Construction & Interpretation Of Contracts

Question 1

What principle was established in Hadley and Baxendale (1854)?

Answer 1

The Remoteness Test: that loss must have been within the reasonable contemplation of the parties

Question 2

What is the remedy when a term is breached?

Answer 2

There is an automatic right to claim damages that would put him in the position he would have been, had the contract been properly performed

Question 3

What is the difference between a term and a representation?

Answer 3

A term involves the promise as to the truth of the statement and is central to the contract, while a representation is an inducement to enter into a contract

Question 4

What four factors in a pre-contractual statement distinguish a term from a representation?

Answer 4

1. Statement-maker’s expertise/knowledge (Oscar Chess v Williams)
2. Importance of the statement to the recipient (Bannerman v White)
3. Assumption of responsibility (Schawel v Reade)
4. Timing - delay? (Routledge v Mackay)

Question 5

What is the parol evidence rule?

Answer 5

The presumption that all contract terms are included in writing

Question 6

What is the effect of an entire agreement clause?

Answer 6

Limits the content of a contract to what could reasonably be understood from what is written in it, and prevents reliance on statements made in pre-contractual negotiations

Question 7

“The party signing is bound, and it is wholly immaterial whether he had read the document or not.” What case is this from?

Answer 7

L’Estrange v E. Gracob [1934]

Question 8

What is the officious bystander test?

Answer 8

A used used to determine whether a term may be implied that asks whether it expresses something that goes without saying (if an ‘officous bystander’ suggested it, the suggestion would be met with ‘of course!’)

Question 9

What is the business efficacy test?

Answer 9

It allows for a term to be implied where it is “necessary to give the transaction the business efficacy as the parties must have intended” (The Moorcock)

Question 10

What was introduced in Attorney General of Belize v Belize Telecom?

Answer 10

Lord Hoffman’s test for whether to imply a term: whether this is what the instrument, read as a whole against the relevant background, would reasonably be understood to mean

Question 11

Did Belize loosen the traditional approach to implying terms by fact?

Answer 11

According to Neuberger LJ - No, a term should be implied on the basis that it’s reasonable to do so, using the tests of business necessity and obviousness

Question 12

What are some terms implied by the Consumer Rights Act 2015?

Answer 12

Goods to be as described

Goods to be fit for a particular purpose

Service provided with reasonable care and skill

Question 13

What is the tradition approach to contract interpretation?

Answer 13

It is the duty of the court not to examine the thoughts or intentions of parties prior to contract formation, but construe the contract according to the ordinary grammatical meaning of the words (Lovell & Christmas v Wall)

Question 14

What is the modern approach to contract interpretation?

Answer 14

Contracts should be interpreted in its context, on the basis of what a reasonable person would understand if given all relevant background knowledge and info (Chartbrook v Persimmon Homes)

Question 15

In which case were the principles of the modern approach laid out by Hoffman LJ?

Answer 15

Investors compensation scheme v West bromwich building society [1998]

Question 16

Which case held that ambiguity in contracts should be resolved consistently with business common sense?

Answer 16

Rainy sky v kookmin bank

Question 17

What was held in Arnold v Britton [2015]?

Answer 17

A rollback of the modern approach: That interpreting contracts involves identifying what parties meant through the eyes of a ‘reasonable reader’ and that meaning is usually gleaned through the language of the provision - one of the only factors over which parties have control

Question 18

Which case is this from? “A court should be very slow to reject the natural meaning of a provision as correct simply because it appears to b a very imprudent term…the purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed.”

Answer 18

Arnold v Britton [2015]

Question 19

What is the exclusionary rule?

Answer 19

There is no recourse to use pre-contractual negotiations to explain what parties intended in a contract (Prenn v Simmonds)

Question 20

When may pre-contractual negotiations be taken into account?

Answer 20

When there is a plea for rectification, as the written statement failed to include some term or failed to reflect an anterior oral agreement (Dean & Dean Sols v Dionissiou-Moussaoui)