CILEx L6 Advanced Contract Law

Question 1

What did the Supreme Court decide in Marks & Spencer plc v BNP Paribas Securities Services [2015] regarding implied terms?

Accepted Answer

The traditional two tests (business efficacy and officious bystander) remain the correct approach; a term is not implied merely because it is reasonable

Answer

Implied terms should always reflect the reasonable expectations of the parties

Answer

The business efficacy test was replaced by a test of commercial common sense

Answer

An implied term can be used to rewrite a bad bargain

Question 2

What is the significance of Arnold v Britton [2015] UKSC 36 for contractual interpretation?

Accepted Answer

Courts must give words their natural meaning; commercial common sense does not allow courts to rewrite clear contractual language

Answer

Commercial common sense always overrides the natural meaning of words

Answer

Ambiguous terms should always be resolved against the party who drafted them

Answer

Extrinsic evidence is admissible to vary the meaning of clear contractual terms

Question 3

What is the Achilles rule from Bain v Fothergill [1874] and has it been abolished?

Accepted Answer

It limited a buyer's damages for a seller's failure to show good title to land to expenses only (not loss of bargain); abolished by s.3 Law of Property (Miscellaneous Provisions) Act 1989

Answer

It prevented sellers from claiming damages for a buyer's failure to complete

Answer

It allowed buyers to recover the full value of the land regardless of the seller's conduct

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It was a rule of specific performance applicable only to land contracts

Question 4

What is the approach to penalty clauses following Cavendish Square Holding BV v Makdessi [2015]?

Accepted Answer

A clause is a penalty only if it is extravagant and unconscionable in comparison with the legitimate interests of the innocent party; the genuine pre-estimate test is no longer the sole test

Answer

Any clause requiring payment of a fixed sum on breach is a penalty

Answer

The penalty rule applies only to consumer contracts

Answer

A clause is automatically a penalty if it exceeds the actual loss suffered

Question 5

What is 'economic duress' in contract law and what test applies?

Accepted Answer

Illegitimate pressure that caused the claimant to contract, where the pressure went to the nature of the act (not merely the circumstances), assessed objectively

Answer

Any financial pressure that causes a party to contract

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Pressure causing hardship that makes performance more expensive

Answer

Any commercial pressure that influences a party's decision to contract

Question 6

What is the rule in White & Carter (Councils) Ltd v McGregor [1962] on affirmation after anticipatory breach?

Accepted Answer

An innocent party may affirm the contract after anticipatory breach and sue for the full price, even if the other party wishes to terminate — unless they have no legitimate interest in performance

Answer

The innocent party must always accept the repudiation and minimise their loss

Answer

The innocent party may only affirm if they have already started performance

Answer

Affirmation after anticipatory breach is only possible with the court's permission