SQE1 manual series: why you should study contract law

Reading time: five minutes

This LCN Says is part of a series looking at The University of Law’s (ULaw) Solicitors Qualifying Exam (SQE) manuals that have been specifically designed to support law students in their SQE1 exams. This LCN Says will look at what students can expect to learn in the Contract Law manual.

What is contract law?

Consumers and businesses enter into contracts every day For example, when you buy a train ticket, you’re making a contract with TFL. This contract is for TFL to fulfil the contract terms by providing you with the train service you have paid for and taking you to your destination.

Read this LCN Blog to find out about smart contracts: ‘Smart contracts and the English law.’

Therefore, when there are delays or train cancellations, you can claim compensation and get a refund within 28 days of the ticket’s expiry date.

This is reflected in the Consumer Rights Act (2015) which gives you rights when you make a contract with a trader to supply goods, services and digital content. The requirements required to create a legal contract are an:

• offer (this is distinguished from an ‘invitation to treat’ which cannot be accepted);
• agreement to accept this offer (all material terms must have been agreed and acceptance must be unconditional and communicated by words or conduct);
• consideration; and
• intention to create legal relations.

Contract law helps law students and lawyers to recognise:

• when an offer has been made;
• when an offer has been accepted to reach an agreement;
• when an offer has been terminated and is no longer capable of being accepted; and
• when a contract might be void for uncertainty.

Formation of a contract

For a contract to exist, there must be an agreement of an offer being accepted and clear intention to create legal relations and considerations. Consideration is something that has value in the eyes of the law and can be given in return of a promise. For example, exceeding a contractual or public duty is consideration. Consideration can also be:

• a promise to do something;
• a promise not to do something; and
• a promise to pay money.

Read this LCN Blog to find out when a contract can be unlawful: ‘Illegal covid-19 contracts.’

Damages and remedies

What happens if a party fails to uphold their end of the bargain – in what ways can a contract be terminated?

We know that the law imposes damages on defendants to compensate claimants for the loss they have suffered as a result of the breach of contract. So, in order to prove they are entitled to damages, the injured party must show that:

• the breach of contract has caused actual loss;
• the type of loss is recognised as worthy of compensation; and
• the loss is not too remote (the loss must be foreseeable as being unlikely to happen for damages).

The Consumer Rights Act outlines what statutory rights you have when something goes wrong. Let’s say you order a dress online from ASOS and you notice that the stitching has come apart or there’s a stain, you are entitled to your money back because ASOS has a contract not to supply faulty products to its customers. This is called compensatory damages (also called ‘actual damages’) because ASOS is covering the loss incurred by you due to the breach of contract.

There are other damages in contract law, such as:

• Incidental damages – this compensates the costs of keeping any more damages from occurring. For example, if ASOS gets repeated complaints about the fabric of their clothing, they might consider changing manufacturers.
• Consequential damages – this compensates for the foreseeable consequences of the breach. For example, ASOS is aware that there will be some cash loss to do with granting its customers free items or a voucher as a gesture of goodwill for a bad sales experience or returned items coming back damaged or stained.
• Liquidated damages – this is agreed to in advance, for example, Depop provides all its buyers with a money back guarantee and 100% buyer protection if they make the sale on the app and not outside. Therefore, it’s difficult to commit fraud on Depop because buyers can contact Depop if they don’t receive their items or if it’s significantly different from its description. Depop will then ask the seller for proof of postage, if the seller is unable to provide this, the buyer is automatically refunded and Depop passes this over to a debt agency who chases the seller for the outstanding balance.

Read this LCN Says to find out how you can use Depop as a law student: ‘How running a business on Depop can sharpen your commercial awareness.’

• Punitive damages – individuals who behave outrageously or disorderly could be ordered to pay their victims punitive damages. For example, drunk driving or distracted driving are punishable offences that you can be fined for as well as paying compensation to the claimant. Like the other damages, punitive damages are there to compensate the injured claimants and to punish defendants for grossly negligent or intentional behaviour.
• Nominal damages – (the clue is in the name: nominal means tiny) This is awarded when the consumer is legally entitled to some type of compensation but they haven’t suffered substantial loss. Perhaps that ASOS dress was discounted to a fiver. The civil court will award you damages because it is your right as a customer, but it will be very little and is unlikely to exceed the amount you paid for the item/product.

If you're interested in other areas of law then read:

• 'SQE1 manual series: why you should study criminal law';
• 'SQE1 manual series: why you should study tort law'; and
• 'SQE1 manual series: why you should study ethics and professional conduct.'

Find out more about ULaw’s SQE1 courses.

Read the latest information about what is happening with the SQE via our SQE Hub.

Christianah Babajide (she/her) is the content and engagement coordinator at LawCareers.Net.