Private Law 9

Question 1

What is an implied term?

Answer 1

Implied terms are provisions that are not expressly stated in the contract but are considered to be included based on the nature of the agreement, the conduct of the parties, or the law.

Question 2

Why Does the Law Imply Terms into a Contract (4 Reasons) ?

Answer 2

1. To Ensure Fairness: Implied terms help balance the interests of both parties, ensuring neither party is unfairly disadvantaged.
2. To Reflect Parties’ Intentions: They align the contract with what the parties would have intended or agreed upon had they addressed the issue explicitly.
3. To Promote Efficiency: Implied terms streamline transactions by filling gaps and preventing disputes over unaddressed issues.
4. To Adhere to Public Policy: They ensure that contracts adhere to legal standards and societal norms, promoting justice and ethical business practices.

Question 3

What are the categories and sub-categories of implied terms?

Answer 3

1. Implied by law:
   * by statute
   * by common law
   * by custom / usage
   * affect similar contracts / types of contract
2. Implied in fact:
   * affect individual contracts

Question 4

What is the Sale of Goods Act 1979 and can it be contracted out of?

Answer 4

Implied terms for business to business contracts for the sale of goods.

The Unfair Contract Terms Act 1977 – restricts the ability to contract out of these implied terms.

Question 5

What is the Consumer Rights Act 2015 and can it be contracted out of?

Answer 5

Implied terms for business to consumer contracts for the supply of goods, digital content or services.

The 2015 Act restricts the ability to contract out of
these implied terms.

Question 6

How can implied terms under Common Law be carried out?

Answer 6

1. Solicitor or Accountant – duty of care
2. Employment – duty of mutual trust /
   confidence

Question 7

How can implied terms under Custom be carried out?

Answer 7

Terms can be implied if they are customary in a particular trade or industry. Both parties must be aware of these customs, and they should be reasonable, certain, and not contradict any express terms of the contract.

Question 8

What case is an example of implied terms and trade customs?

Answer 8

William Morton & Co v Muir (designs for curtains).

Muir used designs for curtains for free as these designs were not registered and there was no express term restricting the use of these designs in the contract.

The court held that a custom of trade existed, limiting the use of the designs, unless given consent.

Question 9

What are the 2 tests for terms implied in fact and what do they mean?

Answer 9

(1) Business Efficacy / Necessity (terms necessary to make the contract work effectively)

(2) Reasonableness / ‘the officious bystander’/goes without saying (terms so obvious that both parties would readily agree to them if an “officious bystander” asked whether the term should be included)

Question 10

What case demonstrates “the officious bystander” test?

Answer 10

Southern Foundries v Shirlaw (Federated Foundries + manager of 10 years).

Shirlaw was made manager of Southern Foundries for a fixed term of 10 years until Federated Foundries took over and Shirlaw was removed as a director.

The court used the “officious bystander test” and found there was an implied term in the contract that Shirlaw would not be removed within the 10 years.

Question 11

What are the requirements for a term to be implied in fact?

Answer 11

“For a term to be implied into the contract it would
either have to be necessary for business efficacy or be
so obvious that it went without saying.”

Question 12

How and to what extent do statutes ensure fairness in Business to consumer contracts?

Answer 12

In Business-to-consumer contracts, consumers are generally seen as the weaker party, often lacking the bargaining power or expertise that businesses have. To protect consumers, various statutes have been enacted.

Question 13

How and to what extent do statutes ensure fairness in Business to business contracts?

Answer 13

In Business-to-business contracts, the parties are presumed to have more equal bargaining power and expertise, leading to a lesser degree of statutory intervention. However, there are still important statutes that ensure fairness.

Question 14

What is the three-part test in the Statutory Control of Contract Terms in Business to Consumer Contracts?

Answer 14

• Contrary to the requirement of good faith
• Causes a significant imbalance in the parties rights/obligations
• To the detriment of the consumer

Question 15

What 4 consumer contract terms may be regarded as unfair?

Answer 15

1. Terms restricting the liability of the trader
2. Terms which allow the trader to make unilateral decisions about the main subject of the contract or the price
3. Terms where the trader’s rights following a breach are disproportionately better than those of the consumer
4. Terms restricting or adversely affecting the consumer’s right to litigate in the event of a breach

Question 16

What 2 consumer contract terms may not be
regarded as unfair?

Answer 16

1. A term about the main subject matter of the contract.
2. A term about the price by comparison with the goods, digital content or services supplied under it.

Question 17

What happens if a term in a Business to Consumer contract is deemed to be unfair?

Answer 17

• Will not be binding on consumer – s62(1) (contract) and s62(2)
• the rest of the contract will continue (so far as practicable) to have effect in every other respect – s67

Question 18

What cannot be entered into an exclusion clause with both types of contracts?

Answer 18

It is not possible to exclude liability for death or personal injury.

Question 19

In what circumstances would a Business to Business contract have no effect?

Answer 19

Will have no effect if excludes or restricts liability for a contractual breach or if allows no performance or a substantially different performance than that anticipated by the contract – s17.