Chapter 7: Terms Flashcards

Question

2.8 Assumption of responsibility/further checks

Answer 1

A statement may become a term of the contract where the vendor expressly accepts the responsibility for the soundness of the sale item in question.

Answer 2

Here, the claimant required a horse for stud purposes. He attempted to examine the defendant’s horse but was told that he need not look for anything and that the horse was sound in every way. The price was agreed and delivery of the horse took place three weeks later. The horse was not in fact fit for stud purposes and the judge directed the jury to consider two points: did the defendant, at the time of the sale, represent that the horse was fit for stud purposes? Did the purchaser act on that in purchasing the horse? Both questions were answered in the affirmative and consequently, the statement was deemed to be a term of the contract.

Answer 3

Another factor which may have been at work in was that the defendant, by the strength of his statement, actually dissuaded the plaintiff from making further checks himself with regard to the fitness of the horse for stud purposes. This can be contrasted with Ecay v Godfrey (1947) 80 Lloyd’s Rep 286, where the seller of a boat stated that it was sound but advised the buyer to have it surveyed. This advice showed that the seller did not intend that his statement should be taken as a term of the contract and that the onus of verification of the soundness of the boat lay with the purchaser.

Answer 4

* Statements made by the parties during negotiations can be divided into ‘mere puffs’, representations or terms of the contract. * If an untrue statement is a term of the contract then this may give rise to a claim for breach of contract. * A representation is likely to be a term if the parties intended the statement to be binding. To ascertain if this is the case, the court will consider. - The importance of the statement. - The timing of the statement. - The reduction of the contract into writing. - Special knowledge or skill of the person making the statement. - Assumption of responsibility by the person making the statement.

Answer 5

The process of ascertaining the express terms of a contract is, at heart, a search to ascertain what an objective observer would think that the parties intended to be bound by. The terms that the parties intend to be bound by (as it would appear to an objective observer) will be terms of the contract. This is the essence of a contract: agreement between the parties. However, how this ‘intention to be bound’ is demonstrated varies in different circumstances. We will now look at some of the possibilities.

Answer 6

Firstly, written terms might be set out in a signed written contract. In almost all such cases the signing of a contract shows that the parties intended to be bound by it. This is true even if a party signing has not read the terms or has not understood what they mean. A party can express an intention to be bound by something they have not read or understood (although it is not wise to do so!)

Answer 7

By way of exception, if the document signed was not intended to have any contractual effect (eg it was a document simply acknowledging receipt of goods) then the terms within it will not form part of the contract. This is because signing such a document does not indicate an intention to be bound by its terms, precisely because it was not intended that the document would have any contractual effect. In this regard, timing is also important: the document in Grogan was described by Auld LJ as a ‘post-contractual document’ making it much less likely it would have a contractual effect

Answer 8

In addition, a party may be prevented from relying on the incorporation of a clause through signature of a document if it has orally misrepresented the meaning of the clause to the other party

Answer 9

Terms can also be incorporated by notice ie by one party notifying the other party of them. In Parker v South Eastern Railway Co (1876-77) 2 CPD 416 it was established that terms will form part of the contract if reasonable steps have been taken to bring them to the claimant’s attention. This is logical, where reasonable steps have been taken to draw terms to a party’s attention, that party’s persistence with the transaction suggests an intention to be bound by the terms

Answer 10

Established that terms may be incorporated by reference to a different document (in this case the contractual document, a ticket, referred to terms contained within a railway timetable). Examples where insufficient notice was given include Henderson v Stevenson (1875) LR S SC & Div 470 where the clause was not referred to on the front of the ticket and Sugar v London, Midland & Scottish Railway [1941] 1 All ER 241 where the clause was illegible.

Answer 11

Where a party wants to incorporate terms that are particularly adverse to the other party, it must bring these to the other party’s attention. stated that where a clause was particularly onerous it would need to be ‘printed in red ink, with a red hand pointing to it, or something equally startling’ to give sufficient notice. This principle was confirmed in the case of Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] 1 QB 433

Answer 12

The above discussion relates to the incorporation of onerous terms through reasonable notice. Note that when a document containing contractual terms is signed the signing party is bound by those terms, even if the offending clause is onerous (L’Estrange v Graucob Ltd).

Answer 13

For a clause to be incorporated into the contract, reasonable notice of it must be given before or at the time of contracting. It follows that any clause will not amount to a binding term if it is communicated only after the contract is made.

Answer 14

* The claimant drove his car to a multi storey automatic car park that he had never used before. At the entrance was a sign giving the charges for the car park. * The claimant drove up to the entrance. The movement of the car turned a light at the entrance from red to green, and a ticket machine produced a ticket that stated that the ticket was issued ‘subject to the conditions of issue as displayed on the premises’. * The claimant drove into the car park without reading the words on the ticket or those displayed on a pillar opposite the ticket machine. * The claimant parked his car and went about his business. * When the claimant returned to the car park, he attended the office in the car park, and paid the necessary charges. * The claimant then returned to his car and was severely injured whilst attempting to put his belongings into his car.

Answer 15

No customer in a thousand ever read the conditions. If he had stopped to do so, he would have missed the train or the boat. None of those cases has any application to a ticket which is issued by an automatic machine. The customer pays his money and gets a ticket. He cannot refuse it He cannot get his money back. He may protest to the machine, even swear at it. But it will remain unmoved. He is committed beyond recall. He was committed at the very moment when he put his money into the machine. The customer is bound by those terms as long as they are sufficiently brought to his notice before-hand, but not otherwise. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late. The contract has already been made.

Answer 16

Finally, terms will only be incorporated by notice if the document giving notice was intended to have a ‘contractual effect’ (there is an analogy here with the law about signed documents outlined above).

Answer 17

The claimant hired a deck chair. Having paid for the hire, he was given a ‘ticket’. On the back of the ticket, there were additional terms and conditions. These were held not to be binding because the ticket was not intended to have a contractual effect –an observer would have understood it to be only a receipt

Answer 18

Where a clause has been brought to the notice of the other party during previous dealings, it may be implied into the current transaction to give effect to the presumed intentions of the parties, even though it has on this particular occasion been omitted. In order for this rule to operate, it must be shown that the course of dealing has been consistent over a period of time.

Answer 19

An attempt to incorporate by a course of dealing was unsuccessful because the written terms relied upon had not been consistently incorporated in the past – sometimes a signature in relation to those terms had been required, sometimes it had not

Answer 20

As well as being consistent, a course of dealing must also have been regular. Incorporation by a course of dealing will not be established if the parties have contracted with each other on only a few occasions over a number of years. In Hollier v Rambler Motors (AMC) Ltd [1972] 2 QB 71 three or four transactions over a period of five years was held to be insufficiently regular to establish a course of dealing

Answer 21

Contrast this with Henry Kendall & Sons v William Lillico& Sons Ltd [1969] 2 AC 31 and Petrotrade Inc v Texaco Ltd [1999] 12 WLUK 745 where three or four times per month and five instances over 13 months respectively appeared sufficiently regular.

Answer 22

However, the terms of a contract can be arrived at in many other ways provided that the parties adequately express an intention to be bound by those terms. Obvious and common examples include the agreement of terms in a conversation or verbal exchange (such terms often being quite simple), or terms being set out in writing (for example in an email) and the other party agreeing to those (for example, by agreeing in reply by email).

Answer 23

Such ‘exemption clauses’ are often ‘onerous’ in the sense that they can leave one party with a dramatically reduced remedy than would otherwise be the case, in the event of breach. Much of the case law about incorporation and about giving ‘reasonable notice’ of clauses was created in the context of exemption clauses.

Answer 24

We have already explored the challenges of: (a) Distinguishing representations from terms of the contract. (b) Identifying whether there are binding oral terms alongside the written terms These challenges can cause uncertainty and confusion for the parties to the contract. The parties might seek to reduce this uncertainty and confusion by including in a written contract an ‘entire agreement’ clause. In its simplest form, such a clause provides that a particular document or set of documents constitutes the entire agreement between the parties

Answer 25

The parties agree that this agreement constitutes the entire agreement between them and supersedes any previous understandings and/or arrangements between them, whether oral or written. The courts will uphold such clauses where they are indeed an attempt to avoid any misunderstanding about the scope of the parties’ agreement. Such a clause might therefore be effective in avoiding confusion about whether any oral terms or preceding written statements form part of the contract.

Answer 26

* The terms that a party intends to be bound by will be the terms of the contract. How the ‘intention to be bound’ is demonstrated varies in different circumstances. * Signing a written contract almost always shows an intention to be bound. * Terms can be incorporated by notice, but ‘reasonable steps’ need to be taken to bring those terms to a party’s attention, and notice of the terms must be given before or at the time of contracting. * Terms can be incorporated by a regular and consistent course of dealing. * Terms can be agreed in many other ways, such as by a conversation or an exchange of emails. * An ‘entire agreement’ clause in a written agreement helps rule out the possibility of there being representations or terms agreed orally which form part of a contract.

Answer 27

4.1 Introduction: There is a general presumption that the parties have expressed, orally or in writing, every material term which they intend should govern their contract. But there are circumstances where terms which have not been expressed by the parties are inferred by the courts. An implied term is binding to the same extent as an express term. A term may be implied in a contract based on fact or law. A term is implied in fact to give effect to the presumed but unexpressed intentions of the parties. A term is implied in law because the courts or statute require this, regardless of the intention of the parties.

Answer 28

In order to discover the unexpressed intention of the parties, the courts may take notice of trade customs and the need to give ‘business efficacy’ to a contract. It must be emphasised that, where the parties have made an unambiguous express provision in their contract, the court will not imply a term to the contrary.

Answer 29

Where a term is implied on the grounds of a custom, the implication is based on the assumption that it was the intention of the parties to be bound by well-known customs of a particular trade (British Crane Hire v Ipswich Plant [1975] QB 303).

Answer 30

A term may be implied into an agreement on the basis that the parties have dealt with each other on many occasions over a long period of time. A term will only be implied in these circumstances where the dealings of the parties have followed a consistent and regular pattern

Answer 31

A term may be implied to give ‘business efficacy’ to a contract – ie to make the contract produce its intended objective (The Moorcock (1889) 14 PD 64). A term will not be implied merely because such an implication will transform the agreement into a business-like arrangement. A term will only be implied on this ground if, without the implied term, the arrangement would be so unworkable that sensible people could not be supposed to have entered into it. Something so obvious that if suggested to the parties, they would respond. ‘Oh, of course’.

Answer 32

Terms can also be implied by the courts at common law to give effect to legal duties which arise, as a matter of policy, out of certain common types of contractual relationships, for example in the context of a landlord and tenant relationship

Answer 33

Certain statutes indicate that stipulated terms will be implied into contracts. Statutory implied terms will also operate irrespective of the intention of the parties, unless there is a valid exemption clause. Examples of statutory implied terms are to be found, most notably, in the Sale of Goods Act 1979, the Consumer Rights Act 2015 and the Supply of Goods and Services Act 1982 (as amended).

Answer 34

These acts provide for the implication of certain very important obligations on the seller in contracts for the sale of goods and the supplier in contracts for the supply of goods and services. The detail of these acts is not considered in this section.

Answer 35

The Sale of Goods Act 1979 (as amended by the Sale and Supply of Goods Act 1994) (SGA) is probably the most important piece of legislation in relation to the sale of goods generally. This section addresses the most important implied terms originating from that legislation, but its scope is considerably broader than the matters addressed in this section.

Answer 36

Implied terms set out in this section do not apply to consumer contracts as defined in the Consumer Rights Act 2015. That Act implies many similar terms in consumer contracts, but the provisions are not precisely the same, and accordingly, the two situations must not be confused.

Answer 37

* Terms can be implied on the basis of fact or law. * Terms can be implied in fact on the basis of a custom or on the basis of a course of dealing between the parties. * Terms can also be implied in fact to give ‘business efficacy’ to a contract. * Terms can be implied at common law, as a matter of policy, in certain types of relationships. * Terms can be implied at law as a result of statutes which indicate that they will be implied, such as the Sale of Goods Act 1979, the Supply of Goods and Services Act 1982 and the Consumer Rights Act 2015.

Answer 38

Section 12 provides for the implication that the seller has the right to sell the goods. The term implied by ss 12(1) is categorised as a condition of the contract. The distinction between conditions and warranties and the relevance of that distinction are not detailed in this section.

Answer 39

Section 13(1) provides: Where there is a contract for the sale of goods by description, there is an implied term that the goods will correspond with the description. Where goods are described as having certain characteristics and specifications then they must correspond with that description. The term implied by ss 13(1) is categorised as a condition under s 13(1A).

Answer 40

Section 14(2) of the Sale of Goods Act 1979 (as amended) provides: Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality

Answer 41

They meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances

Answer 42

(a) Fitness for all the purposes for which goods of the kind in question are commonly supplied; (b) Appearance and finish; (c) Freedom from minor defects; (d) Safety; and (e) Durability.

Answer 43

If goods have a self-evident purpose, eg a hot-water bottle, this self-evident purpose will clearly be covered by s 14(2B)(a) as a purpose for which the ‘goods of the kind in question are commonly supplied’.

Answer 44

The exceptions to the implied term as to satisfactory quality are to be found in s 14(2C)(a) and (b). Thus, there is no condition as regards defects specifically drawn to the buyer’s attention before the contract was made, or, if the buyer examines the goods before the contract is made, as regards defects which that examination ought to have revealed. Breach of s 14(2) is classified as breach of a condition by s 14(6).

Answer 45

In addition to satisfactory quality, the goods should also be fit for purpose. Section 14(3) states where the seller sells goods in the course of a business and the buyer, expressly or by implication, makes known to the seller: any particular purpose for which the goods are being bought, there is an implied term that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller or credit-broke

Answer 46

The section above makes clear that no implied condition as to fitness for a particular purpose arises where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the seller’s skill or judgment.

Answer 47

Where a sale is by sample, two conditions are implied into the contract by the Sale of Goods Act 1979 by virtue of s 15(2): (a) ‘that the bulk will correspond with the sample in quality; (b) […] (c) that the goods will be free from any defect, making their quality unsatisfactory, which would not be apparent on reasonable examination of the sample.’ Breach of s 15(2) is classified as breach of a condition by s 15(3)

Answer 48

Although a breach of ss 13, 14(2), 14(3) and 15 is breach of a condition, this is subject to s 15A. Section 15A provides that if the breach is so slight that it would be unreasonable for the buyer to reject the goods and repudiate the contract, the breach should be treated as a breach of warranty, which will only entitle the buyer to claim damages. The burden of proving that the breach is so slight and therefore unreasonable for the buyer to reject the goods falls on the seller.

Answer 49

Section 55 indicates that a seller’s liability under ss 12, 13, 14 and 15 of the SGA 1979 can be excluded and/or restricted by agreement of the parties, subject to the Unfair Contract Terms Act 1977 (UCTA). UCTA does in fact significantly limit the ability to exclude/restrict these terms. Under s 6(1)(a) of UCTA, the implied undertaking as to title contained in s 12 SGA 1979 cannot be excluded or restricted. Under s 6(1A) of UCTA, the implied undertakings as to description, quality, fitness for purpose or sample contained in ss 13-15 of the SGA can be excluded/restricted subject to the requirement of reasonableness.

Answer 50

The Sale of Goods Act 1979 implies the following terms into contracts for the sale of goods: * Broadly, the seller has the right to sell the goods (s 12); * The goods will comply with their description (s 13); * The goods will be of satisfactory quality (s 14(2); * The goods will be suitable for any purpose made known to the seller (s 14(3); and * The goods will comply with any sample (s 15).

Answer 51

The Supply of Goods and Services Act 1982 (SGSA) provides for the implication of terms in: (a) Certain contracts for the transfer of property in goods; (b) Contracts for the hire of goods; and (c) Contracts for the supply of services. The SGSA 1982 also governs the exclusion of such implied terms. Note: It is important to note that the implied terms set out in this section do not apply to consumer contracts as defined in the Consumer Rights Act 2015.

Answer 52

(a) A contract of sale of goods; (b) A hire purchase agreement; (c) A contract under which the property in goods is or is to be transferred in exchange for trading stamps; (d) A transfer made by deed for which there is no consideration other than presumed consideration; and (e) A contract intended to operate by way of security.

Answer 53

They are implied terms regarding title (s 2), implied terms where transfer is by description (s 3), implied terms about quality or fitness (s 4) and implied terms where transfer is by sample (s 5). Those terms are not addressed in detail in this here.

Answer 54

For the purposes of the SGSA, pursuant to s 6 a ‘contract for the hire of goods’ means a contract under which one person bails or agrees to bail goods to another by way of hire (a) A hire purchase agreement; and (b) A contract under which goods are bailed in exchange for trading stamps.

Answer 55

They are: implied terms about the right to transfer possession (s 7 – this is equivalent to the implied term concerning title in a sale of goods contract), implied terms where hire is by description (s 8), implied terms about quality or fitness (s 9) and implied terms where hire is by sample (s 10).

Answer 56

(a) Care and skill: where the supplier is acting in the course of a business there is an implied term that the supplier will carry out the service with a reasonable care and skill: s 13. (b) Time of performance: where the supplier is acting in the course of a business and the time for the service to be carried out is not fixed by the contract, left to be fixed in a manner agreed by the contract or determined by the course of dealing between the parties, there is an implied term that the supplier will carry out the service within a reasonable time: s 14. (c) Consideration: where the consideration for the service is not determined by the contract, left to be determined in a manner to be agreed by the contract or determined by the course of dealing between the parties, there is an implied term that the party contracting with the supplier will pay a reasonable charge: s 15.

Answer 57

In the case of contracts for transfer of goods or the hire of goods, under s 11 a supplier may negative or vary the terms set out in this section, subject to the provisions of the Unfair Contract Terms Act 1977 (UCTA). Similarly, in the case of contracts for the supply of services, under s 16 a party may contract out of the implied terms set out in this section, subject to the provisions of UCTA. UCTA does in fact significantly limit the ability to negative/vary these terms. The detail of this is not addressed in this here.

Answer 58

* The Supply of Goods and Services Act 1982 implies the following term into contracts for the supply of services: - Services will be carried out with reasonable care and skill (s 13).

Answer 59

The Consumer Rights Act 2015 comprises three Parts. Part 1 deals with consumer contracts for goods, digital content, and services. Part 2 regulates unfair terms (in consumer contracts). Part 3 is of a miscellaneous and general nature.

Answer 60

Part I of the Act applies to contracts to supply goods, digital content or services between a trader and a consumer. A ‘consumer’ is defined as ‘an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession’. A ‘trader’ is defined as ‘a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf’. Section 2(4) provides that, where a trader claims that an individual was not acting for purposes wholly or mainly outside the individual’s trade, business, craft or profession, then it is for the trader to prove it.

Answer 61

Note. Contracts between a consumer and a business entered into prior to 1 October 2015 are governed by the Sale of Goods Act 1979 or the Supply of Goods and Services Act 1982 and the Unfair Contract Terms Act 1977

Answer 62

(a) Goods should be of a satisfactory quality (s 9); (b) Goods should be reasonably fit for any purpose which the consumer makes known to the trader that the consumer intends to use the goods for (s 10); and (c) Where goods are sold by description the goods should match that description (s 11).

Answer 63

In line with the provisions for consumer goods, the implied terms are that the digital content: (a) Should be of satisfactory quality (s 34); (b) Should be reasonably fit for purpose (s 35); and (c) Should match any description of it given by the trader to the consumer (s 36).

Answer 64

According to s 34(2), the ‘quality of digital content is satisfactory if it meets the standard that a a reasonable person would consider satisfactory. Such a reasonable person would take account of matters of description and price together with ‘all other relevant circumstances’ (s 34(2)(c)), such circumstances including ‘any public statement about the specific characteristics of the digital content made by the trader, the producer or any representative of the trader or producer’ (s 34(5)).

Answer 65

Most importantly, the the consumer has a right: (a) That the service is performed with reasonable care and skill (s 49); (b) That (where a price has not been agreed) a reasonable price is to be paid (s 51); and (c) That (where a time has not been fixed) the service is provided in a reasonable time (s 52).

Answer 66

A lso provides that anything that is said or written to the consumer, by or on behalf of the trader, about the trader or the service is to be included as a term where it is taken into account by the consumer: (a) When deciding to enter into the contract; or (b) When making any decision about the service after entering into the contract.

Answer 67

Not only does the Consumer Rights Act 2015 imply terms as set out earlier in this section, it also specifies remedies for consumers when those terms are breached. Unless otherwise stated, these remedies sit alongside the remedies which would be available to the consumer under the general law. Remedies under contract law generally are not considered in this chapter, but it makes sense to consider the remedies under the Consumer Rights Act 2015 at this stage.

Answer 68

The Consumer Rights Act 2015 provides that where goods sold to a consumer fail to meet any of the requirements in s 9 (satisfactory quality), s 10 (reasonably fit for their particular purpose) or s 11 (correspondence with description) then the goods are regarded as non-conforming. Where the goods are non-conforming, there are three remedial options available to the consumer

Answer 69

Broadly speaking, the short term right to reject is available to the consumer for 30 days running from the time (i) that ownership has passed (or, in the case of contracts for hire or the like, possession has been transferred) and (ii) the goods have been delivered and (iii) in cases where the trader is required to install the goods or to take other action to enable the consumer to use the goods, the trader has notified the consumer that the required steps have been taken (s 22).

Answer 70

The right to repair or replacement is available unless repair or replacement is either impossible or disproportionate (in the sense that it imposes an unreasonable cost on the trader relative to the other remedies and the interests of the consumer) (s 23).

Answer 71

The consumer is not entitled to both a price reduction and final rejection; and, in either case, the remedy may only be exercised where: (a) after one repair or one replacement, the goods do not conform to the contract; or (b) the consumer can require neither repair nor replacement of the goods (because it is impossible or disproportionate); or (c) the consumer has required the trader to repair or replace the goods, but the trader is in breach of the requirement to do so within a reasonable time and without significant inconvenience to the consumer (s 24).

Answer 72

It should also be noted that s 24(10) provides that the general rule is that, where the final right to reject is exercised within 6 months (the clock running—as with the short term right to reject—from the time that ownership has passed, and so on), there should be a full refund with no deduction for use—but this does not apply to motor vehicles or any other goods that may be specified by statutory order.

Answer 73

Finally in relation to contracts for goods, it is worth noting that consumers cannot treat the contract as at an end as a result of a breach of a term implied by ss 9, 10 or 11, save to the extent set out in the Act (summarised above). So in one sense, the implied terms are neither conditions or warranties – the extent to which breach gives rise to a right to treat the contract as at an end is set out in the Act.

Answer 74

Section 42 provides that, where the digital content is non-conforming in breach of the terms implied by ss 34 (satisfactory quality), 35 (fitness for purpose) and/or 36 (matching description), there are two remedial options available to the consumer, namely: * The right to repair or replacement; and * The right to price reduction.

Answer 75

In relation to these remedies, s 42(9) provides that ‘digital content which does not conform to the contract at any time within the period of six months beginning with the day on which it was supplied must be taken not to have conformed to the contract when it was supplied.’

Answer 76

Elaborates and qualifies the right to repair or replacement in the way that we have seen already in relation to contracts for goods. In particular, s 43(2)(a) requires the trader to repair or replace the digital content ‘within a reasonable time and without significant inconvenience to the consumer’; s 43(3) precludes the consumer from requiring repair or replacement where this would be impossible or disproportionate; and s 43(5) identifies the nature of the digital content together with the purpose for which the digital content was obtained or accessed as material to judging ‘what is a reasonable time or significant inconvenience’.

Answer 77

Qualifies the right to price reduction, this right being exercisable only where the consumer either cannot require repair or replacement (because this is impossible or it would be disproportionate) or where the trader has failed to repair or replace the digital content within a reasonable time and without significant inconvenience to the consumer

Answer 78

Section 45 gives the consumer the right to receive a refund of all money pay for the digital content. A refund must be given within 14 days. The trader must give a refund using the same payment method that the consumer used to pay for the digital content, without imposing any fee in respect of the refund. Like the provisions in relation to goods, it is not open to a consumer to treat a contract as at an end as a result of a breach of these implied terms.

Answer 79

According to section 46, where (a) a trader supplies digital content to a consumer under a contract, (b) the digital content causes damage to a device or to other digital content, (c) the device or digital content that is damaged belongs to the consumer, and (d) the damage is of a kind that would not have occurred if the trader had exercised reasonable care and skill, then the consumer is entitled to repair or to a compensatory payment

Answer 80

Section 54 provides that, where the services are non-conforming in breach of the term implied by ss 49 (reasonable care and skill), there are two remedial options available to the consumer, namely: (a) The right to require repeat performance; and (b) The right to a price reduction.

Answer 81

The right to require repeat performance is elaborated and qualified in ways that are analogous to the parallel provisions in relation to goods and digital content. In particular, s 55(2)(a) requires the supplier to provide the repeat performance within a reasonable time and without significant inconvenience to the consumer (s 55(4) offering the usual guidance on what, for this purpose, is reasonable and significant), and s 55(3) states that the consumer cannot require repeat performance if completion in conformity with the contract is impossible. According to s 56(3), a price reduction becomes available only where repeat performance is impossible or where the trader has failed to provide repeat performance within a reasonable time and without significant inconvenience to the consumer.

Answer 82

Where the services are non-conforming in breach of the term implied by ss 52 (performance within a reasonable time) the remedial option is the right to a price reduction.

Answer 83

A consumer buys a kettle from a trader. On day two the kettle will not switch on. What is the consumer’s legal position under the Act? Clearly, the kettle is non-compliant relative to the requirements in s 9 (satisfactory quality) or s 10 (fitness for particular purpose) or both. In principle, the consumer may (within 30 days) reject the kettle and get a full refund, or accept a replacement or insist on repair. The consumer is likely to be happy with either an exchange or a refund.

Answer 84

For example, s 23(2)(a) requires the trader to repair or replace the goods ‘within a reasonable time and without significant inconvenience to the consumer’. If the goods under repair are the consumer’s only laptop, what would be a reasonable time for undertaking the repairs and at what point would the inconvenience to the consumer be significant?

Answer 85

According to s 23(5) these questions of reasonableness and significance are to be determined by taking into account ‘(a) the nature of the goods; and (b) the purpose for which the goods were acquired’. In the laptop case, before we can determine what is reasonable or significant, we need to know more about the particular context.

Answer 86

- Contracts for goods: goods will be of satisfactory quality, fit for any particular purpose made known to the trader, and will comply with their description. - Contracts for digital content: the content will be of satisfactory quality, fit for any particular purpose made known to the trader, and will comply with its description. - Contracts for services: the services will be performed with reasonable care and skill, provided in a reasonable time, and (where price has not been agreed) a reasonable price will be paid. * The CRA 2015 sets out various remedies which are available when these terms are breached. These remedies sit alongside normal contractual remedies, but a consumer cannot treat a contract as at an end as a result of a breach of these terms other than in the manner specifically provided for in the Act.

Answer 87

8.1 Introduction The terms of a contract (whether express or implied) can be classified as conditions, warranties or innominate terms. We will begin by considering the distinction between conditions and warranties before considering the law in relation to innominate terms.

Answer 88

As a general principle, if a party breaches a condition, the innocent party has a right to treat the contract as repudiated ie they can terminate the contract, put an end to it with the effect that both parties are released from all future obligations under the contract. The innocent party may also sue for damages immediately. If it does not exercise the right to elect to treat the contract as at an end, and instead chooses to affirm the contract, the contract remains in full force and effect, meaning that all parties will remain bound to perform their obligations under the contract, but the innocent party can still sue for damages with respect to the other party’s breach. The Right to Repudiate is waived

Answer 89

In contrast, if a party is in breach of a warranty, the only remedy available to the innocent party is to sue for damages ie there is no right to treat the contract as repudiated.

Answer 90

According to the traditional approach, the distinction between a condition and a warranty is that a condition is an important term ‘going to the root of the contract’ (Poussard v Spiers (1876) 1 QBD 410). A warranty is a less important term not going to the root of the contract.

Answer 91

The crucial question is, whether the parties intended, at the time of contracting, that any breach of the relevant term could result in the innocent party terminating (see Poussard v Spiers again). Only if the answer to this question is clearly ‘yes’ should the term be categorized as a condition from the outset.

Answer 92

Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 the Court of Appeal held that there are many terms which, at the outset, are neither conditions nor warranties but are of an ‘innominate’ or intermediate nature. The term in question in Hong Kong Fir was that the ship being hired was, ‘in every way fitted for ordinary cargo service’. This is a clause that could be breached in a variety of ways, ranging from the minor to significant.

Answer 93

If the answer to this question is ‘yes’ then the term will be treated as a condition and the innocent party is entitled to treat the contract as repudiated and claim damages. If the answer is ‘no’ the innocent party is entitled to claim damages only.

Answer 94

This is quite different from the traditional approach based on the intention of the parties at the time they made their contract which distinguishes between minor terms (warranties) and important terms (conditions). Admittedly, this analysis may promote justice as between the parties, but such justice is achieved at the cost of certainty, in particular certainty as to whether the innocent party has the right to terminate the contract as a result of the breach.

Answer 95

Taking all this into account, when considering the classification of terms, the starting position should be to consider whether the term in question has been classified as a condition or a warranty by: i) statute; ii) the parties or iii) previous judicial decision(s).

Answer 96

If that does not provide an answer, then the court will need to look at the contract, the subject matter and the surrounding facts to determine whether the parties intended for any breach of the term to entitle the innocent party to terminate the contract (this is where the ‘root of the contract’ test may be relevant). If the court cannot determine the parties’ intention, or determines that their intention was that not every breach would lead to the right to terminate, then the court is likely to decide that the term is innominate, and apply the test from Hong Kong Fir.

Answer 97

Condition: An important term going to the root of the contract. Warranty: A less important term not going to the root of the contract. Innominate term: A term which at the outset is neither a condition or warranty but is of an intermediate nature.

Answer 98

Importantly, however, the remedy for breach of the terms implied by ss 13-15 SGA has been altered as a result of s 15A. Section 15A does not apply to s 12(1) SGA, the implied condition as to title. Section 15A provides that if the breach is so slight that it is unreasonable for the buyer to repudiate the contract and reject the goods, the breach should only be treated as a breach of warranty. In such instance, the buyer will only be entitled to claim damages

Answer 99

When it comes to the terms implied in contracts for the supply of goods by s 9 (satisfactory quality) s 10 (reasonably fit for their particular purpose) or s 11 (correspondence with description) the Consumer Rights Act 2015 specifically provides rights to reject goods, but only in certain circumstances: in this way, the classification of these terms is not really of central importance

Answer 100

A party that has committed a breach of a condition is said to have committed a repudiatory breach. The innocent party can then elect to ‘treat the contract as repudiated‘. Another way of phrasing this is that the innocent party can elect to ‘accept the repudiatory breach‘ (which has been committed by the defaulting party) and to treat the contract as at an end

Answer 101

A party that has committed a breach of condition is said to have committed a repudiatory breach. Generally, the innocent party has a right to treat the contract as repudiated ie they can terminate the contract.

Answer 102

One area where the law on conditions and warranties has developed in a particular way is in relation to contractual terms setting out the time performance or completion of the contract. Time is of greater or lesser importance to the parties in most kinds of contract. It is quite usual for the contracting parties to stipulate for a date for delivery for the sale of goods. Failure to comply with such a stipulation is, obviously, a breach of contract, but whether it is a breach of a condition or a warranty will depend on the intention of the parties.

Answer 103

Where a requirement as to timing is essential to the contract, for instance in mercantile contracts, the expression used is that ‘time is of the essence’. If time is of the essence, lateness will amount to a repudiatory breach entitling the other party to terminate the contract.

Answer 104

Where time is not of the essence, it can usually become so, by the innocent party serving a notice on the defaulting party which states time is of the essence. Such a notice must state completion date, which must be reasonable.

Answer 105

* The terms of a contract (whether express or implied) can be classified as conditions, warranties or innominate terms. * If a party breaches a condition, the innocent party has a right to treat the contract as repudiated ie they can terminate the contract * If a party is in breach of a warranty, the only remedy available to the innocent party is to sue for damages * Some terms, at the outset, are neither conditions nor warranties but are of an ‘innominate’ nature. A breach of such a term, if it has a minor effect, will allow the innocent party to claim damages only. A breach with more serious consequences will allow the innocent party to treat the contract as repudiated and claim damages. * Where terms are implied by statute, the statute will normally specify whether they are conditions or warranties (in some cases the statute will also state or modify the remedy available upon breach of such a term).

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Chapter 7: Terms Flashcards

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