Incorporation of Terms Flashcards
What is an express term?
A term that has been clearly and distinctly discussed, stated and agreed by the parties.
What is an implied term?
An implied term has not been openly considered by the parties but is read into the contract;
- by the courts,
- by statute or
- by custom.
What are the three types of pre-contractual statements?
Mere puffs
Representations
Terms
What are the legal actions if it turns out that pre-contractual statements are false?
Mere puffs - none
Representations - Misrepresentation, requires proof of fault
Terms - Breach of contract, automatic right to sue
What will be considered when the courts are deciding if something is a term or a representation?
Courts will consider the following when differentiating a term and a representation:
- Importance of the statement
- Putting statement in writing
- Timing
- Special knowledge or skills
Answer whether Yes/No would be a term or a representation:
Was the statement of key importance to the recipient?
YES: TERM
NO: REPRESENTATION
Answer whether Yes/No would be a term or a representation:
Has the statement become part of a written contractual document?
YES: TERM
NO: REPRESENTATION
Answer whether Yes/No would be a term or a representation:
Was there a lengthy gap between making the statement and entering into the contract?
YES: REPRESENTATION
NO: TERM
Answer whether Yes/No would be a term or a representation:
Did either party have better knowledge or skills than the other, relating to the statement?
YES, they did: TERM
NO, they didn’t: REPRESENTATION
What are the rules of incorporating written terms into an oral contract?
- Notice
- Consistent course of dealing
- Common understanding of the parties
Explain incorporation through a notice?
NOTICE
- Actual notice (they know) e.g. they’ve read the terms of the contract but not signed, but they’ve accepted the contract via conduct.
- Reasonable/constructive notice (they don’t know, but they should as it was made clear with reasonable steps to bring to their attention)
i) Timing - before or at the time of contract
ii) Type of document - contains contractual information, e.g. ticket or notice, not receipt.
iii) Onerousness - not too unusual, e.g. red hand rule
Explain incorporation through a consistent course of dealing?
Where parties have previously dealt with each other on those terms.
“it does not have to be extensive. Three or four occasions over a relatively short period may suffice.”
“consistent and unequivocal”
Explain incorporation through a common understanding of the parties?
Where it would reflect the common understanding of the parties. E.g. hire of a crane, care of crane usually sits with those who have hired it.
What are the rules of incorporation in general and those that govern incorporating written terms into an oral contract?
GENERAL:
1. Signature
2. Notice
3. Consistent/Previous Course of Dealing
ORAL:
1. Notice
2. Consistent/Previous Course of Dealing
3. Common understanding
Implied terms can be implied in which 3 ways?
- By Statute
- By Custom
- By the Courts
Which piece of legislation applies to business to consumer contracts?
Consumer Rights Act 2015 (CRA 2015)
Which pieces of legislation applies to business to business contracts?
Sale of Goods Act 1979
and
Supply of Goods and Services Act 1982
What are the relevant clauses of CRA 2015 for goods contracts?
s9 - satisfactory quality
s10 - fitness for purpose
s11 - as described
What are the relevant clauses of CRA 2015 for service contracts?
s49 - reasonable care and skill
s51 - reasonable price
s52 - reasonable time for performance
What are the relevant clauses of CRA 2015 for digital contracts?
s34 - satisfactory quality
s35 - fitness for a particular purpose
s36 - as described
What are the relevant clauses of SGA 1979 for business - business goods contracts?
s14(2) - satisfactory quality
s14(3) - fitness for purpose
s15 - as described
Unlike the CRA 2015 and SGSA 1982 terms, which are just called ‘terms’, what are the SGA 1979 terms referred to as? Why are the CRA and SGSA referred to as terms?
Conditions (more important than terms, goes to the root of the contract). However this has been altered since with s15A SGA to state that where the breach of the implied terms would be so slight where it would be unreasonable for the buyer to repudiate the contract, the breach could be treated as a breach of warranty instead of condition.
CRA and SGSA terms are referred to as terms in order for them to be innominate, so the courts can determine their status on each occasion of the alleged breach.
When would you use the Supply of Goods and Services Act 1982, rather than the Sale of Goods Act 1979?
When the transfer of goods cannot have been for money, but perhaps for a swapping of items
or
when the goods transferred when services and goods are supplied together, e.g. car service getting tyres replaced.
What are the relevant clauses of SGSA 1982 for business-business goods contracts?
s4 - satisfactory quality
(s4 - fitness for purpose would fall into satisfactory quality for SGSA)
s3 - as described
What are the relevant clauses of SGSA 1982 for business-business service contracts?
s13 - reasonable care and skill
s15 - reasonable price
s14 - reasonable time for performance
Although unusual, when would it be possible to imply a term by custom?
- where the term has been in use for a sufficient length of time
- it is reasonable
- it is not inconsistent with an express term
- where the term is used in practice
- the implication of term is acceptable to the court.
What does ‘implied by law’ mean?
The courts have read terms into a contract because case law has established that these terms always appear in these types of contracts.
What does ‘implied on the particular facts’ mean and when should it be used?
The courts have read terms into a contract to concur with the intentions of the parties.
Should only be implied on the particular facts if it is satisfied with either the:
- business efficacy test
or the
- officious bystander rule
What is the business efficacy test?
The term is needed to give the contract business efficacy, i.e. the contract would be unworkable without it and both parties would immediately have agreed to insert it without hesitation.
What is the officious bystander rule?
The officious (interfering) bystander rule is that if the parties were making the contract and a bystander came by to suggest some express terms, they would roll their eyes and say ‘oh, of course’! It would be so obvious to both parties, that they wouldn’t even feel the need to write it down.
What is the difference between conditions and warranties?
A condition goes ‘to the root’ of the contract, it is the most important contract term.
A warranty is a less important contract term and will not end the contract.
What are the remedies available for breach of a condition and breach of a warranty?
Breach of condition: something essential to the contract has failed, injured party can repudiate the contract and/or seek damages.
Breach of warranty: injured party must carry on with the contract, but can seek damages.
What would be the breach for the below examples?
- Opera singer misses rehearsal and a few days of the performances
- Opera singer misses a few days of rehearsal
- Breach of condition, can terminate/repudiate the contract as missing performance goes to the root of the contract.
- Breach of warranty, has to carry on with contract, but can sue for damages, as rehearsals don’t got to the root of the contract.
What are innominate (or intermediate) terms?
Terms that do not fit into one category or the other, where the courts must decide whether it goes to the ‘root of the contract’, i.e. is fundamental to the contract.
E.g. ship being seaworthy for 19 out of 24 months, did not go to the root of the contract to repudiate, but could sue for damages.
What differs about the courts’ approach to conditions/warranties and innominate terms?
For conditions and warranties, the courts look at the intention of the parties at the time of entering into the contract.
For innominate terms, the courts adopt a ‘wait and see’ approach to determine how severe the consequences are.
What if a contract does not expressly identify whether the term is a condition or a warranty?
Then the courts will class it as an innominate term to start with, before examining.
What are the 5 principles of contractual interpretation?
- the natural and ordinary meaning of the words
- the overall purpose of the document
- the other provisions in the document
- facts known or assumed by the parties at the time of execution of the document
- Common sense
What is the parol evidence rule?
The parol evidence rule states that, in WRITTEN contracts, evidence other than that which is embodied in the written document cannot be relied upon to change the written contractual terms,
- Can be oral statements, draft contracts, preliminary agrements, any extrinsic evidence outside the written contract.
- Does not apply to partly written and partly oral contracts, as these aren’t considered a written contract.
- It is subject to many exceptions and therefore very narrow in scope. Extrinsic evidence is allowed quite often, e.g. to show mistake/misrep, to identify the parties, to prove custom, collateral contracts, doesn’t operate yet, written agreement not the whole contract.
