Parts of a Contract Flashcards
What are express terms in a contract?
Terms specifically agreed by the parties, which may be in writing or oral.
Why is it better to have express terms in a written contract?
For evidential reasons.
What are implied terms?
Terms not expressly created by the parties but read into the contract.
What can lead to terms being implied into a contract?
Common background assumptions, previous consistent dealings, or to protect one party.
What is an exemption clause?
Contract terms that exclude or restrict a party’s liability for breach of contract.
What is the significance of local custom or trade usage in contracts?
Courts may imply terms based on local customs or trade usage when parties do not expressly agree on all terms.
What case illustrates the implication of terms based on local custom?
Hutton v Warren (1836) 1 M & W 466.
What is the principle established in Spurling J Ltd v Bradshaw regarding previous dealings?
Terms can be implied from a previous consistent course of dealings between the parties.
What are the two tests devised by courts to imply terms based on presumed intentions?
Business efficacy test and officious bystander test.
What does the ‘business efficacy’ test determine?
Whether a term is necessary to make the contract work commercially.
What does the ‘officious bystander’ test involve?
If a bystander suggested a term and both parties would respond with ‘Oh, of course’, the term can be implied.
In what types of contracts might courts imply typical provisions?
Tenancy agreements and employment contracts.
What is the Sale of Goods Act 1979?
A statute that implies terms into contracts for the sale of goods.
What distinction does the Sale of Goods Act 1979 make regarding terms?
It differentiates between major terms (conditions) and minor terms (warranties).
What terms does section 13 of the Sale of Goods Act 1979 imply?
A term that the goods correspond with their description.
What does section 14(2) of the Sale of Goods Act 1979 imply?
A term that the goods will be of satisfactory quality.
What does section 14(3) of the Sale of Goods Act 1979 imply?
A term that the goods will be fit for purpose.
Who does the Sale of Goods Act 1979 apply to after the Consumer Rights Act 2015?
Contracts for the sale of goods made business-to-business, consumer-to-consumer, or consumer-to-business.
What must a buyer do to benefit from section 14(3) regarding the fitness for purpose?
Inform the seller of any special or unusual purpose.
Is liability for breach of sections 14(2) and 14(3) strict?
Yes, the buyer does not need to prove fault on the seller’s part.
Fill in the blank: A condition is a _______ term of the contract.
major
Fill in the blank: A warranty is a _______ term of the contract.
minor
What section of the Sale of Goods Act 1979 implies a condition that goods will correspond with their description?
Section 13
This section applies to contracts for the sale of goods by description.
What does section 14(2) of the Sale of Goods Act 1979 imply?
A condition that goods supplied will be of satisfactory quality when sold in the course of a business.
This applies specifically to sellers acting in a business capacity.
What is the implication of section 14(3) of the Sale of Goods Act 1979?
A condition that goods supplied are reasonably fit for a particular purpose made known by the buyer, unless it is unreasonable for the buyer to rely on the seller’s skill or judgment.
This applies when the seller is selling in the course of a business.
What is the buyer entitled to do if one of the terms implied by sections 13 or 14 is broken?
Terminate the contract and reject the goods, or affirm the contract and sue for damages.
The buyer must return the goods to recover any money paid.
When is the right to reject goods lost according to the Sale of Goods Act 1979?
If the buyer has accepted the goods or if the breach is so slight that it would be unreasonable to reject them.
Acceptance can occur if the buyer retains the goods beyond a reasonable time.
What does section 11(4) of the Sale of Goods Act 1979 state regarding acceptance of goods?
The buyer cannot reject the goods if they have accepted them.
Acceptance is typically determined by the buyer retaining the goods for too long without rejecting them.
What is the significance of section 4(2) of the Supply of Goods and Services Act 1982?
It implies that goods supplied in the course of a business will be of satisfactory quality.
This section applies specifically to goods, not services.
What are the implied terms regarding services under the Supply of Goods and Services Act 1982?
The service will be carried out with reasonable care and skill, and a reasonable price will be paid if not fixed.
These terms ensure a minimum standard for service contracts.
What does the Consumer Rights Act 2015 aim to do?
Consolidate and clarify the law relating to the rights of consumers and the protection of their interests.
It focuses on consumer contracts for goods, digital content, and services.
What is the consumer’s right to reject goods under the Consumer Rights Act 2015?
The short-term right to reject and get a full refund within 30 days of purchase.
This applies unless the goods are perishable or the parties have agreed otherwise.
What are the remedies available to consumers if goods do not conform to the contract under the Consumer Rights Act 2015?
- Short-term right to reject and refund
- Right to repair or replacement
- Right to price reduction or final right to reject.
These remedies are prioritized based on the situation.
What does section 49 of the Consumer Rights Act 2015 imply regarding services?
A term that the service/work will be carried out with reasonable care and skill.
This ensures that consumers receive a competent service.
Fill in the blank: Section 10 of the Consumer Rights Act 2015 implies a term that goods will be _______.
reasonably fit for their particular purpose.
True or False: The Consumer Rights Act 2015 classifies implied terms as ‘conditions’.
False
They are presented as ‘statutory rights’ instead.
What does section 54 of the Consumer Rights Act 2015 provide regarding services?
Consumers have the right to require repeat performance or a price reduction if the service does not conform to the contract.
This applies to breaches of express or implied terms.
What does section 54 of the CRA 2015 provide?
It provides that a consumer has the right to require repeat performance or a price reduction if a service/work does not conform to the contract due to breach of an express term or an implied term to exercise reasonable care and skill.
This section also relates to the breach of the implied term regarding performance within a reasonable time.
What are the remedies available to a consumer when there is a breach of the implied terms regarding satisfactory quality and fitness for purpose?
The remedies include:
* Exercise short-term right to reject the faulty goods
* Claim for replacement goods
* Claim for damages if necessary.
This applies even if the fault is due to a manufacturing defect.
What is the difference between a condition and a warranty in contract law?
A condition is a major term going to the root of the contract, whereas a warranty is a minor, less important term.
The classification affects the remedies available in case of breach.
What happens if a term is classified as a condition and is breached?
The innocent party usually has the option of terminating the future performance of the contract and can claim damages for any additional loss suffered.
This applies even if the innocent party has only suffered minor loss.
What is the effect if a term is classified as a warranty?
The innocent party cannot terminate the contract but can only sue for damages for loss suffered.
This applies even if the innocent party has suffered serious loss.
What are innominate terms?
Innominate terms are those that are neither conditions nor warranties and require an assessment of the breach’s effect to determine the remedies available.
This approach was suggested by Diplock LJ in the Hong Kong Fir Shipping case.
What criteria did Diplock LJ suggest for determining whether an innocent party can terminate a contract for a breach of an innominate term?
The test is whether the breach has deprived the innocent party of substantially the whole benefit of the contract.
This approach allows for a more flexible assessment of the effects of a breach.
What is an exemption clause?
An exemption clause seeks to exclude or limit liability for breach of contract or tort.
Limitation clauses are a type of exemption clause that seeks to limit liability.
What are the three main ways in which a provision may be incorporated into a contract?
The three main ways are:
* By signature
* By notice
* By consistent course of dealings between the parties.
Incorporation is crucial for exemption clauses.
What happens if a party signs a contractual document containing an exemption clause?
The clauses in that document will normally be incorporated into the contract, even if the party did not read them.
This principle is illustrated by the case of L’Estrange v Graucob Ltd.
Under what circumstances will an exemption clause not be incorporated into a contract even if signed?
An exemption clause will not be incorporated if:
* It is illegible
* It has been misrepresented.
Misrepresentation must have led the innocent party to reasonably rely on the inaccurate description.
What are the three situations where an exemption clause will not be incorporated into a contract?
- The exemption clause is illegible
- The clause has been misrepresented
- The clause is unusual and onerous
In which case was it determined that an exemption clause cannot be relied upon if its effects have been misrepresented?
Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805
What must be true for an exemption clause to be incorporated from an unsigned document or notice?
The document must be contractual in nature
What was the significance of the case Chapelton v Barry Urban District Council [1940] 1 KB 532?
The court decided that a deck chair ticket was not contractual in nature
In Parker v South Eastern Railway (1877) 2 CPD 416, what did the Court of Appeal state about the innocent party’s knowledge of the clause?
It was not necessary for the innocent party to know about the clause if reasonable steps were taken to draw attention to it
What factors might a court consider when deciding if reasonable steps have been taken to draw attention to an exemption clause?
- Position of the clause on the document
- Prominence of the clause
- Nature of the clause (unusual or onerous)
What did Lord Denning MR suggest for an onerous or unusual clause to give sufficient notice?
The clause must be printed in red ink with a red hand pointing to it or something equally startling
According to Olley v Marlborough Court Ltd [1949] 1 KB 532, when can a notice exempting liability be incorporated?
Only if it is presented before the contract is finalized
How can an exemption clause be incorporated by a previous consistent course of dealings?
There must be a sufficient number of regular dealings between the parties
What was established in Kendall (Henry) & Sons v Lillico & Sons Ltd [1969] AC 31 regarding exemption clauses?
Exemption clauses were incorporated due to a previous consistent course of dealings
What does the contra proferentem rule state?
If a clause is ambiguous, it will be interpreted against the party seeking to rely on it
What did the court decide in Houghton v Trafalgar Insurance [1954] 1 QB 247 regarding an ambiguous clause?
The clause did not cover a situation where the car was carrying too many people
What guidelines were suggested in Canada Steamship Lines v The King [1952] AC 192 regarding exemption clauses and negligence?
- Clause must expressly exempt liability for negligence
- If no express reference, must determine if wording is wide enough to include negligence
What must be considered if an exemption clause could cover liability other than negligence?
The court may restrict the clause to that other liability and not cover negligence
What does the timing of reasonable steps refer to in the context of exemption clauses?
Steps must generally be taken before the contract is finalized
What is the implication of a consistent course of dealings even after the contract is finalized?
The exemption clause may still be incorporated
In McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125, why was the exemption clause not incorporated?
The dealings were not consistent as sometimes the document containing the clause was signed and sometimes it was not
What is the primary common law rule regarding exemption clauses?
The clause must be incorporated into the contract
What must the wording of an exemption clause cover to be effective?
The breach of contract and the loss or damage that occurred
What is strict liability?
Proof of fault is not required
Strict liability applies in certain legal contexts where a party can be held liable without proof of negligence or fault.
In Monarch Airlines Ltd v London Luton Airport Ltd, what did the court decide about the exemption clause?
The clause covered negligence
The court found that the wording was clear enough to encompass negligence despite the defendant’s attempts to exclude liability.
What is the modern approach regarding exemption clauses and very serious breaches of contract?
Exemption clauses may cover very serious breaches if clearly worded
This was established in Photo Productions Ltd v Securicor Transport Ltd.
How are limitation clauses generally construed compared to exclusion clauses?
Limitation clauses are sometimes less strictly construed
This is because parties may agree to limit liability rather than exclude it completely.
What is the contra proferentem rule?
An unclear clause is construed against the party relying on it
This principle was illustrated in Houghton v Trafalgar Insurance.
What must be included in an exemption clause to exclude liability for negligence?
Clear words are needed
If the wording is clear, the term ‘negligence’ need not be explicitly stated.
What does Section 2 of the Unfair Contract Terms Act 1977 address?
Exemption for negligence or negligent breach of contract
It stipulates that a business cannot exclude liability for negligence causing death or personal injury.
What is the reasonableness test in UCTA 1977?
The clause must be fair and reasonable given the circumstances known to the parties
This is detailed in Section 11 of UCTA 1977.
What does Section 3 of UCTA 1977 apply to?
Clauses in standard form contracts exempting liability for breaches of express terms
It only applies if the parties were dealing on the written standard terms of business.
What factors does the court consider regarding the reasonableness of an exemption clause?
- Relative strength of bargaining positions
- Inducement to agree
- Customer’s knowledge of the clause
- Practicability of compliance with conditions
These factors help assess whether the exemption clause is reasonable.
When determining the reasonableness of a limitation clause, what additional aspects does Section 11(4) of UCTA 1977 consider?
- Resources available to the defendant
- Possibility of insurance coverage
These aspects help gauge the fairness of a limitation clause.
What was the ruling in Stewart Gill Ltd v Horatio Myer & Co Ltd regarding exemption clauses?
The whole clause must satisfy the reasonableness test
The court refused to sever parts of an unreasonable exemption clause.
What did the Court of Appeal rule in Goodlife Foods Ltd v Hall Fire Protection Ltd regarding exemption clauses?
The clause excluding liability was reasonable and valid
Factors included equal bargaining power and awareness of terms.
What is the implication of drafting multiple exemption clauses?
Better to have separate clauses for different issues
This approach enhances clarity and reasonableness.
What does Section 6 of UCTA 1977 cover?
Exemption clauses for breaches of terms implied by the Sale of Goods Act 1979
It specifically relates to goods sold in the course of business.
What is the significance of the customer’s bargaining position in the reasonableness test?
It affects the likelihood of the exemption clause passing the test
A weaker position may indicate an unfair advantage taken by the seller.
Fill in the blank: An exemption clause can cover a very serious or deliberate breach of contract provided the clause is _______.
[clearly worded]
What is the purpose of drafting separate exemption clauses?
To be cautious and have several separate clauses dealing with different issues rather than one long clause.
What case established guidelines on reasonableness for exemption clauses?
Smith v Eric Bush [1990] 1 AC 831, HL.
What was the primary issue in Smith v Eric Bush?
Whether the surveyor could rely on a disclaimer to exempt him from liability for negligence.
What factors should be considered to determine the reasonableness of a disclaimer according to Lord Griffiths?
- Equality of bargaining power
- Practicability of obtaining alternative advice
- Difficulty of the task being undertaken
- Practical consequences of the decision
What does Section 2(2) of UCTA 1977 state regarding disclaimers?
A disclaimer is only effective if it is reasonable.
In St Albans City and District Council v International Computers Ltd, what was the nature of the limitation clause?
It limited the defendant’s liability to £100,000.
What was the conclusion regarding the limitation clause in St Albans City and District Council v International Computers Ltd?
The limitation clause was not reasonable and could not be relied upon.
What are the non-excludable statutory rights under the Consumer Rights Act 2015 for goods?
- Goods to be of satisfactory quality
- Goods to be reasonably fit for purpose
- Goods to be as described
What does Section 57(1) of the Consumer Rights Act 2015 state about service contracts?
A trader cannot exclude liability for breach of the implied term to perform a service with reasonable care and skill.
What defines an unfair term in a contract under the Consumer Rights Act 2015?
A term that causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer.
What is the general rule regarding exemption clauses protecting third parties?
An exemption clause cannot protect a third party due to the privity rule.
What is an exception to the general rule about third parties and exemption clauses?
The Contracts (Rights of Third Parties) Act 1999 allows third parties to acquire rights if the contract expressly provides for it.
What must be true for a third party to enforce a term of the contract in its own right?
The third party must be expressly identified in the contract.
True or False: Jordan could sue Car Care Ltd for breach of contract in the case discussed.
True.
True or False: Car Care Ltd could rely on a clause to protect it from liability for personal injury caused by negligence.
False.
What are express and implied terms in the context of exemption clauses?
Terms that define the obligations of the parties in a contract.
What is the significance of the Unfair Contract Terms Act 1977 in relation to exemption clauses?
It sets out the rules regarding the validity and reasonableness of exemption clauses.
Fill in the blank: An exemption clause may be deemed ‘_______’ if it causes a significant imbalance in the parties’ rights and obligations.
unfair
What are the two types of terms in a contract?
Express and implied terms
Express terms are specifically stated, while implied terms are not explicitly mentioned but are understood to be part of the contract.
What is the difference between conditions, warranties, and innominate terms?
Conditions are essential terms, warranties are less critical, and innominate terms depend on the breach’s effect
The classification affects the remedies available for breach.
What is the effect of the Unfair Contract Terms Act 1977 on exemption clauses?
It restricts the ability to exclude or limit liability in certain circumstances
Particularly relevant when dealing with consumer contracts.
What does the Consumer Rights Act 2015 address regarding exemption clauses?
It imposes requirements on the fairness of terms in consumer contracts
This act complements the Unfair Contract Terms Act 1977.
When considering an exemption clause, what is the first step in the suggested structure?
Identify the parties to the contract
Understanding the parties helps establish the context of the contract.
How can you determine if an exemption clause is incorporated into a contract?
Check if it is in a signed document, legible, not misrepresented, and not onerous
The clause must be reasonably drawn to the other party’s attention.
What factors should be considered when determining if reasonable steps were taken to bring an exemption clause to attention?
- Nature of the document containing the clause
- Position of the clause in the document
- Prominence of the clause
- Unusual or onerous nature of the clause
These factors influence the enforceability of the clause.
What must be assessed regarding the wording of the exemption clause?
Whether it covers the breach and damage alleged
Clarity in the clause’s wording is crucial for its applicability.
Which sections of UCTA 1977 or CRA 2015 apply to a breach?
Analyze the specific term that has been breached
This analysis will guide the application of statutory provisions.
What is the reasonableness test in UCTA 1977?
A test to determine if an exemption clause is fair and reasonable
It is outlined in section 11 of UCTA 1977.
In a business-to-business contract, what is an implied condition regarding the transfer of goods?
The transferor has the right to transfer ownership of the goods
This is mandated by section 2(1) of the Sale of Goods Act 1982.
What is an implied term regarding goods supplied by description?
The goods will correspond with that description
This is covered under section 3 of the Sale of Goods Act 1982.
What is implied regarding the quality of goods supplied in a business?
Goods will be of satisfactory quality
This is specified in section 4(2) of the Sale of Goods Act 1982.
What is the implication if a buyer makes known their purpose for the goods?
There is an implied term that the goods will be fit for that purpose
This is detailed in section 4(5) of the Sale of Goods Act 1982.
What is an implied term regarding services performed in a business?
Services will be carried out with reasonable care and skill
This is stated in section 13 of the Supply of Goods and Services Act 1982.
What happens if no time for performance has been agreed in a service contract?
It is implied that the work will be done within a reasonable time
This is covered under section 14 of the Supply of Goods and Services Act 1982.
What is implied if a price for work or service has not been fixed?
A reasonable sum will be charged
This is an important consideration in service contracts.
What does section 6 of UCTA 1977 state about sale of goods by description?
A condition is implied that goods will fit the description
This protects against misleading descriptions.
How does UCTA 1977 affect liability for breach of terms implied by the Sale of Goods Act?
Liability can be excluded or restricted if the exemption clause passes the reasonableness test
This ensures fairness in contractual obligations.
What is the general privity rule in contract law?
Only parties to the contract can sue or be sued under it
This principle limits who can enforce contract rights.
What is the exception to the general privity rule?
Contracts (Rights of Third Parties) Act 1999 allows third parties to enforce certain contract terms
This act expands the rights of third parties in specific situations.
What should be considered when concluding whether the innocent party can recover for loss and damage?
Evaluate the application of exemption clauses and statutory protections
This assessment determines the potential for recovery.
