As you prepare for the SQE1 exam, you’ll find contract law isn’t just about memorizing rules—it’s about applying them to real-world scenarios that clients face daily. You’ve likely encountered contracts in your own life, but understanding their legal implications requires a deeper analysis of how courts interpret agreements, breaches, and remedies. The difference between passing and excelling on this portion of your exam often comes down to recognizing subtle details in fact patterns that can completely change the outcome of a case.
Offer and Acceptance: When Has a Binding Contract Formed?
Three fundamental elements must align perfectly for a binding contract to exist: a valid offer, proper acceptance, and mutual intention to create legal relations.
You’ll need to distinguish offers (clear expressions of willingness to be bound) from mere invitations to treat. Remember, your offer must be communicated to the offeree and show definite terms.
When they accept, they must agree to those exact terms—any variation creates a counter-offer, not acceptance. In Hyde v Wrench, the court established that making a counter-offer extinguishes the original offer permanently.
The “mirror image rule” means acceptance must perfectly reflect the offer’s terms. While acceptance typically requires communication, the postal rule creates an exception: acceptance is effective upon posting, unless explicitly excluded.
In unilateral contracts, performance constitutes acceptance without communication, while bilateral contracts require explicit acceptance to be communicated to form a binding agreement.
Consideration: The Exchange of Value in Practice
You’ll need to understand that consideration must be sufficient to make a contract valid, but courts won’t generally assess its adequacy or fairness.
While a peppercorn could technically constitute valid consideration in exchange for a house, the key requirement is that something of value—however modest—changes hands between the parties. Consideration transforms a mere promise into a legally enforceable contract that both parties must honor. Remember that moral obligations alone cannot constitute legal value and will not satisfy the requirements for valid consideration.
Subheading Discussion Points
Consideration sits at the heart of contract law, functioning as the essential exchange of value that transforms mere promises into legally binding agreements.
You’ll need to master this concept for the SQE1, as examiners frequently test your ability to identify valid consideration in complex scenarios.
When analyzing consideration issues, remember:
- Both parties must exchange something of legal value—one-sided promises won’t suffice, regardless of intentions.
- The “bargain theory” requires deliberate negotiation where each party’s promise motivates the other.
- Courts assess legal sufficiency (presence of value) but not adequacy (fairness of the deal).
Contract modifications present particularly tricky consideration problems.
Without fresh consideration from both parties, your modification might be unenforceable under common law, though the UCC provides some flexibility for good faith commercial changes.
Be particularly mindful when evaluating forbearance consideration scenarios, where one party agrees not to exercise a legal right they otherwise would have.
Sufficiency, Not Adequacy
While many law students confuse the related concepts, the distinction between sufficiency and adequacy of consideration represents a critical nuance you’ll need to master for the SQE1 exam.
Remember, courts don’t concern themselves with whether the consideration is fair or equivalent in value—only that it exists. You’ll need to identify that a peppercorn for a mansion is perfectly valid consideration, despite the obvious imbalance.
This reflects the principle of freedom of contract, allowing parties to make their own bargains, however one-sided they may appear.
For your exam, focus on spotting when consideration is present, not evaluating its fairness. A promise to pay £1 for valuable services is sufficient, even though it’s clearly inadequate from an economic perspective. This follows the fundamental requirement that both parties must provide something of value, regardless of whether the exchange appears equitable to outside observers.
Identifying Valid and Invalid Contract Terms
Determining whether contract terms are valid or invalid stands as a vital skill for any aspiring solicitor tackling SQE1.
Mastering contract term validity is an essential competency for SQE1 success.
You’ll need to recognize when terms fail statutory controls or common law tests to advise clients effectively.
When evaluating contract terms, remember these essential principles:
- Terms excluding liability for death or personal injury are automatically void under both UCTA 1977 and CRA 2015.
- Express terms must be properly incorporated and sufficiently certain to be enforceable.
- The reasonableness test applies to limitation clauses at the time of contract formation, not when a dispute arises.
A step-by-step breakdown of potentially unfair terms can significantly improve your ability to identify problematic clauses during examinations.
You’ll frequently encounter exclusion clauses in your practice.
Don’t assume they’re automatically enforceable—analyze them against the statutory frameworks and consider the relative bargaining power between parties.
Misrepresentation Cases: Spotting the Warning Signs
Recognizing the telltale signs of misrepresentation can make or break your client’s case in contract disputes. You’ll need to identify whether the misstatement was fraudulent (made knowingly or recklessly), negligent (without reasonable belief), or innocent (honest but incorrect).
Watch for clients who’ve entered contracts after receiving statements that later proved false. Did they actually rely on these statements? As established in Redgrave v Hurd, they can still pursue rescission even if they could’ve discovered the truth themselves.
Don’t overlook silence! With v O’Flanagan confirms that failure to update previously true information can constitute misrepresentation.
Also, be wary of entire agreement clauses – they won’t automatically exclude liability under Section 3 of the Misrepresentation Act 1967 unless they satisfy the reasonableness test.
Remember that statements of opinion generally won’t qualify as misrepresentations unless they involve an implicit statement of fact about the speaker’s knowledge or belief.
Understanding these principles is essential for success in the multiple-choice questions testing your functioning legal knowledge in the SQE1 examination.
Mistake and Unfair Terms: Common Exam Scenarios
Shifting our attention from misrepresentation, let’s examine how mistake and unfair terms frequently appear in SQE1 scenarios.
You’ll need to distinguish between unilateral, mutual, and common mistakes, noting when each might void a contract. Remember that a fundamental error going to the root of agreement provides stronger grounds for setting aside contracts.
Understanding mistake categories is crucial—only fundamental errors that undermine the very basis of agreement justify contractual avoidance.
For unfair terms, you should focus on:
- Consumer Rights Act 2015 provisions, especially the “significant imbalance” test
- Terms exempt from unfairness assessment (price and subject matter if transparent)
- Consequences when terms are deemed unfair (unenforceable but potentially severable)
When analyzing SQE1 scenarios, consider the context, bargaining power, and whether terms were individually negotiated.
Courts emphasize transparency, especially with exclusion clauses and hidden fees. Be particularly alert to clauses that limit liability for personal injury or death as these are automatically invalid regardless of how prominently they appear in the contract.
Maintaining public trust in contractual arrangements is essential and aligns with the SRA Principles that require solicitors to act with integrity when advising clients on potentially unfair terms.
Duress and Undue Influence in Modern Business Relationships
You’ll find that modern contract law has expanded economic duress beyond its traditional boundaries to include commercial pressures that effectively eliminate a party’s free choice.
When studying undue influence, you’ll need to distinguish between presumed influence (where special relationships create automatic suspicion) and actual influence (where specific manipulative behaviors must be proven).
Business relationships often create power imbalances that courts scrutinize carefully, especially when larger corporations might exploit their dominant position to extract unfavorable terms from smaller parties. The courts established in cases like Atlas Express Ltd v Kafco that threats to withhold deliveries constitute economic duress when they leave the other party with no practical choice but to comply. When disputes arise over alleged duress or undue influence, parties should be aware that without prejudice communications are not universally protected if they involve these forms of misconduct.
Economic Duress Evolution
As commercial relationships have grown increasingly complex, the doctrine of economic duress has evolved considerably from its traditional roots to address modern business realities.
You’ll need to understand this evolution for your SQE1 exam, as courts now recognize subtler forms of economic pressure that can invalidate contracts.
Modern economic duress requires you to identify:
- Illegitimate pressure that goes beyond hard commercial bargaining
- Causation between the pressure and the victim’s decision to contract
- Absence of practical alternatives for the coerced party
The burden of proof falls on the party claiming they acted under business compulsion, requiring substantial evidence to demonstrate their lack of free will when entering the agreement.
Undue Influence Categories
While economic duress focuses on improper commercial pressure, undue influence represents a related but distinct concept that examines the psychological manipulation of one party by another.
You’ll encounter two primary categories in your SQE1 studies: actual and presumed undue influence.
Actual undue influence requires proof that the influencer exerted coercive tactics to overcome another’s free will, like when a business partner uses manipulation during moments of vulnerability.
Presumed undue influence arises from relationships of trust (fiduciary relationships), where courts automatically shift the burden of proof to the influencer.
Remember that four key elements must be established: the victim’s vulnerability, the influencer’s position of authority, manipulative tactics employed, and an inequitable outcome. This is particularly concerning when dealing with vulnerable populations such as the elderly who may be more susceptible to manipulation.
Unlike duress’s overt threats, undue influence operates through subtle psychological pressure within trusted relationships.
Relationship Power Imbalances
Throughout modern commercial relationships, power imbalances create fertile ground for both duress and undue influence claims.
You’ll encounter scenarios where dominant parties exploit their position to extract unfair advantages from vulnerable counterparties. Courts scrutinize these situations carefully, especially when examining whether genuine consent existed.
When preparing for SQE1 scenarios involving relationship power dynamics, remember:
- Look for economic pressure tactics where one party threatens to withhold crucial supplies or services
- Identify situations where smaller businesses face “take it or leave it” contract variations from dominant players
- Assess whether practical alternatives existed for the vulnerable party
You must distinguish between legitimate commercial negotiation and improper pressure. Cases like Universe Sentinel (1983) established that the absence of reasonable alternatives is a crucial factor in determining economic duress.
When analyzing these cases, consider both the context and whether the vulnerable party had any realistic choice but to comply.
Breach of Contract: Determining the Appropriate Remedies
When a contract is breached, you’ll need to identify the most suitable remedy to address the wrong you’ve suffered.
Damages remain the most common option, placing you in the position you’d have been in had the contract been performed properly. Remember that damages are awarded as a legal right, not as a discretionary remedy.
Consider specific performance if money won’t adequately compensate you—this court order compels the defaulting party to fulfill their obligations.
For ongoing breaches, injunctions can halt harmful actions, while rescission cancels the contract entirely, returning both parties to their pre-contract positions.
Frustration in the Real World: When Performance Becomes Impossible
The doctrine of frustration stands as a critical safety valve in contract law, releasing parties from their obligations if extraordinary circumstances make performance impossible or radically different from what was originally agreed.
You’ll encounter this rarely successful defense in your SQE1 exam, so understand its strict application.
To successfully claim frustration, you must demonstrate:
- The event was genuinely unforeseen and not contemplated when forming the contract
- Performance has become impossible, illegal, or fundamentally different in nature
- Neither party caused or could have prevented the frustrating event
Remember that mere hardship, inconvenience, or increased costs won’t suffice. Courts distinguish between true impossibility and difficult circumstances.
Once established, frustration automatically terminates the contract, discharging both parties from future obligations without damages for non-performance.
This differs from force majeure clauses, which you’ll often see allocating risk for specific events.
The Law Reform (Frustrated Contracts) Act 1943 provides statutory remedy by allowing recovery of advance payments made before frustration occurred, addressing the unfairness highlighted in cases like Fibrosa SA v Fairbairn.
Damages Assessment: Calculating What Your Client Is Owed
Calculating damages represents one of the most crucial skills you’ll need as a solicitor, as it directly impacts what your client can recover after a breach of contract.
You’ll need to master the principle of putting your client in the position they’d have been in had the contract been performed.
When evaluating damages, focus on what’s foreseeable and caused by the breach. Remember, your client must take reasonable steps to mitigate losses – failure to do so will limit recovery.
You’ll typically pursue expectation damages (lost benefit) or, alternatively, reliance damages (expenses incurred).
Courts apply a commercial reasonableness test, so prepare concrete evidence linking losses directly to the breach.
Don’t forget that in property cases, the market rule often applies – measuring the difference between contract price and market value.
The goal of damages calculation is to provide fair and just compensation that accurately reflects the actual harm suffered by your client.
Final Thoughts
Mastering contract law isn’t just about memorizing principles—it’s about applying them to real scenarios you’ll face as a solicitor. You might worry that theoretical knowledge won’t translate to practice, but these case studies bridge that gap effectively. By understanding how courts have interpreted offer, consideration, and remedies in actual disputes, you’ll develop the practical judgment that distinguishes exceptional solicitors from merely competent ones.