Lecture 3 - Terms and Content of a Contract

Question 1

What constitutes terms of contract?

Answer 1

Whatever parties have agreed

Question 2

‘Puffs’

Answer 2

Extravagant claims about product. No legal effect as no-one really believes them

Question 3

Representations

Answer 3

Pre-contractual statements intended to induce/ persuade other party to enter contract, but not part of it.

Question 4

If representation untrue…

Answer 4

Injured party should be able to rescind (cancel) contract and maybe claim damages unless totally innocent

Question 5

Terms

Answer 5

Statements incorporated into contract expressly/ by implication.

Question 6

If contract term broken…

Answer 6

Breach of contract

Question 7

If something really important part of the contract..

Answer 7

Is a term

Question 8

If one party asks other to check out particular statement for himself..

Answer 8

Unlikely to be term

Question 9

Whether one party has special skill or knowledge

Answer 9

Not important factor

Question 10

If statement made long before contract concluded

Answer 10

Evidence parties didn’t intend it to be a term

Question 11

Condition

Answer 11

Term vital/ fundamental to performance of contract

Question 12

If condition broken

Answer 12

Either:
- Treat contract as at an end
- Carry on with it
Either case, can also sue for damages for breach of contract

Question 13

Breach of warranty

Answer 13

Can only claim damages, not cancel contract

Question 14

Innominate terms

Answer 14

When impossible to say whether condition or warranty. If court thinks innocent party has been deprived substantially, treated as condition. If not, warranty

Question 15

Express terms

Answer 15

Clear, written or oral. What parties have expressly agreed

Question 16

Implied terms

Answer 16

Implied in contract without specifically being mentioned/ agreed by parties

Question 17

Terms implied (2)

Answer 17

• By Statute eg Sale of Goods Act 1979

- By the court eg seems reasonable that parties intended that

Question 18

Two tests for terms:

Answer 18

• Business efficacy - term is essential to make contract work properly
• Officious bystander - if someone suggested to parties a particular clause, they would have said it was taken as read

Question 19

Customs

Answer 19

Local/ industry trade custom is implied in contract where necessary but has to be clear and definite.

Question 20

Can local trade/ custom override express terms of contract?

Answer 20

No

Question 21

Parol evidence rule

Answer 21

If all terms of contract are in writing, no evidence supporting different oral agreement is permitted to vary those terms

Question 22

Exceptions of parol evidence rule (3)

Answer 22

• If written contract clearly not full agreement
• Local/ trade custom
• If written agreement does not reflect true terms

Question 23

Exclusion clause

Answer 23

Term in contract whereby one party attempts to limit liability in event of breach

Question 24

Main features of exclusion clause (3)

Answer 24

• Exclusion > excluding liability for breach of contract
• Limitation > limiting liability to specific amount
• Conditions > imposing conditions before liability is accepted

Question 25

Criteria for exclusion clauses to be valid (4)

Answer 25

• Must be incorporated into contract
• Must be clear, unambiguous and cover exact situation
• Must not fail for misrepresentation
• Must not fall foul of statutory regulation eg death/ injury

Question 26

Incorporation of ECs (3)

Answer 26

• EC must be term of contract
• Notice must be given before contract entered into
• Party whose terms and conditions were last in time wins battle (Battle of the Forms)

Question 27

EC (and only EC) invalid if

Answer 27

Entered into through fraud or misrepresentation

Question 28

The Unfair Contract Terms Act 1977 aimed more at

Answer 28

Unfair ECs

Question 29

ECs for Manufacturers’ guarantees

Answer 29

Liability cannot be excluded in such guarantees

Question 30

Unfair term =

Answer 30

Contrary to the requirement of good faith and causes a significant imbalance in parties’ rights and obligations

Question 31

Contracts voidable (and any money/ property recovered) if consent negated by: (3)

Answer 31

• Physical threats (duress)
• Excessive/ improper commercial pressure/ threats
• Using influence to take unfair advantage

Question 32

Presumed undue influence

Answer 32

Automatically presumed in certain relationships eg parent and child, therefore must prove that they didn’t use undue influence

Question 33

If undue influence can be shown..

Answer 33

Innocent party relieved from obligations of contract, and can recover money paid/ property disposed of