Implied Terms and Contract Interpretation (L14) Flashcards
What does the Contract (Scotland) Act 1997, s1 set out?
Rebuttable presumption that where parties submit agreement to a written document/deed, it contains the whole agreement.
Rebuttable = taken to be true unless someone proves otherwise.
Statutory effect to ‘entire agreement clause’.
What does the Law Reform (Misc. Prov.) (Scotland) Act 1985, ss8&9 set out about the law regarding an error in expression?
Court’s discretionary power to rectify deed to give effect to the true intentions of the parties (s8).
When will the court not exercise its s8 power to rectify a deed where there is an error in expression?
The court will not rectify if there is:
- Any party whose interests would be adversely affected and;
- Such parties didn’t know of (nor ought to have known) of defect and;
- P has relied on “defective” deed and;
- P does not consent to proposed rectification.
The point is that that party has “innocently” relied on the deed and it would unfair on him to set it aside.
What are implied terms?
Implied terms are those which are not expressly agreed on by the parties, but rather implied by the law or in fact.
Implied terms are in effect in nominate contract e.g. sale, lease, and arise out of statute, custom, and the common law.
Naturalia, default rules, are those terms which are automatically implied into the contract unless the parties have provided otherwise.
What are implied terms in contracts of sale?
Sale of Goods Act 1979 s14(2):
“Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality.”
What are implied terms in contracts for sale?
Neilson v Stewart [1991] UKHL 13.
“Every loan carries with it an obligation of the borrower to repay. If the contract contains provisions for repayment those provisions will prevail. If, however, the contract contains no provisions or if for some reason the provisions turn out to be ineffectual then the obligation to repay on demand revives”.
What did William Morton & Co v Muir Bros & Co 1907 SC 1211 say about implied terms?
“In almost every instance they (implied terms) are founded either on universal custom or in the nature of the contract itself.”
What did William Morton & Co v Muir Bros & Co 1907 SC 1211 say about the reasonableness of implied terms?
“If the condition is such that any reasonable man on the one part would desire for his own protection to stipulate for the condition, and that no reasonable man on the other part would refuse to accede to it then it is not unnatural that the condition should be taken for granted … without the necessity of giving it formal expression.”
What did The Moorcock (1889) 14 PD 64 say about the necessity of implied terms?
“In business transactions such as this, what the law desires to effect by the implication of terms is to give such efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all the perils of the transaction, or to emancipate one side from all chances of failure.”
What did J & H Ritchie v Lloyd Ltd 2007 SC (HL) 89 say about the business efficacy of implied terms?
“In these circumstances I am satisfied that business efficacy required the implication of a term that, if asked, the respondents would tell the appellants what their inspection had shown to be wrong with the harrow and what they had done to put it right.”
In which case did the court set out a literal approach to contract interpretation?
Examine the words of the contract to determine intention.
Multi-Link Leisure Developments v North Lanarkshire Council [2010] UKSC 47.
In which case did the court take the approach of examining the surrounding circumstances to interpret the contract?
Not words, but actions, background.
Arnold v Britton [2015] UKSC 36.
In which case did the court interpret the contract based on its commercial sense?
Do we get a commercially sensible result?
R&J Dempster Ltd v Motherwell Bridge & Engineering Co Ltd 1964 SC 308.
In Arnold v Britton what are the 6 considerations which Lord Neuberger set out to bear in mind when engaging in contractual interpretation?
- Natural and ordinary meaning.
- Relevant provisions.
- Overall purpose of the clause.
- Facts and circumstances are assumed by the parties at the time of formation.
- Commercial common sense.
- Disregard to subjectivity.
How did the case of HOE International Ltd v Andersen and another [2017] CSIH 9 view Lord Neuberger’s test?
The CSIH was wary in taking up this “check list”, saying it didn’t represent a “statement of intellectual process that is involved in interpreting a contract.”
