Contract terms Flashcards
Terms, collateral warranties and representations
Terms: an enforceable part of the contract (further broken down to conditions, warranties and innonimate terms)
Collateral warranties: mini collateral contracts to a big contract
Representations: statements about the contract but are not legally enforceable (though see misrepresentation)
Distinguishing terms from representations (considerations)
intention to be bound is considered (Heilbut v Buckleton [1913]), knowledge of the parties (where greater knowledge increases likelihood of it being a term) (Oscar Chess v Williams [1957] and Dick Bentley v Harold Smith [1965]), time elapsed between statement and manifestation (longer = more likely to be a representation) (Routledge v McKay [1954]), importance of statement (Bannerman v White (1861)) and incorporation into written document (Heilbut).
Collateral warranties
Collateral warranties are mini collateral contracts conferring a right to damages (Frisby v BBC [1967]) and are often assurances on certain points (Esso v Mardon [1976]). It is used in contracts between three parties (Shanklin Pier v Detel [1951]).
Conditions
Conditions can be promissory where the condition is a promise and the contract can be repudiated if untrue (Behn v Burness (1862)). They can also be non-promissory where a contract lies on the fulfilment of another condition with no guarantee that it will be fulfilled (Trans Trust v Danubian Trading [1952]). It may create a contract which cannot be resiled from unless the contract is not fulfilled (Total Gas v Arco [1998]).
Warranties
Warranties are not essential to a contract (Dawson v Bonnin [1922]). They give rise to damages if breached (Bettini v Gye [1976]).
Definition of conditions/warranties in a contract
Warranties and conditions are defined ab initio for certainty (The Mihalos Angelos [1971]) but when not done so intermediate terms have arise.
Intermediate terms
Intermediate terms were established in Hong Kong Fir [1962] and they are terms which, if breached lightly, cause no real damage but if breached massively give rise to a repudiation of the contract. the breach must be so that it deprives the innocent party of the benefit of the contract. the courts calculate them on the commercial significance of the breach (State Trading of India v Golodetz [1989]).
Right to discharge
Right to discharge can be lost through waiver or affirmation (s11(1) SoGA) or acceptance through intimation or lapse of time (s35).
Implied terms
Courts only interpret made contracts (Phillips Electronique v BSB [1995]). Some terms are implied in standard contracts (employment, tenancy, etc).
Why do they imply terms?
Terms may be implied where they would be added by the parties but they have forgotten to do so (The Moorcock (1889)). This is where the contract would be unworkable otherwise.
Officious bystander test
The officious bystander testis a test where the courts imply terms which the parties would reply ‘Oh of course we’ll imply that’ if asked during contracting (Shirlaw v Southern Foundries [1925]). The term must be precise (Phillips Electronique v BSB [1995]), not inconsistent with express terms of the contract (Duke of Westminster v Guild [1985]) and the courts are reluctant to do so where the contarct is detailed (Shell v Lostock [1976]). The touchstone is necessity (Liverpool CC v Irwin [1977).
Implied through custom
Terms can be implied through custom if they are binding, reasonable, consistent with the express terms of the contract (Nelson v Dahl (1879)).
Implied through statute
Terms can be implied by statute in ss12-15 of the SoGA 1979 which include right to sell the goods in question, the buyer will have exclusive ownership of them, the goods sold are as appear in the description, the goods are of satisfactory quality (based on the price and context (Brown v Craiks [1970])) and they are fit for purpose.
Objective of judicial construction of contracts
The object is to discover mutual intention (Pioneer v Tioxide [1982]). The modern approach is to find the meaning of the contract subject to its context and all background knowledge (Investors Compensation Scheme v West Brom Building Society [1998]). Past dealings are not considered (Chartbrook v Persimmon Homes [2009]).
Rules of construction
There are particular rules of construction, including that words with dual meanings are given the meaning that makes the instrument valid (Haigh v Brooks (1839)), greater regard is to be had to clear intent (Ford v Beech (1848)), greater weight is to be had to express terms rather than pre-printed ones (The Starsin [2003]), an express mention of a thing excludes things of similar nature (Hare v Horton (1833)), general words will be narrowed by their context (Tillmanns v Knutsford [1908]), and words of written documents are used more forcibly against the party who wrote it (Tan Wing Chuen v Bank HK [1996]).
