SQE1 - Solicitors Qualifying Examination Part 1 Contract Law Principles Questions and Answers

Question 1

A brother and sister agree that if the sister lends the brother £5,000 to start a new business, he will give her a 10% stake in the company.
They write down the terms on a piece of paper and both sign it.
Six months later, the business is successful, but the brother refuses to transfer the shares.
Which legal principle will be most relevant in determining if a binding contract exists?

Accepted Answer

The presumption regarding the intention to create legal relations in social and domestic agreements.

Answer

The doctrine of consideration.

Answer

The 'mirror image' rule of offer and acceptance.

Answer

The requirement for certainty of terms.

Question 2

A construction company contracts with a supplier for the delivery of 10 tonnes of steel on a specific date. The contract includes a clause stating that for every day the delivery is late, the supplier must pay the construction company £1,000. The steel is delivered five days late. This clause is most likely to be interpreted by a court as:

Accepted Answer

A liquidated damages clause, and therefore enforceable if it is a genuine pre-estimate of loss.

Answer

A penalty clause, and therefore unenforceable.

Answer

A condition of the contract, allowing for termination.

Answer

A warranty, allowing for damages only.

Question 3

Which of the following statements concerning the legal principle of consideration in English contract law is correct?

Accepted Answer

Consideration must move from the promisee.

Answer

Consideration must be adequate but need not be sufficient.

Answer

Past consideration is always valid consideration.

Answer

Performing an existing public duty is always good consideration.

Question 4

A company director is negotiating the sale of her business. During negotiations, she tells the potential buyer that the company's profits for the last financial year were 'in excess of £500,000'. The buyer relies on this statement and buys the business. It later transpires the profits were only £300,000. The statement about the profits is most likely to be classified as:

Accepted Answer

A representation.

Answer

A warranty.

Answer

A condition.

Answer

An innominate term.

Question 5

A homeowner emails a local builder, 'I will pay you £20,000 to build a single-storey extension to my kitchen according to the attached plans. I need it finished by 1st October.' The builder replies by email, 'I accept your offer to build the extension for £20,000 based on the plans. My team can start in two weeks.' A binding contract is formed at which point?

Accepted Answer

When the builder's acceptance email is received by the homeowner.

Answer

When the homeowner sends the initial email.

Answer

When the builder begins the work.

Answer

When the homeowner's email server sends the initial email.

Question 6

A party is induced to enter into a contract due to a fraudulent misrepresentation. Which of the following remedies is available to the innocent party?

Accepted Answer

Rescission of the contract and damages.

Answer

Damages only.

Answer

Specific performance only.

Answer

Rescission of the contract only.