Chapter 3.1

Question 1

Express terms

Answer 1

Contractual terms which are specifically stated in contract documents

Question 2

Implied terms

Answer 2

Contractual terms that exist in legislation, or are common practise and therefore a given, but are not written within the contractual documentation, i.e. the law of the land - by default, a contract must comply with the laws of the land to be legally binding

Question 3

What is a contract term?

Answer 3

Any provision of a contract

Question 4

Do contract term and term of a contract mean the same thing

Answer 4

No

Question 5

How are express terms stated?

Answer 5

They are explicitly stated either orally or in writing and set out the definitive agreement between the parties

Question 6

Name 1 way terms can be implied into a contract

Answer 6

Custom and practise

Question 7

When will an express term not override an implied term

Answer 7

If the implied term is a legal requirement in the prevailing legislation

Question 8

Name a common way for terms to be implied into a contract

Answer 8

Through statute

Question 9

Should an agreement state whether implied terms can be overridden by express terms?

Answer 9

Yes

Question 10

Name 2 pieces of case law that relates to how an implied term might be permitted to be overridden by an express term

Answer 10

1. Rights of third parties: UK law contracts (Rights of Third Parties) Act 1999
2. Right to terminate a contract that as a result of a change becomes non-compliant with EU public procurement rules

Question 11

Rights of third parties: UK law contracts (Rights of Third Parties) Act 1999

Answer 11

UK law specifically states that people who would normally benefit under a contract can enforce the terms of that contract, even though they are not party to it. There is therefore an implied term that such rights exist. However, the act goes on to say that this ‘does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by a third party. This sentence means that the parties to the contract can expressly state that they do not intend the terms to be enforceable by third parties. if they do so the implied term is cancelled out

Question 12

Right to terminate a contract that as a result of a change becomes non-compliant with EU public procurement rules

Answer 12

Regulation 73 of the UK Public Contract regulations 2015 (enacting the EU Public Procurement Directive 2014) places a requirement on public bodies to include a right to terminate the contract in circumstances where modifications to it place it outside the parameters permitted by the regulations. The regulations go on to state that if such a right is not expressly stated in the contract, the power to terminate the contract on reasonable notice will be an implied term. There is nothing which permits the parties to agree otherwise

Question 13

What are expressed terms used to do

Answer 13

Set out as clearly as possible what that agreement is

Question 14

Name 6 things expressed terms should do

Answer 14

1. Set out the obligations of the purchaser
2. Set out the obligations of the supplier
3. Set out the rights of the purchaser if the supplier defaults
4. Set out the rights of the supplier if the purchaser defaults
5. State how the parties will deal with circumstances beyond the control of either party
6. Where possible, either confirm or override any potential implied terms

Question 15

What are schedules?

Answer 15

Attachments to a contract which provide more detail - often technical or operational - on the requirements and are structured in such a way as to enable them to be easily updated

Question 16

What does the use of schedules help to do

Answer 16

Clarify the difference between a ‘contract clause’ and a ‘contract term’

Question 17

What is a contract clause

Answer 17

The precise wording in the main document, which will have its own reference number

Question 18

What is a contract term

Answer 18

The totality of that part of the agreement and so it includes the clause wording an any schedule to which it refers

Question 19

Anything set out in a schedule to a contract is also considered to be an…

Answer 19

express term

Question 20

Name 3 issues when establishing what the express terms of a contract are

Answer 20

1. There may be no written contract
2. The written contract may be based on oral negotiations
3. The purchaser may not be aware of the conditions of a written contract at the point of contract

Question 21

What would the legal position be if there was no written contract and all negotiations and agreements were conducted orally?

Answer 21

It depends on the facts of the case, but it can be held that express statements were not intended to be contractual warranties.

Question 22

What piece of case law relates to if there was no written contract and all negotiations and agreements were conducted orally

Answer 22

Oscar Chess Ltd v Williams 1957

Question 23

Oscar Chess Ltd v Williams 1957

Answer 23

A man selling a car to a garage said it was a 1948 Morris when in fact it was a 1939 Morris, and he got a better price as a result. It was held that the statement of the car’s age was not an express term of the contract.
This case could also be considered in light of the rules on misrepresentation outlined in section 1.2. The decision may have hinged on the fact that the seller did not know that the log book had been changed by a previous owner, and that the garage buying the car would be more expert than the seller in estimating its age

Question 24

What would the legal position be if there was a written contract based on oral negotiations

Answer 24

The longstanding view is that the written word supersedes anything said prior to it. The contract means exactly what it says, which is what the court interprets it to say, regardless of what the parties might have intended. However it is now possible to argue that ‘the contract’ is a contract partly in writing and partly oral; or that there are two contracts - one oral and one written. In both scenarios the argument would be that the oral part of the contract can supersede the written part.

Question 25

What piece of case law relates to if there was a written contract based on oral negotiations

Answer 25

J Evans and Son (Portsmouth) v Andrea Mezario (1976)

Question 26

J Evans and Son (Portsmouth) v Andrea Mezario (1976)

Answer 26

Evans and son was an engineering firm that regularly imported machinery from mainland Europe. It employed Mezario as forwarding agents. mezario changed its shipping methods to use containers (which were then relatively new). the matter was discussed and Evans agreed, subject to an assurance that its goods would be carried below decks.
A number of transactions occurred on Mezario’s standard terms and conditions which included permission for the goods to be carried above deck. most containers are above deck. the dispute arose when a container containing goods being imported by Evans was lost overboard.
The Court of Appeal held that Evans could recover damages because of the verbal assurance, despite the written conditions that had been used since that assurance was given

Question 27

Forwarding agents

Answer 27

Specialists in organising the transportation of goods for others

Question 28

What would the legal position be if there was a written contract where the purchaser may not be aware of the conditions at the point of contract

Answer 28

A purchaser can have actually agreed to conditions they do not know about. The most common application of this is bus or train tickets, which refer to terms and conditions published elsewhere (in a timetable on the companies website). because most of the terms and conditions are held not to be unusual, it has become accepted that they can be enforced.
However if the conditions are unusual then effort must be made to bring them to the attention of the purchaser

Question 29

What 2 pieces of case law relates to if there was a written contract where the purchaser may not be aware of the conditions at the point of contract

Answer 29

1. Thornton v Shoe Lane Parking 1970
2. Interfoto Picture Library v Stiletto Visual Programmes Ltd 1989

Question 30

Thornton v Shoe Lane Parking 1970

Answer 30

A ticket produced by an automatic entry barrier to a car park referred to conditions posted inside the car park. Clearly the users of the car park could not read the conditions until they had entered and parked and were therefore already subject to them. The condition excluded liability for damage to cars (which is quite usual) but unusually also purported to exclude injury to drivers. It was held that the term could not be enforced

Question 31

Interfoto Picture Library v Stiletto Visual Programmes Ltd 1989

Answer 31

The library lent 47 photographic transparencies to Stilleto Visual on its usual terms which were free for 14 days and £5 per photo per day thereafter. After a month a bill was sent for £3,783.50. The late fee was held to be an unusual condition which had not been properly communicated. As late fees, in general, are not unusual it is assumed that it was the large amount of charge that caused it to be considered unusual in this case

Question 32

Do oral contracts also include express terms?

Answer 32

Yes

Question 33

Standard terms and conditions

Answer 33

Basic terms and conditions of business governing transactions that do not have a definitive contract, usually designed to be included in form documents such as orders

Question 34

What are standard terms of business also known as

Answer 34

Standard terms and conditions

Question 35

Which two sets of standard terms are organisations likely to have

Answer 35

1. One for when they are acting as a purchaser
2. One for when they are acting as a supplier

Question 36

What do standard terms aim to be

Answer 36

A very short form of contractual agreement, normally printed on no more than one or two pages

Question 37

What do standard terms try to cover?

Answer 37

All eventualities for any type of goods or services that the organisation would normally purchase (or supply)

Question 38

What are standard terms often written with the aim of

Answer 38

Them being attached to order forms and/or delivery notes

Question 39

What are standard terms generally used for

Answer 39

Repetitive transactions (usually low value and low risk)

Question 40

What should have a specific contract rather than relying on standard terms

Answer 40

Any purchase that is subject to the rigours of a full tender exercise with a precise specification and the potential for negotiating variations

Question 41

Name 3 advantages of using standard terms

Answer 41

1. Time saved in negotiating individually with many purchasers
2. Reduced administration costs - not having to produce a new contract for every interaction
3. Consistency of approach - all transactions on the same terms; staff understand risks and act accordingly; both parties understand ‘the deal’

Question 42

Name 4 disadvantages of standard terms

Answer 42

1. Risk that they do not get effectively incorporated into the contract - legal uncertainty and potential ‘battle of the forms’
2. Do not allow for contract-specific risks
3. Can become out of date
4. Can create conflicts if attached to purchase orders that are also used as call off orders under term contracts

Question 43

Ineffective contract term

Answer 43

A term in a contract which cannot be legally enforced

Question 44

Name 4 examples of ineffective contract terms

Answer 44

1. Exclusion of liability for negligence
2. Unusual and unexpected conditions that would not normally apply and to which the other party’s attention was not specifically drawn
3. Exclusion of liability for death of an individual
4. Lack of a warranty of fitness for purpose of the goods

Question 45

Name 16 key areas that should be covered in standard terms

Answer 45

1. Definitions
2. Express term to override other standard terms
3. Express term to state that in specific framework or term contracts signed by the parties, the express terms take precedence over standard terms
4. Formation of the contract
5. Order of precedence
6. Price
7. Invoicing and payment
8. Specification
9. Obligation to comply with the law
10. Delivery and risk
11. Warranties and liability
12. Intellectual property and similar rights
13. Termination
14. Confidentiality and use of data
15. Ethics and environmental, social and governance
16. Law and jurisdiction

Question 46

Time is of the essence

Answer 46

An express condition of a contract used to underline the importance of timely delivery. It is an explicit statement of when goods or services must be delivered. Time is of the essence if failure to supply in accordance with the contract terms has a significant impact on the purchasers ability to perform its normal functions. Time is not of the essence if the late delivery has limited or no impact

Question 47

Defects

Answer 47

Any aspects of delivery that do not match the specification

Question 48

Name 8 of the key features of standard terms

Answer 48

1. form - concise & generic
2. Non-negotiable - unilaterally created by either purchaser or supplier
3. Ineffective terms - may be replaced by implied terms
4. Advantages - basic contractual protection for most common circumstances
5. User friendly - tend to be made to fit on forms by reducing text size almost to ineligibility
6. Usage - low value, low risk, repetitive transactions
7. Coverage - everything included
8. Disadvantages - risk of creating battle of the forms

Question 49

Precedent

Answer 49

A court judgement which is binding on future legal decisions

Question 50

Legal certainty

Answer 50

The ability to predict how a court will decide a matter of dispute

Question 51

Legalese

Answer 51

Complex legal language

Question 52

What does the ability to draft purchase and supply contracts require

Answer 52

Knowledge of the purchase or supply category and the norms of trading behaviour in that category

Question 53

What is a common complaint of contracts

Answer 53

Obscure language that is used in them

Question 54

Name the 4 steps where in common law jurisdictions certain phrases and expressions come to have a specific defined meaning in the context of a contract. How does this work (4)

Answer 54

1. A dispute will go to court
2. In the course of settling the dispute the judges will explain how they have made their decision. Anything said as part of this judgement can become a fixed precedent, depending on the hierarchical level of the court concerned
3. The judges may also add other remarks. These are never binding, but they can be persuasive when future cases are considered
4. Both the ratio and obiter are linked to the very precise wording in the case at hand, so if people drafting future contracts want to rely on that judgement, they tend to use the same wording

Question 55

What concept means disputes can be avoided?

Answer 55

Legal certainty

Question 56

What is the main benefit of legal certainty

Answer 56

It stops arguments going too far which saves everyone time, money and administrative resource

Question 57

Model form contracts

Answer 57

Standardised contracts used within certain industries to create stable and consistent contracts which are affordable and broadly equitable. Examples include NEC4, JCT & FIDIC

Question 58

What level do ethical considerations of a contract tend to be dealt with at?

Answer 58

Supplier management level rather than contract management level

Question 59

What does a model form contract set out?

Answer 59

Core wording to cover all of the normal scenarios and problems in the context for which it is developed

Question 60

Name 3 principles that apply across all model form contract standard forms

Answer 60

1. Contract-specific details: parties to the contract, contract subject matter, dates etc
2. Standard common clauses, covering all key items formulated in a way that is most applicable to the type of purchase normally expected under the relevant form
3. Schedules to cover pricing, specification and any other contract-specific detail

Question 61

Name 7 model forms of contract

Answer 61

1. NEC
2. JCT
3. AS
4. FIDIC
5. IMechE/IET
6. CIPS
7. ITC

Question 62

NEC

Answer 62

New Engineering contract

Question 63

JCT

Answer 63

Joint Contracts Tribunal

Question 64

AS

Answer 64

Australian Standards contracts

Question 65

FIDIC

Answer 65

International federation of Consulting Engineers

Question 66

IMechE/IET

Answer 66

Institution of Mechanical Engineers/Institution of Engineering and Technology

Question 67

CIPS

Answer 67

Chartered Institute of Procurement and Supply

Question 68

ITC

Answer 68

International Trade Centre

Question 69

Name 3 reasons why when searching for model forms of contract, the results may show a heavy bias to the construction sector

Answer 69

1. It is a sector that has long had professional institutions which have traditionally taken the lead in developing model forms in the interests of protecting their members
2. It is a sector known to have a wide scope for contractual dispute and legal action, which can be avoided if good contracts are in place
3. The nature of the procurement is such that the basic contractual requirements are relatively easily reduced to a common formula

Question 70

Traditionally who would model forms of contract be developed by?

Answer 70

Professional institutions with the stated aim of producing a contract which protects the interest of its members

Question 71

Name 3 ways improvements in model form contracts may come about

Answer 71

1. Changes in national or international law
2. A number of legal disputes have highlighted a particular ambiguity or weakness in the contract
3. Technological change in the sector creates new problems, risks or opportunities that need to be catered for within the contract

Question 72

What must you do with a model form contract

Answer 72

It is only a model/template. Every clause should still be reviewed to ensure that it is applicable in the precise circumstance in which the contract is being used

Question 73

Name 4 things an accompanying guidance note (model form contracts) should highlight

Answer 73

1. Blank spaces on the model form which need to be filled in
2. Optional clauses that may only apply in certain circumstances and should be deleted in others
3. Options with a default position
4. Schedules to be completed or attached

Question 74

What does any change to a model contract risk?

Answer 74

That the internal logic of the contract gets broken

Question 75

What should you be careful to do when amending standard forms

Answer 75

To ensure that all cross-references have been appropriately amended

Question 76

Name 10 key steps in using model forms of contract

Answer 76

1. Identify or develop appropriate models for organisations common purchases
2. Identify or develop appropriate guidance for the use of the models, including any standard amendments
3. Review the model and intended use with legal advisors
4. Train procurement staff in the use of the model
5. Select the appropriate model for the specific procurement exercise
6. Review guidance for using contract and confirm it is indeed appropriate
7. Complete blanks, options and schedules with contract-specific info
8. Embed draft contract in the tender/negotiation process in the normal way; agree terms with the supplier
9. Manage the contract in the normal way
10. Continuously review case law which might affect how the model template is being interpreted in legal disputes and how your use of it may be impacted

Question 77

Name 7 advantages of using model forms of contract

Answer 77

1. Saves time and resource drafting bespoke contracts
2. Both suppliers and purchasers familiar and comfortable with main terms
3. Specific to sector or purchase type
4. A measure of legal certainty on court’s response to disputes
5. Consistent structure
6. Lower costs to produce and approve
7. Easier to resolve disputes

Question 78

Name 4 disadvantages of using model forms of contract

Answer 78

1. Poorly trained staff may use templates incorrectly or choose inappropriate model
2. Amendments to published templates can create ambiguity
3. May become out of date if not review regularly
4. May be biased, depending on ownership of the model