Advanced Contract Law Flashcards

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

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

In Marks & Spencer v BNP Paribas [2015] UKSC 72, the Supreme Court reaffirmed that terms are implied only where the two traditional tests are satisfied (business efficacy or the officious bystander test), and rejected any broader 'reasonable expectations' approach.

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

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

In Arnold v Britton, the Supreme Court (Lord Neuberger) emphasised that the starting point is the natural and ordinary meaning of the words. Commercial common sense cannot justify departing from clear language, even if the result proves commercially disadvantageous.

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

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

The rule in Bain v Fothergill limited damages for failure to make good title to land to recovery of expenses, not loss of bargain. It was abolished by s.3 Law of Property (Miscellaneous Provisions) Act 1989 — since then, ordinary principles of damages apply.

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

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

In Cavendish Square [2015] UKSC 67, the Supreme Court replaced the simple 'genuine pre-estimate of loss' test with a broader test: is the clause a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate business interest of the innocent party?

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

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

Economic duress (DSND Subsea v Petroleum Geo-Services [2000]; Pakistan International Airline Corporation v Times Travel [2021] UKSC 40) requires: (1) illegitimate pressure, (2) that was a significant cause inducing the contract, and (3) that the victim had no practical choice.

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

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

In White & Carter v McGregor [1962] AC 413, the House of Lords held an innocent party may affirm and continue performing despite anticipatory breach, then sue for the full price — unless they lack a legitimate interest in performing (the 'legitimate interest' qualification from Lord Reid).