CILEx L3 Contract Law Fundamentals 3 — Questions and Answers
Question 1: What is 'promissory estoppel'?
- An equitable doctrine preventing a party from going back on a promise that another has relied upon (Correct answer)
- A rule that all promises are binding contracts
- A way to enforce a contract without consideration
- A court order preventing a party from breaking a contract
Correct answer: An equitable doctrine preventing a party from going back on a promise that another has relied upon
Promissory estoppel prevents a party who has made a clear and unequivocal promise (not to enforce their strict legal rights) from going back on that promise where the other party has relied upon it (Central London Property Trust v High Trees [1947]).
Question 2: What is a 'condition' in a contract?
- A term so important that breach entitles the innocent party to treat the contract as discharged (Correct answer)
- Any term included in a written contract
- A requirement that must be met before the contract comes into existence
- A minor term the breach of which only gives rise to damages
Correct answer: A term so important that breach entitles the innocent party to treat the contract as discharged
A condition is a fundamental term of the contract. Breach of a condition entitles the innocent party to treat themselves as discharged from the contract and claim damages (or affirm the contract and claim damages).
Question 3: What distinguishes a 'warranty' from a 'condition' in contract law?
- A warranty is a minor term; breach only gives rise to damages, not discharge (Correct answer)
- A warranty is more important than a condition
- A warranty can only be found in written contracts
- A warranty is a guarantee about future performance
Correct answer: A warranty is a minor term; breach only gives rise to damages, not discharge
A warranty is a less important term of a contract. Breach of a warranty only entitles the innocent party to claim damages; they cannot treat themselves as discharged from further performance.
Question 4: What is an 'innominate term'?
- A term that is neither a condition nor a warranty; the remedy depends on the consequences of the breach (Correct answer)
- A term that has not been expressly agreed by the parties
- A term implied by statute
- A term found only in consumer contracts
Correct answer: A term that is neither a condition nor a warranty; the remedy depends on the consequences of the breach
Innominate (or intermediate) terms are terms whose classification depends on the consequences of the breach. If the breach goes to the root of the contract, it is treated as a condition; if minor, as a warranty (Hong Kong Fir Shipping v Kawasaki [1962]).
Question 5: What is the 'parol evidence rule'?
- Extrinsic evidence cannot be used to add to, vary, or contradict the terms of a written contract (Correct answer)
- Oral contracts are never enforceable
- All contracts must be in writing to be valid
- Evidence of prior negotiations is always admissible
Correct answer: Extrinsic evidence cannot be used to add to, vary, or contradict the terms of a written contract
The parol evidence rule provides that where a contract has been reduced to writing, extrinsic evidence (such as prior negotiations or oral statements) cannot be admitted to contradict, vary, or add to the written terms.
Question 6: What are 'implied terms' in a contract?
- Terms incorporated into a contract by statute, custom, or the courts even though not expressly agreed (Correct answer)
- Terms that have been suggested but not yet agreed
- Terms that can be waived by the parties
- Terms automatically included in all written contracts
Correct answer: Terms incorporated into a contract by statute, custom, or the courts even though not expressly agreed
Implied terms are terms incorporated into a contract even though the parties have not expressly agreed them. They may be implied by statute (e.g., Sale of Goods Act), by custom, or by the courts (e.g., to give business efficacy).
CILEx L3 Contract Law Fundamentals 3
What is 'promissory estoppel'?