EXPRESS TERMS CASES

Question 1

Smith v Hughs FACTS

Answer 1

• Mr. Smith provided Mr. Hughes with a sample of oats, which led Hughes to order oats from Smith.
• Upon delivery, Hughes claimed the oats were not what he expected, stating he needed old oats for his racehorses, while the delivered oats were green.
• Hughes refused to pay for the delivered oats and the remaining order.

Question 2

Smith v Hughs HELD

Answer 2

• The court held that a contract existed between Mr. Smith and Mr. Hughes, which could not be avoided.
• There was no prior discussion about the delivery of old oats specifically.
• An objective test indicated that a reasonable person would expect good quality oats in a similar contract.
• Since there was no express discussion of old oats, the sample provided allowed Hughes to inspect the oats, exemplifying caveat emptor (buyer beware).

Question 3

Rose v Pim FACTS

Answer 3

• Rose and Pim enter into a contract for the sale of horsebeans.
  -Pim delivers a different type of horsebean than Rose thought they contracted on.

Question 4

Rose v Pim HELD

Answer 4

• The objective conduct of the parties indicated an intention to contract specifically for horsebeans.
• The court may only use rectification if there is clear evidence that the written agreement does not reflect the contract the parties intended.
• The court cannot create a new contract; it can only correct the existing one.

Question 5

Vector Gas v Bay of Plenty Energy FACTS

Answer 5

Dispute is about whether the stated price of gas in the contract is inclusive of transmission costs of not.

Question 6

Vector Gas v Bay of Plenty Energy HELD

Answer 6

• Courts should interpret terms based on their ordinary meaning, unless context and background suggest otherwise.
• Consideration of the commercial context, previous contracts, and emails is essential for understanding the overall context.
• Transport costs were not included in the quoted price.
  There is considerable obiter that leaves the law uncertain regarding the admissibility of certain evidence..

Question 7

Firm PI 1

Answer 7

• The Supreme Court has confirmed ISC and Vector Gas, reaffirming the central importance of textual interpretation in contracts.
• There is a presumption that words with ordinary meanings reflect the parties’ intended meaning, though this presumption is not very strong.
• A commercially absurd result should only be concluded from contractual language with ordinary meaning in the most obvious and extreme cases, considering the context of the entire contract.

Question 8

Wood v Capitia FACTS

Answer 8

• Capita (buyer) and Wood (seller) entered into an agreement for the purchase of an insurance company.
• The agreement included an indemnity clause, where the seller promised to compensate the buyer for any claims or complaints.
• The seller later discovered that the company had misled customers and created a compensation scheme on their own initiative, without any prompting from complaints.

Question 9

Wood v Capitia HELD

Answer 9

Indemnity clause DOENST include compensation not derived from claims and complaints
- The weight given to context and commercial common sense in contract interpretation varies based on the quality of drafting.
- informal and brief agreements, lacking professional assistance, require greater emphasis on contextual analysis.
- The plain meaning of terms can be considered alongside the wider context; the order of applying plain meaning or context is not significant.

Question 10

Bathurst v L&M Coal FACTS

Answer 10

• Bathurst purchased mining assets from L & M Coal for $120 million, structured as follows: $40 million deposit, $40 million upon delivery, and the remaining balance as performance payments.
• Due to delays lasting several years, the market value for coking coal decreased significantly, leading to the depletion of the most valuable coking coal resources.
• Ultimately, the mine was forced to shut down, resulting in no performance payments being made to L & M Coal.

Question 11

Bathurst v L&M Coal HELD

Answer 11

• The Supreme Court emphasized that the express wording of a contract is of utmost importance, but extrinsic evidence regarding the meaning of that wording to the parties at the time the contract was formed can also be considered.
• The court confirmed that contractual interpretation is an objective exercise, reflecting a mindset in contract law that tends to favor a winners-and-losers mentality to promote commercial certainty.

Question 12

Bathurst Test:

Answer 12

Prior negotiations and subsequent conduct may be admissible through a two-stage test:
1. Is the evidence prima facie relevant? (If it indicates subjective intent, it is not relevant.)
2. Does the probative value of the evidence outweigh the time added to the proceedings? (This is based on a value judgment.)
- Subsequent conduct is rarely deemed relevant.