frustration is recoverable and sums due cease to be payable, but the court may allow retention/recovery of expenses incurred. s.1(3): a party who received a valuable (non-money) benefit before frustration may have to pay a just sum for it.

13. What are the two main types of breach by which a contract may be discharged?

    (1) Actual breach — failure to perform when performance is due; and (2) Anticipatory breach — a party indicates, before performance is due, that they will not perform (by words or conduct).

14. What options does the innocent party have on an anticipatory breach (Hochster v De La Tour)?

    They may (1) accept the breach immediately, terminate, and sue for damages at once; or (2) affirm the contract, keep it alive, and wait until the time for performance, then sue (White & Carter v McGregor).

15. When does a breach entitle the innocent party to terminate (repudiate) the contract?

    Where it is a breach of a condition, a sufficiently serious breach of an innominate term (depriving the innocent party of substantially the whole benefit), or a repudiatory/renunciatory breach showing an intention no longer to be bound.

16. What is the primary remedy for breach of contract and its aim?

    Damages — a common law remedy available as of right. The aim is to put the innocent party, so far as money can, in the position they would have been in had the contract been properly performed (expectation/loss of bargain measure — Robinson v Harman).

17. State the rule on remoteness of damage in contract (Hadley v Baxendale).

    Damages are recoverable for losses that (1) arise naturally, in the usual course of things, from the breach; or (2) were reasonably in the contemplation of both parties at the time of contracting as the probable result of breach (e.g. from special knowledge communicated).

18. What is the claimant's duty to mitigate, and its effect on damages?

    The innocent party must take reasonable steps to minimise their loss and cannot recover for losses that could reasonably have been avoided (British Westinghouse v Underground Electric). They need not take unreasonable risks; reasonable costs of mitigation are recoverable.

19. Distinguish a liquidated damages clause from a penalty clause.

    A liquidated damages clause is a genuine pre-estimate of loss agreed in advance and is enforceable. A penalty clause is designed to deter breach / is extravagant and unconscionable compared with the legitimate interest, and is unenforceable (Dunlop v New Garage; modern test in Cavendish v Makdessi).

20. Name the principal equitable remedies for breach of contract.

    Specific performance (an order to perform), injunction (prohibitory/mandatory order), rescission, and rectification. Being equitable, they are discretionary and granted only where damages are inadequate.

21. When will specific performance NOT be granted?

    Where damages are an adequate remedy; for contracts requiring constant supervision; for personal-service contracts; where there is lack of mutuality; where the claimant has acted inequitably ('clean hands') or delayed (laches); or where it would cause undue hardship.

22. State the doctrine of privity of contract.

    Only the parties to a contract can sue or be sued on it; a person who is not a party (a third party) cannot acquire rights or have obligations imposed under it (Dunlop v Selfridge; Tweddle v Atkinson).

23. How does the Contracts (Rights of Third Parties) Act 1999 modify the privity rule?

    A third party may enforce a contract term if (a) the contract expressly provides they may, or (b) the term purports to confer a benefit on them (unless on proper construction the parties did not intend it to be enforceable). The third party must be expressly identified by name, class, or description.

24. Name two common-law/equitable exceptions to the privity rule that pre-date the 1999 Act.

    Examples: agency, assignment of contractual rights, trusts of contractual rights/promises, collateral contracts, and the rule in Dunlop v Lambert / contracts concerning land (covenants running with land).

What this deck covers

Foundation Stage: Contract Law flashcards FAQ