Contract Terms & Legislative Control of Unfair Terms Flashcards
What is the difference between express and implied terms?
- Express: Those included in the contract and agreed upon by words by the parties
- Implied: Those not included in the contract but can be found either on the intention of the parties, by operation of law, custom or usage
What is the rule on signature for express terms?
- L’Estrange v Graucob, if a party signs a contract they are bound by it, even if they did not read it
- However, if terms are misrepresented then a party cannot rely on the fact that a contract was signed, Curtis v Chemical Cleaning Co
When will a notice be effective to mean an express term can be incorporated?
- Term not incorporated in the contract if the document it is set out in is not intended to have contractual effect
- Parker v Southern Eastern Railway, test for whether a term is incorporated by notice is is whether reasonable notice
- Thorton v Shoe Lane Parking, reasonable notice must be given for an exclusion notice. Notice came too later after contract was formed (Olley case)
- Interfoto v Stiletto Visual, where a term is particularly onerous or unusual, the party enforcing it must show it was fairly brought to the other parties attention
What has the court said with regards to modern methods of incorporating terms?
Parker-Grennan v Camelot UK Lotteries
* Simple click-wrap methods are sufficient as they incorporate terms by giving notice to the consumer
* However, this does not include where they have a time limit or are not easily accessible to the consumer
* If a term is onerous or unusual more will still need to be done for them to be incorporated
NOTE: Onerous terms may be noted next to the checkbox (i.e. I agree and recognise that…)
How do previous course of dealings affect the incorporation of express terms?
McCutcheon v MacBrayne: Previous dealings are relevant only in some cases. Judicial task is to decide what each was reasonably entitled to conclude from the attitude of the other
What is the rule on interpretation of express terms generally?
ICS v West Bromwich BS
1. Interpretation is the meaning of the document that the reasonable person would find having all the knowledge that would have been available to the parties at the time they made it (BASIC PRINCIPLE)
2. This includes absolutely anything relevant that would affect the way in which the document can be understood (CONTEXTUAL)
3. However, previous negotiations of the parties and declerations of subjective intent are not to be considered (only admissable for rectification)
4. Meaning of the document is not a matter of what the words mean. Background to the document may entail the reasonable person to conclude that the parties may have used the wrong words
5. If one concludes that something has gone wrong with the language, this does not require judges to attribute an intention which they plainly could not have had (presumption that people do not easily make linguistic mistakes)
How has the position of interpreting express terms developed over time?
- Rainy Sky: If there are two possible constructions the court should pick the one that is consistent with business common sense, BUT if unambigious language is used the courts must apply it
- Chartbrook: Where there is a clear mistake, there is no limit to the amount of correction that the court is allowed to undertake
- Arnold v Britton: Commercial common sense and surrounding circumstance should not be invoked to undermine the importance of the language. Courts should be slow to reject the natural meaning of a provision because it is imprudent on one party (seems to pull back from Chartbrook)
What do the most recent case on contractual interpretation tell us?
Sara & Hossien Holdings v Blacks Outdoor Retail
* Supreme Court gave an interpretation that neither party advanced
* Lord Briggs said this solution was an imaginative construction not derived by a process of construction of the terms (i.e. simply producing the more favourable result)
Tesco Stores v USDAW
* Held that Tesco’s was barred from a process of firing and rehiring employees to get out of paying them a higher salary
* The contract said this was ‘permanent’, Supreme Court took this as meaning for as long as the person was employed in the same role, not how long the contract was
* The purpose of interpretation is to identify what the parties have expressly agreed, not what the court thinks they should have agreed
What does the case law tell us about the interpretation of exemption clauses?
Photo Productions v Securicor, there is no rule of law that prevents exclusion clauses from applying to a fundamental breach. Whether they do is a matter of construction of the contract
In what two ways may a term be implied into a contract?
- Terms implied ‘in law’ (i.e. those implied by policy grounds into contracts of certain types or by statutory grounds)
- Terms implied ‘in fact’ (i.e. those implied into an individual specific contract based on the intention of the parties)
How may terms be implied into a contract by statute?
- BUSINESS TO BUSINESS: Sale of Goods Act 1979, s12-15A (terms about title, description, quality, sample)
- This may be excluded if reasonable under s6(1A) UCTA 1977
- BUSINESS TO CONSUMER: Consumer Rights Act 2015, s9-18 (goods) & s50-57 (services)
- Rights are not excludeable under S31(1)
How was a term implied in law in the case of Liverpool CC v Irwin?
- Court found it necessary to imply a term in order to make the type of contract at hand (i.e. a lease) effective
- The test is that a term should be implied if required by the nature of the contract, not beacuse it would be reasonable
How are terms to be implied in fact according to the case law?
The Moorcock
* Business Efficacy Test: Must be necessary in order to give business efficacy to the contract
* Officious Bystander Test: Is the term so obvious that it goes without saying?
AG of Belize v Belize Telecom
* The most usual inference is that nothing is to happen
* Said there is only one question, if the implied term is included is that what the instrument read as a whole would reasonably be understood to mean?
Marks & Spencer v BNP Paribas
* Discussion in Belize should be treated as discussion rather than authority (i.e. the idea of one question)
* Thought it could lead the lower courts astray
* Retreat to the old cases, consider what is necessary for business efficacy and what the reasonable person in the shoes of the party would think
* ‘Express words would be needed before it would be right to imply a term to the contrary’ (?)
How has Barton v Morris complicated the law on implied terms in fact?
- MAJORITY: No term could be implied by statute or common law because the contract was not silent as to remuneration (i.e. if sold for less than 6.5 million he would get nothing), it was a gamble
- MINORITY: A contract is presumed to include any term implied in law as a standard incident, unless it is expressly excluded. Silence did not mean that the loss lay where it fell, but the deafult law should apply
Both agreed this was an ‘if and only if’ contract, majority in the strong sense, minority in the weak sense (complete or partial statement?)
How might a term for an obligation to perform in good faith be implied?
Yam Seng
Courts may imply a term to perform a contract in good faith, said we must ask whether conduct would be regarded as comercially unacceptable by reasonable and honest people
Tesco Stores v USDAW
Implied a term precluding exercise of Tesco’s otherwise unqualified termination rights to dismiss employees in order to deny them the benefit promised
How are exemption clauses and unfair terms dealt with in non-consumer contracts?
Unfair Contract Terms Act 1977
* S2-7 establish situations in which a party may try to restrict their liability and the limits to this
* S11 establishes the reasonableness test
* S13 gives further examples of terms that will be excluded (i.e. other forms of exemption)
* Sch 1 and 2 make guidelines to the above sections
Smith v Bush
A duty defining or ‘basis’ clause will be caught by the UCTA. This is because of the final part of S13(1), therefore it could come under negligence liability
How are exemption clauses and unfair terms controlled in consumer contracts?
Consumer Rights Act 2015
* S31, liability that cannot be excluded under a goods contract
* S57, liability that cannot be excluded under a service contract
* S61-76, control of unfair terms
* Sch 2, consumer contract terms that may be regarded as unfair (effecting s63)
Office of Fair Trading v Abbey National
Charges were to be regarded as falling within the scope of the act and being a core term because they were part of the price or remuneration paid by the customer in exchange for the ‘package of services’
ParkingEye v Beavis
Term giving charge for going over time limit was not unfair because it was not contrary to the good faith requirement (S62(4)) because consumers would understand the purpose is to free space, the charge of £85 was not exorbitant
