DIL 1103 - Contract Test 1 Q&A PDF

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Seri Stamford – Diploma in LawTest 1 Q&A – 10%DIL 1103 – Contract LawTest 1 – 10%Topics Introduction to Contract Law  Consideration  ITCLR  Capacity  TermsQuestion 1What are the necessary elements of a binding contract?A) Offer, acceptance, consideration and ITCLR. B) Offer, acceptance, cer...

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Seri Stamford – Diploma in Law Test 1 Q&A – 10%

DIL 1103 – Contract Law Test 1 – 10% Topics     

Introduction to Contract Law Consideration ITCLR Capacity Terms

Question 1 What are the necessary elements of a binding contract? A) B) C) D)

Offer, acceptance, consideration and ITCLR. Offer, acceptance, certainty, practicality and ITCLR. Offer, acceptance, fairness, consideration, and reasonableness. Offer, acceptance and consideration.

Answer: A Reason: In order for there to be a binding contract, there must be first and foremost, offer and acceptance. Consideration is the interest of forbearance by a contracting party Currie v Misa [1875] LR Exch 153. Lastly, there must be an intention for parties to legally enforce the contract. Therefore A is correct and D is incorrect. Recall that courts typically do not save parties from unfair bargains (presuming that parties had contracted on their free will). Therefore, fairness, practicality and reasonableness are not essential elements of a binding contract. Therefore, Answers B and C is incorrect. (Refer to Lecture 1 slides on Offer and Acceptance).

Question 2 What is a unilateral contract? A) A contract in which both parties are legally bound to perform their side of the agreement. B) A contract whereby only one party promises to perform an act if the other party performs a stipulated act and the other party is not under an obligation to perform that stipulated act. C) A contract involving only one party. D) A contract that either party can withdraw from at any time. Answer: B Reason: A contract in general requires both parties to perform their side of the agreement or face legal consequences. This is not an exclusive feature of a unilateral contract. A contract can only be

withdrawn upon before than is agreement between the parties. Therefore A and D respectively are incorrect. A unilateral contract exists only when an offer is made to the world at large (eg. Advertisements with conditions). Therefore, C is incorrect. Recall the case of Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256, CA. It was held that such advertisements are offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the condition accepts the offer.” Hence, B is the correct answer. (Refer to Lecture 1 slides on Offer and Acceptance).

Question 3 Which of the following is NOT an invitation to treat? A) B) C) D)

Goods at an auction. Rewards for the return of lost items. Displays of goods. An invitation to submit a tender.

Answer: B A reward advertised for a return of a lost item is a unilateral offer made to the world at large, whereby a person accepts the offer by performing the condition of finding the lost item and returning it to the person making the unilateral offer. Therefore, it is not an invitation to treat, making the answer B. Refer to the case of Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256, CA. Goods at an auction, displays of goods and tenders are merely invitations to entice a person to make an offer. They are not offers in themselves. Therefore, A, C and D is incorrect. (Refer to Lecture 1 Slides on ITT).

Question 4 English Law: Which one of the following statements is NOT TRUE? A) Performance of a contractual duty owed to a third party does not amount to good consideration. B) Generally, performance by A of an existing legal duty does not provide fresh consideration for a new promise made by B. C) Generally, the performance of a pre-existing contractual obligation by A does not provide fresh consideration for a new promise made by B. D) Generally, part-payment of a debt does not constitute sufficient consideration. Answer: A A contractual duty to a third party generally constitutes to good consideration. The Eurymedon [1975] AC 154, PC, Lord Wilberforce delivered the majority decision that an agreement to do an act which the promisor is under an existing obligation to a third party to do, may quite well amount to valid consideration. Therefore, A is correct.

Performance of an existing legal duty does not provide fresh consideration for a new promise as consideration is only made after the promise is made, not before. Therefore, B and C are incorrect. Part-payment generally does not constitute to sufficient consideration. Therefore, D is the incorrect answer. (Refer to Lecture 2 slides on Consideration).

Question 5 Which case is authority for the fact that consideration must be sufficient but need not be adequate? A) B) C) D)

Stilk v Myrick [1809] Chappell Co Ltd v Nestle Co Ltd (1960) Lampleigh v Braithwaite [1615] Pao On v Lau Yiu Long [1980]

Answer: B All of the cases consider particular aspects of consideration in contract law, but it is the case of Chappell Co Ltd v Nestle Co Ltd which is authority for the fact that consideration must be sufficient but need not be adequate. In Nestle, a record which normally retailed for 6s 8d was offered for a sum of 1s 6d plus three nestle chocolate bar wrappers. The wrappers were of no value and were discarded when received by Nestle. The wrappers were still held to be sufficient consideration, as whilst of no monetary value to Nestle, they had some value in that they assisted the promotion of their chocolate. Therefore, B is correct. (Refer to Lecture 2 slides on Consideration).

Question 6 Creative Kitchen Company agreed to renovate David's kitchen in time for his 40th birthday party. David, worried that the work may not be completed on time, offered to pay the company an extra £250 if the work was completed on time. Creative Kitchen Company did complete on time. David has now refused to pay the additional money. As per the rule on pre-existing duties owed to a promisor, which one of the following statements is correct? A) David is not bound to pay the extra £250 because Creative Kitchen Company was at fault for falling behind the schedule. B) David is not bound to pay the extra £250 because Creative Kitchen Company was already obliged to complete the work on time. C) David is bound to pay the extra money because he had made the offer to Creative Kitchen Company which they have accepted. D) David is bound to pay the extra money as he has had the benefit of ensuring the work was completed on time. Answer: D In Williams v Roffey Bros, the Court of Appeal decided that the promise by the plaintiff to perform an existing contractual duty with the defendant was good consideration because it was a benefit to the defendant in ensuring that the work was completed on time. They avoided the disbenefit of

being liable under a penalty clause in the main contract and of having to find other suitably qualified carpenters. Therefore, D is the correct answer. (Refer to Lecture 2 slides on Consideration).

Question 7 What is the general rule pertaining to contracts formed with minors under English law? A) B) C) D)

Void. Voidable. Subject to the age of the minor. Illegal.

Answer: B The Minor’s Contracts Act 1987 modifies English common law on the capacity of minors to contract. In English Law, contracts made with minors are voidable, not void. Minors are individuals aged 18 and under (Family Reform Act 1969). This would mean that the minor is entitled to repudiate/terminate the contract on his volition. This would mean that A and C is incorrect and B is correct. As the minor is entitled to seek statutory remedies or action (repudiate/terminate) regarding the contract, it is clearly not illegal. Therefore D is incorrect. (Refer to Lecture 3 slides on Capacity).

Question 8 Aqiff’s education was fully paid by Universiti Teknologi Malaya (UTM). Aqiff agreed to be bonded to work for UTM after the completion of his education. However, upon completion of his education, Aqiff defaulted on the agreement and went on to work for Quayside University. UTM sues Aqiff for breach of contract. Aqiff argues that the agreement was void on the grounds that he had entered into it as a minor. Is the contract valid under Malaysian law? A) YES – contracts with minors are voidable in Malaysia. B) YES – agreements entered into by scholars shall not be invalidated on the grounds that the scholar was a minor. C) NO – contracts with minors are void in Malaysia, regardless of scholarship status. D) NO – an education is not a necessary for Aqiff. Answer: B S.4 of the Contracts (Amendment) Act 1976 states that: “Notwithstanding anything to the contrary contained in the principal Act, no scholarship agreement shall be invalidated on the ground that: The scholar entering into such agreement is not of the age of majority.” This would mean B is the correct answer. C would be incorrect as scholars are excluded from the general rule of minor contracts. A is incorrect because the law on minors in Malaysia is that they are not competent to contract, and contracts made with minors are void (s.10 and s.11 of the Contracts Act 1950). It would not make logical sense to invalidate a contract on the grounds that an education is not a necessary. Hence, D is incorrect. (Refer to Lecture 3 slides on Capacity).

Question 9 What is NOT a valid method of incorporating terms into a contract? A) B) C) D)

By signature. By taking reasonable steps to bring the relevant terms to the notice of the other party. By incorporation by previous course of dealings between the parties. By stating that there is no need to verify the truth of a statement.

Answer: D A, B and C are valid methods of contract incorporation – refer to the slides on Express Terms I for case law. Stating that there is no need to verify the truth of a statement is NOT a valid method of incorporation, rather, it merely distinguishes representations from terms (Schawel v Reade [1913] IR 64). (Refer to Lecture 4 slides on Express Terms I).

Question 10 Which one of the following statements correctly describes the difference between express and implied terms? A) B) C) D)

Express terms are regarded as conditions and Implied terms are warranties only. Express terms are in writing, whereas implied terms derive from oral negotiations. Express terms are more important than implied terms. Express terms are terms that the parties have specifically negotiated should form part of the contract. Implied terms are terms added to the contract by the law or based upon the facts of the case or customs.

Answer: D A is incorrect because any term, express or implied, may be a condition or a warranty. B is incorrect as express terms, and not just implied terms, are able to be derived from oral negotiations. C is incorrect because all terms, express or implied, can be breached and be subject to damages (and/or) repudiation or termination. The importance of the times is relied on the classification of the terms, not whether a term is express or implied. Express terms are terms that the parties have specifically negotiated should form part of the contract. Implied terms are terms added to the contract by the law or based upon the facts of the case. Therefore, the answer is D. (Refer to Lecture 4 slides on Express Terms I)....