Contents Flashcards
A formal signed contract drawn up by the parties who are in business but not as lawyers describes one particular term as a ‘condition’. The parties know that at some point(s) during the continuance of the contract the particular term will be breached.
As and when the term is breached what would be the most likely remedy?
A-Rescission and damages.
B-Termination and damages.
C-An indemnity for losses necessarily incurred.
D-Damages for loss of bargain.
E-A reasonable sum in restitution.
Option D is correct. The parties could not have intended the term to be a condition in the legal sense- Schuler v Wickman. This explains too why Option B is wrong.
Option A is wrong as rescission is the main remedy for misrep.
Option C is wrong. An indemnity may be awarded alongside rescission for misrep.
Option E is wrong. A reasonable sum in restitution is rarely awarded for breach.
Which of the following statements is correct?
A-Damages for losses are available for every breach regardless of the term that has been breached.
B-Termination of a contract is only ever available for breach of a condition.
C-Breach of an innominate term means the contract automatically comes to an end.
D-Breach of warranty allows the innocent party to choose between termination and damages.
E-Breach of an implied term will always allow the innocent party to terminate the contract.
Option A is correct. Damages are available regardless of what kind of contractual term has been breached (so long as there is a loss to compensate).
Option B is wrong. Termination may also be available for a serious breach of an innominate term.
Option C is wrong. Termination may be available for a serious breach of an innominate term but the innocent party would have to choose to terminate the contract or to affirm it. The contract would not automatically come to an end simply because of the breach.
Option D is wrong. An innocent party can claim damages for breach of warranty but would not be entitled to terminate the contract.
Option E is wrong. The remedies available will depend on the classification of the term. Different implied terms will be classified in different ways so it is not the case that all implied terms will give rise to the same remedies.
A client, a sole trader, bought from a High Street retailer for £1,500 a self- assemble fire-proof filing cabinet to store important business documents. Once all the pieces had been unpacked the client realised that the cabinet did not come with two keys as described in the brochure. There is just one key. There are no other problems with the cabinet, but the client wants to reject it and get a refund.
Will the client’s claim succeed?
A-Will the client’s claim succeed?
B-No, because the breach is so slight it would be unreasonable for the client to reject the cabinet.
C-Yes, because it was a sale by description and a statutory implied condition has been breached.
D-Yes, because the client can exercise the short term right to reject and get a full refund.
E-Yes, because liability for breach of the implied term as to description is strict and cannot be excluded.
Option B is correct – s15A SGA
Option A is wrong. A buyer will not be deemed to have accepted goods (s35 SGA) unless and until it’s had a reasonable chance to examine the goods.
Option C is wrong. The term implied by s13 SGA is a condition but rejection is likely to be barred (s15A SGA).
Option D is wrong. The short term right to reject is only available to consumers who buy from traders (CRA).
Option E is wrong. Rejection is likely to be barred. Liability for breach is strict but liability may be excluded if reasonable to do so- s6 UCTA.
A company decides to hire a lorry so that it can make deliveries of its goods to its customers. The hire contract was to last for two years. The contract provides that the lorry will be ‘in every way fit for ordinary delivery service’. After two months of being used, the lorry broke down and has had to be repaired, due to serious problems with its engine. The lorry has now been in the garage for five months. The company wishes to end the contract of hire.
Can the company terminate the contract?
A-Yes, because there has been a breach of a condition.
B-No, because the breach of contract is not enough to deprive the company of the whole benefit of the contract.
C-No, because there has been a breach of a warranty.
D-Yes, because the breach of contract is enough to deprive the company of the whole benefit of the contract.
E-No, because the company has affirmed the contract.
CORRECT ANSWER: B. Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd held that, where such terms of a contract could be either a condition or warranty, they would be held to be innominate initially and the innocent party could only terminate the contract if the breach deprived it of sufficiently the whole benefit to be had from the contract. The breach here is not sufficiently significant to deprive the whole benefit of the contract. This also explains why option D is wrong.
Option A is wrong because there has been no breach of condition: the term is innominate.
Option C is wrong because there has been no breach of warranty: the term is innominate.
Option E is wrong because there is no evidence that the company has affirmed the contract by, for instance, accepting the lorry despite its faults.
The owner of a restaurant has contracted with a company for the supply and fitting of a kitchen complete with oven and microwave. The kitchen is fitted within the relevant timeframe but the owner of the restaurant notes that some of the doors of the kitchen cabinets do not close properly as they are out of line. The owner notes that this is because the fitting of the units has been carelessly carried out rather than there being a fault with the units themselves.
Which of the following best describes the rights of the restaurant owner?
A-The restaurant owner can only claim damages for the defects in the performance of the contract.
B-The restaurant owner will be able to terminate the contract and claim damages for the faulty fitting of the kitchen units
C-The restaurant owner will have no rights in contract law at all as the contract has been fully performed.
D-If the restaurant owner terminates the contract the court may decide that they were not entitled to do so and they may then themselves be in breach of contract.
E-If the restaurant owner claims damages for the faulty workmanship, those damages will be based on a reliance measure.
Option D is the best answer. The term which has been breached is the implied, innominate term in s13 of the Supply of Goods and Services Act which determines that any work should be carried out with reasonable care and skill. If the breach is serious enough, it will allow the innocent party to terminate the contract and claim damages for the breach. If, however, the breach is not sufficiently serious, the innocent party will only be able to claim damages. If they wrongly terminate, they may themselves be in breach of contract. Hong Kong Fir Shipping Co. Ltd -v- Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26.
Option A is wrong. Innominate terms when breached can, in the right circumstances, enable the innocent party to both claim damages and terminate the contract. It is therefore wrong to say that the restaurant owner can only ever claim damages.
Option B is wrong. As can be seen above, termination will not always be available as a remedy.
Option C is wrong. The contractor has breached the contract and failed to fully perform its terms.
Option E is wrong. In this case, damages will most likely be assessed on a cost of cure basis. The reliance measure of loss (putting the claimant back in the position they were in before a wrong had been committed) is the usual measure for quantifying damages in tort not in contract.
Last week, an owner of a hotel went into a retail shop to purchase some TV sets for her hotel rooms. She explained to the sales assistant that the TV sets had to be wall-mounted. The sales assistant advised the hotel owner to purchase a particular model. The hotel assistant ordered 20 TV sets of that model and paid for them.
The TV sets were delivered yesterday. The TV sets work, but they cannot be wall-mounted.
Is the retail shop in breach of contract?
A-Yes, because it was an implied term of the contract that the TV sets would be fit for purpose and they are not.
B-Yes, because it was an implied term of the contract that the TV sets would be of satisfactory quality and they are not.
C-Yes, because the shop assistant represented that the TV sets could be wall-mounted and they cannot.
D-No, because it was up to the hotel buyer to inspect the TV sets that she was about to purchase.
E-No, because there were no terms, express or implied, that related to whether the TV sets could be wall-mounted.
Option A is correct. This is a business-to-business contract to which the Sale of Goods Act 1979 applies. Section 14(3) of the Act provides that where the buyer makes known any particular purpose for which goods are being bought, there is an implied term that the goods supplied under the contract are reasonably fit for that purpose. In this case, the hotel owner made it clear that the TV sets were to be wall-mounted. In selling TV sets that cannot be wall-mounted, the retail shop is in breach of this implied term. Accordingly, option E is wrong.
Option B is wrong. While it is the case that the contract will contain an implied term that the TV sets must be of satisfactory quality (implied under s 14(2) of the Sale of Goods Act), we are told that the TV sets are working. It is likely therefore that this implied term has not been breached.
Option C is wrong. The promise that the TV sets could be wall-mounted is an implied term of the contract. There is therefore no need to rely on the law of misrepresentation. In any event, it is arguable whether the seller has made a misrepresentation given that they did not expressly say anything and silence generally does not give rise to a misrepresentation. Finally, even if a claim in misrepresentation were successful, this does not mean that the seller is in breach of contract – the two are conceptually distinct.
Option D is wrong. While physical inspection of the TV sets prior to sale may have been a good idea, it does not prevent the relevant term being implied into the contract.
A client company (‘the Client’) entered into a written contract with another company (‘the Company’) which was drafted by a director of the Company. One particular term of the contract was specifically defined as a “condition”. The term provided that over a long period, one of two named representatives of the Client would visit the Company every week. There was no provision to substitute other representatives and no provision for the Company to say a visit was inconvenient. One week the Company did not receive a visit as agreed and sought to terminate the contract.
Which of the following statements best describes whether the Company could terminate the contract?
A-The term breached was defined as a condition and so the Company was entitled to terminate for any breach (however small).
B-The parties could not have intended the particular term to be a ‘condition’ in the legal sense and so the Company was not entitled to terminate.
C-The Company was not entitled to terminate as commercial contracts cannot be terminated if the breach of a condition is so slight it would be unreasonable to terminate.
D-As the contract was between two companies and had been reduced into writing and signed, the definition of the term as a ‘condition’ would be conclusive and thereby entitled the Company to terminate.
E-The Company was not entitled to terminate as terms in contracts drafted by non-lawyers are neither conditions nor warranties: the remedy for breach will always depend on the seriousness of the breach and the breach here was not serious.
Option B is correct. On the face of it, the contract had not been drafted by a lawyer and the parties must have known the term would be breached at some time or another. Consequently, they could not have intended one breach to justify terminating the contract - Schuler v Wickman.
Option A is not the best answer. Whilst it correctly identifies that if a court decides that a term is a condition, a party will be entitled to terminate for any breach of that condition (however small), the fact that the term in this case had been defined as a condition would not be conclusive in the circumstances. Accordingly, option D is also wrong.
Option C is wrong. Ordinarily, a party is entitled to terminate a contract for breach of a condition even where the breach is slight. A very slight breach of a condition is only a bar to rejecting goods in a commercial contract for the sale of goods (s15A Sale of Goods Act).
Option E is wrong. As a matter of construction, particular terms may have been intended to be warranties or conditions in the strict legal sense.
An employee is working as a sales manager on behalf of a food distribution company. She has never worked for the company before. As a result of the work she does, the employee builds up a detailed profile of the company’s customer base, including delivery schedules and prices. The employee sells this information to a competitor. There is nothing in the employee’s employment contract or in employment legislation that prevents her from selling this information to a competitor.
Which of the following best describes whether the employee’s actions amount to a breach of her employment contract?
A-The only method of implying terms into a contract is through statute. As no statute applies in this case, the employee cannot be in breach of contract.
B-The only method of implying terms into a contract is where the parties have entered into previous contracts (where that term appeared). As this is the first time the employee has worked for the employer, the employee cannot be in breach of contract.
C-It is reasonable to imply a term that the employee shall not disclose confidential information. The employee is in breach of that implied term.
D-An obligation not to disclose confidential information is a necessary incident of all employment contracts. The employee is in breach of that implied term.
E-In the absence of an express term, the employee’s actions cannot amount to a breach of contract.
Option D is correct. Courts can imply terms into certain types of contract where they regard those terms as a necessary incident of that type of contract. This commonly happens in employment contracts, where the employee has a duty to provide an honest and loyal service (and this term will extend to prevent the employee for the duration of her employment from using or disclosing confidential information gained in the course of her employment).
Option A is wrong. The use of statute to imply terms is one method of implying terms into a contract, but not the only method. There are various situations in which the common law can imply terms.
Option B is wrong. Terms can be implied by reference to a previous course of dealing, but this is not the only method for implying terms.
Option C is wrong. The common law will not imply terms simply because it is reasonable to do so. Instead, the common law may imply terms where those terms are necessary.
Option E is wrong. Many contracts are made up of a mixture of express and implied terms. The absence of a relevant express term does not by itself mean that the actions of one party cannot amount to a breach of contract.
The owner of a high street delicatessen (‘deli owner’) contracts with a local builder to extend the premises to expand the customer seating area in the store. During the building works the deli owner is not going to be able to serve any customers indoors and so they want it to be an express term of the contract that the work will be completed by a certain date to limit the loss of profits to the business.
What advice would you give the deli owner?
A-The completion date should be an express condition of the contract which if breached will enable the deli owner to terminate the contract and engage an alternative builder to complete the work.
B-The completion date should be an express condition of the contract which if breached will enable the deli owner to terminate the contract and engage an alternative builder to complete to work, and claim damages.
C-The completion date should be an express warranty in the contract which if breached will enable the deli owner to claim damages.
D-The completion date should be an express innominate term in the contract which if breached will enable the deli owner to decide whether to terminate the contract or claim damages.
E-The completion date should be an express innominate term in the contract which if breached will entitle the deli owner to terminate the contract only.
Option B is correct. A condition is an important term of a contract which entitles the claimant to terminate the contract and claim damages. This will be the best advice to the deli owner because it gives them the choice to terminate as well as claim damages.
Option A is not the best answer because it does not refer to the potential for damages to be a remedy for breach of condition.
Option C is wrong because it would not be in the client’s best interests for the term to be a minor term (a warranty) which only entitles them to claim damages.
Options D and E are wrong because the remedies available for breach of an innominate term depend on the effect of the breach, which cannot be determined in advance.
A man agreed with a trader that, whilst away on business, the trader would supply and fit a grey woollen carpet in the man’s hallway. The trader then supplied and fitted a red nylon carpet in the hallway. The man returned from his business trip seven weeks later and discovered the problem. He wants to use his statutory rights to reject the red carpet and claim a full refund if possible. If not, he wants to find another remedy.
What advice would you give the man?
A-He is not able to reject the red carpet and claim a full refund for breach of contract because he did not agree with the trader that this would be a contractual remedy.
B-He is not able to reject the red carpet and claim a full refund or seek any other remedy because, although there is a breach of contract, he is now out of time to pursue a remedy.
C-He is not able to reject the red carpet and claim a full refund because he is out of time, but he can ask the trader to replace it or he can reject the red carpet and claim a partial refund.
D-He is able to reject the red carpet and claim a full refund because, although nothing was expressly agreed in the contract, he has an implied right in statute to such a remedy.
E-He is able to reject the red carpet and claim a full refund, as there was a breach of an express term that the carpet would be a grey woollen one and also a breach of an implied term that the goods would correspond with their description.
Option C is correct. The Consumer Rights Act applies here, as this is a contract between a trader and a consumer. Section 19 CRA applies a pecking order of remedies where the goods do not conform to the contract. The short-term right to reject non-perishable goods and claim a full refund is lost after 30 days from installation (section 22 CRA). However, the man would still have a right to request replacement and if not, then a final right to reject and claim a partial refund.
Option A is wrong. There is no requirement to expressly agree a contractual remedy and in addition the CRA implies certain remedies into these contracts.
Option B is wrong. The man is not out of time for the remaining statutory remedies to require a replacement or reject and claim a partial remedy. Further, general contractual remedies (such as the general right to claim damages) are still available and have a limitation period of 6 years.
Option D is wrong. Although he had an implied right to that remedy, it is now time barred pursuant to the CRA.
Option E is wrong. Although there has been a breach of an express and implied term of the contract, the man’s rights to that specific statutory remedy are now time barred.
Quick Q:
A man buys a portable CD/DVD reader for his laptop computer from a shop. The packaging described it as being able to read both CDs and DVDs. On trying to use it for the first time three days later, however, he found that it would read CDs but not DVDs. As far as the man is concerned, the product is of no use to him and he wants to buy another one in place of it from another retailer, because he has lost confidence in the shop that he bought this one from. There is no doubt that the man has a claim as the product is not reasonably fit for its purpose.
What is the man’s best remedy?
D or e
D- The man should reject the product and claim a full refund within the next 30 days.
E- The man should reject the product and claim a full refund within the next 27 days.
CORRECT ANSWER: E. Under the Consumer Rights Act 2015, the man’s best remedy, as he has lost confidence in the shop, would be to reject the goods and seek a full refund. He has 30 days to do this from when he purchased the product. As three days have elapsed since then, that means he has 27 days in which to exercise this right.
A is wrong because while the man could ask for a repair, he is not obliged to within the first 30 days of owning the goods. For the same reason, B and C are also wrong as the man need not accept those remedies either within that timeframe.
D is wrong because time starts to run from when the man buys the goods (and delivered), not from when the man discovers the defect.
Quick Q:
The owner of a hotel bought a modern heating system from a plumbing company and also arranged for the plumbing company to install it. The system was manufactured by a third party. The work was finished on time and the hotel owner paid the contract price in full. Two weeks later, due to a manufacturing default, the heating system malfunctioned causing flooding and extensive damage.
Is the hotel owner able to bring a claim for damages against the plumbing company?
D- Yes, because the heating system was not of satisfactory quality.
Option D is correct. This is a business to business contract for work and materials and therefore has statutory implied terms from the Supply of Goods and Services Act 1982. The heating system therefore had to be of satisfactory quality, and arguably was not.
Quick Q:
A client stuck a notice in the window of his second-hand car advertising that it was for sale. The stated price was £8,000 and the car was described as being in good working order. A neighbour went to inspect the car and bought it for the advertised price without first taking it for a test drive. The next day the car broke down. The neighbour has been reliably informed that there is a serious problem with the camshaft and wants to reject the car, get a refund and claim damages.
Which of the following statements best describes the client’s legal position?
The client will not be in breach of any statutory implied terms as to the quality or fitness for purpose of the car.
Option A is correct. It was a consumer to consumer sale of goods so the Consumer Rights Act does not apply. Satisfactory quality and fitness for purpose is only implied into contracts for the sale of goods under the Sale of Goods Act where goods are sold in the course of a business. As such, there were no statutory implied terms dealing with such matters in the sale of the car by the client to the neighbour.
Innominate term
An innominate term is an intermediate term which cannot be defined as either a “condition” or a “warranty”. It is therefore a term that goes to the root of the contract and, if breached, allows the non-breaching to terminate the contract and claim damages.
Remedies available for breach of an innominate term depend on the effect of the breach, which cannot be determined in advance.
A sole trader owns a hairdresser. They purchase hair products from a local supplier. The parties have had dealings five or six times a year over the past three years. An invoice is usually handed over by the supplier when the goods are supplied which sets out the terms and condition.
What advice would you give the sole trader in relation to the incorporation of the supplier’s terms and conditions as part of the contract?
A-The terms are likely to be incorporated as a result of the parties’ regular and consistent dealings.
B-The supplier only needs to demonstrate that they have supplied the sole trade once before in order for the terms to be incorporated.
C-Although the parties have had a consistent course of dealings over the past three years, the previous dealings must extend over a five-year period.
D-In order for a previous and consistent course of dealings to be established, the invoice must have been provided before the goods were supplied to the sole trader.
E-In order for the terms to be incorporated, the sole trader must have signed a document to confirm that he has accepted the terms and conditions.
Option A is correct. The sole trader and supplier have had a previous and consistent course of dealings five or six times a year over the past three years. The supplier’s terms and conditions will therefore be incorporated into the current contract.
Option B is wrong, as there needs to be a previous and consistent course of dealing. Such dealings will extend beyond one prior contract.
Option C is not the best answer, as there is not a set minimum of years over which the dealings must occur.
Option D is wrong. As the terms and conditions are incorporated as a result of a previous and consistent course of dealings, they may be supplied after the contract is formed.
Option E is wrong, as the acceptance of the terms and conditions need not be signed in order for the terms to be accepted.
