contents of a contract Flashcards
why may terms be implied into a contract rather than expressed?
party may not expressly agree with all the terms- can be because share similar background so make certain assumptions which they don’t bother to spell out because it is obvious/they have consistent dealings so assume their latest contract has similar provisions/protect one of the parties
what are the two ways terms can be implied?
by the courts or by statute
what are the types of ways courts can imply terms?
local custom/trade usage, previous course of dealings between parties, to reflect the presumed intention of the parties, because of type of contract
explain terms implied by local custom or trade usage
the contract is formed against a background of common assumptions based on what usually happens in that locality or in that line of business (unless there is a provision in the contract which contradicts a custom)
explain terms implied by a previous course of dealings between the parties
Terms that have been consistently applied in past relationships between the parties may be considered to be implied in the current contract.
explain terms implied by the courts to reflect the presumed intention of the parties
two tests: business efficacy (contract makes business sense) and officious bystander
what case shows business efficacy test
The Moorcock 1889- D court should consider whether a term is necessary to make the contract work commercially- not enough that term would be reasonable to imply in the sense that it would improve it
what did MacKinnon LJ say in Shirlaw v Southern Foundries Ltd about the officious bystander test?
a term would only be implied if the point was so obvious that it went without saying that was what the parties intended
explain terms implied by the courts because of the type of contract
court identifies provisions which are typical of the kind of contract and say tehse are implied terms unless the party makes contrary provisions- common contracts e.g. tenancy agreements, employment contracts
how can terms by implied by statute?
sales of goods act, supply of goods and services act, consumer rights act
what is sales of goods act?
doesn’t apply to contracts for the sale of goods made between trader and consumer- only business to business, consumer to consumer or consumer to business
what is a condition?
major term of a contract (as opposed to a warranty which is a minor term)
what is section 13 of SGA?
where there is a contract for sale of goods by description, s 13 implies a condition that the goods will correspond to their description
what is section 14 (2) of SGA?
where the seller is selling in the course of a business, s 14 (2) implies a condition that the goods supplied will be of satisfactory quality
what is section 14 (3) of SGA?
where seller is in course of business and the buyer expressly or by implication makes known a particular purpose for which the goods are being bought, it implies a condition that the goods supplied are reasonably fit for that purpose
what are remedies for breaches of SGA?
reject goods and recover money (not applicable if breach is so slight it would be unreasonable or if the buyer has accepted the goods) or they can keep goods and claim damages if suffered loss
what is Sales of Goods and Services Act?
implies terms into a contract for services and contracts for work and materials that are not made between a trader and consumer
what are the two types of business to business contracts
work and materials/services
what are work and materials contracts
necessarily involve the supply of goods e.g. building offices or sports stadium
what are services contracts?
supplier simply contracting to provide a service e.g. cleaning
when are s 4(2) and s 4(5) of Supply of Goods and services Act applicable?
when foods are supplied in the course of a business
what are innominate terms?
impose no strict liability
what is the Consumer Rights Act?
to consolidate and clarify the law relating to the rights of consumers and protection of their interests
what does part 1 of the consumers rights act deal with?
consumer contracts for goods, digital content and services
what does the CRA apply to?
sales contracts between trader and consumer (sales of goods and any contract where goods are supplied and paid for as part of the contract
explain terms implied into sales contracts
ss 9-11= similar to those in SGA and SGSA i.e. satisfactory quality, fit for purpose and are as described, but NOT as conditions but as statutory rights
what are the consumers rights if the trader is in breach of ss 9-11 of the CRA?
short term right to reject and get full refund, right to repair or replacement, right to a price reduction or the final right to reject and get a partial refund to reflect the consumer’s use of goods
does the CRA apply to services contracts?
any contract for a trader to supply to a service/work to a consumer
explain implied terms in a services contract
carried out with reasonable care and skill, if no price has been fixed a reasonable price will be paid, where no performance has been foxed the work will be performed in a reasonable time- these are statutory rights NOT conditions
explain consumers rights to enforce terms about services
s 54 of CRA provides that where a service/work does not confrom tp the contract, consumer has right to require repeat performance or a price reduction (for breaches of time and care and skill) or the right to just a price reduction (reasonabel time)
what happens if a court decide a term is a warranty?
cannot terminate contract, btu can sue for damages
what happens if a court decides a term is a condition (if the contract hasn’t been fully performed)?
innocent party have option of terminating the future performance of the cintract as well as obtaining damages
what are exemption clauses?
seeks to exclude liability completely or to limit liability id a breach fo contract occurs or a tort is committed
what is needed for an exemption clause to be relevant?
breach of contract or a tort must have been been committed
how can exemption clauses be incorporated into a contract?
signature, notice, a previous consistent course of dealing
who needs to have signed the contract for the clauses to be incorporated?
only claimant- not party relying on clauses
explain incorporation by signature
if you sign a document then the clauses in that document will be incorporated as part of the contract even if you didn’t read them- L’Estrange v Graucob Ltd- small print but still incorporated
what is incorporation of clauses by notice?
document must be contractual by nature, innocent party must know of the clause to the party relying on the clause must have taken reasonable steps to bring it to the other’s notice before the contract is finalised
what are the 3 exemptions for incorporating clauses into a contract by signature?
illegibility, inaccurately described and claimant is relying on this description, unusual and onerous
what would a court regard as reasonable steps to notify a party before a contract is finalised?
position of the clause on the document e.g. please turn over, prominence of the clause on the document, type and nature of the clause i.e. is it unusual or onerous?
explain incorporation by a previous consistent course of dealing
dealing must be both consistent and amount to a ‘course’ of dealings i.e. a sufficient number of regular dealings
explain the contra proferentum rule when interpreting exemption clauses
if clause is ambiguous or unclear the court will interpret the clause against the party relying on the clause (applies to all clauses that are ambiguous not just exemption)- Houghton v Trafalgar Insurance
can exemption clauses cover the tort of negligence?
clear words needed to exclude liability for negligence but if wording is clear, the word ‘negligence’ doesn’t have to be used- Canada Steamship Lines v The King 1952
can an exemption clause over a breach of contract?
a serious breach provided the clause is clearly worded- Photo Productions Ltd v Securior
what is Unfair Contract Terms Act?
doesn’t apply to exemption clauses trader to consumer as they are governed by rules in CRA BUT UCTA applies to any clause excluding, limiting or otherwise restricting liability including a clause which makes liability subject to restrictive conditions
under the UCTA, can exemption clause limit liability for negligent breach of contract?
if causes death it is void, if any other damages, valid if reasonable
under the UCTA, can exemption clause limit liability for breach of express term of contract?
valid if reasonable
under the UCTA, can exemption clause limit liability for breach of terms implied by ss 13 and 14 of SGA?
valid if reasonable
under the UCTA, can exemption clause limit liability for ss 3 and 4 of SGSA?
valid if reasonable
what is the UCTA reasonableness test?
exemption clause must have been a fair and reasonable one to include having regard to the circumstances which were known to the parties or within the contemplation of that parties when the contract was made
for the reasonableness test, who has the burden of proof?
on party seeking to rely o the exemption clause to show it is reasonable
what factors are involved in the reasonable test?
relative strength of the bargaining positions of the parties/did the customer receive an inducement to agree to the exemption clause/did customer know about it/compliance conditions/were the goods manufactured to special order?
must the whole clause be reasonable?
court decided in Stewart Gill Ltd v Horatio Myer & Co Ltd that the clause was as a whole unreasonable
what did Lord Griffith state should be considered in determining whether this disclaimer was reasonable?
were the parties of equal bargaining power? would it be reasonable/practicable to obtain the advice from an alternative source taking into account considerations of cost and time, how difficult if the task being undertaken for which liability is excluded? what are the practical consequences of the decision on reasonableness?
when would a contract between a trader and consumer not be binding?
if it is unfair i.e. contrary to the requirement of good faith and causes a a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer
what is the general rule about exemption clauses and third parties?
an exemption clause cannot protect a third party as the privity rule applies that only a party can rely on a clause in a contract
what is the exemption to the rule that exemption clauses do not apply to third parties?
Contracts Act 1999- a third party can acquire rights if the contract expressly provides that they acquire a benefit or the term purports to confer a benefit on them
