Contract: Contents of a Contract

Question 1

What is an express term?

Answer 1

Terms that both parties have expressly agreed to - must be incorporated into the contract.

Question 2

What is an implied term?

Answer 2

Read into the contract. Not expressly stated, but implied in fact or in law.

Question 3

In what ways can terms be implied into a contract?

Answer 3

1. Local custom or trade usage (Hutton v Warren)
2. Previous course of dealings (Spurling J Ltd v Bradshaw)
3. Presumed intention of the parties (Business efficacy and officious bystander tests)
4. Type of contract (Liverpool City Council v Irwin and Another)

Question 4

What is the ‘business efficacy’ test?

Answer 4

Established in The Moorcock: The court should consider whether a term is necessary to make the contract work commercially.

Question 5

What is the ‘officious bystander test’?

Answer 5

Established in Shirlaw v Southern Foundries Ltd: A term could only be implied if the point was so obvious that it went without saying that that was what the parties intended.

Question 6

Where there is a contract for the sale of goods by description which statute implies a condition that the goods will correspond with their description.

Answer 6

s 13 SGA 1979 - this term will be implied whether the seller is a business or a private individual.

Question 7

Where the seller is selling in the course of a business to a commercial buyer, which statute implies a term that the goods supplied will be of satisfactory quality?

Answer 7

s 14(2) SGA 1979

Question 8

Where the seller is selling in the course of a business to a commercial buyer, which statute implies a term that the goods are reasonably fit for the purpose which the buyer expressly or by implication makes known to the seller?

Answer 8

s. 14 (3) SGA 1979

Question 9

What are the remedies for breach of terms implied by s 13 and s 14 of the Sale of Goods Act 1979?

Answer 9

• Terminate the contract
• Reject the goods even if the breach is minor
• Sue for damages if there is any further loss
• Alternatively, the buyer may affirm the contract, keep the goods and just sue for damages for any loss suffered.

Question 10

Where the supplier of a service is acting in the course of business which statute implies a term that the supplier will carry out the service with reasonable care and skill?

Answer 10

s. 13 SGSA 1982

Question 11

Which statute implies that a service will be carried out within a reasonable time in the absence of an express term?

Answer 11

s. 14 SGSA 1982

Question 12

What is a condition?

Answer 12

A major term or, as some writers say, a term ‘going to the root of the contract’.

Question 13

What is a warranty?

Answer 13

A warranty is a term of less importance, not going to the root of the contract.

Question 14

What is an innominate term?

Answer 14

Looks at consequences of the breach in deciding how serious it is and what remedy to award.

‘Does the breach deprive the innocent party of substantially the whole benefit of the contract?’ (Hong Kong Fir v Kawasaki)

YES = Treat breach as a condition
NO = Treat breach as a warranty

Question 15

What terms implied by virtue of statute are conditions?

Answer 15

 Ss. 12-15 SGA 1979
 SS. 3-4 SGSA 1982
 SS. 9-17 and 49-52 CRA 2015

Question 16

What terms implied by statute are treated as innominate?

Answer 16

Ss. 13 & 15 SGSA 1982

Question 17

What remedies are available for breach of a condition?

Answer 17

1. Option of terminating the future performance of the contract.
2. As well as obtaining damages for any additional loss suffered.

Question 18

What remedies are available for breach of a warranty?

Answer 18

Can only sue for damages for loss suffered.

Question 19

What remedies are available for breach of an innominate term?

Answer 19

If deprived of substantially the whole benefit of the contract, the innocent party has a right of election, exactly as for conditions (to choose to terminate or affirm the contract and to claim damages)

If it does not, then only damages available.