Express Terms & Terms Implied in Fact

Question 1

What are the 3 types of statements and their legal significance?

Answer 1

1. Mere puff = no legal effect
2. Representations = not intended to be legally binding but failure to comply may result in an action for misrepresentation
3. Terms = intedned to be legally binding and failure to comply = breach of contract.

Question 2

What is the test to identify a term?

Answer 2

The reasonable person would understand it to be the **intention of the parties that the statement is a legally binding term **of the contract, having regard to all the circumstances:
* So important that A wouldn’t have entered contract otherwise
* Timing
* Writing in the contract?
* Special knowledge or skill of the person making the statement
* Assumption of responsibility
* Inferred where made for the purpose of inducing the other party to enter the contract.

Question 3

What are the methods of incorporation of an express term?

Answer 3

1. Contained in contract in writing
2. Incorporation by notice
3. Incorporation by a course of dealing

Question 4

How does incorporation by writing work?

Answer 4

Signing contract shows intention to be bound even if they did not read it but cannot rely on this if you have orally misrepresented the meaning of a clause to the other party.

Question 5

How does incorporation by notice work?

Answer 5

Must be incorporated by document which is intended to have contractual effect.

• One party notifies the other by taking reasonable steps to bring the term to their attention before or at time of contracting - this might be startling if it is particularly adverse to the other party!

Question 6

How does incorporation by a prior course of dealings work?

Answer 6

• Gives effect to presumed intentions of the parties where the prior course of dealings was consistent and regular (3-4 times per month, not over 5 years).

Question 7

What is the principle of supremacy of express terms?

Answer 7

Where the parties have made unambiguous express provision in the contract, the court will not imply a term to the contrary.

Question 8

How can terms be implied in fact?

Answer 8

1. Trade or professional custom
2. Business efficacy
3. Prior course of dealings.

Question 9

How does the implied term by trade or custom work?

Answer 9

Presumed that parties intended to be bound by well-known customs of a particular trade.

Question 10

How does the implied term of business efficacy work?

Answer 10

Term implied so that the intended objective of the contract can take effect.

“Of course” test: arrangement would be so unworkable that sensible people could not have been supposed to enter it, something that if you suggested to the parties they would respond “of course”