Express Terms Flashcards
How are express terms of a contract arrived at?
· A signed written contract
· Incorporation by notice
- Timing
· Incorporation by course of dealing
· Other ways of agreeing express terms
Firstly, written terms might be set out in a…
Exception?
…signed written contract. In almost all such cases the signing of a contract shows that the parties intended to be bound by it.
This is true even if a party signing has not read the terms or has not understood what they mean. A party can express an intention to be bound by something they have not read or understood (although it is not wise to do so!) (see L’Estrange v Graucob Ltd [1934] 2 KB 394). Accordingly, all the terms of the contract will be binding.
By way of exception, if the document signed was not one which was 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 (see Grogan v Robin Meredith Plant Hire [1996] CLC 1127).
This is because signing such a document does not indicate an intention to be bound by its terms, precisely because it was not intended that the document would have any contractual effect. In this regard, timing is also important: the document inGrogan was described by Auld LJ as a ‘post contractual document’ making it much less likely it would have contractual effect.
In addition, 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 (Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805).
Terms can also be incorporated by notice ie…
… by one party notifying the other party of them. In Parker v South Eastern Railway Co (1876-77) 2 CPD 416 it was established that terms will form part of the contract if reasonable steps have been taken to bring them to the claimant’s attention.
This is logical – an objective observer would consider that, 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.
What will amount to reasonable notice will be dictated by the facts of the case. Thompson v London, Midland & Scottish Railway [1930] 1 KB 41 established that 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).
Examples where insufficient notice was given include Henderson v Stevenson (1875) LR S SC & Div 470where the clause was not referred to on the front of the ticket and Sugar v London, Midland & Scottish Railway [1941] 1 All ER 241 where the clause was illegible.
Where a party wants to incorporate terms which are particularly adverse to the other party, it must clearly bring these to the other party’s attention.
In Thornton v Shoe Lane Parking [1971] 2 QB 163, Lord Denning MR, stated that where a clause was particularly onerous it would need to be ‘printed in red ink, with a red hand pointing to it, or something equally startling’ to give sufficient notice. This principle was confirmed in the case of Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] 1 QB 433.
The above discussion relates to the incorporation of onerous terms through reasonable notice. Note that when a document containing contractual terms is signed the signing party is bound by those terms, even if the offending clause is onerous (L’Estrange v Graucob Ltd [1934] 2 KB 394).
For a clause to be incorporated into the contract, reasonable notice…
…of it must be given before or at the time of contracting. It follows that any clause will not amount to a binding term if it is communicated only after the contract is made.
In Thornton v Shoe Lane Parking [1971] 2 QB 163 the events were as follows:
The claimant drove his car to a multi storey automatic car park that he had never used before. At the entrance was a sign giving the charges for the car park.
The claimant drove up to the entrance. The movement of the car turned a light at the entrance from red to green, and a ticket machine produced a ticket that stated that the ticket was issued ‘subject to the conditions of issue as displayed on the premises’.
The claimant drove into the car park without reading the words on the ticket or those displayed on a pillar opposite the ticket machine.
The claimant parked his car and went about his business.
When the claimant returned to the car park, he attended the office in the car park, and paid the necessary charges.
The claimant then returned to his car, and was severely injured whilst attempting to put his belongings into his car.
The defendant company claimed that the ticket was a contractual document and that it incorporated a condition exempting them, inter alia, from liability for injury to the customer occurring when the customer’s motor vehicle was in the car park.
Finally, terms will only be incorporated by notice if the document giving notice was intended…
…have ‘contractual effect’ (there is an analogy here with the law in relation to signed documents outlined above).
In Chapleton v Barry UDC [1940] 1 KB 532, the claimant hired a deck chair. Having paid for the hire, he was given a ‘ticket’. On the back of the ticket there were additional terms and conditions.
These were held not to be binding, because the ticket was not intended to have contractual effect – an observer would have understood it to be only a receipt
Incorporation by a course of dealing
It is often the case that the contract in question is one of a number of contracts entered into by the parties. They may have dealt with each other on many occasions over a period of years. Where a clause has been brought to the notice of the other party during previous dealings, it may be implied into the current transaction…
…to give effect to the presumed intentions of the parties, even though it has on this particular occasion been omitted. In order for this rule to operate, it must be shown that the course of dealing has been consistent over a period of time.
In McCutcheon v David MacBrayne [1964] 1 WLR 125 an attempt to incorporate by a course of dealing was unsuccessful because the written terms relied upon had not been consistently incorporated in the past – sometimes a signature in relation to those terms had been required, sometimes it had not.
As well as being consistent, a course of dealing must also have been regular. Incorporation by a course of dealing will not be established if the parties have contracted with each other on only a few occasions over a number of years.
In Hollier v Rambler Motors (AMC) Ltd [1972] 2 QB 71 three or four transactions over a period of five years was held to be insufficiently regular to establish a course of dealing.
Contrast this with Harry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 and Petrotrade Inc v Texaco Ltd [1999] 12 WLUK 745 where three or four times per month and five instances over 13 months respectively appeared sufficiently regular.
What other ways of agreeing express terms are there?
Contracts can be arrived in many other ways, provided that the parties adequately express an intention to be bound by those terms.
Obvious and common examples include:
- The agreement of terms in a conversation or verbal exchange (such terms often being quite simple)
- Terms being set out in writing (for an example in an email) and the other party agreeing to those (for example, by expressing agreement in reply by email).
What are the challenging aspects of written contracts?
How do parties reduce uncertainty and confusion in a written contract?
Written contracts have the the challenges of:
(a) Distinguishing representations from terms of the contract.
(b) Identifying whether there are binding oral terms alongside the written terms.
These challenges can cause uncertainty and confusion for the parties to the contract. The parties might seek to reduce this uncertainty and confusion by including in a written contract an ‘entire agreement’ clause.
In its simplest form, such a clause provides that a particular document or set of documents constitutes the entire agreement between the parties.
How Possible boilerplate clause – ‘entire agreement’ clause work?
The parties agree that this agreement constitutes the entire agreement between them, and supersedes any previous understandings and/or arrangements between them, whether oral or written.
The courts will uphold such clauses where they are indeed an attempt to avoid any misunderstanding about the scope of the parties’ agreement.
Such a clause might therefore be effective in avoiding confusion about whether any oral terms or preceding written statements form part of the contract.
Note that it is unlikely that such a clause would be effective to exclude liability for misrepresentation. Misrepresentation, and clauses excluding liability for it, are not explored in this element.
Signing a written contract almost always…
…shows an intention to be bound.
Notice of the terms must be given…
…before or at the time of contracting
An ‘entire agreement’ clause in a written agreement…
…helps rule out the possibility of there being representations or terms agreed orally which form part of a contract.
