Module 3: Terms of a Contract Flashcards
In English law, what is a condition?
A term vital to a contract
Breach will destroy the basis of the agreement
In English law, what is a warranty?
A minor term in a contract
Subsidiary to the main purpose of the contract
Breach only entitles to claim for damages
Difference between Scots and English law in terms of classification of terms?
Scots: material/non-material
English: conditions and warranties
What is the key principle underlying what may be taken to have been agreed?
Objectively judged
Not interested in innermost thoughts but the objective face of the agreement
What are the three terms of a contract?
Express terms
Implied terms
Terms incorporated by reference
What are express terms?
Terms clearly set out and agreed by the parties
Verbally or in writing
What are implied terms?
Additional terms for reasons e.g. promote fairness
Can’t be implied if contradicts express term
Implied by stature can’t be ignored
What are terms incorporated by reference?
State that their contract is subject to additional rules set out elsewhere
E.g. model rules by professional body
Interpretation of intention of the parties?
Interpret so as to give effect to the intention
Words should be given their ordinary, everyday meaning
Must interpret, not rewrite
Interpretation of ambiguous words?
Should be interpreted so as to give effect to the contracts
If so vague as to be uncertain it can’t be enforced
Interpretation of extrinsic (outside of contract) evidence?
Cannot be led to prove an additional term
May be admitted as to the meaning of foreign words or technical terms
If an error not obvious, use to show that a different agreement was actually agreed
What does Contra proferentem mean?
Any ambiguity will be interpreted against the person who drafted the contract
Standard form contacts and exclusion clauses
Interpretation of contra proferentem?
Standard form contracts and exclusion clauses
Interpreted against the person who drafted
What is the ejusdem generis rule?
Where the contract refers to a list of things of the same type or with common characteristics followed by general words, the general words are interpreted as being restricted to items of the same types with characteristics
Applied to ambiguous contracts
Powell v Kempton Park Racecourse 1899
Offence to use a ‘house, office, room or other place for betting’
Used an outdoor ring
‘Other place’ had to refer to a place indoors as all listed words were indoors
Outdoors so not guilty of an offence
What are restrictive covenants?
Provision in a contracts which limits one party’s freedom to work where or for whom he pleases
Restrictive covenants are in general void, but may be enforceable provided what?
They are reasonable and in the interests of the parties
In the public interest
Concern of court in relation to restrictive covenants in employment/business purchase contracts?
To ensure individual not prevented from earning a living
Ensure that the buyer of a business who has paid for goodwill is not restricted from making use of that goodwill
What are the 4 factors the court will consider in relation to restrictive covenants?
Are legitimate business interests being protected?
Are restrictions wider than necessary?
Is the employee an appropriate target? e.g. trade secrets, solicit clients
Is it reasonable in terms of area and time?
The Scottish Farmers Diary Co (Glasgow) v McGhee 1933
Restrictive covenant- business interests protected
Milkman bound not to carry on business as a milkman within 1 mile of former employer
Reasonable to preserve employers trading interest Popular milkman may have goodwill linked directly to him
Nordenfelt v Maxim Nordenfelt Guns and Ammunition 1894
Restrictive covenant- wider than necessary?
Not engage in trade of arms manufacturer for 25 years worldwide
Restrictive covenant was reasonable
Nature of business was such that former customers came from all over the world
Rentokil Ltd v Kramer 1986
Restrictive covenant appropriate target?
K prohibit for 2 years canvassing R customers
Restriction was not wider than necessary
Full access to customer list
Prevent K using to their prejudice and advantage of his new employers
What would deciding if the restriction was reasonable in terms of area and time incolve?
What type of business
Business radius of potential customers
Rural or urban
Where a number of restrictions are imposed in restrictive covenants what may the court do?
Uphold reasonable parts and discard the unreasonable ones
Why must an employer take care in deciding the terms of a restrictive covenant?
If he tries to be too restrictive and it fails will lose all protection
Empire Meat Co v Patrick 1939
Restrictive covenant
Tried to impose a 5 mile restriction on manager
Likely radius of customers was only 2 miles
Restriction failed
What is an exclusion clause?
Term in a contract that excludes or limits the civil liability of one party for the consequences of his breach of contract or negligence
May be implied by ref to conditions in another doc
Considered with ref to common law and statutory law
Common Law limitations on exclusion clauses?
Valid only if its terms are incorporated into the contract
Where found in an unsigned doc then the document must for an integral part of the contract and should expect t and cs
Taylor v Glasgow Corporation 1952
Exclusion clause
T went to public baths and given a ticket
Knew had writing but not conditions
Said not responsible for loss or injury
T injured herself and tried to claim it was due to negligence
Ticket was not of a types a person could reasonable be expected to study for conditions
Entitled to assume just a voucher
Not sufficient notice so not part of contract
Case of unsigned document exclusion clause?
Reasonable steps must be taken to bring the conditions to the attention of the party
Must be aware before or at time of entering
Olley v Marlborough Court Hotel 1949
Paid for room at hotel
Hotel notice disclaimed liability
Thief stole key and coat from room
Hotel couldn’t rely on notice because contract was formed at reception when room was paid for
L’Estrange v Graucob 1934
Signed a document but didn’t read it
Still binding on her
Curtis v Chemical Cleaning and Dyeing Co Ltd 1951
Misleading exclusion clause
Took wedding dress to be claimed
Sign conditions that restricted liability to damage to beads on dress
Dress stained
Cleaners couldn’t rely on exclusion clause as they had actively misled claimant
Assumed risked beads only
Interfoto Picture Library v Stiletto Visual 1988
Unusual or onerous term; for every day late returning Onerous term not sufficiently brought to attention of defendant
Court did not apply
Damages that more fairly reflect loss
When did the Consumer Rights Act 2015 come into force?
1 October 2015
What does the CRA apply to?
Electronic contracts and face to face
Goods and services
What is a consumer contract?
One party is acting for purposes relation to his trade or business (trader) and the other is an individual acting for purposes wholly or mainly outside that individuals trade or business (consumer)
What is the main purpose of part 2 of the CRA?
Provide protection to consumers
Requires both negotiated and non-negotiated terms to be fair
An unfair term in a CRA provides what?
Not binding
Consumer may choose to rely on it
What is on the grey list of terms that may be unfair in the CRA?
Disproportionately high sum compensation Unilaterally without valid reason Fulfill without performing obligations Determine characteristics after bound Decide price payable after bound
When is a term or notice unfair as provided by the CRA?
If it is ‘contrary to the requirement of good faith, it causes significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer’
What consumer contracts are automatically unenforceable?
That excludes liability for personal injury or death arising from negligence
Must also be what as well as fair?
Transparent
Legible and expressed in plain language
Traders obligation to ensure met
