Contract Law

Contract Law Revision Guide for the LLB (2024)

A case-specific, exam-focused walkthrough of every major contract law topic you'll face in your LLB or SQE assessments.

Contract law questions reward students who can spot the precise issue fast and anchor every argument in authority. This guide walks you through the topics that appear most often, the cases examiners actually want to see, and the mistakes that cost marks.

Formation: Getting the Basics Sharp

Every problem question starts here. Formation issues crop up even when the question looks like it's about something else, so be automatic about checking them.

Offer and Acceptance

The distinction between an offer and an invitation to treat is tested constantly. The rule from Partridge v Crittenden [1968] 1 WLR 1204 is that advertisements are generally invitations to treat, not offers. The exception is a unilateral offer to the world, as in Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, where the advert's precise language and the deposit of money showed genuine contractual intent.

Shop displays follow Pharmaceutical Society of GB v Boots Cash Chemists [1953] 1 QB 401. The offer is made by the customer at the till, not by the retailer placing goods on a shelf. You'll see this in exam scenarios involving websites and online checkouts too. An e-commerce product page is an invitation to treat; the customer's order is the offer.

For acceptance, the postal rule from Adams v Lindsell (1818) 1 B & Ald 681 means acceptance is complete on posting, not on receipt. Apply it only where post is the contemplated medium. It does not apply to instantaneous communications. Entores v Miles Far East Corporation [1955] 2 QB 327 confirms that with telex (and by analogy, email and electronic acceptance), the contract is formed when and where acceptance is received.

Counteroffers kill the original offer. Hyde v Wrench (1840) 3 Beav 334. A request for information does not. Stevenson, Jacques & Co v McLean (1880) 5 QBD 346. Train yourself to distinguish the two in facts: is the reply changing the terms, or just asking a question?

Consideration

Three rules dominate exam questions on consideration:

1. Consideration must not be past. Re McArdle [1951] Ch 669.
2. Consideration must move from the promisee. Tweddle v Atkinson (1861) 1 B & S 393.
3. Performing an existing duty owed to the promisor is not good consideration. Stilk v Myrick (1809) 2 Camp 317.

The third rule is where most marks are lost, because Stilk sits in direct tension with *Williams v Roffey Bros* [1991] 1 QB 1. In Williams v Roffey, the Court of Appeal held that promising to pay more for work already contractually required can be binding if the promisor obtains a practical benefit and there is no duress. The carpenter had not finished the flats; Roffey stood to lose their bonus under the main contract. That practical benefit was enough.

You need to be able to distinguish the two cases. Stilk involved sailors demanding extra pay mid-voyage with no real pressure on the captain beyond the voyage itself. Williams v Roffey involved a commercial context where the promisor actively benefited from the renegotiation. When your problem question has a builder, subcontractor, or service provider asking for more money, work through: Was there duress? What was the practical benefit to the party paying more? If there is duress, Williams v Roffey doesn't save you anyway, because economic duress (developed through cases like Atlas Express v Kafco [1989] QB 833) makes the variation voidable.

Intention to Create Legal Relations

Domestic and social agreements are presumed not to be legally binding. Balfour v Balfour [1919] 2 KB 571. Commercial agreements are presumed to be binding. Edwards v Skyways [1964] 1 WLR 349. These presumptions are rebuttable.

The exam twist is a family arrangement made in a commercial context, or a commercial document with an express "binding in honour only" clause. For the latter, Rose & Frank Co v JR Crompton [1925] AC 445 shows the clause can be effective.

Terms

Conditions, Warranties, and Innominate Terms

Classification matters because it determines the remedy. A breach of condition lets the innocent party terminate and claim damages. A breach of warranty only sounds in damages. Innominate terms go either way depending on the consequences of the breach.

The innominate term category was established in Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha [1962] 2 QB 26. The question is whether the consequences of the breach are so serious that the innocent party should be entitled to treat themselves as discharged. Apply this by looking at the actual effect: did the breach deprive the innocent party of substantially the whole benefit of the contract?

Examiners like scenarios where a party tries to terminate for what looks like a minor breach. If the term is innominate and the consequences are trivial, termination is not available. The claimant is left with damages only.

Exclusion Clauses

Two-stage analysis, every time:

1. Is the clause incorporated?
2. Does it cover the loss on its true construction? (And if the Unfair Contract Terms Act 1977 or the Consumer Rights Act 2015 applies, does it survive the reasonableness or fairness test?)

For incorporation: signature (L'Estrange v Graucob [1934] 2 KB 394, you are bound even if you didn't read it), notice (Olley v Marlborough Court [1949] 1 KB 532, notice must be given before or at the time of contracting), and course of dealing (Spurling v Bradshaw [1956] 1 WLR 461).

For construction, apply the contra proferentem rule: ambiguity is read against the party relying on the clause. And remember that UCTA 1977 applies to business-to-business contracts. The Consumer Rights Act 2015 applies to B2C contracts. A clause excluding liability for death or personal injury caused by negligence is void under UCTA s.2(1). Other exclusions of negligence liability must pass the reasonableness test.

Spot the context in the question: two businesses, or a business and a consumer? That tells you which regime to apply.

Vitiating Factors

Misrepresentation

The Misrepresentation Act 1967 is the engine here. You need to know the three types of misrepresentation and their remedies.

• Fraudulent: Derry v Peek (1889) 14 App Cas 337. Rescission plus damages in the tort of deceit.
• Negligent: s.2(1) of the 1967 Act. Rescission plus damages. The burden is on the representor to disprove fault. This is the one most students underuse. The statutory action is often easier to establish than Hedley Byrne negligence.
• Innocent: s.2(2). Court has discretion to award damages in lieu of rescission.

Rescission can be barred. The four bars are: affirmation, lapse of time, third party rights, and impossibility of restitution. Leaf v International Galleries [1950] 2 KB 86 is the classic lapse of time case: five years after buying a painting represented as a Constable, rescission was barred.

Duress and Undue Influence

Duress at common law requires a threat to the person or (for economic duress) an illegitimate threat that leaves no reasonable alternative. The will must be vitiated, not merely influenced. Pao On v Lau Yiu Long [1980] AC 614 sets out the factors: did the party protest, was there an alternative course, did they affirm the contract?

Undue influence in equity is either actual (Class 1) or presumed. Presumed undue influence arises in certain relationships (solicitor/client, doctor/patient, trustee/beneficiary) or where the claimant proves a relationship of trust and confidence plus a transaction that calls for explanation. Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44 is the key authority on the bank's obligations where a spouse stands surety.

Breach and Termination

Anticipatory breach is often the surprise topic. Where a party makes clear before performance is due that they will not perform, the innocent party can accept the repudiation immediately and sue at once, or wait until the performance date. Hochster v De la Tour (1853) 2 El & Bl 678. The risk of waiting is that if the innocent party also becomes unable to perform, or the contract is frustrated, they lose their claim.

Actual breach: distinguish between breach that goes to the root of the contract (repudiatory breach, entitling termination) and lesser breach (damages only). The test is the same as for innominate terms: deprivation of substantially the whole benefit.

Frustration

Frustration discharges both parties automatically. The doctrine applies where a supervening event, not caused by either party and not contemplated when the contract was made, makes performance radically different from what was agreed.

*Davis Contractors v Fareham UDC* [1956] AC 696 is the leading case and the one you must know cold. The House of Lords held that a building contract was not frustrated merely because it took longer and cost more due to a shortage of labour. Lord Radcliffe's test: the situation must be so significantly different from what the parties bargained for that it would be unjust to hold them to it. Increased hardship alone is not enough.

Common frustration scenarios you will see: destruction of the subject matter (Taylor v Caldwell (1863) 3 B & S 826), unavailability of a person in a personal services contract, and the coronation cases for supervening illegality or cancellation of the anticipated event (Krell v Henry [1903] 2 KB 740, though note the limits shown in Herne Bay Steam Boat Co v Hutton [1903] 2 KB 683).

Self-induced frustration is not frustration at all: Maritime National Fish v Ocean Trawlers [1935] AC 524.

Consequences of frustration are governed by the Law Reform (Frustrated Contracts) Act 1943. Money paid is recoverable; money due ceases to be due. The court can allow a party who has conferred a valuable benefit to recover a just sum. BP Exploration Co (Libya) v Hunt (No 2) [1979] 1 WLR 783 worked through how that just sum is calculated.

Remedies

Damages

Damages aim to put the claimant in the position they would have been in had the contract been performed. The expectation measure. But you can also claim the reliance measure (expenditure wasted in reliance on the contract) or, rarely, an account of the defendant's profits.

Two limitations matter most in exams:

Remoteness: Hadley v Baxendale (1854) 9 Exch 341 gives you the two limbs. Loss arising naturally from the breach in the usual course of things. Or loss that was in the reasonable contemplation of both parties as a probable result at the time of contracting, because of special circumstances communicated. Victoria Laundry v Newman Industries [1949] 2 KB 528 applies this to lost profits.

Mitigation: The claimant cannot recover for loss they could have avoided by taking reasonable steps. Payzu v Saunders [1919] 2 KB 581. They are not required to do anything unreasonable, but if they do take reasonable steps to mitigate and actually make a profit, that profit is not set off.

Damages for non-pecuniary loss in contract are narrow. The rule in Addis v Gramophone Co [1909] AC 488 denied damages for distress from wrongful dismissal. The exceptions are contracts whose object is to provide pleasure, relaxation, or peace of mind. *Farley v Skinner* [2001] UKHL 49 confirmed that the consumer does not need the whole object of the contract to be pleasure: it is enough that a major or important part of the contract is to provide it. Mr Farley recovered for aircraft noise because his surveyor had specifically been asked to investigate it.

Specific Performance and Injunction

Specific performance is equitable and discretionary. It will not be ordered for contracts of personal service, where damages are adequate, or where it would require constant court supervision. The classic example: you cannot specifically enforce an employment contract against an unwilling employee.

An injunction can sometimes achieve a similar result indirectly. Page One Records v Britton [1968] 1 WLR 157 refused an injunction that would have compelled the Troggs to use only their manager, because it would effectively force personal service. But an injunction to restrain a singer from performing elsewhere for the contract period was granted in Warner Bros v Nelson [1937] 1 KB 209, on the basis it left the defendant other ways to earn a living.

Exam Technique: How to Use This in a Problem Question

A structured approach beats a brain dump. For every contract problem question:

1. Formation first: Is there a valid offer, acceptance, consideration, and intention? Do not assume a contract exists.
2. Terms: What is the status of the relevant term? Is there an exclusion clause? Which regime governs it?
3. Vitiating factors: Was the contract procured by misrepresentation, duress, or undue influence? If so, what remedy follows?
4. Performance and breach: Has there been a breach? Is it repudiatory? Has the innocent party affirmed?
5. Frustration: Only if there is a supervening event. Distinguish from cases of mere difficulty.
6. Remedies: Work through expectation, reliance, remoteness, and mitigation. Does any equitable remedy fit?

Do not just describe the law. Apply it to the specific facts. Examiners call this "engagement with the problem," and it is where the difference between a 2:1 and a first often sits.

For essays, always have a thesis. "This essay argues that the practical benefit test in Williams v Roffey has undermined the doctrine of consideration" is a thesis. A list of what happened in each case is not.

You can find detailed breakdowns of the cases mentioned here in the contract law topic hub, and practise applying this framework against real questions using past papers with model answers.