Expressed + Implied Terms Flashcards
What can be argued to e a term of a contract?
All statements made before the final agreed contract may be agreed to be terms of the contract
Why is it important to know if statement is a term of a contract or not?
If its not a term, the innocent party cannot argue a breach in contract
Therefore will have access to a full range of contractual remedies
How to the Cts determine if a statement is a term of a contract?
Will look at the parties intention - did they intend the statement to be a contractually binding?
Detached objectivity
What would a reasonable 3rd party have taken the parties to have intended
What test is applied to determine if the parties intended to be bound by a statement?
Objective test
Specifically, detached objectivity
- what would a reasonable 3rd party have taken the parties to have intended?
What are the factors that the Cts consider when deciding the intention of the parties regarding a statement?
- Knowledge of the parties
- Reliance/ importance at the time
- Writing/ parole evidence rule
How can the knowledge of parties determine if a statement is a term?
Cases?
Where 1 party relies on a statement made with specialist knowledge or skill of the other party in deciding whether or not the enter into a contract, then the statement may be considered to be a term of the contract
Bentley (Dick) Prod. v Smith (Harold) Motors Ltd (1965)
Oscar Chess Ltd v Williams (1957)
Bentley (Dick) Prod. v Smith (Harold) Motors Ltd (1965)
Claimant asked the D to source a ‘well vetted’ Bentley
D claimed that a particular car had 20,000 miles since being fitted with a new engine + gearbox
In fact, it had done 100,000 miles
Claimant discovered this after purchasing the car
Held: statement regarding the milage was a term of the contract
Claimant had relied on the specialist knowledge of the dealer in making the statement which = major factor in his decision to enter into the contract
Oscar Chess Ltd v Williams (1957)
D sold a Morris car to the claimants (motor traders) for £290
Ds provided copy of the vehicles 1st registration
Indicating car = 1st registered in 1948
8 months later, claimants became aware that the car had actually been registered in 1939
Therefore only worth £175
D honestly believed that the car = 1948 model
Claimant claimed for breach of contract
Held:
Statement relating to age of the car = representation
Not a term
Representee, had the greater knowledge + would be in a better position to know the age of the manufacture than the D
How may the timing of the statement determine if it is a term of the contract?
Cases?
Statements made by A to B during the course of negotiations will not become a term unless B reasonably relies on A’s statement + A knows, or ought to know, that B may be relying on the statement
The longer the lapse of time between the statement + the formation of the contract, the more likely the Cts will consider the statement to be a representation rather than a term
Schawel v Reade (1913)
Bannerman v White (1861)
Schawel v Reade (1913)
Claimant purchased a horse from D
Told D he wished to use the horse as a stud
Whilst he was examining the horse, D told him that the horse was sound
Stated that if there = anything wrong with the horse he would tell him - = no need to get a vet to check him out
Reliance of these statements, claimant purchased the horse
Horse had hereditary eye disease - not able to be used as a stud
Held: statement = contractual term
D had assured him he could rely on his word
Claimant had communicated the purpose for which the horse was to be used
D = thus in breach of contract
Bannerman v White (1861)
Claimant agreed to purchase some hops - to make beer
He asked seller if the hops had been treated with sulphur - wouldn’t buy them if they had
Seller assured him that the hops hadn’t been treated with sulphur
In fact they had been
Held: Statement that the hops hadn’t been treated = term of the contract, not a representation
Claimant had communicated the importance of the term + relied on the statement
Claimants action fro breach of contract = successful
What is the parole evidence rule?
States that where a contract has been reduced to writing, extrinsic evidence = inadmissible to add to, vary or contradict the terms
At CL a written contract = presumed to contain everything upon which the parties agreed
Only these terms are the ones that the parties will to be bound by
Shogun Finance Ltd v Hudson (2003)
Car dealer sold a car to a fraudster, who produced a stolen license as his own
Dealer wrote out the hire-purchase contract in the name written on the license
Fraudster took physical possession of the car
D purchased the car from the fraudster in good faith
Upon discovery of the dishonoured payment by the fraudster + failure to make payments under the hire purchase agreement, SF brought action against D for conversion
D counter claimed, claiming to have obtained the right title of the vehicle
Ct: dismissed Ds appeal
s21(1) of the Sale of Goods Act 1979
Title of the vehicle = S’s - had been no consideration on S’s part for the vehicle, as the vehicle was subject to the terms of the hire purchase agreement
D couldn’t have acquired title from fraudster - he never owned vehicle
Hire purchase agreement = not between the fraudster + S, as the name on the agreement = stolen license = fraudulent ID
= no agreement/ hire purchase between S + the fraudster
Fraudster couldn’t have passed a possessive title to D, as he never had one
D = required to return the car to S
What are collateral contracts?
Case?
A promise that is contractually binding but not in the main contract
They have implications to the main contract
De Lassalle v Guildford (1901)
De Lassalle v Guildford (1901)
Potential tenant of a house said that he would only sign the lease if the landlord gave him assurance that the drains = in good order
LR gave him his assurance (oral agreement)
The lease = signed, but it said nothing about the quality of the drains
Tenant tried to argue that the oral agreement should be part of the main contract
Held: the LR had contracted that the drains were in good order
In additional to the contract contained the lease
= also ‘collateral contract’ between the parties
In consideration of the tenant signing the lease, the LR promised that the drain = good
(unilateral collateral contract - Tenant = no obliged to sign, but once signed, binds the LR)
Tenant = entitled to damages for the collateral contract
City and Westminster Properties v Mudd (1959)
Main contract = lease
Contained a covenant not to use the premises fro any purposes other than trade purposes
Earlier lease, D had been in the habit of sleeping on the premises (even though = contrary to lease)
D declined to sign the new lease unless claimant agreed to him sleeping there
Claimant = unwilling to include a clause BUT orally assured the D he could sleep there
Claimant brought action - forfeiture of the lease
Action failed - assurance = collateral contract
Ds consideration = signing the lease
Hugely undermines parole evidence rule!!
Why is the signature of a contract so significant?
Case?
Where a written agreement is signed, the parties t it are considered to be in agreement with everything it contains even if they have not read it
(in absence of fraud, misrepresentation…)
L’Estrange v Graucob (1934)
L’Estrange v Graucob (1934)
Claimant signed a document to purchase a machine from the manufactures
The claimant had signed a contract without reading it
Ds knew that the claimant had not read the agreement
Held: Ds were still entitled to enforce the agreement
What was held in the case of L’Estrange v Graucob (1934)?
The party who signs the document expresses his assent to the terms in it, whatever they may be and regardless of whether those terms have been read + understood
Do you have to be given reasonable notice to be bound by a term?
Case?
Yes - the other party has to have given you reasonable notice for you to be bound by a term
Parker v South Eastern Railway (1877)
Parker v South Eastern Railway (1877)
Claimant left a bag in the cloakroom at the Ds railway station
Then received a ticket with a number, date + words ‘see back’ on it
The back had exclusion for liability clauses
Claimant didn’t read the ticket
Claimants bag got lost
Held: reasonable notice had been give
Claimant had bee clearly signposted to the exclusion clause
When giving notice of a term, what are you allowed to presume?
Case?
Allowed to presume that the person you are giving noticed to can read + understand English
Thompson v London, Midland and Scottish Railway (1930)
Thompson v London, Midland and Scottish Railway (1930)
Claimant = illiterate
Purchased a ticket
On the front on the ticket: ‘see back for conditions’
= no indication that the claimant = illiterate
CA: reasonable notice had been given
How much notice needs to be given for onerous terms?
Case?
No exact time frame
The Harsher the term, the more notice that as to be given
Thornton v Shoe Lane Parking (1971)
Thornton v Shoe Lane Parking (1971)
Claimant = injured in a car park partly due to the D’s negligence
Claimant s= given ticket on entering the car park after putting money into a machine
Ticket: contract of parking = subject to T+Cs
= displayed on the inside of the car park
1 term = excluded liability for personal injuries arising through negligence
Was this term incorporated?
Held: machine itself constituted the offer
Acceptance = putting £ in the machine
Ticket = dispensed after the acceptance took place
Clause = therefore not incorporated into the contract
Denning: needs to be a red hand pointing to it
What did Lord Denning emphasise in the case of Thornton v Shoe Lane Parking (1971)?
Personal injury = severe sort of injury
A lesser sort of injury (such as property damage) may not require as extensive measures in order for a court to find that reasonable steps had been taken to bring an exclusion clause to the other party’s attention
Does the timing of the notice given affect whether the term is incorporated into a contract?
Case?
Yes - if the notice is given after they have already gone into the contract it will not be counted as the terms
Olley v Marlborough Court Ltd (1949)
Olley v Marlborough Court Ltd (1949)
Claimant booked into a hotel
Contract = made at the reception desk
= no mention of an exclusion clause
In the hotel room (back of the door) = notice
Exclude liability of the hotel proprietors for any lost, stolen or damaged property
Claimant had her fur coat stolen
Held:
Notice = ineffective
Contract had already been made by the time the claimant had seen the notice
Therefore form part of the contract
How can a ‘course of dealing’ affect if a term is incorporated into a contract?
Case?
If there has been a consistent ‘course of dealing’ between A + B of such a nature that any reasonable person would know that A invariably intends to contract only on certain terms, B will be bound by those terms even if he is unaware of them
Hardwick Game Farm v Suffolk Agricultural Poultry Prod. Association (1969)
Hardwick Game Farm v Suffolk Agricultural Poultry Prod. Association (1969)
Farmer ordered feed from a merchant
Came with a sol note - exclusion clause printed on the back (not part of the contract - Olly v Marlborough)
Farmer continued to order feed from the merchant for 3 years
Each occasion, same sold note = given to the farmer
= problem with one of the loads
Caused farmer substantial losses
Merchant relied on the exclusion clause
Held: farmer ad been given notice that these were the terms on which the seller did business
What happens if a term is not fully incorporated into a contract?
It is held to not be included in the contract
What interpretive approach do the Cts tend to take in cases such as these?
‘Purposive’ or ‘Commercial’
Rather than literal interpretations
What are the 4 types of implied terms?
- Terms implied in Fact
- Terms implied by Custom
- Terms implied in Law
- Terms implied by Statute
What are term implied in Fact?
A term will be implied in fact if it is obvious + necessary IOT gives the contract business efficacy
What are the 2 tests that the Cts use to determine if a term in implied in fact?
- Officious bystander test
2. Business necessity/ efficacy test
In what case was the officious bystander test stated?
MacKinnon LJ in:
Shirlaw v Southern Foundries (1939)
What is the officious bystander test?
MacKinnon LJ in Shirlaw v southern foundries case
Prima facie that which is left to be implied is something so obvious that it goes without saying; so that if, while the parties were making a bargain, an officious bystander were to suggest some express provision for it in the agreement, they would testily suppress him with a common ‘oh, of course’
What case ‘established’ the business necessity/efficacy test?
The Moorcock (1889)
The Moorcock (1889)
Claimant entered into a contract with the Ds to dock + unload cargo from his ship at the river Thames
Ship = grounded at the jetty at low tide + broke on the rocks
Claimant sued for damage to his ship
Ds claimed = no express term relating to the safety of the ship - not liable
Held: = implied term in the contract that the ship would not be damaged Term = necessary IOT give the contract business efficacy Ds = liable for breach of this implied term
What did Lord Hoffman state in AG for Belize v Belize Telecom Ltd (2009) regarding the OB test?
Commented that it may be that the missing term = deliberately omitted
If the process of construction revealed that was so, then the Cts should accept that the clause is not implied in fact + allow the loss to lie where it falls
What are terms implied by custom?
Case?
Terms which are customary to a particular trade/ profession or certain types of contracts in particular locality
Ct must be satisfied that there is such a custom that = alleged
Once done term will be imported unless party can show they didn’t intend it to apply
Hutton v Warren (1836)
Hutton v Warren (1836)
Tenant of a farm, on quitting in accordance with the notice given by the landlord, = entitled to a fair allowance for the seeds + labour which he had expended on the land
Which the landlord would ow reap the benefit
= nothing in the terms of the lease to entitle the tenant to the allowance
BUT = proved that there = custom of the country to that effect
+ = nothing in the express terms of the contract which = inconsistent with the existence of the customary term
What must customary terms be IOT ratify the Cts?
Must be certain, well known and recognised as binding
British Crane and Hire Corp Ltd v Ipswich Plant Hire Ltd (1975)
…
What are implied terms in law?
= terms that = so generally implicit in contracts that it can be asserted that those terms will be implied unless the parties have, in some way, indicated an intention that that they shouldn’t be applied
Give examples of terms implied by statute?
Sales of Goods Act 1979
s12 - right to sell (title)
s14(2) - satisfactory quality
Supply of Goods and Services Act 1982
s13 - services must be supplied with reasonable care + skill
Consumer Rights Act 2015
Can ‘implied’ terms be excluded from contracts?
What has this been described as?
By whom? What case?
Yes
Any term which would otherwise be implied will be excluded if it is inconsistent with an expressed term
Described as the ‘cardinal rule’ by Lord Neuberger in the Marks and Spencers case (2015)
What are the 2 main categorisations of terms?
What would breaches of them result in?
- Major - any breach gives right to terminate the contract + damages
- Minor - breach gives right to damages
(No right to terminate the contract, regardless of the consequences)
What type of term is a condition?
Major term - goes to the root of the contract
What type of term is a warranty?
Minor term - contractual term that is of lesser importance
What are the 3 thing that determine the whether a term is a condition or a warranty?
- Statute (e.g. Sales of Goods Act 1979)
- Importance of the term (Poussard v Spiers) (Bettini v Gye)
- Labelling by the parties (Schuler AG v Wickman Tools Sales Ltd)
Poussard v Spiers (1876)
Claimant entered a contract to perform as an opera singer for 3 months
Became ill, not able to perform the 1st 4 nights
D replaced her with another opera singer
Held: claimant = in breach of CONDITION
D = entitled to terminate the contract
Missing opening night = most important performance - all the critics + publicity would be based on this
Bettini v Gye (1876)
Claimant contracted to perform as an opera singer for 3 months
He became ill
Missed 6 days of rehearsals
Employer replaced + fired him
Held: claimant = in breach of a WARRANTY
Employer wasn’t entitles to end the contract
Missing rehearsals dint go to the root of the contract
Schuler AG v Wickman Tools Sales Ltd (1974)
Claimants = manufactures of certain tools
Ds = sales company granted with the sole right to sell certain tools manufactured by claimant
Term in the contract = described the parties as a condition
- D would send a salesman to each named company once a week (1,400 visits in total)
D failed to make some of the visits
Claimant terminated the contract - breach of condition
HL: term = only a WARRANTY
Despite fact = expressly stated as a condition in the contract
What are innominate terms?
Case?
New category of terms recently added by the Cts
‘Wait + see approach’
Cts will look at the effects of the breach on the injured party to determine whether the breach itself = warranty/ condition
Classification = determined only once the effects of the breach ar known
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha (1962)
What do innominate terms give the Cts in terms of remedies?
Gives the Cts some flexibility in determining the appropriate remedy
Make it fair for both parties
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha (1962)
Ship = chartered to Ds for a 2 years period
Agreement included a term that the ship would be seaworthy throughout the period of hire
Problems developed with the engine of the ship
Engine crew = incompetent
Consequently, ship = out of service for a 5 week period, then a further 15 week period
Ds treated this as a breach of condition + ended contract
Claimants brought action for wrongful termination
Argued term = not a condition of the contract
Held: Ds = liable for wrongful termination
Ct introduced innominate term approach
Looked at the effect of the breach - had it substantially deprived the innocent party of the whole benefit of the contract?
Ct: 20 weeks out of 2 years didn’t substantially deprive the Ds of the whole benefit
Therefore, not entitled to terminate the contract
What is the Q that the Cts ask in relation to innominate terms?
Look at the effect of the breach
Had it substantially deprived the innocent party of the whole benefit of the contract?
Are there statutory controls over the fairness of terms?
Examples? (2)
Yes
e.g. Unfair Contract Terms Act 1977
(applies to business + business contracts)
Consumer Rights Act 2015
(applies to contracts between a trader + a consumer for the trader to supply goods, digital content or services
