Contract Law Practice Test

Questions and Answers

1. Define the concept of consideration.

Consideration is what each party brings to the contract and is based on the Latin “quid pro quo”

which means “something for something.” For example, when a person buys a cup of a coffee,

the customer’s consideration is the money they pay for the coffee and the barista’s

consideration is the provision of the coffee.

2. Explain the distinction between executed and executory consideration, providing an

example of each.

Executed consideration is a promise in return for a thing, eg. if you give me that pizza I will give

you £10.

Executory consideration is a promise in return for a promise meaning promises to perform acts

in the future. Eg a person who orders pizza online and the shop promises to deliver the pizza

and the customer promises to pay for it when it arrives.

3. Explain the principle that consideration must be more than what a party is legally

obliged to do and provide an example of a case.

A promise to perform an act that you are legally obliged to do anyway will not constitute

sufficient consideration for any new agreement. E.g. Collins v Godefroy (1831)

4. Define frustration and explain any THREE circumstances under which a contract may

be discharged by frustration.

Frustration of a contract arises when an action or event beyond the parties control makes it

impossible to complete the terms of the contract as agreed. It must occur after the contract is

made and must be an unforeseeable event, cause a radical change, make completion of the

contract impossible, and must not have been caused by either party.

1) Impossibility

2) Illegality/ Government Intervention

3) Non-occurrence

4) Death or incapacity

5. Discuss the law in relation to contract formation, paying particular attention to the law

on offer, termination of an offer and acceptance.

Contract Formation: to create a contract an offer must be met by acceptance and supported by

consideration.

An offer can be defined as “a clear and unambiguous statement of the terms and conditions

under which the parties are willing to contract” whereas acceptance can be defined as the “final

and unequivocal expression of agreement to the terms of the offer”

Where a person accepts an offer by post the key issue is whether the postal rule applies – this

rule states that acceptance takes place on the date, time and place of posting, and not receipt –

provided that postal acceptance has been agreed or reasonable, and that the letter was

properly stamped, posted and addressed – relevant case law includes: Adams v Lindsell (1818)

An offer may be terminated through acceptance or

1) Rejection or counter-offer

2) Unreasonable lapse of time between offer being made and accepted

3) Revocation or withdrawal of the offer by the offeror

4) Death of one of the parties

5) Before performance in unilateral contracts

6. Put a tick (✔) beside the correct answer:

According to the rule where an offer is accepted by post, acceptance takes place

a) on the date, time and place of posting of the letter (✔)

b) on the date, time and place of receiving the letter

c) on the date, time and place of signing the letter

7. Discuss the remedy of an Order for Specific Performance

Where there is a breach of contract, specific performance is an order for the defaulting party to

perform their obligations under the contract. This empowers the court to order due performance

of the terms agreed. It is an equitable remedy and courts will only do this when damages are an

inadequate compensation and importantly where the order would not cause undue hardship on

the party in breach. Eg. Patel v Ali

The courts will not grant an order for specific performance in the following contracts:

1) Contracts for personal services

2) Contracts to advance money (compelling a person either to lend or borrow)

3) Where the court cannot supervise performance of a contract where supervision is

required

4) Where one of the parties is an infant

5) Where the contract is neither fair nor just

8. Explain the meaning of the term mitigation of losses and give an example of a case .

Where damages are awarded to an injured party they can be reduced if that party has failed to

mitigate their losses meaning that they must try to reduce their losses as much as possible

following a breach by the defendant. The injured party should not allow a loss to unnecessarily

accumulate when he is in a position to prevent it. They must take reasonable steps to mitigate

losses and failing to do so may result in reduced damages. The burden lies on the defendant to

prove the injured party did not mitigate their losses. E.g Bord Iascaigh Mhara v Scallon

9. Explain the difference between bilateral and unilateral contracts.

Bilateral contracts are contracts where there is an exchange of promises between the parties to

carry out acts and both parties are bound by the contract from the beginning.

A unilateral contract is where one party offers to do something in return for an act done by the

other party.

10. List the 4 essential elements of a contract

1) Agreement (offer + acceptance)

2) Intention to create legal relations

3) Exchange of consideration

4) Terms expressed with a degree of certainty

11. What is the primary distinction between an offer and an invitation to treat?

The main distinction between an offer and an invitation to treat is that an offer can be converted

into a contract by acceptance but an invitation to treat cannot be accepted. A response to an

invitation to treat may be an offer but a response to an offer can be acceptance or rejection.

In making the distinction the court will ask if the statement is clear, definitive and unambiguous

and is it complete.

12. Give the names of two cases that demonstrate examples of invitations to treat.

Partridge v Crittenden 1968

Grainger v Gough 1896

Pharmaceutical Society of GB v Boots 1952

Fisher v Bell 1961

Minister for Industry and Commerce v Pimm 1966

Norgren v Technomarketing

Harris v Nickerson

13. Will the courts enforce non-commercial agreements between family members?

Provide an example of a case that shows this.

Intention to create legal relations is a requirement for a contract to be valid. The Irish courts

have held that the presumption is that those who enter into social relations do so without the

intention that the agreement becomes legally binding. They will enforce family arrangements

between husbands and wives (Balfour v Balfour) or parents and children (Jones v Padavatton),

but where spouses have separated the courts have found that intentions can be legally binding

(Merritt v Merritt).

14. List the main categories of persons that the law states do not have the capacity to

enter into a contract?

1) Minors

2) Drunkards / Intoxicated

3) Persons of unsound mind

4) Convicts

15. What types of contracts can minors legally sign? Provide the names of cases to back

up your examples.

Minors may sign contracts for necessities (Nash v Inman) and they may also sign beneficial

contracts of service (Chaplin v Leslie Frewin Publishers).

16. Complete this sentence: Contracts entered into by a person who is mentally

incapacitated are valid unless the mentally incapacitated can demonstrate that…..

...they were unable to understand the nature of the contract and therefore consent to the

transaction.

… the other party to the contract knew of his incapacity and lack of understanding and used that

to their advantage.

17. Provide the name and basic facts of a case that demonstrate the rules concerning

intoxicated persons signing contracts.

In White v McCooey it was shown that contracts entered into by a person intoxicated will be

considered valid unless the intoxicated person can demonstrate they were so drunk at the time

of entering the contract that they were prevented from understanding the transaction and the

other party knew of their incapacity. In White v McCooey the defendant agreed to sell his pub in

Monaghan to the plaintiff. A contract was signed following a verbal agreement. The defendant

argued that he was so intoxicated when signing that he lacked capacity to contract. The Court

decided for the plaintiff and stated that he failed to establish that he was incapable of entering a

contract through drunkenness and there was no evidence that the plaintiff knew the defendant

was drunk.

18. Give two examples of how terms may be implied in a contract.

Terms implied by custom

Terms implied by legislation

Terms implied by the courts

Terms implied by the Constitution

19. Define a condition of the contract.

Conditions are the most important terms in a contract and have been defined as terms that go to

the root of the contract. If a party to the contract breaches a condition of the contract, the injured

party has the right to repudiate or terminate without notice and sue for breach of contract.

20. Define the warranties of the contract.

Warranties are considered to be the less vital terms or ancillary terms of a contract, They are

additional terms that do not form the basis of the contract and are not usually the terms that

persuade the party to enter the contract.

21. Name the three ways in which the courts have determined that an exemption clause

can only be validly incorporated into a contract.

1) By signature

2) By reasonable notice

3) In the course of dealing

22. What legislation restricts the use of exemption clauses?

Sale of Goods and Supply of Services Act 1980 (S.12 -15)

European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 - 2013

23. List any FOUR methods by which an offer can be terminated.

1) Rejection or counter-offer

2) Unreasonable lapse of time between offer and acceptance

3) Revocation or withdrawal of the offer

4) Death of one of the parties

5) Before performance in unilateral contracts

24. Explain the doctrine of remoteness of damages.

The doctrine of remoteness of damages means that the parties cannot be compensated for all

the loss suffered as some of the loss will be considered too remote from the breach. In

determining if the loss is too remote the courts will look at 1) what damages arose naturally as a

consequence of the breach of contract 2) what damages were within the contemplation of the

parties (foreseeable losses).

25. Explain the difference between a mandatory and a prohibitory injunction.

An injunction is an order of the court requiring a party to do something (a mandatory injunction)

or to stop doing something (a prohibitory injunction).