Law For Accountants (ROI) Toolkit Section 3.1 Solutions PDF

SOLUTIONS 3. Contract, Commercial Law and Other Applicable Law 3.1 Contract Law 1. B False. For example, an adult not of sound mind does not have capacity. D False. Legislation often implies terms to protect the weaker party, notwithstanding any express provision in the contract (for exa...

SOLUTIONS 3. Contract, Commercial Law and Other Applicable Law 3.1 Contract Law 1. B False. For example, an adult not of sound mind does not have capacity. D False. Legislation often implies terms to protect the weaker party, notwithstanding any express provision in the contract (for example the Consumer Rights Act 2022). 2. D Acceptance will only be effective to create the agreement (that is an essential element of a contract), if the accepting party is aware of the offer. 3. B No. The flyer from Annabelle is merely an invitation to treat. D No. She cannot be in breach of contract since no contract has been made. She is simply rejecting James’ offer (which is made in response to Annabelle’s invitation to treat). 4. B No. The display constitutes an invitation to treat only. C Yes. An offer is made by Florence when she takes the bunches of tulips to the till and proffers €8. The shopkeeper is free to accept or reject that offer. 5. D Advertisements are generally invitations to treat. 6. C When a pre-condition is satisfied, the offer becomes unconditional. 7. D If the event or circumstances on which an offer is conditional does or do not transpire, the offer is no longer capable of acceptance and is terminated. 8. A No, Ciara’s reply on Tuesday constitutes a counter-offer, which terminates Stephen’s offer. 9. C The offer remains capable of acceptance (at least for a reasonable time). Vera is simply asking for information about when she can make payment. 10. D Keith’s reply is a counter-offer which Josh accepts. He should have revoked his counter-offer on buying the tandem from eBay by communicating that fact to Josh. 11. B False. The postal rule applies to acceptance only and not to revocation. D False. The offeror may still revoke the offer within that three-month period, unless they have bound themselves to keep it open by a separate contract. 173 LAW FOR ACCOUNTANTS (ROI) TOOLKIT 12. D There must be some act on the part of the offeree to indicate their acceptance. 13. B No. The ’postal rule’ does not apply to revocation. D No. The acceptance takes effect when it is posted on 7 April (assuming postal acceptance was within the contemplation of the parties) with the result that there is a binding contract at that point. 14. B False. The offeror may waive the requirement for acceptance to be communicated (either expressly or by implication). C True. 15. B False. The offeree may use any reasonable method. C True. The offeror would need to be very specific indeed for this not to be the case. 16. A Yes, as acceptance took place by an application of the postal rule on the 6 September. C Yes. Because the postal rule applies, even where the letter of acceptance has not been received, provided the other party can prove the fact of posting. 17. B Jennifer’s acceptance is effective when posted. A revocation is ineffective until received (which, in this case, is after the contract becomes binding on the posting of the acceptance on 17 December). 18. A Yes. The express term will prevail. C Yes, if it can be shown that the document was not intended to comprise all the agreed terms (otherwise the general rule applies, that oral evidence cannot be admitted to add to, vary or contradict written terms). 19. C Consideration must have some identifiable value (’sufficient’) but does not need to be equal in value to the consideration received in return (’adequate’). 20. A Yes. This is valid consideration. C Yes. Such a rent may not be adequate, but it is sufficient, which makes it valid consideration. 21. D Performance of an existing contractual duty owed to the promisor is not valid consideration. 174  SOLUTIONS 22. D The value of the bicycle is irrelevant. It is something to which Charlotte was not previously entitled. 23. A True (provided that such implied terms are not inconsistent with express terms in the contract). C True. 24. C Colin has given no consideration and is not a party to the contract. He has no rights to enforce the contract. 25. C A third party cannot acquire contractual rights, even where there is an agreement with the contracting parties. 26. A True. However, this presumption is rebuttable. D False. On the contrary, there is a rebuttable presumption that parties to a social or domestic agreement do not intend to create legal relations. 27. A True. No contract is formed without agreement between the parties (usually in the form of an offer and an acceptance). C True. As a general rule, an advertisement in a newspaper is an invitation to treat which, unlike an offer, cannot be accepted to form a legally binding contract. 28. B Karen’s performance of the works for which Graham promises a laptop, is past consideration and not valid. However, the contract between Graham and Mark is binding as there is a promise to pay for services in return. 29. B The postal rule applies, which means that Sophia’s acceptance is effective on posting. The postal rule does not apply to revocation, which must be communicated to the offeree. The purported revocation is ineffective, therefore, as it does not occur before acceptance on 3 May. 30. A Yes. An offer is deemed to lapse after a reasonable period of time (in the absence of an express provision or a separate option contract). C Yes. Rejection of an offer terminates it. It cannot subsequently be accepted. 31. A Yes. Contracts must contain an agreement (offer and acceptance). D No. Not all contracts need to be in writing. For example, a contract for the sale of goods does not need to be in writing, nor evidenced in writing. 32. A True. Revocation must be communicated to the offeree before acceptance, either by the offeror or their agent. 175 LAW FOR ACCOUNTANTS (ROI) TOOLKIT D False. Revocation does not have to be in writing, it may also be express or implied. 33. A The consideration is executed because payment occurs at the time the contract is made. Executory consideration is a promise given for a promise. Past consideration is made before the contract is formed. There is no such consideration as executive consideration. 34. B Substantial performance is a sufficient discharge of a party’s contractual obligations but entitles the other party to seek redress in respect of the part not completed. 35. B Where a frustrating event occurs, the loss lies where it falls, except where there is “total failure of consideration”, which is the case in this scenario. Payments made prior to the frustrating event can then be recovered. 36. B False. He may treat the contract as discharged and sue for damages. C True. 37. A Damage not arising in the ordinary course of things is only recoverable to the extent that it is in the reasonable contemplation of the parties at the time of making the contract as the probable result of the breach. 38. A True. The claimant is required to take only reasonable steps, not ones that carry undue risk or that are discreditable. C True. Damages are intended to put the party in the position they would have been in had the contract been performed. 39. D Noah is in breach of contract and therefore liable to pay damages, but Charlie is unlikely to be able to show any outstanding loss. 40. C The amount of €150 when compared against the contract price is only 1.5% per day and would not be thought of as excessive. It is intended to protect Jonas’s legitimate interest of ensuring the work is completed on schedule and is therefore a valid liquidated damages clause. 41. A Specific performance is unlikely to be ordered in such a case because of the difficulties in supervising compliance with the award. 42. C Because it is a negative promise (i.e. an agreement not to do something) that requires it to be enforced. A mandatory injunction compels positive action and specific performance is unsuitable because it should require supervision. A quantum meruit award or claim is relevant where one party has been prevented from completing their performance of a contract but deserves to be paid for partial performance. 176  SOLUTIONS 43. C Damages for losses sustained are recoverable to the extent that they are reasonably foreseeable and not too remote. The losses claimed under the first head are too remote – even if Fabulous Foods Ltd had been able to bid for the contract, there is no certainty that it would have been awarded the contract. The losses claimed under the second head can be described as arising in the ordinary course of business and are likely to be recoverable. 44. B Specific performance will not be given in relation to contracts with minors, or contracts for the advancement of money. 45. A Yes. The fire has clearly frustrated the contract because the house is no longer available to use. D No. A contract that is made more difficult to perform, but is not rendered illegal or impossible to perform, is not frustrated. 46. B False. Georgina will not be compelled to perform, as specific performance is not granted in relation to contracts for personal services. C True. This breach is anticipatory as it arises before performance is due. 47. B False. The other party may seek redress in respect of that part of the performance which did not match the contractual obligations completely. D False. There will be no liability if they have a lawful excuse, for example if the contract is discharged by frustration. 48. A Lois has prevented complete performance and so Ruth's offer to perform is sufficient discharge of her obligations. She is entitled to be paid for duties already completed. 49. B A reasonable deduction must be made in respect of the use of the wrong paint for the hull and wrong material for the tow straps. 50. A Yes. Destruction of the subject matter of a contract is a frustrating event if neither party is responsible for such destruction. D No. It should only be repaid where there is a total failure of consideration, otherwise the loss lies where it falls. 51. B Industrial action is not a frustrating event – and can be dealt with by the terms of the contract. 52. C The innocent party is not discharged from any contractual obligations that are due or outstanding at the time of termination. 177 LAW FOR ACCOUNTANTS (ROI) TOOLKIT 53. B Even if the damages at (1) were considered exceptional or abnormal, they would still be recoverable because Fred knew about the special contract. The damages at (3), however, will be considered too remote. 54. B False. The burden of proof is on the defendant to show that the claimant failed to do so. C True. Normally economic loss can only be recovered where other losses may be recoverable. In exceptional circumstances, however, they can be recovered, such as where there is a special relationship between the parties and evidence of knowledge of potential economic loss. 55. B As the property has already been sold to a third party, it is highly unlikely that specific performance will be awarded in this situation. C €125,000 is the difference between the contract price and the market value of the property. 56. A Yes. C Yes. Provided no misleading explanation has been given of its effect. 57. B False. This regulation requires that one of the parties to the contract is a consumer. C True. 58. A Such a term is prohibited by the Consumer Rights Act 2022. 59. A True. These losses are recoverable based on loss of bargain. C True. This award is known as punitive damages and is only awarded in exceptional circumstances. 60. B False. A contract for necessary goods or services is a valid contract. C True. The law does not care about the value of the consideration, just the fact that it has some economic value. 61. D Quentin made a counter-offer, therefore the original offer was no longer available to accept. 62. B False. Commercial agreements between family members are still considered commercial agreements and are automatically presumed to be legally binding. C True. 178  SOLUTIONS 63. B False. There is no requirement that a contract must be in writing or evidenced in writing. D False. 64. B The absence of consideration makes this promise unenforceable. 65. D Although the price is not definite, it is sufficiently clear or ascertainable to be accepted by Abi. 66. A True. This was established in the case of Carlill v. Carbolic Smoke Ball Co. D False. Although this is normally the case there may be exceptions. The advertisement in Carlill v. Carbolic Smoke Ball Co. was held to be an offer, for example. 67. B No. Exhibiting goods for sale constitutes an invitation to treat, not an offer. C Yes. Sophia made the offer when she responded to Vicky's invitation to treat. 68. B The original offer from Dave is terminated and this reply from Ken constitutes a new offer that can be accepted or rejected by Dave. 69. A Yes. D No. His original offer was terminated by Susan's counter-offer, which he did not accept. 70. C In the absence of an express time limit, an offer is deemed to stay open for a reasonable time. Given Billy would be expecting a new-born puppy, it is likely that the offer will have expired long before the puppy reached nine months old. 71. B No. A revocation may be made by the offeror, by action, or by a reliable third party D No. Revocation must be communicated to the offeree. The 'postal rule' applies only to acceptance, not revocation. 72. D There must be some positive act which can be construed as acceptance. 73. B Jane required written notice to have reached her by lunchtime on Friday. This means that the postal rule is not effective to render the acceptance valid when posted. By the time Claire's 'acceptance' is communicated, the offer has lapsed. 74. B No. The offeree may choose any reasonable method. 179 LAW FOR ACCOUNTANTS (ROI) TOOLKIT C Yes. As was the case in Carlill v. Carbolic Smoke Ball Co. where acceptance was made by conduct. 75. C Provided a prescribed means of communication is sufficiently particular, acceptance must comply with it to be effective. If the offeree chooses to reply by another method, they do so at their own risk if it in fact turns out to be disadvantageous to the offeror. 76. B There can be no acceptance, and thus no agreement, where the person who accepts an offer is not even aware of the offer. 77. A True. This means that it must have some identifiable value. D False. Consideration does not need to be adequate, meaning that it does not need to equal or exceed the value of the consideration received in return. 78. B Performance of an existing contractual duty is not valid consideration. 79. A Yes, as there is sufficient consideration where an offeror agrees to payment of a lesser sum earlier than the date when payment is due. C Yes, as it is an alternative means of payment to which Angela was not already entitled. 80. B No. Paying cash instead of cheque is not sufficient to support the waiver of debt by Brian. C Yes. The promise of payment from a third party, against whom the creditor previously had no claim, is sufficient. 81. A Andy and Beverly are parties to the contract. Cara is not – so there is no privity of contract between Cara and Andy and Beverly, as she is not a contracting party and has provided no consideration. 82. B False. Breach of a representation will result in a claim for misrepresentation. C True. Under the Electronic Communications Act 2000, an electronic signature can constitute evidence of a valid contract in the same way as a signature written in the normal way. 83. D Such an agreement must be in writing (the transfer itself must be by deed). 84. D The rule is that consideration must be sufficient but need not be adequate. 85. A This agreement is likely to be classed as a commercial agreement, where intention is automatically presumed. 180  SOLUTIONS 86. A True. C True. 87. D None – consideration must be sufficient but need not be adequate. 88. C These are also known as exemplary damages. 89. A True. D False. This is known as a total failure of consideration. 90. B The sum of €100 is likely to be regarded a valid liquidated damages clause. 91. A True. D False. Specific performance is not usually awarded in cases of personal service. 92. B An agreement to transfer land should be written and is unenforceable if not. Roger's agreement to erect fencing is consideration, and this agreement is more commercial than social. 93. B D 94. B 181