1-1. Terms Flashcards
Types of Contract
Business to Consumer
- Consumer Rights Act 2015 (CRA 2015)
- “consumer” - an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession”. (s2(3) CRA).
Business to Business
- Sale of Goods: Sale of Goods Act 1979 (SGA 1979)
- Services: Supply of Goods and Services Act 1982 (1982)
Types of Statement: Mere Puff
Def: an exaggerated and/or promotional statement which a Rperson could not read literally or consider to have a legal effect.
Effect: Has no legal effect.
Types of Statement: Representation
Def: a statement made by one party to another, at the time of contracting, that certain facts are true and which induces the formation of the contract.
Effect: potentially legally binding.
Types of Statement: Term
Def: a promissory statement of fact, intended to be legally binding, which forms part of a contract.
Effect: Legally binding.
Term or Representation
GR: a statement made during negotiations in order to induce the other party to form the contract will prima facie constitute a term unless the other party can demonstrate that it is unR for him to be bound by it.
Whether the parties intended the statement to be binding in judged obj., the court considers the following factors:
- THE IMPORTANCE OF THE STATEMENT (Bannerman v White)
- -TEST: ‘BF’ the statement would the party have contracted?
- -If no, the statement will be considered a term.
- THE TIMING OF THE STATEMENT (Routledge v McKay)
- A statement made at the time of contracting is likely to be a term.
- -Where there is a delay between the time the statement is made and the time of contracting, the statement is more likely to be a representation.
- WHETHER THE TERM HAS BEEN REDUCED INTO WRITING
- -Generally, where an oral statement is written into an agreement it will be a term (Inntrepreneur v East Crown).
- -Though failure to reduce the term into writing will NOT automatically or necessarily make it a representation (Birch v Paramount Estates).
- SPECIAL SKILL OR KNOWLEDGE
- -Where the statement maker has special skill, kowledge or access to information compared with the other party, the statement is likely to be a term (Dick Bentley v Harold Smith).
- -If the party to whom the statement is made has special skill… compared with the statement maker, the statement is likely to be a representation (Oscar Chess v Williams).
- ASSUMPTION OF RESPONSIBILITY
- -GR: Where a vendor guarantees the quality of an item for sale, this may constitute a term if his guarantee discourages the buyer performing further checks on the item himself (Schawel v Reade).
- –EX 1: where the vendor encourages the buyer to perform checks (Ecay v Godfrey)
- –EX 2: where the vendor is not authorised to make the guarantee (Hopkins v Tanqueray).
Express or Implied: Express Terms
Def: a term in a contract which has been expressly communicated and agreed by the parties.
The Parol Evidence Rule
- GR: Extrinsic evidence cannot be admitted to vary, contradict or interpret the terms of a written contract (Jacobs v Batavia).
- -EX 1: The contract is not wholly written (J Evans & Sons v Andrea Merzario; Couchman v Hill)
- -EX 2: Collateral Contracts (Heilbut Symons v Buckleton)
- –Rule: where an oral contract can be shown to be a separate collateral contract to the main written contract, the parol evidence rule will only apply to the main contract.
- –A collateral contract can exist between either:
- —both parties to the main contract (City of Westminster v Mudd), or
- —one party to the main contract and a third party (Shanklin Pier v Detel Products).
- -EX 3: Onerous Terms
- –In order for a party to enforce an onerous term, that term must be Rly and fairly brought to the other party’s attention (Interfoto v Stiletto).
Entire Agreement Clauses
- Parties may exclude terms not expressly included in the agreement by including an “entire agreement clause” in the contract (Inntrepreneur Pub v East Crown).
Express or Implied: Implied Terms
Def: an implied term is a term not expressly agreed by the parties which is inferred into the contract.
Courts may imply terms into contracts in certain circumstances.
Implied terms are implied either:
- IN FACT or IN LAW…
Express or Implied: Terms Implied IN FACT
A term will not be implied into a contract where the parties have expressly and unambiguously excluded it (Trollope & Colls v North West Regional Hospital Board)
A court may imply terms into a contract in the following circumstances:
- PREVIOUS COURSE OF DEALING
- -where a previous course of dealing was regular and consistent (McCutcheon v MacBrayne; Hollier v Rambler Motors).
- TRADE AND PROFESSIONAL CUSTOMS (British Crane Hire v Ipswich Plant; Ofir Scheps v Fine Art Logistics)
- -implied due to trade and prof. customs, UNLESS the parties expressly exclude the application of such customs.
- BUSINESS EFFICACY (The Moorcock)
- -imply a term to give it business efficacy where the parties would have intended it to exist.
- -TEST: ‘Officious Bystander’ test, the term must be so obvious that if an OB suggested it should be included in contract, the parties would reply “Oh, of course.” (Shirlaw v Southern Foundries, per MacKinnon LJ)
- –the purpose of the test is to identify the ultimate intentions of the parties (AG of Belize v Belize Telecom).
- -Both parties must be aware of the term that is to be implied into the contract (Spring v National Amalgamated Stevedores).
Express or Implied: Terms Implied IN LAW
…at Common Law
- Courts will imply terms at common law in order to standardise or give effect to certain contractual relationships for POLICY REASONS or out of NECESSITY. (Liverpool CC v Irwin; Mahmud v BCCI).
…by Statute
- terms implied by statute have effect regardless of the parties’ intentions (UNLESS an exemption clause exists).
- the relevant statute implying terms will depend on whether the contract in concern is a B2C/B2B and whether it is for the SALE OF GOODS/SUPPLY OF SERVICES.
B2C Contracts
SALE OF GOODS
- Chapter 2 of Part 1 CRA 2015. The following terms are implied by CRA 2015.
- s.17: RIGHT TO SELL THE GOODS (I Term)
- (1) trader must have the right to sell the goods
- (2)(a) goods should be free from any undisclosed charge/encumbrance.
- (2)(c) consumer should enjoy the right to quiet possession of the goods.
- – Where seller lacks title to sell the goods, buyer entitled to reclaim FULL purchase price (Rowland v Divall) - s.11: CORRESPONDANCE WITH DESCRIPTION (I Term)
- (1) goods must match their description
- (3) sale will still be by desc. if buyer selects the goods
- where goods fail to correspond with description, is irrelevant whether that failure to correspond impairs the use of the goods or not (Arcos v Ronaasen)
- Ads may constitute descriptions of goods (Beale v Taylor) - s.9(1): SATISFACTORY QUALITY (I Term)
- goods must be of satisfactory quality
- – (2) STANDARD: the standard that a R person would consider satisfactory, accounting for the description of the goods, price or other consideration, and any other relevant circumstances.
- (3) Factors in assessing the quality of the goods
- – fitness for purposes which that good is typically supplied (Priest v Last; Grant v Australian Knitting Mills)
- – appearance and finish
- – freedom from minor defects
- – safety
- – durability: must continue to be fit for purpose for a “R time” after purchase (Lambert v Lewis)
- (4) EXCEPTIONS, doesn’t apply to defects:
- – that are specifically drawn to consumer’s attention
- – where consumer examines goods beforehand and should have been discovered
- – where sale by sample, a R examination would have revealed the defect - s.10: FITNESS FOR A PARTICULAR PURPOSE (I Term)
- (3) goods must be R fit for purpose regardless of whether it’s one the good is usually supplied for IFF customer makes known the intended purpose.
- – (4)does not apply where consumer doesn’t rely on seller’s skill or judgement OR where buyer is in a position of superior knowledge about the defect (Balmoral Group v Borealis) - s.13: SALE BY SAMPLE (I Term)
- (1) where there is a sale by reference to a sample, two conditions will be implied:
- – the goods will match the sample in quality except for any differences that were brought to the consumer’s attention (2)(a).
- – the goods will be free from any defect which would not be apparent on R examination of the sample ((2)(b); Godley v Perry)
SUPPLY OF SERVICES
- Chapter 4 of Part 1 CRA 2015. Following terms are implied:
- s.49: R CARE AND SKILL (I Term)
- a trader must perform the service with R care and skill - s.52: R TIME (I Term)
- a trader must perform the service within a R time - s.51: R PRICE (I Term)
- if a contract does not expressly fix a price, the consumer must pay a R price for the service (I Term)
B2B CONTRACTS
SALE OF GOODS
- Sale of Goods Act 1979, following terms implied:
s. 12: TITLE
- (1) seller must have the right to sell the goods (Cond)
- (2)(a) goods should be free from any undisclosed charge/encumbrance (W)
- (2)(b) buyer should enjoy a right to quiet possession (W)
- where seller lacks title to the goods, buyer can claim FULL purchase price (Rowland v Divall)
s. 13: CORRESPONDANCE WITH DESCRIPTION (Cond)
- (1) goods must correspond with their description
- – (3) sale will still be by desc if goods selected by buyer.
- where goods fail to correspond to desc, irrelevant whether that failure to correspond impairs the use of the good or not (Arcos v Ronaasen)
- Ads may constitute descriptions of goods (Beale v Taylor)
s. 14(2) SATISFACTORY QUALITY (Cond)
- Goods must be of satisfactory quality
- – (2A) STANDARD: that which a R person would regard as satisfactory, accounting for price, desc, and other circumstances
- (2B) Factors to consider when assessing quality of goods
- – Fitness for common purposes (Priest v Last; Grant v Australian Knitting Mills)
- – Appearance and finish
- – freedom from minor defects
- – safety
- – Durability: goods must be fit for purpose for a R time after delivery (Lambert v Lewis)
- (2C) EXCEPTIONS - doesn’t apply to defects:
- – that are specifically drawn to consumer’s attention
- – where consumer examines goods beforehand and should have been discovered
- – where sale by sample, a R examination would have revealed the defect
s. 14(3) FITNESS FOR A PARTICULAR PURPOSE (Cond)
- (3) goods must be R fit for purpose where:
- – seller is in course of business, AND
- – buyer makes known to the seller, explicitly/implicitly, any particular purpose for which the goods are being bought
- Does NOT apply where buyer does not rely on sellers skills or judgement
- does NOT apply where buyer is in a position of superior knowledge in regards to a defect (Balmoral Group v Borealis)
s. 15 SALE BY SAMPLE (Cond)
- (2) where there is a sale by sample the following two conditions will be implied:
- – (2)(a) the quality of the goods will correspond with the sample, AND
- – (2)(c) the goods will be free from any defect which would not be apparent on R examination of the sample (Godley v Perry)
SUPPLY OF SERVICES
- Supply of Goods and Services Act 1982 (SGSA). Following terms will be implied:
s. 13: R SKILL AND CARE (I Term)
- a supplier acting in the COURSE OF BUSINESS must carry out a service with R skill and care
s. 14: R TIME (I Term)
- a supplier acting in the COURSE OF BUSINESS must perform a service in a R time.
s. 15: R CONSIDERATION (I Term)
- where the contract does not specify the amount payable, a R sum will be payable
BREACH
If any of the terms have been breached, briefly and clearly explain how.
EG. car coloured blue when ordered in red.
CATEGORISATION
The term will be a CONDITION, WARRANTY or INNOMINATE TERM. The court will generally give effect to the parties’ description of the term (their intention) (Lombard North Central v Butterworth), UNLESS it leads to an unR result (Schuler v Wickman Tools).
Categorisation: CONDITION
Def: an important term which goes ‘to the root of the contract’ (Poussard v Spiers)
Rights on breach
- IMMEDIATE RIGHT OF ELECTION TO:
- – affirm, continue and claim damages, OR
- – terminate and claim damages
Categorisation: WARRANTY
Def: a less important term than a condition which does NOT go to the root of the contract (Bettini v Gye)
Rights on Breach
- the right to claim damages only. Primary contractual obligations remain.
- C must also take R steps to mitigate losses stemming from the breach
