CONTENTS OF A CONTRACT

Question 1

Define ‘terms’.

Answer 1

• contents of a contract
• they determine the extent of the parties’ obligations
• they can be express or implied

Question 2

Why might terms be implied in a contract?

Answer 2

• maybe because they share the same background (eg they both work in the same line of business)
• because of this common background, they make certain assumptions which they do not bother to spell out in their contract because these points seem so obvious to them
• any previous dealings? They may assume it will contain same terms as before
• perhaps parties havent considered the point at all
• statutory implied term

Question 3

What are the implied terms in the Sale of Goods Act 1979 section 14?

Answer 3

• the implied terms of satisfactory quality (2) and reasonable fitness for buyer’s purpose (3) (apply if seller sells in the course of the business - so doesn’t apply to private sellers)
• buyers purpose being made known to the seller expressly or by implication (3) (if using goods for normal purpose no need to disclose this) + must be reasonable for buyer to rely on seller’s judgement
• liability fo breach of s 14 2 and 3 is strict (buyer does not have to prove that seller is at fault)

Question 4

What does the Sale of Goods Act 1979 deal with compared to the Consumer Rights Act 2015?

Answer 4

• since the CRA 2015 came into force (Consumer Right Act 2015) the SGA 1979 doesn’t apply to contracts for the sale of goods between trader and consumer
• SGA only applies to sale of goods made business to business, consumer to consumer or consumer to business

Question 5

What are the implied terms of Sale of Goods Act 1979 section 13?

Answer 5

• a condition that the goods must correspond their description
• term will be implied whether seller is business or private individual
• Harlingdon & Leinster Enterprises ltd v Christopher Hull Fine Art Ltd [1991] made it clear that for s13 to apply the buyer must rely on the description
• there will be clear sale by description if buyer does not see product and simply goes off description
• can even be sale by description if buyer does see product and examines them but also reasonably relied on description
• liability for breach of s13 is strict

Question 6

What are the implied terms of the Sale of Goods Act 1979 section 8?

Answer 6

• where price is not fixed in contract, then buyer must pay reasonable price

Question 7

What are the remedies for breach of terms implied by s13 and s14 of Sale of Goods Act 1979?

Answer 7

• normally buyer can terminate contract and reject goods even if breach is minor
• can recover money paid but must give goods back to seller
• can also recover damages for any further loss suffered

Question 8

When is the right to terminate contract and reject goods lost?

Answer 8

• breach is so slight that it would be unreasonable to reject
• the buyer has accepted goods and kept them beyond reasonable time without instigating rejection
• however buyer may still recover damages

Question 9

What are the implied terms of the Supply of Goods & Services Act 1982 s3 and s4?

Answer 9

• s3’s implied term is that the goods will correspond with the description
• s4(2) implied term is that the goods will be of satisfactory quality
• s4(5) that they are reasonably fit for any purpose transferee makes known

Note s4(2) and (5) only applies where goods are supplied in course of a business

Both terms implied in s3 and s4 are conditions

Question 10

What are the implied terms in s13, s14 and s15 of Supply of Goods and Services Act 1982?

Answer 10

S13: where supplier is acting in course of business, supplier must carry out service with reasonable care and skill

S14: if the time for service to be carried out is not specified, then implied term is that service will be carried out in reasonable time

S15: where consideration is not determined in contract then implied term is that reasonable price will be paid

Note: if it is just a service being carried out, then only s13 s14 and s15 apply

If it’s services and goods then s13, s14, s15, s3 and s4 apply

Question 11

What does s19 CRA 2015 say in ss 20/22/23/24 regarding rights of customer if the goods do not conform to rights of customer?

Answer 11

ss 20 and 22: short term right to reject and full refund

s 23: right to repair/replacement

s24: right to price reduction/ reject and get partial refund reflecting customer’s use of goods

The first being the first possible solution, the second being the next viable option and the final one as a final resort

Question 12

What does ss 49/51/55/56/52 of the CRA 2015 say?

Answer 12

s49: performance of service/work must be carried out with reasonable skill and care

s55: if s49 breached, right to require repeat performance

s56: OR right to a price reduction

S51: where no price is fixed, a reasonable price will be paid for service/work

s52: breach of implied term to perform within reasonable time will equal an appropriate time reduction

Question 13

What is an exemption clause?

Answer 13

• a clause which seeks to exclude liability completely or limit liability if breach of contract occurs
• common law and statutory laws govern exemption clauses

Question 14

For a clause to be valid it needs to be incorporated. What are the three ways

Answer 14

1) by signature

2) by notice

3) by consistent course of dealings between parties

Question 15

L’Estrange v Gracoub Ltd 1934

Answer 15

• incorporation through signature
• here print was ‘regrettably small’ but was legible
• court said it was incorporated
• only C needs to sign it

Question 16

Other than illegibility, why wouldn’t an exemption clause be incorporated into contract even if innocent party has signed document?

Answer 16

1) if clause has been described inaccurately and innocent party has reasonably relied on this inaccurate description under Curtis v Chemical Clearing & Dyeing Co

2) if clause is unusual or onerous or not fairly and reasonably drawn to attention of party under Blue Sky Solutions Ltd v Be caring ltd
- here no attempt was made to highlight relevant clauses using headings or labels, there was just detailed text in small type

Question 17

How does incorporation work in unsigned documents like a ticket or a notice?

Answer 17

• document must be contractual in nature
• would reasonable person think it included contractual terms?(Under Chapelton v Barry Urban District Council)
• innocent party must know of clause or party relying on clause must have taken reasonable steps to bring it to other’s attention before contract is finalised e.g Parker v South Eastern Railway
• they must pay close attention to the position of the clause e.g PTO for conditions
• the prominence of the clause on the document
• if clause is unusual or onerous then it needs to be OBVIOUS under Thornton v Shoe Lane Parking LTD
• and it must be brough to other party’s attention BEFORE contract is finalised under Olley v Marlborough Court Ltd

Question 18

Can an exemption clause still be incorporated even if steps to bring clause to other parties’ attention comes after contract is finalised?

Answer 18

• yes there has to be previous course of dealings
• Kendall (Henry) & Sons Ltd 1956 (dealt 3/4 times a month for three years ie sufficient number of times)
• Mccutcheon v David MacBrayne ltd 1964 (no of times they made deals but only a few were signed documents)

Question 19

What needs to be determined after incorporation? What is this?

Answer 19

• construction
• the clause needs to cover he breach of the contract and the loss/damage that occurred

Question 20

What is the contra proferentum rule?

Answer 20

• where an ambiguous clause will be construed against person seeking to rely on it
• so if there is a word that has two meanings, favour the other party
• this is used only for exclusion clauses where they are relying on it to wholly exclude

Question 21

When it comes to negligence, what conditions must there be to make it constructed into contract?

Answer 21

Under Canada Steamship Lines v The King
- wording must be clear
- must express reference to negligence
- ‘howsoever caused’ refers to negligence

Question 22

What if other liabilities, such as strict liability, are in play? Will negligence still be covered by the clause?

Answer 22

• in commercial clauses the court tend to take a more relaxed approach ie Monarch Airlines Ltd v London Luton Airport
• then negligence may not be covered by the clause
• this is usually decided by the court

Question 23

Photo Productions Ltd v Securicor Transport Ltd

Answer 23

• even if breach of contract is serious or deliberate, it is simply a matter of construction of whether the exemption clause covers the breach
• provided it is correctly worded, it will cover it

Question 24

What kind of relationship must there be between the parties for UCTA 1977 to apply?

Answer 24

• it only applies to business to business deals
• doesn’t apply to trader to consumer as this is dealt in CRA 2015

Question 25

UCTA can do what two things to a clause?

Answer 25

• render clause void
• subject it to the reasonableness test

Question 26

What does s6 UCTA 1977 target?

Answer 26

• s13 and s14 of SGA 1979

Question 27

What does s7 of UCTA 1977 target?

Answer 27

• deals with s3 and 4 of SGSA 1982

Question 28

What does s2 of UCTA 1977 target?

Answer 28

• deals with businesses attempting to exclude liability for negligence
• 2(1) states that they cannot exclude liability for death or personal injury
• 2(2) states that other loss/ damages (inc physical damage and loss of profit) caused by negligence by a business can restrict liability provided it satisfies reasonableness test

Question 29

What does section 3 of UCTA 1977 target?

Answer 29

• was innocent party dealing on defaulting party’s written terms of business

Question 30

Draw a flowchart showing all the different things UCTA 1977 targets.

Answer 30

Question 31

What do s9 10 and 11 of the CRA 2015 say?

Answer 31

s9: implies a term that goods will be of satisfactory quality
S10: goods will be reasonably fit for their particular purpose
S11: goods will be as described

Question 32

Outline Sch 2 guidelines for the reasonableness test.

Answer 32

(a) the relative strength of the bargaining positions of the parties
For example, if the bargaining positions of the parties are equal, it will be easier to show that the exemption clause is reasonable than if a multinational corporation is dealing with
a small trader.
(b) did the customer receive an inducement to agree to the exemption clause, or in accepting it did the customer have an opportunity to enter a similar contract with someone else, but without having to accept a similar exemption clause? For example, was the customer offered a lower price for accepting a contract with an
exemption clause and a higher price for accepting a contract without an exemption clause? If so, this might suggest that the clause was reasonable. Also, if the customer
could have gone elsewhere and avoided an exemption clause but chose not to do so, the court might feel that the customer had some good reason for accepting the contract with the clause and be reluctant to interfere with the agreement the parties had reached.
(c) Whether the customer knew, or ought reasonably to have known, of the existence and extent of the clause, taking into account any trade custom or previous dealings between
the parties.
For example, if the clause is clearly worded and clearly set out in the document, the court might be encouraged to say that the clause is reasonable as the customer should have been aware of the existence and extent of the clause.
(d) Where the exemption clause will apply if a condition is not complied with, whether it was reasonable at the time of the contract to expect that compliance with the condition would be practicable
At the time of the contract was it reasonable to expect that it would be practicable for the buyer to comply with this condition?
(e) Whether the goods were manufactured, processed or adapted to the special order of the customer

Question 33

What does s11(4) of UCTA 1977 say about what also needs to be taken into regard other than sch 2 guidelines?

Answer 33

• the resources which the defendant could expect to be available for the purpose of
  meeting the liability should it arise; and
• how far it was open to the defendant to cover itself by insurance.

Question 34

What does s11 of UCTA 1977 actually say?

Answer 34

• must be fair + reasonable exemption clause which must be known to parties or within their contemplation when contract was made
• burden of proof is on party attempting to rely on exemption clause

Question 35

What does s31(1) of CRA 2015 say about restriction surrounding excluding liability of s9/10/11?

Answer 35

• cannot limit this is any way whatsoever
• consumers should be able to obtain a remedy without restriction on the trader
• however, Consumer Rights Act 2015 (CRA 2015) requires contract terms and notices to be fair (s. 62). The term or notice is regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer
• such an unfair term is not binding at the option of the consumer.