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EW SQE1 - Contract > 6. Determining the Terms of the Contract > Flashcards

6. Determining the Terms of the Contract Flashcards

1
Q

What are the two types of contract terms?

A

Conditions and warranties

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2
Q

Can contract terms be express and implied?

A

Yes

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3
Q

What is the difference between a term and a representation?

A

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.

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4
Q

How is it determined whether a statement is a term or a representation?

A

Based on the intentions of the parties, viewed objectively through their conduct from the perspective of a reasonable person

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5
Q

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

A

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

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6
Q

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

A
  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
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7
Q

What is the question to ask when considering whether a statement is important?

A

If the other party wouldn’t have entered into the contract but for the statement, it is likely to be deemed important, and therefore a term

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8
Q

What is the question to ask when considering specialist skill?

A

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

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9
Q

Why is the distinction between term and representation important?

A

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

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10
Q

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

A

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

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11
Q

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

A

If it is untrue and it has not been incorporated into the contract, the remedy will depend on whether the misrepresentation was made innocently, negligently, or fraudulently

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12
Q

Why is the distinction between condition and warranty important?

A

It determines the remedies which are available upon breach

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13
Q

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

A

Innominate term

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14
Q

What will the courts give more weight to: the term’s label or its effect on the operation of the contract?

A

The term’s effect on the operation of the contract

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15
Q

What is a condition?

A

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

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16
Q

What is another name for a breach of condition?

A

Repudiatory breach

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17
Q

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

A

They can terminate the contract and sue for damages

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18
Q

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

A

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

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19
Q

What is a warranty?

A

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

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20
Q

Can the other party terminate the contract for breach of warranty?

A

No

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21
Q

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

A

By looking at the effect of the breach

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22
Q

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

A

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

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23
Q

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

A

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

24
Q

When is time presumed to be of the essence?

A

In commercial contracts, where a delivery time has been agreed

25
Q

Regarding notice, what is required for a term to form part of a contract?

A

The parties must have reasonable notice of it

26
Q

What is the parol evidence rule?

A

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

27
Q

What are three exceptions to the parol evidence rule?

A
  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
28
Q

What is an entire agreement clause?

A

A term in written contracts which provides that the written document constitutes the entire agreement between the parties

29
Q

What is one instance in which the courts are unwilling to uphold an entire agreement clause?

A

Where it is being used by a party to avoid liability for misrepresentation

30
Q

What is the binding effect of an implied term?

A

Same as if it had been expressly agreed between the parties

31
Q

What are four ways through which terms are implied?

A
  1. Statute
  2. Courts
  3. Custom and usage, or
  4. A course of dealing between the parties
32
Q

What are the three main sources of law through which contract terms are implied?

A
  1. Sale of Goods Act 1979
  2. Consumer Rights Act 2015, and
  3. Supply of Goods and Services Act 1982
33
Q

What is an important term implied by the SGA?

A

That the seller has legal right to sell the goods

34
Q

What is the impact of a seller not having title?

A

There is no consideration, and therefore no valid contract

35
Q

What are other terms implied by the SGA?

A

Goods sold should:

  1. match any description given by the seller
  2. be of satisfactory quality (if seller is a business), and
  3. be fit for any particular purpose made known to the seller by the buyer (if seller is a business)
36
Q

What does satisfactory quality mean?

A
  1. Fit for the purpose for which such goods are generally used
  2. Free from minor defects
  3. Safe and durable
37
Q

What defects are excluded when considering satisfactory quality?

A
  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
38
Q

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

A

Conditions, meaning that if they are breached, the buyer can terminate the contract, reject the goods, and refuse to pay, but must return the goods

39
Q

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

A

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

40
Q

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

A
  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
41
Q

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

A
  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)
42
Q

Are terms implied by the SGSA conditions, warranties, or innominate terms?

A

Innominate terms

43
Q

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

A

The same terms which are implied under SGA

44
Q

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

A

Same as for SGA

45
Q

What is the scope of the Consumer Rights Act 2015?

A

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

46
Q

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

A

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

47
Q

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

A
  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
48
Q

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?

A

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

49
Q

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

A

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

50
Q

What kind of term are the courts unlikely to imply?

A

One that contradicts an express term

51
Q

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

A

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

52
Q

Whilst the courts will generally not get involved to make an incomplete or vague contract work, what is required of a contract before they would get involved?

A

Sufficient certainty

53
Q

What is one instance where the courts will not get involved with a contract?

A

Where the court is unable to conclude that the parties intended to be bound

54
Q

What are four instances in which the courts will get involved in a contract which is uncertain?

A
  1. Mechanism, e.g. a clause, between the parties to resolve uncertainties
  2. Commercial cases in which the parties are familiar with the trade
  3. Future performance over a period of time (parties can resolve uncertainty over time), and
  4. Where there has been partial performance, or one party has invested on the basis of the agreement
55
Q

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

A

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

56
Q

In deciding to sever an uncertain term, what is the test the courts will use?

A

Whether the term can be severed without affecting the substance of the bargain between the parties

57
Q

What is the effect of an uncertain term not being able to be severed?

A

The entire contract is void for uncertainty

EW SQE1 - Contract (11 decks)

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