6. Determining the Terms of the Contract

Question 1

What are the two types of contract terms?

Answer 1

Conditions and warranties

Question 2

What is the difference between a term and a representation?

Answer 2

A term is intended by the parties to form part of the contract.

A representation is made merely to induce a party to enter into the contract.

• note that for the purposes of classifying term, reliance is irrelevant. Objective test.

Question 3

How will the court likely classify an oral statement which was not included in a written contract, and why?

Answer 3

As a representation, because if the parties thought it was important enough to be a condition, they should have put it in the written contract.

• parol evidence rule - rebuttable presumption

Question 4

What conditions must be met for the non est factum rule to find that a party is not bound by the term(s) in a signed contract?

Answer 4

1) not the fault of the claimant - did not understand what document they were signing;
2) Radical or very substantial difference between what the person signed and what they believed they wre signing.

Very restrictive approach

Question 5

What are the three factors a court will take into account when determining whether a statement is a term or a representation?

Answer 5

1. Importance of the statement
2. Stage of negotiations at which the statement was made
3. Whether the party making the statement had any specialist skill

Question 6

In what contracts is the UCTA not relevant?

Answer 6

in freely negotiated contracts between parties (cf. standard-term contracts)

• only exception is that UCTA will still apply as it relates to excluding liability for death/personal injury.

Question 7

What is the question to ask when considering whether a statement is a term versus a representation?

Answer 7

If the other party would not have entered into the contract but for the statement, it is likely to be deemed important, and therefore a term.

Key factors
* timing of statement
* special knowledge or skill
* reduction of contract into writing (i.e. does oral statement not appear in written form?)
* assumption of responsibility/further checks

Question 8

What is the question to ask when considering specialist skill?

Answer 8

Did the seller make a factual statement that should be within the scope of their knowledge, intending that the other party would act on the statement.

• Oscar Chess Ltd v Williams - statement about car’s age was a represention as expertise lay in the hands of purchaser rather than car seller.

Question 9

Why is the distinction between term and representation important?

Answer 9

If the statement turns out to be untrue, the available remedies depend on whether it was a term or representation.

• represenation = misrepresenation
• term = breach of contract

Question 10

What is the impact of a statement being deemed a term?

Answer 10

Any failure to comply will be a breach of contract, entitling the other party to damages

Question 11

Why is the distinction between condition and warranty important?

Answer 11

It determines the remedies which are available upon breach

Question 12

Along with condition and warranty, what is the third category of term, where it is unclear whether it is a condition or warranty?

Answer 12

Innominate term
* classification will depend on specific breach.

Question 13

What is a condition?

Answer 13

A term so fundamental that it goes to the root of the contract, and the contract does not work without it

Question 14

What is another name for a breach of condition?

Answer 14

Repudiatory breach

Question 15

What options are available to the other party upon a breach of condition?

Answer 15

They can terminate the contract and sue for damages

Question 16

What is the effect of the other party affirming a contract after breach of condition?

Answer 16

They lose the right to terminate, but can still sue for damages

Question 17

What is a warranty?

Answer 17

A term that is incidental/collateral to the main terms of the contract.

*unlike breach of condition does not give rise to right to terminate.

Question 18

With innominate terms, how does the court determine what remedy should be available?

Answer 18

By looking at the effect of the breach

Question 19

In what instance will the court deem an innominate term to be a condition?

Answer 19

Where the other party loses substantially the whole of the benefit of the contract due to the breach

Question 20

What is the effect of time being of the essence on whether a term is a condition or warranty?

Answer 20

Time of the essence: the term is a condition (late performance gives rise to right to terminate)
Time not of the essence: the term is a warranty

Question 21

When is time presumed to be of the essence?

Answer 21

In commercial contracts, where a delivery time has been agreed.

Question 22

What is required for a term to be incorporated by notice?

Answer 22

Relevant where document is not actually signed by party, but still taken to have contractual effect.

Require that:
1) notice be timely - communicated before or at the time of contracting.
2) reasonable steps are taken to bring other party’s attention to the term (red hand rule)
3) document must be one that is normally taken to have contractual effect.

Question 23

What is the parol evidence rule?

Answer 23

When a contract is in writing, there is a general presumption that external evidence cannot vary the terms of the written contract

Question 24

What are three exceptions to the parol evidence rule?

Answer 24

1. Implied terms
2. If there is a secondary (collateral) contract
3. Where the court finds that the contract was always partly written and partly oral

Question 25

What is an entire agreement clause?

Answer 25

A term in written contracts which provides that the written document constitutes the entire agreement between the parties.
* avoids any oral terms or representations from forming part of finally agreed contract.

Question 26

What is the impact of a seller not having title?

Answer 26

There is no consideration, and therefore no valid contract.

Question 27

What are terms are implied by the SGA?

Answer 27

Goods sold should:

S.13 - match any description given by the seller
S.14(2) - be of satisfactory quality (if seller is a business), and
S.14(3) - be fit for any particular purpose made known to the seller by the buyer (if seller is a business)
s.15 - if sold by sample, bulk should correspond to sample in quality.
s.12 - implies term as to title; seller has the right to sell the goods.

Question 28

What does satisfactory quality mean?

Answer 28

1. Fit for the purpose for which such goods are generally used
2. Free from minor defects
3. Safe and durable

Question 29

What defects are excluded when considering satisfactory quality?

Answer 29

1. Defects brought to the buyer’s attention
2. Defects that would have been obvious to the buyer had they inspected the goods prior to sale

Question 30

Are terms implied under SGA conditions or warranties and what is the importance of this?

Answer 30

Conditions

If breached, the buyer can terminate the contract, reject the goods, and refuse to pay, but must return the goods

Question 31

When is a breach of terms implied under the SGA a breach of warranty?

Answer 31

When the breach is so slight that it would be unreasonable for the buyer to reject the goods

Question 32

What does the Unfair Contract Terms Act 1977 provide regarding SGA implied terms?

Answer 32

1. UCTA prevents a seller from excluding the implied term as to title
2. Exclusion of liability for all other implied terms will be valid only if reasonable.

Question 33

What are some terms implied by the Supply of Goods and Services Act 1982?

Answer 33

1. Supplier will carry out service with reasonable care and skill
2. Supplier will carry out service within reasonable time (if no time is agreed)
3. Supplier will carry out service for a reasonable price

Question 34

What terms are implied under SGSA for goods supplied incidental to the provision of services?

Answer 34

The same terms which are implied under SGA

Question 35

What is the scope of the Consumer Rights Act 2015?

Answer 35

Supply of goods/services in a consumer context, i.e. between trader and consumer

Question 36

What is a big difference between CRA and SGA/SGSA?

Answer 36

Under CRA, liability for breach of implied terms cannot be excluded at all

Question 37

What are four terms implied by the CRA into contracts for services?

Answer 37

1. Carried out with reasonable care and skill
2. Completed in accordance with information relied upon by the consumer (e.g. price)
3. Completed for a reasonable price
4. Completed within a reasonable time

Question 38

Although the courts are reluctant to interfere with the presumed intentions of the parties generally, other than in the statutory contexts, when are they prepared to imply terms into contracts?

Answer 38

To give business efficacy to the contract, i.e. make it work in a way which reflects the parties’ intentions and expectations.

• necessary as without this implied term,t he arrangement would be so unworkable that sensible people could not be supposed to have entered into it.

Question 39

What is the officious bystander test in the context of a court implying terms into a contract?

Answer 39

They will only do so if the term to be implied is so obvious to a reasonable person that it goes without saying

Question 40

What is required for the courts to imply a term through course of dealings between the parties?

Answer 40

The parties have contracted on the same terms on several occasions, enough to show a regular and consistent course of dealings.
* require consistent incorporation.

Question 41

What is one term the statutes will help resolve if it is not dealt with in the contract?

Answer 41

If no price has been agreed and none can be determined from the dealings between the parties, the buyer must pay a reasonable price

Question 42

What are the three implied terms for contracts of goods under the CRA?

Answer 42

• goods should be of satsifactory quality (s.9)
• fit for purpose (s.10)
• goods sold should match their description (s.11)

Question 43

What are the three implied terms for contracts for digital content under the CRA?

Answer 43

• should be of satsifactory quality (s.34)
• reasonably fit for purpose (s.35)
• match any description of it given by the trader to the consumer (s.36)

‘reasonableness’ - assessed objectively taking into ccount description, price, and any relevant circumstances (ie. public adverts by trader).

Question 44

What are the three implied terms for contracts for services under the CRA?

Answer 44

• service is performed with reasonable care and skill (s.49)
• where no price is agreed, a reasonable price is to be paid.
• where no time is fixed, service is performed in a reasonable time (s.52)

Question 45

In addition to the three implied terms for service contracts in the B2C context, what is an additional way a term may be implied via s.50(1)?

Answer 45

anything said or written to a consumer by a trader, or on their behalf, about the trader or the service is to be included as a term of the contract where it is taken into account by the consumer when:
- deciding to enter into contract
- making any decision about the service after entering into the contract.

Question 46

What are the three forms of remedies available for breaches of any of the three implied terms for contracts of goods under the CRA?

Answer 46

• short term right to reject
• right to repair and replacement
• right to price reduction or the final right to reject

Question 47

How long does a consumer have to exercise its short term right to reject goods under the CRA?

Answer 47

30 days

timeclock starts either from the time (i) ownership has passed and (ii) goods have been delivered; and (iii) where the trader is required to install the goods to allow consumer to use it, after the consumer is notified this has been completed.

Question 48

In order to obtain a price reduction or final rejection of the goods, what initial steps must be exercised before either remedy becomes available?

Answer 48

• after one repair/replacement, the goods do not conform to the contract;
• where right to repair/replacement cannot be exercised (because it would disproportionate/impossible);
• consumer has required trader to repaid goods, but trader failed to do so within reasonable time and w/out significant inconvenience to consumer.

Question 49

In what instance will the right to repair or replace a good under the CRA be unavailable?

Answer 49

where repair or replacement would be impossible or disproportionate

Question 50

Within what timeframe must a consumer exercise their final right to reject goods under the CRA?

Answer 50

6 months
- qualifies for full refund, w/ no deduction for use (except for motor vehicles).

Question 51

What are the four forms of remedies available for breaches of any of the three implied terms for contracts of digital content under the CRA?

Answer 51

• right to repair/replace
• right to price reduction
• right to receive a refund within 14 days
• right to repair/compensation for any damage caused by the trader’s negligence to any ancillary device/other content.

Question 52

What are the two forms of remedies available for breaches of any of the three implied terms for contracts of services under the CRA?

Answer 52

• right to require repeat performance
• right to price reduction

Question 53

In what instance is the remedy of repeat performance unavailable under the CRA?

Answer 53

if completion in conformity with the contract is impossible.

Question 54

When will express term form part of the contract?

Answer 54

• Signed written contract (note exception)
• Incorporation by notice
• Incorportation by course of dealing

Question 55

When will an express term forming part of a signed written contract not be binding?

Answer 55

1) Person signs a document as a result of fraud or misrepresentation
2) Non est factum rule

Question 56

How might an express term be incoroprated by notice?

Answer 56

Where one party gives reasonable notice to the other party as to it.
* what is reasonable depends on surrouding facts.
* Timing is crucial - notice must be given eitherbefore or at time of contracting.
* document in which term is contained must be intended to have contractual effect (albeit not actually a contract, i.e. receipt would not satisfy this condition).
* more adverse to a party, the more must be done to bring it to the other party’s attention.

Note - position is different where the onerous term is contained in signed contract, in this case, the party would be bound.

Question 57

How can terms be implied into to a contract?

Answer 57

• in law - at common law (ie. landlord/tenant relationship) or by statute (SGA/SGSA)
• In fact - trade and customs or business efficacy or course of dealing between parties.

Question 58

What exception does s.15A of the SGA set out in relation to remedies for breach of condition?

Answer 58

Where the breach of condition is so slight so as to be unreasobable for the buyer to reject the goods and repudiate the contract, the breach should be treated as a breach of warranty
* buyer would only be entitled to damages.
* burden to prove this is on the seller

Question 59

Can you contract out of the SGA’s provision?

Answer 59

Yes, subject to the UCTA’s requirement that such limitation/exclusion clause be ‘reasonable’

• not possible for s.12 - implied term as to seller’s title to sell goods.