FE-1 Contract Law 3

Question 1

What is the test for an implied term in fact in an Irish contract (the 'officious bystander' test)?

Accepted Answer

A term is implied in fact if it is so obvious that if an officious bystander suggested it, both parties would say 'of course' — it must be necessary to give business efficacy to the contract

Answer

Any term that would be reasonable to include is implied

Answer

Terms are implied whenever the written contract is incomplete

Answer

Implied terms in fact only operate in employment contracts

Question 2

In Irish contract law, what is meant by 'anticipatory breach'?

Accepted Answer

Where a party indicates before performance is due that they will not perform their contractual obligations — the innocent party can treat the contract as immediately repudiated or wait until the time for performance

Answer

A breach that has already occurred but is not yet known to the other party

Answer

A situation where both parties agree to modify the performance date

Answer

Anticipatory breach only applies to contracts for goods under the Sale of Goods Acts

Question 3

What is the duty to mitigate loss in an Irish contract claim?

Accepted Answer

The innocent party must take reasonable steps to minimise their losses following a breach — they cannot recover for losses that could have been avoided by reasonable action

Answer

The innocent party has no obligation to take any steps to reduce their loss

Answer

Mitigation only applies to personal injury claims, not contract

Answer

The duty to mitigate means the innocent party must accept any settlement offered by the breaching party

Question 4

What is a liquidated damages clause and how does Irish law distinguish it from a penalty clause?

Accepted Answer

A liquidated damages clause is a genuine pre-estimate of loss — it is enforceable. A penalty clause imposes a payment in terrorem to compel performance — traditionally unenforceable, though now assessed under a broader test post-Cavendish Square [2015]

Answer

Liquidated damages and penalty clauses have identical legal effects

Answer

Both types of clauses are always enforceable in commercial contracts

Answer

A clause is a penalty only if it exceeds twice the likely loss

Question 5

What is the effect of economic duress on a contract in Irish law?

Accepted Answer

Economic duress — illegitimate pressure by one party that leaves the other with no practical choice but to agree — allows the victim to void the contract as it vitiates consent

Answer

Economic pressure is never grounds to avoid a contract in Irish law

Answer

Only physical duress can render a contract voidable

Answer

Economic duress makes the contract void, not merely voidable

Question 6

Under the Statute of Frauds (Ireland) 1695, which contracts must be evidenced in writing to be enforceable?

Accepted Answer

Contracts for the sale or other disposition of land, contracts not to be performed within one year, and contracts of guarantee

Answer

All contracts over €500 in value

Answer

All commercial contracts between businesses

Answer

Employment contracts and contracts for the sale of goods over €100