CORPORATE AND BUSINESS LAW

CHAPER 1- ENGLISH LEGAL SYSTEM

 DEFINE LAW?
Principles and regulations established in a community by some authority and applicable to its people
whether in the form of legislation or of custom and policies recognised and enforced by judicial decision

Types Of Law

1) Common Law Vs Equity

2) Private Law Vs Public Law
3) Criminal law Vs Civil Law
 Common Law Vs Equity
Common Law
. Devoloped from local customs.
. Introduced the system of precedent
. The only remedy is damages
. May be rigid and inflexible
. Sometimes this would result in harsh consequences
Equity

Introduced fairness in to English Legal System

. Devoloped as a petition by a party who felt the common law had led to injustice
. More flexible compared to common law
. Introduced new discretionary remedies eg:Injunctions and Specific Performance
 Will not be granted if there is undue delay in bringing the case or if the petitioner
himself acted unfairly or where there is no mutuality (both parties should be able
to bring the case) .

Private Law Vs Public Law

Public Law

Relating to the whole country

Eg: Constitutional law, Administrative Law, Social welfare Law

Private Law

Law enforced between individuals

Eg: Contract Law, Family Law, Intellectual property Rights , Land Law, Probate
 Criminal Law Vs Civil Law
Criminal Law Civil Law
Involves relationship between individual
Conduct which state disapproves and seeks to
citizens.
control
Public Law Private Law

Purpose: Enforcement of particular form of Purpose: to settle disputes between

behaviour by state which acts to ensure individuals and to provide remedies
compliance

The case is brought by the state Case is brought by the claimant who is
seeking the remedy

Burden of proof: On the prosecution Burden of proof: On the claimant

 Criminal Law Civil Law

Standard of proof: guilt must be shown Standard of proof: Liability must be

beyond reasonable doubt shown on the balance of probabilities
(high standard of proof) (low standard of proof)

Object: To regulate the society by threat Object: usually financial compensation

of punishment to put the claimant in a position they
would have been in had the wrong not
occurrred

Guilty: Sentence the accused or may Civil court will order the defendant to
fine him or her or impose a period of pay damages or it may order some other
imprisonement remedies Eg: specific performance or
Innocent: The accused will be acquitted Injunctions
 QUESTIONS?
1) In a criminal case , who is responsible for prosecuting the accused?
a) The Claimant
b) The Defendant
c) The Crown Prosecution Service
d) The Judge

2) What is the standard proof in a civil case?

a) Beyond Reasonable Doubt
b) Balance Of probability
c) Beyond Any Doubt
d) Balance Of Evidence
 THE COURT SYSTEMS
The Main English Civil Courts

Supreme Court
5 justices hear appeal from the court of appeal and exceptionally from high court

High court Of Justice

Family Division : Hears matrimonial cases
Queens Bench Division: Hears first instance cases of contract and tort
Chancery Division: Deals with land law , company law etc . it hears appeals from county court
on probate and insolvency
 County Court
First instance civil claims in contract,
Magistrate Court tort,landlord and tenant, probate and
. Jurisdiction is mainly criminal but have insolvency
civil jurisdiction in civil matters such as One District Judge: Hear small claims.
contact orders , adoption Hearing is informal and no cost
. Recovery of council tax arrears and rewarded. simple claims valued at no
charge of water gas and electricity. more than ₤10000.
One Circuit Judge: Hears most fast
track (₤10000-₤25000) and some multi
track cases (›₤25000 and complex
cases)
 The Main English Criminal Courts

Supreme Court

Court Of Appeal

Hear appeals from crown court Divisional Court Of QBD

3 judges preside
Crown Court Hear cases from Magistrate
Presided over by a judge whose role is to decide question of law Court on point of law
and impose the punishment . Appeals go directly to
Cases will be heard before a jury whose role is to decide question supreme court
of fact ie,whether defendant is guilty of the offence .
Magistrate Court
Summary Offences : Decides wether defendant is
guilty of the offence and impose penalty. Penalties
are less in Magistrate court
Indictable Offences: Where there is to be trial by
jury
Offences Triable Either Way:The defendant can
chose wether to be tried in Magistrate court or to be
tried in Crown Court
 OTHER COURTS
European Courts Of Human Rights
Final court of appeal in relation to matters concerning human rights

Judicial Committee Of Privy Council

Highest court of appeal

Both civil and criminal cases
Right to appeal to the JPC is regulated by the constituition and legislation of particular country

3)Which of the following is not a division of high court?

a) The Chancery division
b) The Family division
c) The Queens Bench division
d) The Supreme division
 TRIBUNALS
Alternative to court system to settle a dispute
Employement Tribunal : Hear disputes between employee and employer on certain statutory employement matters
(such as unfair dismissal)
Appeal to Employement Appeal Tribunal (EAT) can only be made on point of law .
Diffrentiate between Court and Tribunal
Court Tribunal

Case may not be heard by a specialist in that Case will be heard by someone who has expertise
particular area of law - slower process in that area - quicker process

Legal aid may be available if not can be Legal aid not available (except for land tribunals
expensive and EAT) but can be much cheaper

Decisions are bound by Doctrine Of Judicial Not bound therefore risk of making inconsistent
Precedent therefore consistent decisions decisions
 Doctrine Of Judicial Precedent

The system adopted by judges of following the decisions in previous cases .

Some precedents are binding (means they must be followed in later cases)
Others are persuasive (means judges in later cases may chose to follow it but they are not bound to do so)
3 fcators to be considered in deciding wether a precedent is binding or persuasive
1) The hierarchy of the Courts
2) Ratio Decidendi and Obiter Dicta
3) Materials facts of the case

Hierarchy Of Courts

The precedent of higher court binds the lower court not viceversa
 Supreme Court
Bind all lower courts but doesnot bind itself

Court Of Appeal
Bind all lower courts and itself in civil cases unless earlier decision overruled
or inconsistent with European Law

High Court
Not bound by its own decision but strong persuasive authority

Ratio Decidendi and Obiter Dicta

Ratio Decidendi: Legal reason for the decision and it is capable of forming a binding precedent .
it is a statement of law which is carried down to later decisions.
Obiter Dicta : Not a part of the Ratio they are the other statements made by judges .
such as hypothetical situation or wide legal principles.They are persuasive rather than
binding .

Material Facts Of The Case

Precedent to be binding in later cases the material facts of two cases must be same. If they are
significantly different the precedent will be persuasive rather than binding

When is a precedent not binding?

a) Where it has been overruled by higher court
b) Has been overruled by statute
c)Was made without proper care (Per in Curiam)
d) Material facts differ
 Advantages and Disadvantages of Judicial Precedent

Advantages Disadvantages

Due to doctrine of judicial precedent Law is very complex because there

consistent decisions. Become easier to is a vast number of cases
predict the result of litigation inconsistencies can arise

Flexible - Decision can be adapted and Law can become rigid leading to
extended to reflect changes in society inflexibility and loss of
devolopment

Decisions arise from actual events Case law is reactive rather than
therefore practical proactive
QUESTION?
Which of the following statement regarding the doctrine of precedent is correct?
a) Obiter dicta is binding on future decisions
b) The ratio decidendi is binding on future decisions
c) if a precedent is overruled the earlier decision is overruled
d) The ratio decidendi can be subsequently overruled in certain cases

LEGISLATION
Types of Legislation
Legislation fall in to two categories
1) Acts of Parliament
2) Delegated Legislation
 1) Acts of parliament
Parliament consist of :
1) the House of Commons
2) the House of Lords
3) the Monarch

Inorder to become an act of a parliament a bill must go through following stages in both houses
1) First Reading : The name of Bill and its proposer is read out
2) Second Reading : Debate on the principles of bill and voting
3) Report stage : The bill as amended by the committee is reported back to the full house
4) Third Reading : The bill is read for the final time
At the end of the processes in both house the bills must receive royal assent
Doctrine Of Soverignity Of Parliament
Parliament is soverign means that only parliament can make new law and it can
make any law it wishes however it can never pass an act which can never be repealed .

Deligated Legislation
Parliament has delegated some of its legislative powers to other bodies. Usually parliament passes
an ‘enabling act’ setting out the policies involved and objectives it wishes to acheive . The Act then
delegates the task of filling in the details to some other body .
Rules enacted under such powers are called delegated legislation
Examples: statutory instruments made by government ministers ,bye-laws made by local authorities
and orders in council made by privy council
 Advantages and Disadvantages of Delegated Legislation

Advantages Disadvantages

Saves parlimentary time Its volume and lack of publicity means that
it can be difficult to keep up with the
changes introduced

May benefit from acess to technical Criticised as being undemocratic as it is

expertise thus leaving parliament free to made without recourse to the elected
consider and debate the underlying House of Commons
principles

Flexibility- it is quick and easy to make and

to change
There are number of means of controlling delegated legislation :
1) Parliamentary: Joint select committee on statutory instruments whose function
is to scrutinise all statutory instruments
2) Judicial : The courts can challenge the validity of the delegated legislation through the
process of judicial review. it can be challenged on the grounds that the person making
it has acted ‘ultra vires’ by exceeding their powers outside of the authority granted to them

Question?
3) Which of the following is not a form of delegated legislation?
a) Statute
b) Statutory instruments
c) Orders in Council
 Rules of Statutory Interpretation

The process by which judges assign meaning to ambiguous words or phrases in statute
is called interpretation of statutes
Judges can use certain aids, rules and presumptions to help them assign a meaning to a word
Aids to Interpretation
1) The Legislation itslef
2) Judicial Precedent
3) The Interpretation Act 1978
4) The Oxford English Dictionary
5) Hansard

1. Literal Rule
Words must be given their ordinary dictionary meaning even if it produces an undesirable outcome
Golden Rule
Used to ensure that preference is given to the meaning that donot result in the
provision being an absurdity

Mischeif Rule
Used to interpret a statute in a way which provides a remedy for the mischeif the
statute was enacted to prevent

Purposive Rule
It is making a decision as to what they felt parliament meant to acheive

Eiusdem Generis
General words means the same kind of thing the specific words they follow
 Expressio Unius Exclusio alterius
Where a statute seeks to establish a list of what is covered by its provisions
then anything not expressly included in that list is specifically excluded

Presumptions
There are presumptions which will generally apply unless the legislation specifically states otherwise
. A statute cannot conflict with international law. An act should be interpreted as giving effect to
international obligations
. A statute doesnot have any retrospective effect
. A statute doesnot alter Common law
. A statute doesnot exclude the jurisdiction of the court
. Legislation doesnot extend beyond the territorial jurisdiction of UK
 HUMAN RIGHTS LAW

Human Rights are the basic

rights and freedom that belong
to every person in the world.
Eg: Right to Freedom of Relegion
and Beleifs

In UK the Human Rights Act 1998 sets out the fundamental rights and freedom that everyone
in the UK is entitled to .
 QUESTIONS?

4) What rule of interpretation is being used if a judge interprets general words in the
context of the particular words preceding it and considered of the same kind?
A.Ejusdem Generis
B.Literal rule
C.Mischief rule
D.Expressio Unius Exclusio Alterius

5) Which of the following is an English court normally bound to follow?

a) An obiter statement of higher court
b) A ratio of a lower court
c) A ratio of a court at a same level
d) An obiter statement of Supreme court
2 - CONTRACT LAW
 CONTRACT
An agreement which is legally enforceable

Essential Elements of a valid contract

Agreement - Offer and Acceptance

Consideration – a commercial element a "price" for the agreement
Intention – the parties must intend to be legally bound by the agreement
Capacity – the parties must be legally competent to make a contract
Legality - The court will not enforce a contract which deemed to be illegal
(Offer – a proposal on clear terms as distinct from an invitation to treat )
(Acceptance – a clear assent to the terms of the offer).
 Restrictions

Any legal person – human or corporate – can make a contract. However, there are restrictions on the
following:
Minors (people under 18): can make contracts validly, but may repudiate (cancel) them without liability
unless the contracts are for necessaries (i.e. the purchase of goods or services needed to maintain their
standard of living). They may have to pay a reasonable price for benefits received under a contract while it
was in force.
The Companies Act 2006 imposes a minimum age limit of 16 on company directors .
Companies: a company must be properly incorporated before it can make a contract . Before this, the person
claiming to contract on behalf of the company will be personally liable.
Mental incapacity, intoxication and the like these can reduce a person's capacity
 Form of the contract

A contract can be any form - Simple contract - It may be written or oral or inferred from the conduct
of the parties.
Most contracts are simple contracts .
Exceptions :
Some contracts must be made in particular form such as in writing or they will be void .
Example: Contract for sale of land , Transfer of shares in a company

Speacialty Contracts
Conveyances of land and lease for 3 years or more must be by deed. These are known as speacialty
contracts .
Such contracts must be in writing , signed , witnessed and delivered .
Limitation period of a contract made by deed is 12 years and for all other contract it is 6 years
 Subject to Contract
Where the words subject to contract are used this means that the parties to an agreement are
not legally bound until the contract have been excecuted.
Eventho either parties have agreed terms the matter effectively remains in the state of negotiation.
Furthermore either parties can withdraw from the transaction without liability .

Offer
An offer is a definite and unequivocal statement of willingness to be bound on specific terms
without further negotiations .
Offer can be in any form - Oral , Written , or by Conduct . However it is not effective until it is
communicated to the offeree .
An offer can be made to a particular person , to a class of persons or even to whole world .
What is not an Offer?
An invitation to treat is not an offer ( An invitation to treat means an invitation to other party to
make an offer )
An invitation to treat cannot be accepted to form a valid contract
An advertisement is an invitation to treat not an offer
A window display was not an offer for sale but only an invitation to treat
Goods on shop shelves is an invitation to treat
Expections to an advertisement not being an offer :
It would be an offer if no further negotiation were intended or expected
Tenders
A tenders arise when one party issues a statement asking intrested parties to submit the terms
on which they are willing to work or supply goods .
 The person inviting the tender is simply making an invitation to treat .
The person submitting a tender is the offeror and the other person is free to accept or reject the offer
as they please.A mere intention to sell is not an offer.

Auction
When the auctionist ask for the bid that constituites an invitation to treat. When a bid is made that is
deemed to be an offer. When the auctioneers hammer falls the winning offer has been accepted and
there is a legally binding contract .

Cross Offer
Sometimes 2 parties make identical or similar offers to each other without knowing that the other has
made the offer .
No binding contract will be created as no one has accepted the offer made by the other .
Termination of Offer
Once an offer is terminated it cannot be accepted
An offer can be terminated by :
a) Revocation
b) Rejection
c) Lapse

Revocation
Revocation by the offeror can be made at any time before the acceptance even if the offeror agreed
to keep the offer open .
Revocation must be communicated to the offeree. ie it must be brought to their actual notice
Revocation can be communicated by the offeror or reliable third party .
Exceptions
If the offeree pays the offeror to keep the offer open any revocation will amount to breach of
collateral contract.
In case of unilateral contract the offeror cannot revoke the offer once the offeree has begun to
perform the acts which amount to acceptance .
Rejection
Rejection by the offeree may be outright or by means of a counter offer. A counter offer is an
offer made in response to an offer .
A mere request for futher details doesn’t constituite a counter offer .
Lapse
An offer will lapse on :
a) The death of the offeror
b) The death of the offeree
 c) The failure of a condition’
d) After expiry of the fixed time or reasonable time
If goods are perishable the time for lapse will be very short .

LET’S RECOLLECT
1)In the context of contract law, what will a display of goods in a shop window generally constituite
a) An Offer
b) An invitation to treat
c) A statement of intention

2) Which of the following statements regarding an offer is CORRECT?

A.It must be in writing
B.It must be certain
C.It can be vague
D.It can be ambiguous
3) Ravi offered by letter to sell Mary a car for £5,000. Mary wrote back saying she
accepted the offer and would pay in two instalments at the end of the two following
months.
Is there a contract, and for what reason?
A) .No – because Mary is trying to amend the contractual terms, Ravi can be assumed
to have revoked the offer
B) .Yes – there has been valid offer and acceptance
C) .No – Mary’s response constitutes a counter-offer and is effectively a rejection of
Ravi’s offer
Acceptance
Acceptance is the unqualified and unconditional assent to all the terms of the offer .
It can be oral , written or by conduct
The offeror can stipulate a mode of acceptance but if they merely request a mode the offeree is
not limited to that mode .
Communication
Acceptance is not effective until it is communicated to the offeror
in case of fax, telex or telephone :
if message is received during the normal business hours that is when is communicated eventho it
might not be read until later .
if message received outside normal business hours it is deemed to be communicated when the business
next opens .
The offeror can expressly or impliedly dispense with the need for communication , however
they cannot stipulate that silence is acceptance .

Postal Rule
Postal rule is an exception to the rule that acceptance must be communicated .
The postal rule states that acceptance is completed as soon as the letter is posted .

Postal rule apply only if :

a) the letter is properly stamped , addressed and posted
b) post is a reasonable method of communication
It applies even if the letter is never received by the offeror
However postal rule doesnot apply if the offeror states that they must actually recieve the acceptance
 Consideration
Consideration is an act of forbearence (or the promise of it) on the part of one party to a contract as the
price of promise made to him by the other party to the contract .
Every simple contract must be supported by consideration from each party but for contracts made by deed,
donot require consideration unless the terms of the agreeement require it .
Types of consideration
Executory consideration : is given where there is an exchange of promise to do something in the future
Executed consideration : is in the form of act carried out at the time of contract is made
Sufficient consideration
Consideration must be sufficient but need not be adequate .
Sufficient means that :
a) There must be some monetary value to the consideration
b) It must be capable in law of amounting to consideration
 Past Consideration
Consideration is past if the consideration is an act which has been
wholly performed before the other party gives his or her promise .
Past consideration is insufficient and invalid
Performance of an existing statutory duty is not sufficient consideration
Performance of an existing contractual duty is not sufficient consideration
The performance of an existing contractual duty may be sufficient if it
confers some benefit of a practical nature to the other party .
The performance of an existing contractual obligation is sufficient
consideration to support a promise from a third party
Illegal Acts
An illegal act is insufficient amount of consideration
 The Part Payment Problem
Payment of small sum doesnot discharge the debt of a greater amount. There are four exceptions :
1) Where part payment is made by a third party
2) Composition with the creditors
3) Accord and Satisfaction
Promissory Estoppel
The doctrine of promissory estoppel is based on the principles of fairness and justice .
It prevents a person going back on his or her promise to accept a lessor amount .
Conditions :
There must be an existing contract between the parties
The claimant must be vouluntarily waive their rights under the contract
There must be an intention that the defendent should rely on the waiver
The defendent must alter their legal position because of the waiver
 Limitation
It is a shield not a sword ie it is a defence not a cause of action
It may only have a suspensory effect
The party seeking to use it as an equitable defence must also have acted fairly in their dealings
with the claimant
Privity of contract
Only parties to a contract can :
Acquire rights and obligations under it
Can sue or be sued on it
Exceptions
1) The Contracts (Rights of Third Parties) Act 1999 permits a person who was not a party to
the contract to enforce it as long as the contract was for their benefit and they were expressly
identified by name or description .
 2) A contract between 2 parties may be accompanied by a collateral contract between one
of the parties and a third person relating to the subject matter
Under the rules of land law restrictive covenants run with the land to which they relate ie, the
future owner will be subjected to the restrictions made in previous contracts

4) On 1 August Daniel sent a letter to Martin offering to sell Martin some steel. On 5 August,
Daniel sent a further letter revoking the offer. Martin received the original letter of offer on 6
August and immediately posted his letter of acceptance. On 10 August, Martin received the letter of
revocation.
Is there a contract and why?
a) Yes – because Martin accepted before receiving the revocation
b) No – the revocation is effective from the date of posting
c) No – because Martin’s acceptance was not posted before Daniel’s revocation was posted
d) Yes – Martin’s acceptance stands because offers cannot be revoked by post
5) Peter owed Kate £1,000. Peter’s father, James, agreed with Kate, in writing, to pay her £550 if
she took it “in full settlement”. Kate took the £550 on this basis and then demanded £450 from
Peter. Peter refused to pay.
In the context of contract law what is Peter’s position?
A) Peter is liable – part payment of a debt is not consideration for a promise to discharge the debt
B) Peter will not be liable – the agreement between Kate and James was in writing
C) Peter will be liable – James, as his father, is not a third party
D) Peter is not liable – part payment of a debt by a third party is good consideration for a promise
not to sue for the balance
 Intention to create legal relation
Inorder to create a contract both parties must intend to enter in to a legal relationship. If it is not clear
from contract that the parties intended legal consequences then law presumes the intention of the parties
based on the type of agreement .
Domestic or Social Agreement
In social or domestic dealings, the parties are presumed not to intend legal relations
unless they clearly agree otherwise.
Commercial Agreements
In commercial dealings it is presumed that the parties do intend to be legally bound, unless they
otherwise agree.
There is a strong presumption that can only be rebutted by clear evidence to the contrary.
Letter of comfort
Often in international contracts a letter of comfort is used to assure a contracting party that a
 parent company will provide its subsidary company with the necessary resources to
fulfill the contract .
Contractual Terms
A statement written or oral made during negotiation leading to a contract may be a term of the
contract or merely a representation inducing the contract .
Terms
The parties' particular obligations under the contract.
Representations
Statements of fact made by the parties to one another during the course of negotiating a contract to
encourage one another to accept its terms.
Distinction
Representations become terms if they become part of the contract
If representation become term of contract the innocent party has remedies for breach of term as well
as for misrepresentation
 if representation donot become term of contract the innocent parties will have remedies
only for misrepresentation which are based on equitable remedies .

The dividing line between terms and representations is not precise. The courts will have
particular regard to:

Time: The shorter the time between the making of a pre-contract statement and the contract's being
concluded, the more likely the statement is to be regarded as a term.
Importance of statement: If the statement can be regarded as having been so important that without it
the contract would not have been made, it will be regarded as a term.
Special skills or knowledge: The statement of a party having greater specialist knowledge or skills is
more likely to be regarded as a term
Sources Of Terms
Terms may be express or implied
Express terms are included in the contract by being explicitly stated by the parties. Ideally they will be
listed by the parties. They must be clear for them to be enforceable .
Implied terms are not expressly included in the contract but they are neverthless still part of the contract.
They may be implied by statute or by courts rarely by custom.
Express terms will generally override implied terms

Implied by Statute
These statutes deal mainly with consumer-related transactions, where it is foreseeable that individuals
might otherwise be taken advantage of by terms imposed by the stronger party.
 Consumer Rights Act 2015
All goods (tangible, moveable items) must meet the
following standards:
Satisfactory quality – goods should not be faulty or damaged;
Fit for purpose – including any specific purpose made known to the seller before the sale;
As described – at the time of purchase.

If standards are not met the consumer has various rights, depending on the circumstances, that
include:
a) 30-day right (from date of purchase) to reject and obtain full refund;
after 30 days:
b) up to 6 months : giving the retailer one opportunity to repair or replace;
c) up to 6 years : if goods donot last a reasonable length of time the consumer may be entitled to
some money back .
 If a consumer discovers a fault within six months, it is presumed that the products were
defective when delivered – the seller is liable unless they can prove otherwise.
After six months, the burden of proof is on the consumer to show that the products were defective
when delivered.

Sale of Service
A Service must be carried out with reasonable care and skill .
If not following remedies are available :
1) Right to Repeat Performance
2) Right to Price Reduction
Sale of Digital Content
Digital content refers to data which are produced and supplied in digital form . eg: e-books
Digital content must be of satisfactory quality , fit for purpose and as described
 Remedies
1) Right to repair / replacement
2) Right to damage
3) Reduction in price

Implied by court

The court will imply a term if:

it is necessary for the commercial efficacy of the contract;
it is fair and reasonable; and
it does not contradict the parties express terms.
6) Which of the following is NOT considered by the courts when determining if a
statement is a term of a contract?
a) The time between the making of a pre-contract statement and the contract being
concluded
b)If the statement can be regarded as having been so important that without it the contract
would not have been made
c) Whether the statement is in writing
 Types of Terms
There are 3 types of terms
1) Conditions
2) Warranties
3) Innominate terms
Conditions

Conditions are core terms of the contract. If they are broken, the breach strikes at the very heart of the
agreement, so that the innocent party can treat the contract as at an end. The innocent party can:
a) Repudiate (i.e. refuse to perform) any further obligations owed; and
b) Claim damages from the party in breach for any loss
Warranties

Warranties are subsidiary terms which are not central to the main purpose of the contract. If a warranty is
broken the innocent party may claim damages for loss, but does not have a right to repudiate.
 Innominate terms
It is neither a condition nor a warranty . The remedy depends on the effect of breach :
1) if trivial : damages only ( ie treat as warranty)
2) if serious : damages , discharge or both (ie treat as condition)

Exclusion Clauses
Either or both parties may want a contract to include terms excluding or limiting liability in the event
of a breach .

Common Law Rules

Inorder to be valid an exclusion clause must satisfy 2 conditions
1) It must be incorporated in to the contract
2) Its wording must cover the loss
An exclusion clause can be incorporated in to a contract by :
1) signature - A claim is incorporated by signature even if the signatory did not read or understand the
document except if the term was misrepresented
2) Notice - For an exclusion clause to be incorporated by notice reasonable steps must have been taken
to bring it to the attention of the other party at the time of contract was made
3) Previous Dealings - For an exclusion clause to be incorporated by previous dealings there must have
been consistent course of dealings between the parties
The wordings must cover the loss
If the wording of an exclusion clause is ambiguous, the court will interpret it contra proferentem
(i.e. in the least favourable way to the party seeking to rely on it).

Statutory Rules
Even if clauses passed common law test it must also satisfy the satutory rules. These ar contained in :
1) Unfair contract Terms Act 1977
2) Consumer Rights Act 2015
 Unfair Contract Terms Act 1977
The Unfair Contract Terms Act 1977 (UCTA) imposes statutory limits on the avoidance of civil
liability through exclusion clauses in trade contracts for breaches of contract, negligence or
other breaches of duty.

UCTA indicates that an exclusion clause is any clause that attempts to:
restrict or exclude a liability;
make or enforce a liability subject to restrictive or onerous conditions;
exclude or restrict the rights and remedies of an aggrieved party; or
exclude or restrict rules of evidence or procedure.

An exclusion clause that is subject to the provisions of UCTA will be void unless the party that
seeks to rely on it can show that it is "reasonable" .
It applies to contracts between traders.
 UCTA restricts exclusion of liability for:
negligence
breach of contract.

UCTA renders void clauses which attempt to exclude liability for death or personal injury caused by
negligence.
Clauses which attempt to exclude liability for any other loss or damage (i.e. other than death or personal
injury) are also void unless they satisfy the test of reasonableness.
The burden of proving reasonableness is on the party who is seeking to rely on the clause .
Consumer Rights Act 2015
The CRA covers:
consumer contracts (other than for employment or apprenticeship); and
"notices" relating to rights or obligations between a seller and a consumer or which purport to
exclude or limit a seller's liability to a consumer.
 Fairness of Contract Terms and Notices

Any unfair term or notice, whether negotiated or non-negotiated, is not binding on the consumer
unless the consumer chooses to be bound by it.

Contract terms and notices must be fair.

The fairness test does not apply to all terms in consumer contracts. Specifically, it does not apply to :
a) Terms that specify the main subject matter; or
b) The price payable.
However, even terms such as these are open to regulation under the Act if they are neither:
a) Sufficiently transparent (i.e. in plain and intelligible language and legible where written); nor
b) Sufficiently prominent (i.e. brought to the consumer's attention in such a way that the "average"
consumer would be aware of it).
If these conditions are not met, such terms will be subject to the fairness test.
CRA further requires all written terms to be transparent.
The CRA also governs terms between businesses and individual consumers which attempt to
exclude or restrict the seller or supplier's liability for:
a) Death or personal injury caused by the seller or supplier's fault; or
b) Their failure to perform the contract substantially.

The CRA deals with:

a) Exclusion clauses in contracts where the seller/supplier is a business and the consumer is an
individual; and
b) Exclusion clauses and notices which seek to limit liability in tort for negligence.

Essentially, provisions purporting to exclude liability are invalid unless the party seeking to
rely on them can establish that they are "reasonable".
7) What are the subsidiary or secondary terms of a contract called?
A) Conditions
B) Innominate
C) Representations
D)Warranties

8) Which of the following statements regarding a term of a contract is CORRECT?

A) It must be in writing
B) It can be implied
C) It must be express
D) It must always be fair
 Discharge of Contract
The party will earn the discharge by properly fulfilling all obligations this is referred to as performance
However, this will not always happen. A contract also may be discharged by:
1) By Agreement: a contract may become burdensome to one or both parties, so they may agree to
release
each other from their promises.
2) By Frustration : Where after the contract is made it becomes impossible to perform
3) Bydoes
Breach Breach
not Of Contract discharge either party from their obligations.
automatically
1) For the breach of a warranty, the injured party's only remedy is to seek damages.
The injured party cannot repudiate the contract.
2) For the breach of a condition (or a court construes a breach of an innominate term as a breach of
condition), the injured party’s future obligations can be repudiated; because a core term has been broken,
the contract is at an end.
 Breach Of Contract
Breach of Contract occurs when one of the parties to the agreement fails to comply either completely or
satisfactorily with their obligations under it .
Types of Breach
1) Actual Breach : Breach occurs on the due date of performance
2) Anticipatory Breach : Breach occurs before due date of performance

Effects of Anticipatory Breach

Anticipatory breach doesnot automatically bring the contract to an end . The innocent party has 2 options :
1) Treat the contract as discharged and bring an action for damages immediately without waiting for the
contractual date of performace
2) Elect to treat the contract as still valid , complete his or her side of bargain and then sue other party
for payment -right to claim the full contract price.
 Damages
Damages are common law remdies and they are available as right for breach of contract

Liquidated Damages and Penalty Clauses

Where a contract provides for the payment of a fixed sum on breach it may either be a liquidated damages
caluse or a penalty clause
Liquidated Damages : Genuine pre-estimate of the expected loss . The amount stated is the amount of
damages claimable and is enforceable by court
penalty clause : If a clause was not genuine pre-estimate then it is deemed as a penalty clause and
not enforceable
Assesment of Unliqudated Damages
Where the contract donot make any provision for damages the court will decide the damages payable
2 factors to consider unliqudated damages
1) Remoteness of Loss
2) Measure of Damages
 Other Remedies
Action for Price
If the breach of contract arises out of one parties failure to pay the contractually agreed price then the
creditor should bring an action to recover the sum .
Quantum Meruit ("as much as he has deserved")
Under this remedy the value of the contractual work which has already been performed is measured .
This remedy is likely to be sought where one party has already performed part of his or her obligations and the
other party then repudiates the contract .

9) What does a breach of a condition entitle the injured party to do?

A) Claim damages only
B) Claim quantum meruit
C) Repudiate the contract and claim damages
 Equitable Remedies

Specific Requires someone to perform their contractual obligations .Not

Performace available for personal service contracts . It enforces positive
covenants within the contract

Injunction Orders someone to do somthing or not to something . It enforces

negative covenants within the contract

Rescission Restores the parties to their exact pre-contractual position

Equitable remedies are only available at the discretion of the court, they are not granted if :
1) Damages are an adequate remedy
2) The claimants have acted unfairly
3) The order would cause undue hardship
4) The order would require the constant supervision of the court
4) There is undue delay in seeking the remedy
10) What occurs when one party puts the other party on notice of their intention to not comply
with the terms of a contract?
a) Repudiatory breach
b) Misrepresentation
c) Frustration
d) Anticipatory breach

11) Which of the following best describes rescission?

a) A court restoring both parties to a pre contractual position
b) Both parties fully performing their contractual obligations
c) A court insisting both parties perform their contractual obligations
d) Both parties failing to perform their contractual obligations