Contract Law Flashcards

What is the effect of 'economic duress' on a contract?

Answer: The contract is voidable at the option of the innocent party

Economic duress (illegitimate pressure such as threatening to breach a contract unless extra payment is made) renders a contract voidable at the option of the innocent party. It does not make the contract void ab initio.

What is the primary distinction between a condition and a warranty in a contract?

Answer: Breach of a condition entitles the innocent party to terminate and claim damages; breach of a warranty allows only a claim for damages

A condition is a fundamental term: breach entitles the innocent party to treat the contract as terminated (repudiated) and claim damages. Breach of a warranty (a less important term) allows only a damages claim — the innocent party cannot terminate.

Under the law of agency, what does 'apparent authority' mean?

Answer: The authority the agent appears to have based on the principal's conduct or representations, even if actual authority is absent

Apparent (or ostensible) authority arises when a principal's words or conduct lead a third party to reasonably believe the agent has authority to act, even if that authority was not actually given or has been revoked. The principal is then bound by the agent's acts.

What does the equitable doctrine of promissory estoppel prevent?

Answer: A party from going back on a clear promise not to enforce their strict legal rights, where the other party relied on that promise to their detriment

Promissory estoppel (Central London Property Trust Ltd v High Trees House Ltd [1947]) prevents a party from going back on a clear, unequivocal promise not to enforce their strict contractual rights, where the other party has relied on that promise to their detriment.

In the law of contract, what is 'anticipatory breach'?

Answer: A clear indication by one party before the performance date that they will not perform their contractual obligations

Anticipatory breach occurs when, before the date for performance, one party makes clear (expressly or by conduct) that they will not perform their obligations. The innocent party can immediately treat the contract as terminated and sue for damages without waiting for the performance date.

Which type of term, implied by the courts, is based on the presumed intention of the parties in a specific contract?

Answer: A term implied in fact

Terms implied in fact are implied based on the presumed intention of the specific parties to fill a gap in that particular contract (using the business efficacy or officious bystander tests). Terms implied in law apply automatically to all contracts of a particular type.