SQE1 Contract Law 1

Question 1

Which case established that an advertisement for a product (such as the Carbolic Smoke Ball) could constitute a binding unilateral offer?

Accepted Answer

Carlill v Carbolic Smoke Ball Co [1893]

Answer

Carlill v Carbolic Smoke Ball Co [1893] established that an advertisement can be a unilateral offer to the world capable of acceptance by performance, making the company bound to pay the reward.

Question 2

What is the legal effect of a counter-offer on the original offer?

Accepted Answer

It terminates the original offer, which cannot then be accepted

Answer

A counter-offer terminates the original offer (Hyde v Wrench [1840]). The original offer cannot subsequently be accepted; the counter-offer itself becomes the new offer which the original offeror may accept or reject.

Question 3

In contract law, what does 'consideration' mean?

Accepted Answer

Something of value given by each party in exchange for the other's promise

Answer

Consideration is something of value (money, goods, services, or a promise) provided by each contracting party in exchange for the other's promise. It must be sufficient (legally recognised) but need not be adequate (equal in value).

Question 4

Under the Misrepresentation Act 1967, which type of misrepresentation allows the innocent party to claim both rescission and damages?

Accepted Answer

Both fraudulent and negligent misrepresentation under s.2(1)

Answer

Rescission is available for all types of misrepresentation. Damages can be claimed for fraudulent misrepresentation (under the tort of deceit) and under s.2(1) of the Misrepresentation Act 1967 for negligent misrepresentation. Innocent misrepresentation may only result in rescission or damages in lieu.

Question 5

What principle was established in Hadley v Baxendale (1854) regarding damages for breach of contract?

Accepted Answer

Damages are limited to losses that were reasonably foreseeable at the time of contract formation

Answer

Hadley v Baxendale established the remoteness principle: damages for breach of contract are recoverable only if they arise naturally from the breach (limb 1) or were within the reasonable contemplation of both parties at contract formation (limb 2).

SQE1 Practice Test

SQE1 Practice Test

SQE1 Contract Law 1