Determining the terms of a contract Flashcards
What are the two types of contract terms?
- Conditions
- Warranties
Express or implied
What is the difference between a term and a representation?
- Term = statement of fact during negotiations incorporated into the contract itself
- Representation = statement of fact not incorporated but made to induce other party to contract
What is the standard of measure you use to determine if something is a term or a representation?
Intention of the parties, viewed objectively from a reasonable person’s perspective and having regard t conduct of parties
What factors do the courts use to determine if something is a term or a representation?
- Importance of the statement (would party have contracted if it as not for statement, if no = term)
- What stage of negotiations was statement made (at time of contract = term, preliminary negotiations = rep)
- Did the statement maker have specialist knowledge or information or a particular skill (if within scope of knowledge = term)
What happens if there is a breach of a term?
It is a breach of contract
What happens if there is a breach of a misrepresentation?
Remedy depends if the representation was made innocently, negligently or fraudulently and the amount of damages may be less
What is the remedy for a breach of a condition?
innocent party can terminate the contract
What is a term called if it cannot be determined to be a condition or a warranty?
Innominate term
Will the courts look at the label given to a term and agree that it is a condition, if labelled as such?
No, they will look at the actual effect of the term
What is a condition?
Fundamental term going to root of contract, breach of which makes the contract unworkable
Why is a breach of a condition called a repudiatory breach?
Party breaching it is repudiating the contract ntirely
What can an innocent party do if there is a breach of a condition?
Terminate contract and claim damages
What if an innocent party does not terminate the contract for breach of a condition?
They lose their right to terminate but can still sue for damages
What is a warranty?
Incidental or collateral term to the main terms of a contract
Can an innocent party terminate the contract for a breach of a warranty?
No
What is an innominate term?
Term which is unclear as to being a warranty or condition
What will the court do if an innominate term is breached?
Look at the effect of the breach and determine the remedy
If a term contains something that implies time is of the essence, is that term a condition or warranty?
Condition
What is the presumption about time in commercial contracts?
Time is of the essence for delivery if a time for delivery is agreed
What is essential for a term to form part of a contract, whether written or oral?
The other party must have REASONABLE NOTICE of the term
Are the prices of coffee on a board at Coffee Angel terms of the contract with a customer?
Yes, they are incorporated because the customer has reasonable notice of the terms
What is the parol evidence rule?
Presumption that external evidence cannot add to, subtract from, contradict or vary the terms of a written contract
What are the exceptions to the parol evidence rule?
- Implied terms
- Collateral contracts
- If the contract was partly oral and partly written
What is the purpose of an entire agreement clause and will the courts uphold it?
Upholds the parol evidence rule and is upheld unless it is seen as an attempt by a party to avoid liability for misrepresentation
How can terms be implied into contract?
- Statute
- Courts
- Custom and usage
- Course of dealings between the parties
What are the main statutes that imply terms into contracts?
- Sale of Goods Act 1979
- Consumer Rights Act 2015
- Supply of Goods and Services Act 1982
Briefly describe what the sale of goods act, supply of goods and services act and the consumer rights act do?
- Sale of goods act and supply of goods and services = apply to private sales and B2b transactions
- CRA = consumer to business
What terms do the SGA (Sale of Goods Act) imply?
- Seller has title to goods
- Goods match description applied by seller
- Goods of satisfactory quality (IF SOLD BY BUSINESS)
- Fit for purpose made known to the Buyer (IF SOLD BY BUSINESS)
What does it mean under the SGA that goods must be of satisfactory quality?
Fit for purpose for which such goods are generally used
Free from minor defects
Safe and durable
What is the exception to the SGA rule that goods must be safe from defects under the satisfactory quality provision?
No liability for defects pointed out to the Buyer
Defect was obvious if Buyer inspected goods prior to sale
Are SGA implied terms warranties or conditions?
Conditions, unless breach is so minor that it would be unreasonable to reject the goods
What happens if an SGA condition is breached?
Buyer can terminate the contract BUT MUST RETURN THE GOODS
Does the Supply of Goods and Services Act (SGSA) apply to consumers or businesses, or both?
Business-to-business transactions
Private agreements
Are SGSA implied terms conditions or warranties?
Neither, they are innominate terms
What innominate terms does the SGSA imply?
- Supplier will carry out service in reasonable time (if no time specified)
- Supplier will carry out service with reasonable care and skill
Can you contract out of SGSA terms?
Yes
To whom does the consumer rights act (CRA) apply?
Supply of goods and services to consumers
What are some key implied terms under CRA?
- Goods and services must match description
- Be of satisfactory quality
- Be fit for purpose
Can CRA implied terms be excluded from a contract?
No
What are the CRA implied terms for SERVICES?
- Carry out with reasonable care and skill
- Complete in accordance with information the consumer relies on
- Complete for a reasonable price (if no price agreed)
- Complete in a reasonable time (if no timescale agreed)
What terms will courts imply into a contract?
Business efficacy terms - to make terms work in a way that reflects parties intentions and expectations (terms implied by fact)
STRICT TEST of NECESSITY, not REASONABLENESS
What are the tests for implied terms a court will apply?
Strictly necessary terms
No terms that would contradict the express terms
What are terms implied by custom and usage?
Industry and market standards
Can customs and usage implied terms be excluded?
Yes
When will terms be implied from a course of dealings between the parties?
Parties contract regularly on regularly on similar terms to show regular and consistent course of dealings
When will a court not enforce a contract?
When the terms are incomplete or vague (lack of sufficient certainty)
What is an agreement to agree and is it enforceable?
Using words “to be agreed” in relation to an essential term prevents a contract from coming into existence
When will courts nontheless become involved to enforce a vague/incomplete contract?
When there is evidence that parties intended to be bound by the terms of the contract as they stand, the court will give effect to this intention by resolving uncertainty
When are the courts more likely to enforce a vague contract where there is evidence that parties intended to be bound by and stand by the existing terms?
- Where there’s a mechanism agreed to resolve uncertainties
- Commercial cases where parties are familiar with the trade in question
- Contracts for future performance over a period of time where parties leave matters to be adjusted
- Where there has been partial performance
What is the test for severance of a term?
Whether severance will not affect the substance of the bargain between the parties
