Module 3: Terms of a Contract

Question 1

In English law, what is a condition?

Answer 1

A term vital to a contract

Breach will destroy the basis of the agreement

Question 2

In English law, what is a warranty?

Answer 2

A minor term in a contract
Subsidiary to the main purpose of the contract
Breach only entitles to claim for damages

Question 3

Difference between Scots and English law in terms of classification of terms?

Answer 3

Scots: material/non-material
English: conditions and warranties

Question 4

What is the key principle underlying what may be taken to have been agreed?

Answer 4

Objectively judged

Not interested in innermost thoughts but the objective face of the agreement

Question 5

What are the three terms of a contract?

Answer 5

Express terms
Implied terms
Terms incorporated by reference

Question 6

What are express terms?

Answer 6

Terms clearly set out and agreed by the parties

Verbally or in writing

Question 7

What are implied terms?

Answer 7

Additional terms for reasons e.g. promote fairness
Can’t be implied if contradicts express term
Implied by stature can’t be ignored

Question 8

What are terms incorporated by reference?

Answer 8

State that their contract is subject to additional rules set out elsewhere
E.g. model rules by professional body

Question 9

Interpretation of intention of the parties?

Answer 9

Interpret so as to give effect to the intention
Words should be given their ordinary, everyday meaning
Must interpret, not rewrite

Question 10

Interpretation of ambiguous words?

Answer 10

Should be interpreted so as to give effect to the contracts

If so vague as to be uncertain it can’t be enforced

Question 11

Interpretation of extrinsic (outside of contract) evidence?

Answer 11

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

Question 12

What does Contra proferentem mean?

Answer 12

Any ambiguity will be interpreted against the person who drafted the contract
Standard form contacts and exclusion clauses

Question 13

Interpretation of contra proferentem?

Answer 13

Standard form contracts and exclusion clauses

Interpreted against the person who drafted

Question 14

What is the ejusdem generis rule?

Answer 14

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

Question 15

Powell v Kempton Park Racecourse 1899

Answer 15

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

Question 16

What are restrictive covenants?

Answer 16

Provision in a contracts which limits one party’s freedom to work where or for whom he pleases

Question 17

Restrictive covenants are in general void, but may be enforceable provided what?

Answer 17

They are reasonable and in the interests of the parties

In the public interest

Question 18

Concern of court in relation to restrictive covenants in employment/business purchase contracts?

Answer 18

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

Question 19

What are the 4 factors the court will consider in relation to restrictive covenants?

Answer 19

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?

Question 20

The Scottish Farmers Diary Co (Glasgow) v McGhee 1933

Answer 20

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

Question 21

Nordenfelt v Maxim Nordenfelt Guns and Ammunition 1894

Answer 21

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

Question 22

Rentokil Ltd v Kramer 1986

Answer 22

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

Question 23

What would deciding if the restriction was reasonable in terms of area and time incolve?

Answer 23

What type of business
Business radius of potential customers
Rural or urban

Question 24

Where a number of restrictions are imposed in restrictive covenants what may the court do?

Answer 24

Uphold reasonable parts and discard the unreasonable ones

Question 25

Why must an employer take care in deciding the terms of a restrictive covenant?

Answer 25

If he tries to be too restrictive and it fails will lose all protection

Question 26

Empire Meat Co v Patrick 1939

Answer 26

Restrictive covenant
Tried to impose a 5 mile restriction on manager
Likely radius of customers was only 2 miles
Restriction failed

Question 27

What is an exclusion clause?

Answer 27

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

Question 28

Common Law limitations on exclusion clauses?

Answer 28

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

Question 29

Taylor v Glasgow Corporation 1952

Answer 29

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

Question 30

Case of unsigned document exclusion clause?

Answer 30

Reasonable steps must be taken to bring the conditions to the attention of the party
Must be aware before or at time of entering

Question 31

Olley v Marlborough Court Hotel 1949

Answer 31

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

Question 32

L’Estrange v Graucob 1934

Answer 32

Signed a document but didn’t read it

Still binding on her

Question 33

Curtis v Chemical Cleaning and Dyeing Co Ltd 1951

Answer 33

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

Question 34

Interfoto Picture Library v Stiletto Visual 1988

Answer 34

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

Question 35

When did the Consumer Rights Act 2015 come into force?

Answer 35

1 October 2015

Question 36

What does the CRA apply to?

Answer 36

Electronic contracts and face to face

Goods and services

Question 37

What is a consumer contract?

Answer 37

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)

Question 38

What is the main purpose of part 2 of the CRA?

Answer 38

Provide protection to consumers

Requires both negotiated and non-negotiated terms to be fair

Question 39

An unfair term in a CRA provides what?

Answer 39

Not binding

Consumer may choose to rely on it

Question 40

What is on the grey list of terms that may be unfair in the CRA?

Answer 40

Disproportionately high sum compensation
Unilaterally without valid reason
Fulfill without performing obligations
Determine characteristics after bound
Decide price payable after bound

Question 41

When is a term or notice unfair as provided by the CRA?

Answer 41

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’

Question 42

What consumer contracts are automatically unenforceable?

Answer 42

That excludes liability for personal injury or death arising from negligence

Question 43

Must also be what as well as fair?

Answer 43

Transparent
Legible and expressed in plain language
Traders obligation to ensure met