Chapter 3

Question 1

What happens during the course of negotiations?

Answer 1

Many statements are made by the parties involved.

Question 2

What happens to these statements? Why?

Answer 2

Not all statements become terms of the contract. Some are mere ‘puffs’ or representations.

Question 3

A contract will consist of a ____. It depends on the ____.

Answer 3

Number of terms. Complexity of the contract.

Question 4

What are terms?

Answer 4

Terms set out the rights and obligations of the parties and also the remedies available in the event of a breach of contract.

Question 5

How are terms communicated?

Answer 5

Orally stated or written into a contract.

Question 6

What are terms? (2nd definition)

Answer 6

Terms are promises and undertakings given by each contracting party to the other before a contract is formed. It also states how contractual obligations are to be performed.

Question 7

What are the types of terms?

Answer 7

Express and implied terms.

Question 8

What are express terms?

Answer 8

Terms which are expressly communicated between the parties.

Question 9

What does ‘expressly communicated’ mean?

Answer 9

It has been discussed and agreed upon orally or in writing.

Question 10

What are implied terms?

Answer 10

Terms which are NOT expressly communicated but are still part of the contract.

Question 11

What are the ways that implied terms may be implied into the contract?

Answer 11

(1) By fact (2) By custom (3) By law

Question 12

What are implied terms by fact?

Answer 12

The courts have inserted implied terms into a contract for the purposes of business efficacy.

Question 13

What do implied terms for business efficacy mean?

Answer 13

These are terms which help businesses to operate effectively, even though the parties did not include these terms expressly.

Question 14

What is the rationale behind these implied terms by fact?

Answer 14

These implied terms are so obviously necessary that the parties must have intended such terms.

Question 15

What is another rationale that the courts have held that a term will be implied?

Answer 15

A term will also be implied if the parties would have included it themselves in the contract should they have addressed their minds to it.

Question 16

What are implied terms by custom?

Answer 16

It refers to customs and practices that are so well-known in a particular trade or industry that it does not have to be expressed.

Question 17

What are implied terms by law?

Answer 17

It refers to terms which are implied by law irrespective of the expressed intentions of the parties.

Question 18

Who implies terms by law and where are they implied?

Answer 18

The Parliament, in certain types of contracts.

Question 19

What is an example of an implied term by law?

Answer 19

Sale of Goods Act.

Question 20

Where does the Sale of Goods Act imply terms?

Answer 20

In every contract for the sale of goods.

Question 21

What is the first implied term of the Sale of Goods Act? (section no., condition, warranty)

Answer 21

Title- Section 12
Condition- There is an implied condition that the owner has the right to sell goods
Warranty- There is an implied warranty that the buyer will enjoy quiet possession of the goods

Question 22

What does this mean for the seller and buyer?

Answer 22

Seller- Sell goods while free from burden

Buyer- Possess goods without the interference of a third party

Question 23

What is the second implied term of the Sale of Goods Act? (section no., condition)

Answer 23

Description- Section 13
Condition- Where there is a sale of goods by description, there is an implied condition that the goods will match the description.

Question 24

What is the first requirement to rely on Section 13 of the Act?

Answer 24

Buyer must have entered into the contract in reliance upon the description.

Question 25

What is the second requirement to rely on Section 13 of the Act? If not, what happens?

Answer 25

If there is a defect, the buyer should not (1) have been notified of the defect (2) examined the goods, prior to entering the contract. If the buyer has been notified or examined the goods, Section 13 will not be applicable.

Question 26

What is the third implied term of the Sale of Goods Act? (section no., condition)

Answer 26

Quality- Section 14(2)
Condition- Where a seller sells goods in the course of business, there is an implied condition that the goods supplied are of satisfactory quality.

Question 27

What does ‘satisfactory quality’ mean? What does it take into account.

Answer 27

The goods should meet a standard that a reasonable person would regard satisfactory, taking into account the description, price and other relevant factors.

Question 28

When does Section 14(2) not apply?

Answer 28

(1) The defect on the goods had been brought to the attention of the buyer; or (2) The buyer had examined the goods prior to entering into the contract

Question 29

Why does Section 14(2) not apply in the following circumstances?

Answer 29

The buyer had been given the opportunity to examine and reject the good prior to entering into the contract.

Question 30

What is the fourth/last implied term of the Sale of Goods Act? (section no., condition)

Answer 30

Fitness for particular purpose- Section 14(3)
Condition- Where a seller sells goods in the course of business, and the buyer makes known to the seller any particular purpose for which the goods have been bought, there is an implied condition that the good will be reasonably fit for that particular purpose.

Question 31

What does ‘reasonably fit for that particular purpose’ mean?

Answer 31

The seller does not guarantee that the goods are fit for all purposes, but reasonably fit for that particular purpose.

Question 32

When does Section 14(2) not apply?

Answer 32

(1) Buyer does not rely on the seller (2) It is not reasonable for the buyer to rely on the skill and judgement of the seller.