1.2 Contract Terms

Question 1

What are express terms?

Answer 1

Terms specifically agreed by the parties, either in writing or oral.

IMPORTANT: In order to be terms, statements must be incorporated into the contract.

Question 2

What are implied terms?

Answer 2

Implied terms are not expressly created by the parties but are implied (i.e read) into the contract.

Terms implied by statute: UCTA 1977, SGA 1979, SGSA 1982, CRA 2015

Question 3

Types of terms: what is a warranty?

Answer 3

Minor term of the contract. The consequences are less serious. A breach does not bring the contract to an end but does allow the innocent party to claim damages.

Question 4

Types of terms: what is a condition?

Answer 4

Major term of the contract. Goes to the root of the contract - the breach would be so fundamental that the contract will come to an end and damages can be claimed.

• Performances of that term “goes to the root” of the contract
• Certain terms are regarded as conditions because of an ‘industry standard’ and the need for certainty in maintaining that standard.

Question 5

Types of terms: what is an innominate term?

Answer 5

Not categorised as either a condition or a warranty until after it has been breached.

The courts will decide if the innominate term is a condition/warranty by determining - whether the ‘substantial benefit’ of the contract has been lost.

Substantial benefit of contract has been lost: term is a condition and will bring contract to an end.

Substantial benefit of contract is available: term is a warranty, breach of warranty will exist.

Question 6

What is the difference between a term and a representation?

Answer 6

A statement made in negotiations is a term if: this becomes binding on both sides and remedies for breach of contract are available in case of breach.

A statement made in negotiations is a representation if: it has induced somebody to enter into a contract. E.g. negotiating tactic. The remedy would be under misrepresentation.

Question 7

What is an exclusion clause?

Answer 7

A clause in a contract or a term in a notice which appears to exclude or restrict a liability or legal duty which would otherwise arise.

Question 8

What does a party attempting to exclude/limit liability have to show?

Answer 8

They need to show I.C.E! They are icy as they are attempting to exclude / limit liability.

Incorporation - the clause is a term of the contract.

Construction - the term deals with actual loss, damage incurred and protects person/body seeking to rely on it

Effectiveness - law does not prevent or restrict operation of the clause

Question 9

What should be considered for incorporation of a term? (Signature / Reasonable Notice)

Answer 9

Incorporation by signature / reasonable notice

1. [Notice is integral] A document containing notice of clause must be an integral part of the contract
2. [Signed document] A term is not usually disputed if it is included in a document which is signed
3. [Term put forward before signature] A term cannot be part of contract unless it is put forward before the contract is signed.
4. [Awareness] A term is not binding unless the person whose rights it restricts is sufficiently aware of it at the time of agreeing to it
5. [Highlighting onerous terms] Any onerous terms must be highlighted

Question 10

What should be considered for construction of a term?

Answer 10

The term deals with actual loss or damage incurred and protects the person/body seeking to rely on it. Liability can only be excluded if clear words are used.

Question 11

What should be considered for effectiveness of a term?

Answer 11

The law does not prevent or restrict the operation of the clause

Question 12

What is the rule with onerous terms?

Answer 12

Onerous and unusual terms should be drawn to the attention of the party affected by it

Question 13

What is the rule with ‘course of dealing’?

Answer 13

Exception to the rule that there should always be prior notice:

Parties have had consistent dealings with each other in the past and documents contain similar terms.

Allows for contracts to be sent after job completion if there was been a course of dealing.

Question 14

Describe Section 2(1) and (2) of UCTA

Answer 14

Negligence Liability

UCTA s2(1) - **not possible to exclude liability for **death or personal injury

s2(2) - possible to exclude liability for negligence which involves damage to property, so long as the exclusion clause is reasonable

Question 15

Describe Section 3 of UCTA

Answer 15

Liability arising in contract - written standard terms of business

Other party cannot seek to exclude or restrict liability for breach of contract except where the exemption clauses pass the reasonableness test

Question 16

How can a contract be varied (e.g increase or reduce work, change timescales?)

Answer 16

Subsequent mutual agreement of the parties (oral or written). There must be:

1. Valid agreement between the parties - mere notification by one party to the other is not effective
2. Some form of consideration supporting this agreement

Variation can also lead to discharge of the contract by agreement

Question 17

What is the difference between UCTA and CR Act?

Answer 17

Business to business contracts are governed by UCTA. Business to consumer contracts are covered by the CR Act.

Question 18

What is important to note about ‘time of the essence’ in a contract?

Answer 18

If there is a time clause in a contract, breach of a term relating to time will be seen as a breach of condition - will entitle the non-breaching party to terminate the contract.

Question 19

What is the common law test to determine a term from a representation?

Answer 19

1) Did the representor have special knowledge or expertise? Yes - term. No - representation

2) ‘Importance attached’ test. Did the representor know that the representee would not have entered into the contract if the pre-contractual statement had not been made? Yes - Term. No - representation.

3) Did the representor assume responsibility for the pre-contractual statement? Yes - Term. No - Representation

4) Did the representor advise the representee to check / verify the statement? No - Term. Yes - Representation