LSI FE1 Contract Law (manual) 2018 PDF

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CONTRACT LAW Law Society of Ireland Final Examina Examination tion (Part 1) Preparatory Course

This manual has been prepared solely for use in conjunction with Griffith College Dublin Professional Law School’s Law Society Entrance Examination Preparatory Course. All rights reserved. No part of this publication (whether hard or digital copy) may be reproduced, or transmitted in any form or by any means, including recording and photocopying, without the written permission of the copyright holder, application for which should be addressed to the Griffith College. Written permission should also be obtained before any part of the publication is stored in a retrieval system of any nature. Disclaimer: Whilst every effort has been made to ensure that the contents of this book are accurate, neither the Griffith College nor the author can accept responsibility for any errors or omissions or loss occasioned to any person acting or refraining from acting as result of any material in this publication.

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Table of Contents CHAPTER 1

Introduction to FE1 Contract Law ............................................................................. 1

CHAPTER 2

Formation of Contract – Introduction........................................................................ 3

CHAPTER 3

Offer and Acceptance................................................................................................. 5

Bi-Lateral and Unilateral Contracts ................................................................................................ 5 Offers.............................................................................................................................................. 5 Introduction ............................................................................................................................... 5 Offers and Invitations to Treat ................................................................................................... 6 Exceptions .................................................................................................................................. 8 “Mere Puffs” .................................................................................................................................. 9 An Offer Must be Properly Communicated ............................................................................... 9 When an Offer Ends ................................................................................................................. 10 An Offer May Lapse by Passage of Time .................................................................................. 10 An Offer can be revoked (If you communicate the Revocation) ............................................. 11 Death ........................................................................................................................................ 12 Rejection .................................................................................................................................. 12 Acceptance ................................................................................................................................... 13 The Mirror Image Rule ............................................................................................................. 13 Communication of Acceptance ................................................................................................ 13 The General Rule ...................................................................................................................... 14 Acceptance Being Inferred From Conduct ............................................................................... 14 The Postal Rule......................................................................................................................... 14 Electronic Communications – Fax, Telex, Email ....................................................................... 15 Modes of Acceptance............................................................................................................... 17 Bi-lateral and Unilateral Contracts............................................................................................... 18 Rule 1: Acceptance of the Unilateral Contract is Co-Existent With Performance .................. 19 Rule 2: Revocation Cannot Occur Once Performance Has Begun .......................................... 20 Offer and Acceptance in Specific Cases ....................................................................................... 21 Auctions.................................................................................................................................... 21 Tenders..................................................................................................................................... 22 The Judicial Approach to Offer and Acceptance .......................................................................... 23 The Objective Principle ............................................................................................................ 23 When Offer and Acceptance Seems Unhelpful – the Battle of Forms..................................... 24 CHAPTER 4

Consideration and Estoppel .................................................................................... 27

The Need for Consideration ......................................................................................................... 27

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Attempts at Defining Consideration ............................................................................................. 27 The Idea that Consideration Must Move From the Promisee...................................................... 28 Consideration Need not be Adequate.......................................................................................... 29 Consideration Has to Be Sufficient ............................................................................................... 30 General ..................................................................................................................................... 30 Past Consideration is not sufficient .......................................................................................... 30 Pre-Existing Obligations............................................................................................................ 31 Estoppel ........................................................................................................................................ 36 Promissory Estoppel: General .................................................................................................. 36 The Origins of Promissory Estoppel.......................................................................................... 37 Elements ................................................................................................................................... 38 Proprietary Estoppel................................................................................................................. 40 Legitimate Expectation ............................................................................................................. 43 CHAPTER 5

Intention to Create Legal Relations ......................................................................... 45

Family and Domestic Agreements................................................................................................ 45 Collective Agreements.................................................................................................................. 46 Commercial Agreements .............................................................................................................. 49 Generally................................................................................................................................... 49 Letters of Comfort .................................................................................................................... 50 CHAPTER 6

Certainty and Incomplete Contracts ........................................................................ 53

Agreements to Agree.................................................................................................................... 53 ConDitional Contracts................................................................................................................... 55 CHAPTER 7

Formal Requirements .............................................................................................. 57

What contracts fall within the Statute? ....................................................................................... 57 Special promise[s] to answer for the debt default or miscarriage of another person............. 57 Agreement[s] made upon consideration of marriage .............................................................. 57 Contracts which are not to be performed within one year from the making thereof............. 58 Interests in Land ....................................................................................................................... 59 What does the Statute require? ................................................................................................... 60 Note or memorandum in writing ............................................................................................. 60 The Deposit Issue...................................................................................................................... 61 Must be Signed by the Party to be Charged or his Agent ........................................................ 61 Joinder of Documents............................................................................................................... 62 Using the Words “Subject to Contract”.................................................................................... 62 Has a debate re-emerged on this? ........................................................................................... 63

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What are the effects of non-compliance with the Statute? ........................................................ 64 Part Performance ......................................................................................................................... 64 “Gazumping” ............................................................................................................................ 65 Waiver of Terms ........................................................................................................................... 66 Estoppel / Acceptance ................................................................................................................. 66 CHAPTER 8

Construction of Contracts ....................................................................................... 67

A Note on the Cases ..................................................................................................................... 67 The Overall Aim of Contract Interpretation ................................................................................. 67 The Factual Matrix of the Parties ................................................................................................. 68 Caution in Using the Factual Matrix ......................................................................................... 69 Time Limits ............................................................................................................................... 69 Literal Words Get Literal Meanings ............................................................................................. 69 Previous Negotiations .................................................................................................................. 70 Where Clauses are Inconsistent With One Another .................................................................... 70 Overall Commercial Purpose........................................................................................................ 70 CHAPTER 9

Privity of Contract ................................................................................................... 73

Theory .......................................................................................................................................... 73 Privity and Agency........................................................................................................................ 74 Privity and Contractual Trusts ...................................................................................................... 76 Using The Law of Tort .................................................................................................................. 77 The Special Case of Covenants Concerning Land......................................................................... 77 Statutory Intervention ................................................................................................................. 77 Assignment................................................................................................................................... 77 Collateral Contracts...................................................................................................................... 77 Are these mechanisms enough? .................................................................................................. 78 Damages for Loss Suffered by Third Party ................................................................................... 78 Extension of the Albazero Exception / Building Contracts....................................................... 79 CHAPTER 10

Capacity to Contract............................................................................................. 81

Capacity of Married Women ........................................................................................................ 81 Capacity of Companies................................................................................................................. 81 Capacity of Convicts ..................................................................................................................... 81 Capacity of the Mentally Ill .......................................................................................................... 81 Capacity of Drunks ....................................................................................................................... 82 Infants / Minors............................................................................................................................ 82 Introduction ............................................................................................................................. 82

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Necessaries ............................................................................................................................... 83 Beneficial Contracts of Service ................................................................................................. 84 All Other Contracts (i.e. Voidable Contracts) ........................................................................... 85 Statutory Intervention .............................................................................................................. 86 Recommendations of the Law Reform Commission ................................................................ 87 CHAPTER 11

The Parol Evidence Rule ....................................................................................... 89

Exceptions..................................................................................................................................... 89 CHAPTER 12

Terms of a Contract .............................................................................................. 93

What are the Express Terms: “Mere Representations” or “Warranties”?................................... 93 Introduction and Terminology.................................................................................................. 93 How does one determine whether a given statement amounts to a contractual term? ........ 93 The Respective Positions of the Parties.................................................................................... 94 Express Acceptance / Rejection of Responsibility .................................................................... 95 Significance of the Purported Term / Representation ............................................................. 95 The Stage at Which the Statement Was Made ........................................................................ 96 Reduction to Writing ................................................................................................................ 97 Reliance .................................................................................................................................... 97 Specifity .................................................................................................................................... 98 Implied Terms ............................................................................................................................... 98 Introduction .............................................................................................................................. 98 Implying Terms on the Basis of Custom & Practice .................................................................. 99 Implying Terms on the Basis of the Business Efficacy Test ...................................................... 99 Officious Bystander Test......................................................................................................... 101 Case Study .............................................................................................................................. 102 Terms Implied By Law................................................................................................................. 102 By Statute ............................................................................................................................... 102 By the Constitution ................................................................................................................. 103 By Common Law ..................................................................................................................... 103 Conditions and Warranties (Relative Importance of Contractual Terms).................................. 105 CHAPTER 13

Exclusion Clauses ................................................................................................ 109

Other Law ................................................................................................................................... 109 The Need to Incorporate an Exclusion Clause............................................................................ 109 Incorporation by Signature......................................................................................................... 109 General ................................................................................................................................... 110 Dissatisfaction with the Signature Rule? ................................................................................ 110

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Where the Contract Has Already Been Formed......................................................................... 110 Incorporation by Notice ............................................................................................................. 111 Older Cases............................................................................................................................. 111 Modern Movement....................