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

The tests from The Moorcock [1889] (business efficacy) and Shirlaw v Southern Foundries [1939] (officious bystander) both apply in Irish law. A term will be implied if it was obviously intended by both parties and its absence would make the contract work poorly.

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

Anticipatory breach, as in Hochster v De La Tour [1853], arises when one party clearly indicates it will not perform before the performance date arrives. The innocent party may immediately accept the repudiation and sue, or wait until performance falls due.

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

Following Dunkirk Colliery v Lever, the injured party must take reasonable (not heroic or unreasonable) steps to mitigate. Failure to mitigate reduces the damages recoverable to what they would have been had reasonable steps been taken.

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

The traditional test from Dunlop v New Garage [1915] distinguishes a genuine pre-estimate of loss (enforceable) from a penalty (unenforceable). The UK Supreme Court in Cavendish Square broadened this to ask whether the clause protects a legitimate interest proportionately.

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 duress, recognised in Irish law following English cases such as Universe Tankships v ITWF [1983], renders a contract voidable. The pressure must be illegitimate, leave no practical alternative, and have been a significant cause of the agreement.

FE-1 Practice Test

FE-1 Practice Test

FE-1 Contract Law 3