Contract 5 - Terms of the contract Flashcards
What are the types of statements made in negotiations?
- Term = statements of fact parties intend to be binding
- Representation = statements of fact/law which parties don’t intend to be binding but help induce making of the contract
How can you determine if a statement is a term or representation?
By the intention of the parties
Objective = reasonable person test
What factors will the courts take into account when deciding if a statement is a term or representation?
- Importance of the statement (would the contract exist without it)
- What stage in the negotiations was it made?
- Whether the party making the statement had specialist skill and knowledge
Explain the remedy available for terms and representations
- Terms = breach of contract = damages
- Misrepresentation = depends on circumstance and damages likely to be lower
What are the 3 types of terms?
- Condition
- Warranty
- Innominate term
What are the main principles of conditions?
- The root of the contract - without the term the contract does not work
- Repudiatory breach = repudiates contract if condition breached
- Innocent party can terminate and claim damages
- If innocent party continues and affirms contract = can only claim damages not terminate
What are warranties?
A term that’s incidental to the main terms of a contract
If breach a warranty =can only claim damages
What’s an innominate term?
Unclear at outset if it’s a condition or warranty = not clear how severe the consequences of a breach would be
How do courts determine if an innominate term is a condition or warranty?
Will look at effect of breach
If innocent party loses whole benefit of contract = term
If incidental = warranty
How does ‘Time of the essence’ relate to conditions and warranties?
If a party doesn’t perform obligations when required by the contract
If time is of the essence of obligation = condition and can terminate and claim damages
Presumption commercial contracts that time is of the essence if a delivery time has been agreed
If time is not of the essence = warranty and only claim damages
When will a term form part of the contract?
When parties have reasonable notice of it
What is the parol evidence rule?
General presumption that external evidence cannot add to or vary terms of a written contract
What are the exceptions to the parol evidence rule?
- Implied terms
- Collateral contracts
- Contract was always partly written and party oral
What is an entire agreement clause?
Where the written document constitutes entire agreement except if its seen to try and reduce liability for misrepresentation
How can a contract term be implied?
- Statute
- Courts
- Custom and usage
- Course of dealings between the parties
What are the main sources of terms implied by statute?
- Sale of Goods Act 1979 (SGA)
- Consumer Rights Act 2015 (CRA)
- Supply of Goods and Services Act 1982 (SGSA)
Who does the SGA apply to?
Private sales and business to business transactions - sale of goods and services
What are the terms implied by SGA to a contract?
- Seller has title / legal right to goods they’re selling
- Goods match description applied to them by the seller
- Must be satisfactory quality
- Must be fit for particular purpose
What does satisfactory quality mean by SGA
- Fit for the purpose for which the goods are used
- Free from minor defects (unless buyer told)
- Safe and durable
Explain what happens if any implied terms by SGA are breached?
Condition = terminate contract and damages but buyer must return goods
If breach slight and unreasonable to reject goods = warranty
Can you exclude liability for SGA implied terms?
No - Unfair Contract Terms Act 1977 excludes liability as to title
Other implied terms liability exclusion only valid if reasonable
Who does the Supply of Goods and Services Act 1982 apply to?
Business to Business transactions for the hire of goods and contract for services
What terms are implied by SGSA?
- carry out service within a reasonable time = innominate term
- Seller has title / legal right to goods
- Goods match description
- satisfactory quality
- fit for purpose
Can you exclude liability under SGSA?
No - Unfair Contract Terms Act 1977 excludes liability as to title
Other implied terms liability exclusion only valid if reasonable
What terms are implied by CRA for sale and supply of goods?
All goods:
1. Match description
2. Satisfactory quality
3. Fit for purpose
Who does the Consumer Rights Act 2015 apply to?
Sales contracts between trader and consumer
What is the difference between liability between CRA and SGA?
Liability for breach of implied terms cannot be excluded or limited
What terms are implied by CRA for provision of services contracts?
- Carried out with reasonable care and skill
- Completed in accordance with any info the consumer relied on
- Completed for reasonable price
- Completed within reasonable time
What terms are implied by the courts?
Terms implied by facts
‘Business Efficacy’ - make the contract work that reflects parties intentions
‘so obvious’ and necessary to include (unless it contradicts express terms)
What are terms implied by custom and usage?
Industry or market standard = imply terms that are normal
Can be excluded by express term
What terms are implied from course of dealings between the parties?
Regular and consistent course of dealings = imply the same terms as before
When will the courts not get involved if there are vague terms or incomplete agreements?
If the courts cannot conclude intention of parties without its intervention
Must be sufficiently certain
What does ‘Agreement to agree’ mean on an essential term?
Contract is uncertain and will not exist - courts will not get involved
When will the courts get involved in incomplete or vague terms?
- Contracts stating mechanism to resolve uncertainty agreed between parties
- Commercial cases = parties familiar with trade and they think there is a binding contract already
- Contracts for future performance over a period of time
- Partial performance
- One of parties made an investment based on contract
Do the statues assist in assisting contracts where there are incomplete terms?
Yes e.g.
1. Price (reasonable)
What will happen if the courts cannot find sufficient certainty to enforce a term?
It will be severed from agreement
What test will the courts use in deciding whether to sever a term?
Can it be severed without affecting whole agreement?
More essential the term = harder for the court to sever
What happens if the courts cannot sever an essential term?
Contract is void for uncertainty
