Source of Contractual Terms Flashcards
What are the types of terms?
- Expressed
- Implied
- Inominate
What is an Express Term??
A Term of the contract agreed by the party in advance
Factors to determine whether a statement is a term?
Responsibility and Checks - Schawel v Reade &Ecay v Godfrey
Importance of the statement made - Bannerman v White & Couchman v Hill
Timing - Routledge v McKay
Reduction into writing - Routledge v McKay
Specialist Skill & Knowledge - Oscar chess v William
Dick Bentley v Harold Smith Motors; Esso Petroleum Mardon
Responsibility and checks + Cases
•Statement may become a term where the vendor expressly accepts responsibility
Schawel v Reade : Horse said to be sound by owner, buy stops examining horse because of this and the horse turns out to not be sound.
This was a warranty as the vendor encouraged buyer to rely on sellers assurance.
HELD : Term of contract
Importance of the statement made + cases
Couchman v Hill: Prior to auction buyer asked auctioneer and owner whether heifer was unserved, both said “yes” but was in calf and died
HELD: this was a term
Bannerman v White: Buyer asked whether sulphur had been used in the production of hops - would not buy if had; hops contained sulphur.
HELD: the assurance was a term
Timing + Cases
Routledge v McKay - 2nd hand motor cycle sole successively with each sale relying on misinformation in long book
HELD: Age not a term (Lapse of time too wide to create a binding relationship based on statement)
Reducing the agreement into writing +Cases
Routledge v McKay (1954)
Writhing agreement made no mention of the age of the motor cycle
HELD: it had not been important enough to be a term
Expertise/ Special Knowledge + Cases
Oscar Chess v Williams (1954): Owner told garage his car was a 1948 Morris (log book gave this date), was a 1939 model - no warranty
(D had no expertise and was an innocent misrepresentation (before Hedley Byrne so no remedy)
Dick Bentley v Harold Smith (1965) : statement by dealer car had done 20,000 miles when it had done 100,000 - a warranty (Claim allowed because C relied on specialist expertise of the car dealers and statement was key to deciding to contract)
Expertise + Cases (continued)
Esso Petroleum v Mardon(1976): prospective tenant told forecourt throughput was 200,000 gallons, did 60,000 to 70,000 (The amount of Petroleum that the area would sell)
- breach of contractual warranty
- negligence misstatement
- Esso had special knowledge and skill in making forecast
What is the parol evidence rule?
Any oral or other evidence that the party was trying to introduce to show the actual agreement would not be accepted as admissible if it was to be used either to add to, or to vary or to contradict, the terms contained in the written contract.
- applies to contracts in writing
- Extrinsic evidence may not be adduced to vary an express written contract (Jacobs v Batavia)
What is the problem with the Parol evidence rule?
Many contracts are partly written and party oral, and therefore, in reality, both elements of the agreement would need to be considered in order to have an accurate picture of the contract in total.
All the exceptions to this rule had made it unworkable
What is an implied term??
A term in a contract which has not been expressly stated, but which the courts are willing, or required by statue, to imply.
How are implied terms imposed?
- By Statute
- Implied in law
- Implied In fact
How are Implied term imposed by statute?
Sale of Good Act 1979 (Business to Business)
S.12: title
S.13: description
S.14 quality
Supply of Goods and Service Act 1982 (Business to Business)
S.13 reasonable care and skill
Consumer Rights Act 2015 (Business to Consumer)
S.9 satisfactory quality
S10(3) particular purpose
S.11 Description
Terms implied as a matter of Law (CASES)
Shell v Lostock Garage
Contract between Shell and a Garage owner under which the garage owner could only purchase petrol from Shell but Shell later gives other garages cheaper rate.
HELD : no grounds for a term being implied
Liverpool City Council v Irwin
Implied term to keep property in reasonable repair
Courts felt that such terms should always be present
Terms implied as a matter of law [Employment contracts] CASES
Spring v Guardian Assurance plc
HELD: Courts Implied term into a contract of employment that an employer will write a reference for an employee based on facts complied with due care.
Employee will serve diligently with loyalty and reasonable competence - Lister v Romford Ice & Cold Storage ltd (1957)
Employer will not require employee to act unlawfully - Gregory Ford (1951)
Employer will take reasonable care not to endanger employee’s health: Jhonstone v Bloomsbury (1992)
Employer and employee owe each other an obligation not to act so as to destroy or damage the relation and confidence between them: Malik v BCCI (1998)
How do courts imply term by fact
Courts try to ascertain and give effect to the true, yet unexpressed intention of the parties
Two test
1) Business Efficacy
2) officious bystander test
What is the business efficacy test
The moorcock (1889)
Action for damages brought by a ship owner against the owner of a wharf due to damage caused to the vessel when attempting to load cargo; it was necessary for the vessel to rest on the ground adjoining the wharf when loading.
“An implication from the presumed intention of the parties with the object of giving the transaction such efficacy as both parties must have intended..” INTENTION OF PARTY
What is the officious bystander test?
Shirlaw v Southern Foundries
HELD: A term may be implied where it is so obvious that it goes without saying
Officious bystander test CASES
Equitable Life Assurance v Hyman
HELD: that the society’s distraction was subject to an implied term preventing it from overriding or undermining the guaranteed annuity rate
Lord Stein “the implication is essential to give effect to the reasonable expectation of the parties”.
What do Business efficacy and officious bystander test have in common?
INTENTION
Both these test focus on what the parties intended (unexpressed intention)
Attorney General of Belize and Other v Belize
Terms implied in fact (trade or professional customs) CASES
Hutton v Warren
-Custom was well founded and this became part of the contract
British Crane Hire v Ipswich Plant
- Both parties were in the plant hire business
- Court was prepared to imply a term based on trade custom
