Contents of a Contract Flashcards
Circumstances where the court may imply a term into a contract
- Custom or trade usage (both in same trade / area)
- Consistent course of dealings
- Necessary to make a contract commercially viable (business efficacy test)
- So obvious parties intended it (both must be in agreement) (officious bystander test)
What is the business efficacy test
A term will be implied if…
Necessary to make contract commercially viable
What is the officious bystander test?
Term will be implied if…
So obvious goes without saying the parties intended it.
Both must agree to term
Who does the SGA 1979 apply to?
- b2b
- c2c
- c2b
Only sale by description applies to consumers (not quality / purpose)
Who does SGSA 1982 apply to?
b2b
Who does the CRA 2015 apply to?
t2c
What are the statutory implied terms?
- comply with description
- satisfactory quality
- fit for purpose
- reasonable skill and care
- reasonable time (if not otherwise agreed)
- reasonable price (if not otherwise agreed)
When is the class of term relevent?
Obligations are unfinished
What statutory implied terms are conditions (strict liability)
- correspondence with description
- satisfactory quality
- fit for purpose
What statutory implied terms are innominate?
- reasonable skill and care
- reasonable time
- reasonable price
When will the court imply a term due to previous course of dealings?
- consistent (same terms + signed)
- course (high number + regular basis)
What is the test to determine whether a term is a condition or warranty?
Whether a reasonable person would think the parties intended the term to be a condition / warranty at the time the contract was made
classification in contract can be rebutted
Remedies for breach of a condition
- Termination (only if future obligations)
- Damages
What is an innominate term?
- Cannot be classified at outset as wide spectrum of possible breaches
- parties wait and see consequence of breach
- condition if effect deprives innocent party of substantially whole benefit of contract
When is an innominate term a condition?
Breach deprives innocent party of substantially whole benefit of the contract
3 conditions
When is the term that goods must comply with description implied by statute?
CRA / SGSA / SGA
- b2b (SGA or SGSA), c2b or c2c (SGA) or t2c (CRA)
- Buyer relies on a description
- Reasonable to rely on description
When are the conditions that goods must be of satisfactory quality / fit for purpose implied by statute?
SGA / SGSA / CRA
Sold in the course of a business (b2b or t2c only)
Never if a consumer is selling
3 exceptions
What are the exceptions to the GR that goods must be of satisfactory quality?
Before the contract is made…
1. Defect is specifically drawn to buyer’s attention; or
2. Buyer examined goods and should have noticed defect; or
3. Buyer was supplied a sample and defect was present.
When can a buyer rely on ‘fit for purpose’ if not using for intended purpose?
- Sold in course of business
- Buyer makes purpose known to supplier
- Reasonable to rely on supplier’s skill / knoweldge
What are the statutory remedies under SGA for breach of statutory condition?
e.g. Compliance with description, satisfactory quality, fit for purpose
- Terminate + reject goods + full refund; or
- Affirm + keep goods + damages; or
- Damages only
Cannot terminate if fails to reject in reasonable time or minor defect
When is termination unavailable as a remedy under the SGA?
- Buyer accepts goods + does not reject in reasonable time; or
- breach is very small (e.g. goods still usable)
Burden is on seller prove that minor breach
When will reasonable time and sum be implied?
No express agreement in contract
Can liability be excluded or restricted for breach of statutory condition?
e.g. by description, satifactory quality, fit for purpose
- If b2b: UCTA (yes, if reasonable)
- if t2c: CRA (no)
Statutory remedies for breach of statutory condition under CRA?
Within 30 days of delivery / installation:
* rejection + full refund
Within 6 months of delivery / installation:
* repair or replacement; or
* price reduction OR rejection + partial refund (only if repair / replacement is inappropriate)
EXCEPTIONS:
* if perishable: time limit as long as goods can be expected to last
* no remedy after 30 days if seller can prove goods conformed with contract on day of delivery
Statutory remedies under CRA for breach of
* reasonable care; or
* express term
- repeat performance (if reasonable); or
- price reduction
- damages for breach of express term
Statutory remedy under CRA for breach of:
* implied terms reasonable time and price
* express term relating to time
Price reduction
When is a clause incorporated?
- Signature (unless illegible OR misrep OR unusual or onerous + not drawn to attention OR mistake)
- Notice (contractual in nature + C knows of clause OR D took reasonable steps to alert C)
- consistent course of dealings (same terms + signed + regular + frequent)
3 exceptions
Exceptions to the GR that a signed contractual document incorporates a clause?
- clause is illegible (more than regrettably small) ; or
- effect is described inaccurately + C reasonably relied on misrep (e.g. consumers not businesses); or
- unusual and onerous + not fairly drawn to C’s attention
Conditions for terms in an unsigned document to be incorporated?
e.g. notice / ticket
- contractual document (reasonable person would expect to contain terms)
- C knows of clause OR D takes reasonable steps to bring it to C’s notice
- C knows of clause before contract is finalised UNLESS consistent course of dealings
Contra proferentem rule?
Court will interpret an ambigious clause in favour of C
Coverage / construction rule for exemption clauses?
clause must cover:
1. breach
2. loss / damage
3. remedy
What conditions must be satisfied for an exemption clause to be enforceable?
- Incorporated
- Construction
- Reasonable / Fair (if implied term OR express term in standard T&Cs OR express term in consumer contract)
An express term in bespoke b2b contract does not need to be reasonable
When will an exemption clause be automatically void?
Excludes liability for death or personal injury
Can liability be excluded for breach of an express term in b2b contract (not T&Cs)?
Yes provided incorporation and construction conditions satisfied.
No need to satisfy reasonableness test in UCTA
UCTA reasonableness test
Was the clause reasonable to include at the time the contract was made?
Burden is on person seeking to rely on clause to prove reasonable
Who must prove an exemption clause is reasonable?
person seeking to rely on it (benefit from it)
Factors the court will take into account when considering whether an exemption clause is reasonable?
- strength of bargaining position (size, age and experience)
- ability to bear loss (resources)
- inducement (price reduction) abiilty to enter similar contract without exemption clause
- reasonable to expect C to comply with condition? (how long for defect to emerge / perishable?)
- Special order
- Best placed to insure
- Difficulty of task
- Practical consequences (invalid if loss bourne by taxpayer / D stands to profit)
- Knew of existence (clear / previous dealings)
When is UCTA not applicable?
- t2c contract
- contract of insurance
- contract relating to creation, transfer or termination of an interest in land
When is UCTA applicable?
- Negligent breach
- breach of statutory implied term
- breach of express term in standard T&Cs
When is an exclusion clause under CRA void?
Statutory conditions (as described, fit for purpose, quality)
* excludes or restricts liability
Reasonable skill
* excludes liability
* restricts liability + prevents C from obtaining remedy
Death and personal injury
* Excludes liability
Any statutory term
* makes enforcement subject to restrictive or onerous condition
* Puts C at a disadvantage for pursuing right / remedy
* excludes or restricts rules of evidence or procedure
Express terms
* Causes a significant imbalance to the detriment of consumer (i.e. unfair)
Loss resulting from property damage
1. Were parties of equal bargaining power?
2. Difficulty of task
3. Best placed to insure?
Can a 3rd party be protected by an exemption clause
i.e. be sued personally?
GR: An exemption clause cannot protect a 3rd party
EXCEPTION:
A 3rd party can rely on an exemption clause if:
1. named OR member of class OR answers particular description; and
2. express benefit or purports to confer benefit + nothing to contrary; and
3. exemption clause is valid (incorporated, construction + reasonable (if applicable))
