SQE1 Contract Law Revision Guide: Key Topics, Cases and Exam Tips for 2026

Why Contract Law Matters for SQE1

Contract Law is one of the six subjects tested on the Functioning Legal Knowledge 1 (FLK1) paper, and it underpins almost every other area of legal practice you will encounter on the SQE1. Business Law and Practice, Property Law, Wills, and even Dispute Resolution all assume a working knowledge of contract principles. If your contract law foundations are weak, you will feel it across the entire exam.

The good news is that most law graduates and GDL candidates have already studied contract law in some form. The bad news is that the SQE1 does not reward passive familiarity. It tests application — your ability to read a factual scenario, identify the relevant contract law rule, and select the single best answer from five options. Knowing that consideration must be sufficient but need not be adequate is not enough. You need to spot when a scenario is testing that principle and eliminate the four wrong answers quickly.

Contract law is also one of the more predictable SQE1 subjects. The same core topics — formation, terms, exclusion clauses, vitiating factors, discharge, and remedies — appear consistently across sittings. If you revise these areas systematically and practise enough questions, you can turn contract law into one of your strongest subjects.

For an overview of how FLK1 and FLK2 differ and which subjects appear on each paper, see our guide to FLK1 vs FLK2.

Contract Law on SQE1: What You Need to Know

Contract Law questions appear in the FLK1 paper. They are mixed in with Business Law and Practice, Dispute Resolution, Tort, Legal System, and Legal Services questions throughout the exam — there is no separate "contract law section."

Exam Format

• Question type: Single best answer multiple-choice questions (SBAs). Each question presents a factual scenario followed by five answer options. You select the one best answer.
• No negative marking: You are never penalised for a wrong answer, so always attempt every question.
• Time pressure: You have roughly 1 minute 45 seconds per question. Speed matters.
• Scenario-based: Almost every question is built around a realistic fact pattern. Pure recall questions (e.g., "define consideration") are rare. Instead, you will be asked to apply a rule to a specific set of facts.

What Examiners Focus On

Based on the SRA syllabus and past sittings, the most commonly tested contract law areas are:

Start building exam-ready speed with our practice questions — they replicate the scenario-based format of the real SQE1.

Formation of Contract

A contract requires four elements: offer, acceptance, consideration, and intention to create legal relations. The SQE1 loves testing the boundaries of each element.

Offer vs Invitation to Treat

An offer is a clear, definite statement of willingness to be bound on specific terms. An invitation to treat is merely an invitation to others to make offers — it is not binding.

Key distinctions to know:

• Shop window displays are invitations to treat, not offers (Fisher v Bell [1961]).
• Advertisements are generally invitations to treat, unless the wording is sufficiently specific and unilateral — as in Carlill v Carbolic Smoke Ball Co [1893], where the deposit of £1,000 in a bank showed an intention to be bound.
• Auction bids are offers, and the fall of the hammer is acceptance (Payne v Cave [1789]).
• Tenders are generally invitations to treat, though an invitation to tender can sometimes create a unilateral obligation to consider conforming tenders (Blackpool and Fylde Aero Club v Blackpool Borough Council [1990]).

Acceptance

Acceptance must be unconditional and must correspond exactly with the terms of the offer (the mirror image rule). A purported acceptance that introduces new terms is a counter-offer, which destroys the original offer (Hyde v Wrench [1840]).

Key rules:

• Communication: Acceptance must generally be communicated to the offeror. Silence is not acceptance (Felthouse v Bindley [1863]).
• Postal rule: Where post is a reasonable method of communication, acceptance is effective when the letter is posted, not when it is received (Adams v Lindsell [1818]). This rule does not apply to instantaneous communications.
• Electronic acceptance: For emails and other electronic means, the general rule is that acceptance takes effect on receipt, not on sending (Entores v Miles Far East Corporation [1955], applied to email in Thomas v BPE Solicitors [2010]).
• Prescribed method: If the offeror prescribes a method of acceptance, using an equally advantageous method is usually sufficient (Yates Building Co v Pulleyn & Sons [1975]).

Consideration

Consideration is the price paid for the other party's promise. It must be sufficient but need not be adequate — the law does not inquire into whether the bargain is fair (Chappell & Co v Nestle [1960]).

Key rules:

• Past consideration is no consideration. A promise made after the act has been performed is not supported by consideration (Re McArdle [1951]), unless the act was done at the promisor's request and payment was always expected (Pao On v Lau Yiu Long [1980]).
• Pre-existing duty rule: Performance of a duty already owed is not good consideration (Stilk v Myrick [1809]). However, the modern position under Williams v Roffey Bros [1991] is that if a party receives a practical benefit from the other party's promise to perform an existing duty, that can constitute good consideration — provided there is no economic duress.
• Part payment of a debt: Payment of a lesser sum on the due date does not discharge a debt for the full amount (Pinnel's Case [1602], affirmed in Foakes v Beer [1884]).
• Promissory estoppel: Where a party makes a clear and unequivocal promise not to enforce their strict legal rights, and the other party relies on that promise, the promisor may be estopped from going back on their promise (Central London Property Trust v High Trees House [1947]). Promissory estoppel is a shield, not a sword — it is a defence, not a cause of action (Combe v Combe [1951]).

Intention to Create Legal Relations

The law presumes:

• Domestic and social agreements do NOT create legal relations (Balfour v Balfour [1919]), unless there is evidence to the contrary (Merritt v Merritt [1970] — separated spouses).
• Commercial agreements DO create legal relations, unless the parties expressly state otherwise (e.g., an "honour clause").

Contract Terms

Once a contract is formed, the next question is: what are its terms, and what is their legal status?

Express vs Implied Terms

Express terms are those explicitly agreed by the parties, whether orally or in writing. The parol evidence rule generally prevents parties from relying on extrinsic evidence to add to or vary a written contract, though this rule has been significantly weakened by exceptions.

Implied terms are terms not expressly stated but read into the contract by:

• Statute: The most important statutory implied terms for SQE1 are those under the Sale of Goods Act 1979 (satisfactory quality, fitness for purpose, correspondence with description — ss.13-15) and the Consumer Rights Act 2015 (CRA 2015) which replaced the Sale of Goods Act provisions for consumer contracts.
• Common law — business efficacy: A term will be implied if it is necessary to give the contract business efficacy (The Moorcock [1889]).
• Common law — the officious bystander test: A term will be implied if it is so obvious that a bystander would say "of course" (Shirlaw v Southern Foundries [1939]).
• Custom and usage: A term may be implied by trade custom or local usage.

Conditions, Warranties, and Innominate Terms

The classification of a term determines the remedies available for its breach:

SQE1 tip: Questions often test whether the innocent party is entitled to terminate. Always ask: is the term a condition, a warranty, or an innominate term? If innominate, look at the consequences of the breach.

Incorporation of Terms

A term is only part of the contract if it has been properly incorporated. The three methods are:

1. Signature: A party who signs a document is bound by its terms, even if they did not read them (L'Estrange v Graucob [1934]).
2. Reasonable notice: For unsigned documents, the term must be brought to the other party's attention before or at the time of contracting, and the notice must be reasonable (Parker v South Eastern Railway [1877]). The more onerous or unusual the term, the greater the notice required (Interfoto Picture Library v Stiletto Visual Programmes [1989]).
3. Previous course of dealing: If the parties have dealt on the same terms over a consistent course of previous transactions, those terms may be incorporated (Spurling v Bradshaw [1956]).

Exclusion Clauses and Unfair Terms

Exclusion clauses (also called exemption clauses) attempt to limit or exclude a party's liability. The SQE1 tests both the common law controls and the statutory controls on these clauses.

Common Law Controls

Before you reach any statute, an exclusion clause must pass two common law hurdles:

1. Incorporation: The clause must be properly incorporated into the contract (see the rules above on signature, reasonable notice, and course of dealing).
2. Construction (contra proferentem): Any ambiguity in the clause is construed against the party seeking to rely on it (Houghton v Trafalgar Insurance [1954]). However, the modern approach is less rigid — under Persimmon Homes v Ove Arup [2017], the Supreme Court favours a contextual, purposive interpretation rather than strict contra proferentem.

Unfair Contract Terms Act 1977 (UCTA)

UCTA applies to business-to-business (B2B) and some business-to-consumer contracts. Its key provisions are:

• s.2(1): A business cannot exclude or restrict liability for death or personal injury caused by negligence. Any such clause is void.
• s.2(2): A business can exclude or restrict liability for other loss or damage caused by negligence, but only if the clause is reasonable.
• s.3: Where one party deals on the other's written standard terms, the other party cannot by reference to any contract term exclude or restrict liability for breach, or claim to perform substantially differently or not at all, except insofar as the term satisfies the requirement of reasonableness.
• s.6: In contracts for the sale of goods, the implied terms as to title (s.12 SGA 1979) can never be excluded. The implied terms as to description, quality, fitness, and sample (ss.13-15) cannot be excluded against a consumer, and can only be excluded against another business if reasonable.

The reasonableness test (s.11 and Schedule 2) asks whether the term was fair and reasonable having regard to the circumstances known to the parties at the time of contracting.

Consumer Rights Act 2015 (CRA 2015) — Unfair Terms

For consumer contracts (trader to consumer), the CRA 2015 now provides the primary framework:

• A term is unfair if it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer, contrary to the requirement of good faith (s.62 CRA 2015).
• An unfair term is not binding on the consumer, but the rest of the contract continues to bind the parties if it can do so without the unfair term (s.67).
• Certain terms are listed in Schedule 2 of the CRA 2015 as potentially unfair (the "grey list").

SQE1 tip: Many exam questions test whether UCTA or CRA 2015 applies. The key question is: is the contract a consumer contract or a business contract? UCTA primarily governs B2B relationships (for most SQE1 purposes), while CRA 2015 governs B2C contracts. Getting this distinction right is often the difference between a correct and an incorrect answer.

Vitiating Factors

Even if a contract is validly formed, it may be set aside (or rendered void) if one of the vitiating factors is present. The main vitiating factors are misrepresentation, mistake, duress, undue influence, and illegality.

Misrepresentation

A misrepresentation is a false statement of fact (not opinion or future intention) made by one party to the other before or at the time of contracting, which induces the other party to enter the contract.

Types of misrepresentation:

Bars to rescission: Affirmation, lapse of time, third party rights, and impossibility of restitution (Leaf v International Galleries [1950]).

Mistake

Mistake is a narrow doctrine. The main categories are:

• Common mistake: Both parties share the same mistake about a fundamental fact (e.g., the subject matter has been destroyed). The contract is void at common law if the mistake is sufficiently fundamental (Bell v Lever Brothers [1932]). The test is very strict — the mistake must render the subject matter essentially and radically different from what the parties believed.
• Mutual mistake: The parties are at cross-purposes — each is mistaken, but about different things. If a reasonable person would interpret the agreement the same way, the contract stands. Otherwise, it may be void for lack of agreement.
• Unilateral mistake: One party is mistaken about a term of the contract, and the other party knows of that mistake. In face-to-face dealings, the contract is generally not void for mistake as to identity (Lewis v Averay [1972]). In written distance dealings, the contract may be void (Cundy v Lindsay [1878]).

Duress and Undue Influence

Duress is illegitimate pressure that vitiates consent. It can be:

• Duress to the person: Physical threats — the contract is voidable.
• Economic duress: Illegitimate commercial pressure that leaves the victim with no practical alternative (DSND Subsea v Petroleum Geo-Services [2000]). The key question is whether there was a practical alternative and whether the victim protested at the time.

Undue influence is equitable pressure that impairs the victim's free will:

• Actual undue influence: Direct proof that influence was exercised.
• Presumed undue influence: Arises in relationships of trust and confidence (e.g., solicitor-client, parent-child, doctor-patient). The presumption can be rebutted by evidence of independent legal advice (Royal Bank of Scotland v Etridge (No 2) [2002]).

Illegality

A contract may be illegal because its purpose is prohibited by statute or because it is contrary to public policy. Illegality generally renders the contract unenforceable, though the Supreme Court's decision in Patel v Mirza [2016] introduced a more flexible, proportionate approach to the consequences of illegality.

Discharge of Contract

A contract can be discharged — that is, the parties' obligations brought to an end — in four ways.

Performance

Both parties perform their obligations completely and precisely. The general rule is that performance must be exact (Cutter v Powell [1795]), but this is mitigated by:

• Substantial performance: Where a party has substantially performed, they can recover the contract price less a deduction for defects (Hoenig v Isaacs [1952]).
• Severable obligations: If the contract can be divided into separate parts, each part can be performed and paid for independently.
• Prevention by the other party: If one party prevents the other from performing, the prevented party can claim on a quantum meruit basis.

Agreement

The parties agree to discharge the contract. If both parties have outstanding obligations, the mutual release of those obligations provides consideration (bilateral discharge). If only one party has outstanding obligations, the release must be supported by fresh consideration or made by deed (unilateral discharge — an accord and satisfaction).

Frustration

A contract is frustrated when a supervening event, beyond the parties' control and not provided for in the contract, makes performance impossible, illegal, or radically different from what was contemplated (Taylor v Caldwell [1863], Davis Contractors v Fareham UDC [1956]).

Key points:

• Frustration operates automatically — the contract is discharged from the date of the frustrating event.
• Self-induced frustration does not count — a party cannot rely on their own default (Maritime National Fish v Ocean Trawlers [1935]).
• The Law Reform (Frustrated Contracts) Act 1943 governs the financial consequences: money paid is recoverable, money payable ceases to be payable, and the court may allow a just sum for expenses incurred or valuable benefits conferred.

Breach

A breach occurs when one party fails to perform their contractual obligations.

• Actual breach: Failure to perform when performance is due, or defective performance.
• Anticipatory breach: One party indicates, before performance is due, that they will not perform (Hochster v De La Tour [1853]). The innocent party can either accept the repudiation (treat the contract as discharged and claim damages immediately) or affirm the contract (hold the other party to their obligations and wait for the date of performance).

Remedies for Breach of Contract

Remedies are one of the most heavily tested areas in SQE1 contract law. Know the rules on damages inside out.

Damages

Damages are the primary remedy for breach of contract. They aim to put the innocent party in the position they would have been in had the contract been performed.

Measures of damages:

• Expectation loss (loss of bargain): The most common measure. Compensates the claimant for what they expected to receive under the contract (Robinson v Harman [1848]).
• Reliance loss: Compensates the claimant for expenses incurred in reliance on the contract. Useful where expectation loss is too speculative to quantify (Anglia Television v Reed [1972]).
• Restitution: Restores to the claimant any benefit conferred on the defendant.

Remoteness

Damages are only recoverable if the loss is not too remote. The test comes from Hadley v Baxendale [1854]:

1. Limb 1: Loss arising naturally from the breach in the ordinary course of things (objective foreseeability).
2. Limb 2: Loss that may reasonably be supposed to have been in the contemplation of both parties, at the time the contract was made, as the probable result of the breach (subjective foreseeability — requires special knowledge).

The modern restatement in Transfield Shipping v Mercator Shipping (The Achilleas) [2008] suggests that the test may also include whether the defendant assumed responsibility for the type of loss in question. For SQE1 purposes, focus primarily on the Hadley v Baxendale two-limb test.

Mitigation

The innocent party must take reasonable steps to mitigate their loss (British Westinghouse v Underground Electric Railways [1912]). They cannot recover damages for losses they could reasonably have avoided.

Specific Performance

An equitable remedy ordering the defendant to perform their contractual obligations. It is discretionary and only available where:

• Damages would be an inadequate remedy (e.g., sale of unique goods or land).
• The court can supervise performance.
• It would not cause undue hardship to the defendant.

Specific performance is not available for contracts of personal service (employment contracts).

Injunctions

An injunction restrains a party from breaching a negative contractual term (e.g., a non-compete clause). Like specific performance, injunctions are equitable and discretionary.

Privity of Contract

The Common Law Rule

The doctrine of privity holds that only the parties to a contract can enforce its terms or be bound by them. A third party who benefits from a contract cannot sue on it at common law (Tweddle v Atkinson [1861], Dunlop Pneumatic Tyre Co v Selfridge [1915]).

Contracts (Rights of Third Parties) Act 1999

The 1999 Act creates a statutory exception to the privity rule. A third party may enforce a contractual term if:

1. The contract expressly provides that the third party may enforce it (s.1(1)(a)); or
2. The term purports to confer a benefit on the third party (s.1(1)(b)), unless it appears that the parties did not intend the term to be enforceable by the third party (s.1(2)).

The third party must be expressly identified in the contract by name, as a member of a class, or by description (s.1(3)). The third party need not be in existence at the time of the contract (e.g., a future company).

SQE1 tip: Questions often test the s.1(1)(b) route — a contract confers a benefit on a named third party. The trap is whether the parties intended the term to be enforceable. Look for facts suggesting the parties did or did not intend third party enforcement.

For more on how to spot these traps in practice, read our SQE1 MCQ technique and exam strategy guide.

Top 10 Contract Law Cases You Must Know

These are the cases that appear most frequently in SQE1 contract law questions. Learn the principle each one stands for.

Use our flashcards to drill these cases until you can recall each principle instantly.

SQE1 Contract Law Exam Tips

1. Read the Entire Scenario Before Looking at the Options

Many contract law questions contain critical facts in the final sentence — a deadline that has passed, a written term, or a specific communication method. Jumping to the options too early often leads to errors.

2. Identify the Legal Issue Before Choosing an Answer

Ask yourself: what is this question testing? Is it formation? Terms? Remoteness? Vitiating factors? Once you identify the topic, you can apply the relevant rule. Do not get distracted by facts in the scenario that are irrelevant to the legal issue being tested.

3. Watch for Common Traps

• Past consideration traps: A scenario where a favour was done before any promise was made — the promise is not supported by consideration unless the Pao On exception applies.
• Invitation to treat vs offer: A shop display or advertisement that looks like an offer but is legally an invitation to treat.
• Remoteness traps: Losses that seem natural but were not within the parties' contemplation. Apply both limbs of Hadley v Baxendale carefully.
• UCTA vs CRA 2015: Identifying whether the contract is B2B (UCTA) or B2C (CRA 2015) is often the entire question.
• Anticipatory breach: The distinction between accepting repudiation and affirming the contract — the remedy depends on which path the innocent party chooses.

4. Eliminate Wrong Answers First

In a five-option question, you can often eliminate two or three obviously wrong answers. This dramatically improves your odds, even if you are not certain about the final two options.

5. Practise Under Timed Conditions

You cannot develop exam speed by reading notes alone. Use our practice questions to build your speed, and sit at least one full mock exam under timed conditions before your real sitting.

For a deeper dive into MCQ strategy across all SQE1 subjects, read our SQE1 MCQ technique guide.

How to Structure Your Contract Law Revision

Weeks 1-2: Build Your Foundations

Read through each topic area (formation, terms, exclusion clauses, vitiating factors, discharge, remedies, privity) and make concise notes. Focus on understanding the rules and their exceptions. Do not start practice questions yet — you need the knowledge base first.

Weeks 3-4: Active Recall and Practice Questions

Switch to active recall. Close your notes and test yourself on each topic using our flashcards. Start working through practice questions — aim for 15-20 questions per day, reviewing the explanations for every question you get wrong.

Weeks 5-6: Spaced Repetition and Weak Spots

By now you should know which topics are your weakest. Double down on those areas. Continue using spaced repetition with flashcards — review each rule at increasing intervals (1 day, 3 days, 7 days, 14 days). The rules you find hardest to remember are the ones that need the most repetition.

Week 7: Full Mock Exams

Sit at least one full timed mock exam that covers all FLK1 subjects, not just contract law. This tests your ability to switch between subjects under pressure and builds the stamina you need for the real exam day.

Week 8: Final Review

Review your mistakes from mock exams and practice questions. Re-read the rules for any topics you are still getting wrong. Trust your preparation and avoid the temptation to cram entirely new material in the final days.

Revision Tools Summary

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Final Thoughts

Contract law is one of the most logical and structured subjects on the SQE1. The rules are well-established, the leading cases are consistent, and the exam questions follow recognisable patterns. That makes it a subject where systematic revision pays off enormously.

Start with the foundations — formation and consideration. Build up through terms and exclusion clauses. Tackle vitiating factors and discharge. Finish with remedies and privity. Along the way, practise relentlessly. Every question you get wrong is a learning opportunity.

If you want to see where contract law sits relative to the other SQE1 subjects in terms of difficulty, check out our SQE1 hardest subjects ranked.

The SQE1 pass rate tells you that roughly half of candidates fail on their first attempt. Do not be in that half. Prepare properly, practise under exam conditions, and trust the process. Good luck with your contract law revision for SQE1 in 2026.