Contract

• Topic 01

  Formation of a Contract

  95 questions
• Topic 02

  Contents of a Contract

  92 questions
• Topic 03

  Vitiating Elements

  64 questions
• Topic 04

  Discharge of Contract and Remedies

  78 questions
• Topic 05

  Unjust Enrichment

  69 questions

A few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.

1. Alpha Ltd and Beta Ltd have entered into 50 transactions over two years, always on Alpha's standard terms. Beta now enters a new contract with Alpha and claims it did not see the terms this time. Which of the following best describes the legal position regarding the incorporation of Alpha's standard terms?

   • A
     Alpha's terms are likely incorporated by course of dealing, but the high frequency strengthens the argument that Beta knew and accepted those terms as part of the ongoing commercial relationship.
     Correct answer
   • B
     Beta is not bound because it did not read or specifically acknowledge the terms in this particular transaction, even though previous transactions used the same terms.
   • C
     Course of dealing can only incorporate terms after 100 or more transactions between the same parties; fewer transactions are insufficient as a matter of law.
   • D
     The terms can only be incorporated if Beta signed the specific contractual document containing them in this particular transaction.
   Explanation

   Under Spurling v Bradshaw [1956], terms may be incorporated by a consistent course of dealing. Fifty transactions over two years is a strong example of a consistent course of dealing. The fact that Beta did not read the terms on this occasion is irrelevant — the consistent pattern establishes that both parties understood the terms formed part of their dealings. The frequency and regularity of dealings are key factors. Compare Hollier v Rambler Motors [1972], where only 3-4 dealings over 5 years was insufficient.

2. An offeror states: 'Acceptance must be made by registered post only.' The offeree accepts by email instead. The offeror argues the acceptance is invalid. Which of the following is correct?

   • A
     The acceptance is invalid because an offeror has an absolute and unchallengeable right to dictate any method of acceptance they choose.
   • B
     The acceptance is valid regardless of the offeror's stipulation because email is faster and more reliable than post in all practical situations.
   • C
     The acceptance is valid because an offeror can suggest but never legally require any particular method of acceptance from the offeree.
   • D
     The acceptance may still be valid if the offeror has not insisted that the specified method is the only permitted method, but merely indicated a preferred method — the question is whether the offeror's words amounted to a mandatory requirement
     Correct answer
   Explanation

   Where an offeror prescribes a method of acceptance, the question is whether they have mandated it as the exclusive method or merely indicated a preference. If mandatory, acceptance by another method is generally ineffective. If merely a preferred method, acceptance by an equally effective or better method may suffice. The courts will construe the offeror's words to determine whether the stipulation was mandatory.

3. A haulage company and a warehouse operator have dealt with each other regularly over many years. On every previous occasion, the warehouse operator's standard terms — including a clause limiting liability for damaged goods to £100 per item — were sent with each booking confirmation. On the most recent occasion, the booking was made urgently by telephone and no standard terms were sent. Goods worth £10,000 are damaged. The warehouse operator seeks to rely on the limitation clause. Which of the following best describes the legal position?

   • A
     The limitation clause cannot be incorporated because the standard terms were not sent with this particular booking
   • B
     The limitation clause cannot apply because it is unreasonable in relation to the value of the damaged goods
   • C
     The limitation clause is automatically incorporated because it is a standard trade term in the haulage industry
   • D
     The limitation clause may be incorporated by the consistent course of dealing between the parties, even though the standard terms were not sent on this particular occasion
     Correct answer
   Explanation

   Under the course of dealing doctrine established in Spurling v Bradshaw [1956], where parties have dealt consistently on the same standard terms over a period, those terms may be incorporated into a new transaction even if they were not expressly communicated on that specific occasion.