Contract Law (CNL): essential SQE1 knowledgeContract Law is examined in FLK1 and represents 14–20% of the 180-question paper, approximately 25–36 questions. Questions frequently combine Contract with…
Contract Law is examined in FLK1 and represents 14–20% of the 180-question paper, approximately 25–36 questions. Questions frequently combine Contract with Dispute Resolution, Business Law, Tort or Ethics. Official SQE1 blueprint
The official syllabus covers:
A binding contract ordinarily requires:
Candidates should consider each element separately.
An offer is a clear expression of willingness to contract on specified terms, intended to become binding upon acceptance.
The test is objective:
Would a reasonable recipient understand that acceptance would create an immediate agreement?
An offer must be distinguished from:
An invitation to treat invites another person to make an offer.
Common examples include:
The customer normally makes the offer, which the seller may accept or reject.
Key authorities include:
An advertisement may constitute an offer where it is:
Key authority:
A unilateral offer is accepted by complete performance of the specified act, although beginning performance may restrict revocation in appropriate circumstances.
An invitation to tender is usually an invitation to submit offers.
However, the invitation may create a separate procedural obligation where it promises to:
The wording determines whether the invitation itself creates a unilateral contractual obligation.
At a traditional auction:
An auction “without reserve” may create a collateral obligation to sell to the highest genuine bidder.
A person cannot accept an offer of which they are unaware.
For reward cases, the claimant ordinarily must know of the offer when performing the required act.
An offer may be made:
An offer may terminate through:
Once validly terminated, it cannot ordinarily be accepted without renewal.
An offeror may generally revoke before acceptance, even where they promised to keep the offer open, unless:
Revocation must generally be communicated to the offeree.
Reliable information from a third party that the offeror has acted inconsistently with the offer may also terminate the offer.
A counter-offer:
A request for information does not necessarily reject the offer.
Compare:
Key authorities include:
Acceptance is a final and unqualified assent to the terms of the offer.
It must:
Introducing new terms is usually a counter-offer, not acceptance.
The general rule is that acceptance takes effect when communicated to the offeror.
For instantaneous communications, effectiveness generally depends on receipt.
Relevant factors include:
Where post is an authorised or reasonable method, acceptance may take effect when properly posted rather than when received.
The postal rule may be excluded where:
The postal rule generally applies to acceptance, not revocation.
Silence does not ordinarily amount to acceptance.
An offeror cannot impose a contract by saying:
“If I hear nothing, I will assume you agree.”
However, acceptance may arise through:
Key authority:
A contract may arise where conduct objectively shows agreement, even without a signed document.
Examples include:
The court must still identify sufficiently certain terms.
Where businesses exchange conflicting standard terms, the court determines which terms govern the transaction.
Traditional analysis considers:
The “last shot” may prevail, but the court examines the full sequence and objective conduct.
Key authority:
Consideration is the price of the promise.
It may consist of:
Consideration must be:
The court generally does not assess whether the bargain was economically equal.
An act performed before a promise is made is ordinarily not valid consideration.
Exceptionally, an earlier act may support a later promise where:
Key authorities include:
Performance of an existing duty owed to the promisor may sometimes provide consideration where it gives a practical benefit and is not procured by:
Key authority:
The doctrine does not automatically apply to part-payment of an existing debt.
Performance of a public duty is not ordinarily consideration unless the person:
Key cases include:
Performance of an existing duty owed to a third party may constitute consideration for a new promise.
The promisor receives the benefit of enforceable performance or assurance.
Key authority:
Part-payment of an existing debt does not ordinarily discharge the whole debt unless fresh consideration exists.
Possible fresh consideration includes:
Key authorities:
Promissory estoppel may prevent a party from insisting on strict legal rights where:
It is generally:
Key authority:
A promise made by deed does not require consideration.
A valid deed must:
Deeds are important for:
The test is objective.
Presumed intended to be legally binding.
The presumption can be rebutted by clear wording, such as an honour clause.
Often presumed not binding, but context may rebut this where:
Key authorities include:
A contract must be sufficiently certain to enforce.
Problems include:
The court may preserve an agreement through:
But it will not create a bargain the parties never made.
A bare agreement to negotiate in good faith is generally difficult to enforce because:
A defined negotiation process may be enforceable where:
Contracts with minors may fall into categories including:
Necessaries are goods or services:
A minor pays a reasonable price rather than necessarily the contractual price.
A contract of employment, apprenticeship, education or training may bind a minor where, viewed as a whole, it is substantially for the minor’s benefit.
The court considers:
A contract may be avoided where:
Contracts for necessaries may remain enforceable for a reasonable price.
Mental Capacity Act 2005 principles may apply, but contractual validity depends on the relevant common-law and statutory rules.
A company has broad capacity, but the person entering the contract must have authority.
Authority may be:
This overlaps with Business Law and Practice.
The traditional rule is that only parties to a contract may:
A third party who provided no consideration generally could not sue at common law.
Important exceptions include:
A third party may enforce a term where:
The third party must be identified by:
They need not exist when the contract is made.
Contracting parties may lose unrestricted power to vary or rescind where the third party has:
The contract may reserve variation rights.
The promisor may rely against the third party on relevant defences and set-offs arising from the contract.
A contractual benefit may generally be assigned unless:
A burden cannot ordinarily be assigned without novation.
Under section 136 LPA 1925, a legal assignment generally must be:
If requirements are not met, an equitable assignment may still arise.
Novation replaces:
It requires consent of all relevant parties.
Unlike assignment, novation can transfer both:
The original party is generally released and the new party assumes the obligations.
Express terms arise through:
The court distinguishes contractual terms from:
Relevant factors include:
If a statement is a term, breach gives contractual remedies. If a representation, misrepresentation remedies may apply.
Key authorities include:
A person who signs a contractual document is generally bound by its terms even if they did not read it.
Exceptions may include:
Key authority:
An unsigned term is incorporated where:
Notice given after formation is ordinarily too late.
Key authorities include:
Terms may be incorporated through a course of dealing where dealings are:
A small number of irregular transactions may be insufficient.
Terms may be implied:
The court will not imply a term merely because it appears reasonable.
The principal tests are:
The proposed term must:
Key authorities include:
A term may be implied into a category of contract where necessary as a legal incident of that relationship.
Examples may arise in:
The test is broader and policy-based, but still restrictive.
Important statutes include:
Implied terms may concern:
The applicable statute depends on:
The court interprets contractual wording objectively, considering:
The court does not ordinarily use subjective intentions or prior negotiations as direct interpretation evidence.
Key authorities include:
From September 2026, interpretation is expressly separated from classification of terms in the blueprint.
A condition is a major contractual term.
Breach generally entitles the innocent party to:
A term may be a condition because:
The label “condition” is relevant but not always conclusive.
A warranty is a less important term.
Breach generally gives:
The term “warranty” may also have specialised meanings in insurance or commercial drafting, so context matters.
For an innominate term, the remedy depends on the consequences of breach.
Termination is available only where breach deprives the innocent party of substantially the whole contractual benefit.
Otherwise, damages are available but not termination.
Key authority:
Whether “time is of the essence” depends on:
Where time is of the essence, delay may justify termination.
Otherwise, the innocent party may need to serve notice making time essential before terminating for continued delay.
Apply four questions:
Do not begin with reasonableness before establishing incorporation and construction.
The clause is interpreted objectively.
Relevant principles include:
Under the Canada Steamship approach, consider:
The modern court treats these as interpretative guidelines rather than inflexible rules.
UCTA principally regulates business liability and certain non-consumer contracts.
Key rules include:
Reasonableness is assessed when the contract was made.
Factors include:
A negotiated commercial clause between sophisticated parties is more likely to be reasonable, but not automatically valid.
A consumer is broadly an individual acting wholly or mainly outside their trade, business, craft or profession.
A trader acts for purposes relating to their business.
Under the CRA:
A term is unfair where, contrary to good faith, it causes a significant imbalance in parties’ rights and obligations to the consumer’s detriment.
Relevant considerations include:
Ambiguous consumer terms are generally interpreted in the consumer’s favour.
A misrepresentation is:
It must be distinguished from:
An opinion may imply a factual basis where the maker has special knowledge.
A statement of intention is false where the maker did not genuinely hold that intention when speaking.
Key authorities:
Silence is not generally misrepresentation, but disclosure may be required where:
Key authorities include:
The claimant must have relied on the misrepresentation in entering the contract.
The statement need not be:
But it must be a real and material influence.
No actionable inducement exists where the claimant:
Failure to verify does not necessarily defeat reliance.
Fraud exists where the representor makes a statement:
Remedies may include:
Key authority:
Under section 2(1) Misrepresentation Act 1967, the representor is liable unless they prove reasonable grounds for believing, and actual belief, that the statement was true up to contract formation.
Remedies may include:
The statutory burden is favourable to the representee.
A misrepresentation is innocent where the representor proves reasonable grounds for belief in its truth.
Possible remedies include:
Damages are not automatically available merely because a misrepresentation occurred.
Rescission sets the contract aside and seeks substantially to restore the parties to their pre-contract positions.
Bars include:
Indemnity for obligations necessarily incurred under the contract may accompany rescission.
A term excluding or limiting liability for misrepresentation is subject to statutory reasonableness under section 3 Misrepresentation Act 1967.
A non-reliance clause may be treated as an exclusion in substance.
Fraud cannot ordinarily be excluded.
A common mistake occurs where both parties share the same mistaken assumption.
At common law, the contract is void only where mistake makes performance or subject matter essentially and radically different from what was agreed.
A mistake about:
is ordinarily insufficient unless fundamental.
Key authority:
A contract may be void where, unknown to both parties:
Statutory rules, risk allocation and contract wording may alter the result.
A mutual mistake arises where parties misunderstand each other and attach different meanings to their communications.
The court asks objectively whether:
A unilateral mistake may make a contract void where:
Mistakes about identity receive special treatment, particularly where contracting:
A person signing a document may exceptionally avoid it where:
The doctrine is narrow because signed documents ordinarily bind.
A contract may be voidable where illegitimate pressure:
Forms include:
The victim must act promptly after pressure ends or risk affirming the contract.
Relevant factors include:
Hard commercial pressure is not necessarily unlawful duress.
Key authorities include:
Undue influence concerns improper influence affecting consent.
Must be proved through evidence.
Requires:
The stronger party may rebut the presumption by showing free and informed consent, often through proper independent advice.
Where a person guarantees or secures another’s debts in a non-commercial relationship, a lender may be put on inquiry.
Reasonable steps commonly include:
Key authority:
A claim may be restricted where it is connected with unlawful conduct.
The modern approach considers:
Factors include:
Key authority:
A valid variation generally requires:
Consideration issues may be addressed through:
A clause requiring variation in writing is generally effective.
An oral variation may fail if it does not satisfy the prescribed formalities.
Estoppel may operate exceptionally where conduct makes reliance on the clause unjust, but the threshold is demanding.
Key authority:
A contract is discharged when obligations are fully performed.
The general rule requires complete performance, subject to doctrines including:
Where performance is substantially complete but defective, the performing party may recover the contract price less:
depending on circumstances.
Substantial performance is unavailable where defects are too serious or central.
Key cases include:
Where one party prevents the other from completing:
Key authority:
Termination requires:
The innocent party may:
Damages may be claimed in either case.
Anticipatory breach occurs where, before performance is due, a party:
The innocent party may:
Affirmation may expose the contract to later frustration or make cooperation requirements relevant.
Key authority:
Affirmation requires:
Once affirmed, termination for that particular breach is generally lost, although damages remain available.
Continued performance does not always amount to affirmation if the party:
A contract may provide rights to terminate for:
Contractual termination must comply with:
A defective termination notice may itself be repudiatory.
A contract is frustrated where, without fault of either party, an event after formation makes performance:
Frustration automatically discharges future obligations.
The doctrine is narrow.
Possible events include:
Not normally sufficient:
Force majeure is principally contractual under English law.
The clause determines:
Where the clause covers the event, contractual interpretation generally applies before frustration.
Following frustration:
The Act contains exclusions and does not apply uniformly to every contract.
A restitutionary claim generally asks:
Relevant unjust factors may include:
A claimant may recover a transferred benefit where the basis on which it was provided has failed.
The failure often must be total for traditional contractual restitution, although the precise analysis depends on:
A party may sometimes recover money or value where:
Restitution does not automatically replace contractual damages.
The ordinary aim is to put the claimant in the position they would have occupied had the contract been properly performed.
This may include:
The claimant must establish:
Reliance damages compensate expenditure incurred in reliance on the contract.
They seek to restore the claimant to the pre-contract position.
They may be useful where expected profit is difficult to prove.
The claimant cannot use reliance damages to escape a loss that proper performance would itself have produced.
Where performance is defective, the court considers whether cost of cure is:
If cure cost is disproportionate, damages may instead reflect:
Key authorities include:
Damages for distress or disappointment are generally unavailable for ordinary commercial breach.
Exceptions may apply where:
Key authorities include:
Damages may be awarded for loss of a real and substantial chance, particularly where outcome depended on a third party.
The claimant must show:
Where outcome depended solely on what claimant would have done, ordinary balance-of-probabilities principles may apply.
The claimant must show the breach caused the loss.
Apply:
A breach need not be the sole cause, but must make a legally effective contribution.
An intervening act may break the chain where it is sufficiently independent and unforeseeable.
Possible intervening acts include:
The court asks whether the later event falls within the risk created by the breach.
Under Hadley v Baxendale, recoverable loss generally includes:
The modern question asks whether the type of loss was within reasonable contemplation when the contract was made.
In some contracts, particularly unusual or volatile commercial arrangements, the court may consider whether the defendant objectively assumed responsibility for the type of loss.
Key authorities include:
Ordinary Hadley v Baxendale principles remain the starting point.
A claimant must take reasonable steps to reduce loss.
Consequences:
The defendant bears the burden of establishing failure to mitigate.
Damages are generally assessed at the date of breach, but the court may choose another date where necessary to achieve proper compensation.
Later events may be relevant where:
A contractual sum payable on breach is enforceable unless it is a penalty.
The modern test asks whether the provision imposes a detriment out of all proportion to the innocent party’s legitimate interest in enforcement.
Relevant questions include:
Key authority:
A genuine deposit provides security for performance and may be forfeitable following buyer default.
An excessive deposit may be treated as penal unless justified by custom or special circumstances.
A part-payment is generally recoverable after termination unless the contract provides otherwise or the payee has an accrued right to retain it.
Classification depends on substance and wording.
Specific performance orders a party to perform the contract.
It is discretionary and usually requires:
It is generally unavailable for:
It is commonly considered for unique land or assets.
An injunction may:
The court considers:
A guarantee is a secondary promise to answer for another person’s debt or default.
It generally must satisfy section 4 Statute of Frauds 1677:
Candidates should distinguish:
A guarantor may be discharged where, without consent:
A continuing guarantee or advance consent clause may alter the result.
An indemnity is generally a primary obligation to compensate for specified loss.
Candidates should consider:
Clear wording is required to determine whether ordinary damages limitations are modified.
Prioritise:
For every scenario, ask:
The controlling source is the official SRA FLK1 specification. The attached sample paper is FLK2, so it illustrates SQE question style but does not directly define or sample Contract Law.
6 subtopics · 116 questions