1.2 Terms Flashcards
The difference between remedies for terms and misrepresentation
If it is a term, remedies are available for breach of contract. If it is a representation, the remedy will be under misrepresentation
Name the three main groups of terms
- conditions (major terms)
- warranties (minor terms), and
- innominate terms (undetermined until they are breached).
What is a condition?
A condition is a major term of the contract, breach of which is so fundamental that the contract
will come to an end and damages can be claimed. Either a promissory condition or a time condition
How does the court determine if something is a term?
- performance of that term “goes to the root” of the contract, or
- certain terms will be regarded as conditions because of an “industry standard” and the need for certainty in maintaining that standard
Promissory condition
A term of the contract under which a party promises to do
something and, if they fail to perform the promised act, it will be regarded as a breach of contract
Time condition
- Possible to make time the central point of the contract.
- Term of the contract under which a party promises to do
something and, if they fail to perform the promised act, it will be regarded as a breach of contract
Warranty is a and what are the consequences of a breach?
Consequences are usually less serious. A breach does not bring the
contract to an end but does allow the innocent party to claim damages.
Innominate term
Used interchangeably - term which is not categorised either as a condition or a warranty until
after it has been breached.
What is the test for an innominate term?
Courts decide if a breach has resulted in a loss of a ‘substantial benefit’ of the contract. If it is a minor breach and the substantial benefit of the contract is still available, it will be a breach of a warranty.
What takes priority - express term or implied term?
Express term overrides an implied term
What is an implied term?
An implied term is a term in a contract which has not been expressly stated, but which the
courts are willing, or required by statute, to imply.
Name the ways in which a term can be implied within a statute
- by statute
- in law
- in fact, and
- by custom.
Examples of terms implied by statute
Unfair Contract Terms Act 1977 (UCTA)
Also statutes which relate to employment
Business to business
What are terms implied by fact?
Terms implied “in fact” are based on the presumed intention of the parties. The courts apply a subjective test to determine if a term should be implied. It is only done if necessary, using these tests:
Business Efficacy Test: Does the term make the contract workable as the parties intended?
Officious Bystander Test: Is the term so obvious that both parties would have agreed to it?
Reasonable Expectations Test: What are the reasonable expectations of the parties under the agreement?
How are customary terms implied?
well known facts that are obvious to the contract.
Should be:
* certain
* notorious (well-known in the area or market), and
* reasonable.
Must make sure that all three elements are present.
What is an exclusion clause?
A clause in a contract which seeks to restrict liability or a legal duty ie. restricting liability for death
What are the requirements for an exclusion clause under common law
- the clause is incorporated (integral part of the contract, signed etc and other party given notice)
- the terms are clear, and
- there is no reason in law that the term cannot be applied.
How does the Unfair Contract Terms Act 1977 interact with unfair terms?
UCTA applies when certain types of exemption clauses have no effect and other types of
exemption clauses are effective if they are reasonable.
Applies to business liability - course of a business
Under UCTA s 2(1) it is not possible to exclude
Not possible to exclude liability for death or personal injury. It is
possible to exclude liability for negligence which involves damage to property so long as the
exclusion clause is reasonable: s 2(2).
Section 3 of the Unfair Terms Act
Party cannot embed terms which do not pass the reasonableness pass (business dealings)
What are the four strands of protection which the Consumer Rights Act 2015 offers?
- makes certain exclusions of liability for negligence automatically ineffective
- makes certain unfair terms ineffective
- provides that contracts must be in clear and intelligible language, and
- implies terms that protect the consumer into all consumer contracts.
Common law test for exclusion clauses
Incorporation: The clause must be part of the contract, and the party must be aware of it. It can be incorporated through signature, notice, or course of dealing.
Construction: The clause must be clear and unequivocal. Ambiguity is interpreted against the party relying on it (contra proferentem rule).
Effectiveness: Exclusion clauses may be ineffective if influenced by misrepresentation, oral assurances, collateral contracts, or third-party interests.
Exclusion clauses in a business context must pass the
Reasonableness test in the Unfair Contract Terms Act 1977
Business to business contracts are covered by
Unfair Contract Terms Act 1977
Business to consumer contracts are governed by
The Consumer Rights Act
What must happen for a contract to be varied under common law?
A contract can be varied by mutual agreement (oral or written), but there must be a valid agreement and consideration for the variation to be effective.
What is the role of the Competition and Markets Authority (CMA) under the CRA?
The CMA enforces the CRA and can issue injunctions to stop the use of unfair or non-transparent terms in consumer contracts (s 69).
What are the requirements for core terms to be excluded from the fairness test under the CRA?
Core terms are excluded from the fairness test if they are transparent (expressed in clear, plain language) and prominent (brought to the consumer’s attention in a way they would be aware of).
What makes a term unfair under the CRA?
A term is unfair if, contrary to good faith, it causes a significant imbalance in the rights and obligations between the parties to the detriment of the consumer (CRA s 62(4)).
What are the four key protections offered by the Consumer Rights Act 2015 (CRA)?
- Exclusion of certain liability for negligence is ineffective.
- Certain unfair terms are ineffective.
- Contracts must be in clear and intelligible language.
- Implied terms protect the consumer in all consumer contracts.
