Robert Duxbury: Answering problem questions on contract law

2 comments, posted on August 7, 2012

Fundamentally, answering problem questions in contract does not differ from answering such questions in any other area of law. In any legal subject, you should begin your answer by identifying the legal issues raised by the problem; you should then explain the legal rules relevant to those issues; next, apply those rules to the facts; and finally come to some sort of reasoned conclusion to the problem. Credit will be given for explaining the relevant law with clarity and precision and, where appropriate, both sides of the legal argument should be explored. Markers will reward in particular the ability to construct a well-reasoned legal argument, supported by appropriate authority – this should of course be a relevant case, statute or other recognized source of law.

This article examines four areas of contract law which are much-favoured by the examiners, and aims to provide guidance on the nature of the questions (or parts of questions) you may face on these areas and the best way of tackling them. They are also topics which require a particular analytical approach when it comes to answering problem questions. Although there has been some statutory intervention, most notably with the Unfair Contract Terms Act 1977 (UCTA 1977), contract is still largely a case law subject. You will therefore need a sound grasp of the case law to do well. I mention this because unfamiliarity with the relevant cases is one of the most common failings in students attempting problem questions in contract law. I should add – for the avoidance of any doubt – that a similarly sound knowledge of the statutory law is also required.  We will consider below problem answering in the following areas of contract: offer and acceptance; exclusion clauses; misrepresentation; and discharge by frustration.

Offer and Acceptance

Offer and acceptance is an area where there are a lot of rules, almost entirely contained in cases, and you can expect to be tested on the interplay between the various rules.  For example, the outcome of a question may turn on whether an advertisement is an invitation to treat (as in Partridge v Crittenden, 1968) or an offer, which, if accepted will result in a unilateral contract (as in Carlill v Carbolic Smoke Ball Company, CA, 1893). As mentioned above, it is vital here to consider the law on both sides of the argument before coming to a conclusion as to the most likely outcome on the facts.

Questions may also turn on whether there has been a counter-offer or a mere request for information; whether the postal rule of acceptance applies; or whether there has been an effective revocation of the offer. The fact that a postal acceptance is as a general rule effective on posting may have to be considered against a revocation, which is only effective when it is received (see Byrne & Co v Van Tienhoven & Co, 1880 where the postal rule prevailed).

Don’t forget that the postal rule is essentially a rule of convenience; in an examination or coursework question you are likely to be tested on those situations where the rule may not apply – these include where the letter is not properly addressed or where the express terms of the offer exclude the postal rule. You will score a higher mark by being aware of, and displaying an ability to apply, the exceptions to a rule (where relevant) rather than merely stating the rule itself.

Exclusion clauses

Exclusion clauses (the expression is used so as to extend also to limitation clauses) is a multi-layered topic – there are long-established common law principles and there is more recent statutory regulation. In terms of approach, it is advisable to apply the common law rules first. You will need to analyse the facts to see whether the clause is incorporated, whether by signature, notice or by previous dealings. You should then consider the construction of the clause. Remember here, that since the passing of UCTA 1977, the courts no longer need to resort to “strained” construction to restrict the operation of exclusion clauses. Remember also that limitation clauses are construed much less stringently that exclusion clauses.

Having considered the common law rules, you should then turn to the application of the statutory provisions. Consider which of the operative sections of UCTA 1977 apply. In some cases, the clause must satisfy the requirement of reasonableness in s.11, in others the clause may be invalid. It is vital to have a thorough understanding of these provisions and how they operate.

Don’t forget that, in the case of consumer contracts, there is a further tier of regulation in the shape of the Unfair Terms in Consumer Contracts Regulations 1999. These regulations will have to be considered, where they apply, in addition to UCTA 1977.  A common error is to treat the regulations as if they were of general application; in fact, they only apply to unfair terms in contracts concluded between a seller/supplier and a “consumer” (who is defined as a natural person who is acting for purposes outside his trade, business or profession).

Misrepresentation

In a problem question on this topic, as a preliminary issue, you may first have to consider whether any of the statements made are representations or terms. If the latter, the remedy will lie in breach of contract, not misrepresentation. You should apply the established criteria to this distinction, which entail looking at the manner and timing of the statement; the importance of the statement; any special knowledge and skill possessed by one party; and whether or not the statement has been reduced to writing.

Secondly, if any statements are classifiable as representations, you will have to consider whether there has been any actionable misrepresentation. On this issue, you must examine the statements closely. You should bear in mind that there is a fine line between, eg statements of opinion and statements of fact, and be on your guard for statements that are actionable because they amount to a “half-truth” or where there has been a change of circumstances since the making of the statement.

Thirdly, you must attempt to establish whether statements are fraudulent, negligent or wholly innocent. This can be difficult but remember that, under s.2(1) of the Misrepresentation Act 1967, the false statement is assumed to be fraudulent (the “fiction of fraud”) and the burden is placed on the maker of the statement to prove that it was wholly innocent, ie that they had reasonable grounds for believing in its truth.

Finally, you should consider remedies. Here you will need to consider whether rescission is available or whether it has been barred, eg by affirmation. The type of misrepresentation (ie fraudulent, negligent or innocent) is significant in terms of the damages available. Where misrepresentation is negligent under s.2(1), damages may be awarded on the same basis as fraud.

Frustration

Problem questions on frustration usually involve a two stage process. First, one may have to consider whether the contract is frustrated. The situations in which a contract may be so discharged cannot be exhaustively listed, so it is important to explain the general test for frustration, ie that there must be such a change in the significance of the obligation, that the thing undertaken, if performed, would be something different from that contracted for; see Lord Radcliffe in Davis Contractors Ltd v Fareham UDC, HL, 1956. Mere hardship, inconvenience or loss will not suffice – frustration is exceptional. There may be deliberate ambiguity in the question, for example, it may state simply that the subject matter of the contract “was destroyed by fire”. It will not tell you how the fire was started. You will need to point out that if the fire was started as a result of the fault of one of the parties, the contract will not be frustrated and will be a case of breach; if begun without such fault, it may be a case of frustration.

Secondly, you will almost certainly be required to consider the legal consequences of frustration.  The difficulty here is that, at common law the contract was discharged from the moment of frustration onwards. The effects of this operated very harshly and as a result, the Law Reform (Frustrated Contracts) Act 1943 was passed. A question is likely to concentrate on those aspects of the Act of which the scope is uncertain. Those students who handle the provisions of the Act reasonably competently tend to obtain the best marks.

Conclusion

When it comes to examinations, an important part of your preparation should be thinking how you will answer questions on a particular topic. In an unseen examination, you will not know in advance the particular questions that will come up. But by carefully reviewing the questions your tutors have set you in contract seminars and courseworks, you should learn something about the type of questions that are likely to face you in the examination. Use that knowledge wisely. Preparing for examinations is more than merely committing the law to memory, vitally important though that is.

Robert Duxbury is the author of the new 2nd edition of Contract Law Textbook (Sweet & Maxwell, 2011), available as an eBook on the Amazon Kindle eBook store.

2 Responses

  1. Hassy says:

    Amazing ! thank you

  2. Andrei says:

    A big question mark re the whole exam thing.

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