Contracts - 1.7 - Terms Flashcards
Contract formation requires
Offer & Acceptance
Consideration
ICLR
Capacity
Ways in which an otherwise good contract might be voided
Duress and undue influence
The content of a contract
Means the terms and interpretation of contracts
Express Terms
Terms communicated between the parties
Implied Terms
Terms that have not been communicated between the parties, but the law assumes or decides they exist.
Statements made by parties during negotiations may be divided into three groups
1) Mere puffs - no legal significance
2) Representations - statements not intended to be binding
3) Statements of fact - intended on being binding
When does the distinction between representations and terms matter?
- The statement turns out to be untrue
- Promise is not fulfilled
Is there a remedy in law for misrepresentation?
Yes
The difference between a representation and a term
Only a Term is binding
How do Courts ascertain if parties intend to be bound by a statement made by one of them?
An objective test
What would a reasonable person understand to be the intention of the parties having regard to all circumstances
What is taken into account when ascertaining whether a statement is binding?
- The importance of the statement
- The timing of the statement
- The reduction of the contract into writing
- Special knowledge/skill of person making statement
- Assumption of responsibility
The importance of the statement
- Regarded a Term if it can be shown that the injured party would not have entered into the contract but for that statement.
Bannerman v White 1861
The Terms of a contract are….
- It’s contents
- They define rights and obligations
Express terms
Statements made by the parties, by which they intend to be bound.
A contract can have terms agreed in writing, or agreed orally, or a mixture of the two.
Implied Terms
Not formed by statements made by the parties.
They have not been agreed
upon, orally or in writing.
The law deems that they exist.
Mere Puff
Statements of no legal significance.
Representations
Statements of fact or law which induce the making of the contract which the parties do not intend to be binding.
Terms
Statements of fact which the parties intend to be binding.
Why does distinction between representations and terms matter?
- When a statement is not true
- May amount to a breach of contract, leading to remedies or damages
- Misrepresentation is not a breach, but may be able to obtain a remedy in law.
Can a statement be both a term and a representation
YES
This would give rise to an action for both breach of contract and misrepresentation
What is the objective test for whether parties intended to be bound by a statement?
‘what would a reasonable person understand to be the intention of the parties, having regard to all the
circumstances?’
Where a statement is made during negotiations for the purpose of inducing the other party to enter a binding contract,
There is ground for inferring the statement was intended to be binding.
The inference can be rebutted if the party if it can be shown that it is not reasonable to hold them bound to it
The importance of the statement
Statement may be regarded as a term, if it can be shown it was so important that the counterparty would not have entered into the contract but for that statement
- Bannerman v White
Bannerman v White
- Purchase of hops
- Not interested if they are treated with sulphur
- Held that the statement was a term of the contract
Timing
- If the statement was made at the time of contracting, it’s more likely to a term than if at an early stage
Routledge v McKay, 1954
Routledge v McKay [1954]
- Private seller of motorcycle
- Told the buyer it was a 1941 or 1942 model
- Entered into sale, did not mention the year of the model
- CoA held that the time lapsed meant the statement was a representation and not a term of contract.
Reduction of the contract into writing
- Court influenced by the fact contract reduced into writing.
- Inference drawn is that the statement could not have been regarded as significant
- Court concluded the statement was never intended to be a term
eg Routledge v McKay: Motorcycles
Special knowledge or skill
When one party had exclusive access to info or special knowledge this is likely to be taken into the other’s favour.
Oscar Chess Ltd v Williams vs Dick Bentley Productions v Harold Smith (Motors)
Oscar Chess Ltd v Williams
- Age of car wrong (1939 rather than 1948)
- The skill and expertise lay in the hands of the car dealer
- Consequently age of the car was a representation rather than a term
Dick Bentley Productions v Harold Smith (Motors)
- Told consumer that car had done 20,000 miles
- After changing the engine and gearbox it was clear that the car had done more miles
- Court of Appeal held the mileage was a term.
Harold should have known better
Assumption of Responsibility
A statement may become a term of the contract where the vendor expressly accepts the responsibility for soundness of the sale item in question.
Schawel v Reade 1913
Schawel v Reade 1913
- Horse for stud purposes
- Tried to examine stud horse, was told the horse was sound in every way.
- At the time of sale was the horse represented as fit for stud purposes?
- Did the purchaser act on that to but the horse?
- Strength of statement dissuaded plaintiff from making checks
Ecay v Godfrey (1947)
- Seller of a boat stated it was sound but advised the buyer to have it surveyed
- Buyer did not intend that his statement should be taken as a term of the contract.
- Onus of verification on purchaser
In deciding if a statement is a representation, the court will consider
- The importance of the statement.
- The timing of the statement.
- The reduction of the contract into writing.
- Special knowledge or skill of the person making the statement.
- Assumption of responsibility by the person making the statement.
How are express terms incorporated
- A signed written contract
- Incorporation by notice
- Other ways of agreeing express terms
- Incorporation by a course of dealing
A signed written contract
In almost all cases then signing a contract shows that parties intended to be bound.
Even if they have not read the terms or understood them L’Estrange v Graucob Ltd
Exception to Incorporating terms by signed written contract
Grogan v Robin Meredith Plant Hire [1996]
If the document signed was not intended to have any contractual effect (eg it was a document simply acknowledging receipt of goods) then the terms within it will not form part of the contract.
‘post contractual document’
Oral Misrepresentation
Curtis v Chemical Cleaning and Dyeing Co [1951]
A party may be prevented from relying on incorporation of a clause through signature
of a document if it has orally misrepresented the meaning of the clause to the other party`
Incorporation by notice
ie by one party notifying the other party of them.
Where reasonable steps have been taken to draw terms to a party’s attention, that
party’s persistence with the transaction suggests an intention to be bound by the terms
Parker v South Eastern Railway Co (1876-77)
Reasonable Notice: Incorporation by notice
Thompson v London, Midland & Scottish Railway [1930]
* terms may be incorporated by reference to a different document (in this case the contractual document, a ticket, referred to terms contained within a railway timetable)
Insufficient notice
- Henderson v Stevenson (1875): where the clause was not referred to on the front of the ticket
- Sugar v London, Midland & Scottish Railway [1941]: clause was illegible.
Incorporation by notice of adverse terms
- Must clearly bring these tot the other party’s attention
- Denning MR stated that would need printing in red ink with a red hand to it or something equally startling
(Thornton v Shoe Lane Parking) - Confirmed in: Picture Library Ltd v Stiletto Visual Programmes Ltd [1989]
Parker v South Eastern Railway Co (1876-77)
- Limit of liability for bags costing more than £10 that are lost or stolen.
- Notified via signs
- Parker argued he did not see notice or ticket believing it was a receipt
- Court held that an individual cannot escape a contractual term by failing to read the contract but that a party wanting to rely on an exclusion clause must take reasonable steps to bring it to the attention of the customer.
Thompson v London, Midland & Scottish Railway [1930]
- Exclusion clause for inuries
- Company had taken sufficient steps to bring the terms to customers’ attention in clear and legible print.
- Accepting the ticket for travel constituted acceptance of the terms of travel
- Reference to the time tables amounted to adequate notice of the existence of the terms and of their contents.
Henderson v Stevenson (1875)
- Luggage lost on voyage
- Ticket by steamer
- not on front of the ticket
Sugar v London, Midland & Scottish Railway [1941]
A date stamp made the writing on the ticket illegible. The clause was therefore not incorporated.
Thornton v Shoe Lane Parking [1971]
- Ticket tried to incorporate conditions displayed on premises.
- Slipped/liability
- When did offer and acceptance take place
- Exclusion clause not successfully incorporated; not brought to attention prior to contract formation.
- Offer was notice at entrance - too late to retract.
Interfoto Picture Library Ltd v Stiletto Visual
Programmes Ltd [1989]
- Transparencies should be returned, holding fee.
- SCP contended they were unaware of standard conditions and had not be sent copy prior.
- Insufficent steps to communicate onerous terms
- Clause not successfully incorporated into the contract.
- Where a clause is particularly onerous, as in this case, and the fees are exorbitant at ten times the level of other photographic libraries, the party seeking to rely on the clause must show they have taken reasonable steps to bring the clause to the other party’s attention.
- IPL had failed to do this and they could, therefore, only recover fees assessed on a quantum meruit basis.
Incorporation of terms: Timings
- Reasonable notice of it must be given before or at the time of contracting.
- Clause not binding term if it is
communicated only after the contract is made
Thornton v Shoe Lane Parking [1971]
Thornton v Shoe Lane Parking [1971]
Car parking
The contract had been formed before the machine produce the ticket, and the conditions referred to on the ticket or later were not incorporated into the contract
Contractual Effect - Incorporation of terms
Terms will only be incorporated by notice if the document giving notice was intended to have ‘contractual effect’
Chapleton v Barry UDC [1940]