Terms Flashcards
What are terms?
The rights and obligations within a contract
What is the consequence of a breached term?
Breach of contract
What is the purpose of terms?
Defines the contract, the scope of the contract and what we can expect when things go wrong
What are not terms?
Mere puff and mere representation
What is mere puff?
Advertising hyperbole- unintended to be taken seriously (no legal status)
How can a representation be elevated to terms?
Contains an implicit promise of the truth
How can terms be categorised?
As express or implied terms
What are express terms?
Terms that the parties agree to directly
What are implied terms?
Terms that are put into the contract via a mechanism of law other than direct expression
What is the first step when litigating for breach?
- Allege breach
- Identify the content of the term
- Argue for incorporation of a term
How can a term be identified?
Written document stipulating terms
Point to a conversation that has been had
When is a representation likely to be a term?
Timing
Importance
Special knowledge/expertise
Checks
What is the rule for timing?
Closer in time a representation is made to contracting, the increased likelihood the courts are to interpret it as a term
Routledge v Mckay
Buyer told seller that the motorbike was a different model than it was. Buyer argued that the statement made was a contractual term.
The lapse of time meant the seller could verify/put the term in writing
What is the rule for importance?
If there is clear importance of the fact to the contract, and it is established but for the statement the contract would not have been entered= likely to be a term
Bannerman v White
The claimant agreed by contract to purchase some hops to be used for making beer. He asked the seller if the hops had been treated with sulphur and told him if they had he wouldn’t buy them as he would not be able to use them for making beer if they had. The seller assured him that the hops had not been treated with sulphur. In fact they had been treated with sulphur.
The statement that the hops had not been treated with sulphur was a term of the contract rather than a representation as the claimant had communicated the importance of the term and relied on the statement. His action for breach of contract was successful.
Special knowledge
If their is a disparity between the knowledge of the parties, a statement made by the expert is less likely to be accepted that it is/isnt a term
Oscar Chess v Williams
Representee purchases car in reliance of the model. Model turned out to be incorrect
Held:
The statement relating to the age of the car was not a term but a representation. The representee, Oscar Chess ltd as a car dealer, had the greater knowledge and would be in a better position to know the age of the manufacture than the defendant.
Checks/verification
If one undertakes or dissuades verification, likely to take risk upon the statement = term
Schawel v Reade
Seller dissuaded buyer from undertaken checks on the soundness of a horse.
Horse was not sound=breach of term
Which rule do the courts adhere to if there is a written contract?
The parol evidence rule
What is the parol evidence rule?
If a contract is a written contract, extrinsic oral evidence can’t be adduced to add, vary or detract from that document
What will the courts do if theres a claim for extrinsic oral evidence?
The courts will ignore oral discussions
What is a hybrid contract?
A contract that relies on both written and oral terms
jacobs v Batavia
J Evans v Merzarrio
What is the exception to the parol evidence rule?
If there is an existence of an ancillary contract
City and Westminster Properties v Mudd
Mudd leased property
Lease up for renewal with a new proviso that the building could not be used for residential purposes.
COW agreed not to enforce the proviso which they later retracted
A collateral contract was made where C&W made a unilateral offer that Mudd could use the property for residential purposes if he extended the lease
Ancillary contract suspended the provisions of the main contract
What is an onerous term?
Where a term is onerous it must be pointed out with care
Interphoto v Stilleto
Late return fee of £5 a day
Stiletto forgot to send back in time
Penalty of £3,780
The more onerous the clause the more effort must be brought to the attention of the other party - printed in red ink
What is an entire agreement clause?
Application of the parole evidence rule in its strictest sense. Agreed between the parties that the document is the entirety of the contract (Inntrepeneur Pub v East Crown)
What are implied terms?
Terms implied into a contract at common law/statute
Liverpool CC v Irwin
- Block of flats owned by LA
- Tenancy agreement that the tenants were to maintain their own flats
- No terms stating whose obligation it was to maintain the communal area
- CA- implied term will only be incorporated if the contract will fail without it
What is an implied term in fact?
Term incorporated if it goes without saying ie a contract to sell a car holds the implicit assumption that it will come with wheels
What are the implied terms regarding trade customs?
In particular trades, there are universally accepted customs that are prevalent. In the event that the custom is notorious in a trade, it will be implied into the contract
British Crane hire v ipswich plant
norms within a trade can imply terms into the contract
Incorporation of a contract by previous course of dealings
If there is a long term practice, in a regular and consistent manner, it will be incorporated into the contract
What are some statutes that incorporate terms automatically into a contract?
Sales of Goods Act 1979
Consumer Rights Act 2015
S13 (1) Description of goods
Implied term that goods correspond with their description
Arcos v Ronaasen
Planks were not of the correct dimension. Argued there was a sale by description, with the goods not corresponding to the description = breach of contract
S14 (2) (3) Quality and fitness for purpose
S14 (3)
Implied term that where a buyer makes known to the seller the particular purpose for the goods, the goods will be reasonably fit for their purpose
Supply of Goods and Services Act 1982
S13- Reasonable care and skill
S14- Within reasonable time
S15- To pay reasonable consideration
What are the different categories of terms?
Condition
Warranty
Innominate
What is a condition?
A term of the contract that is so important it goes to the root of the contract (Poussard v Spiers)
What does a breach of a condition entitle C to?
Termination of contract and damages
What is a warranty?
A provision that is not so important that it goes to the root of the contract. The breach of which cannot terminate the contract, but may entitle C to damages
Hong Kong Fir v Kawasaki
Introduction of innominate terms.
What does s15 A of the SGA stipulate?
that where a breach is so slight that it is unreasonable to reject the goods, the buyer will not be entitled to reject the goods
Lombard North Central v Butterworths
- Condition that prompt payment be made by a certain date.
- Late payment by 1 day = entitled breach- termination and damages
- Owners took the computers and loss from profits
- Courts- a condition had been stated and agreed upon
Schuler v Wickman Tools
COntract specified a condition that he was to visit every car manufacturer at least once a month
- Failed to do so
Company attempted to terminate the contract
Courts- while persuasive, courts entitled to look at the understanding and reality of the situation
What is an innominate term
A term which is ambigious as to whether it is a condition or a warranty.
What is the approach adopted in relation to innominate terms?
Wait and see approach
Wait until the breach has arisen and look at the consequences of the breach.
If the severity of the consequences was such as to deprive the innocent party of the whole benefit of the contract, they are entitled to treat it as a condition
What is the distinction between the remedies available where a term v condition is breached?
Misrep will always entitle representee to set aside the contract
A term will only be set aside if it is a condition or an innominate term with consequences severe enough to deprive the innocent party of the whole benefits of the contract
L’estrange v Graucob
Claimant bought an automatic slot machine from the defendants
Signed an order form containing a clause excluding liability for all express and implied warranties
MAchine did not work- claimants brought an action
Courts- contract still stood- respect for the sanctity of a written contract
Grogan v Robin Meredith Plant Hire
Document signed by the defendants was a time sheet.
All hire undertaken under CPA conditions
Courts held that the nature and purpose of the document (administrative document) as well as the circumstances surrounding its use could factor in their considerations on whether it is legally binding
What is the defence available to one who is illiterate and signs a deed read to him incorrectly?
Non est factum- this is not my deed
To whom is the defence of non est factum available to?
To those who are permanently or temporarily unable, through no fault of their own, to have without explanation any real understanding or purpose of a particular document, whether that be from defective education, illness or innate incapacity
Olley v Marlborough Court
Hotel had a disclaimer excluding liability for lost or stolen items in the hotel bedrooms.
The contract had been concluded at the hotel desk, the C unable to see the notice prior to contracting.
Courts- notice of the terms must be given at or before contracting.
Chapleton v Barry
Ticket after purchasing a deck chair containing an exclusion clause.
Injured when the deck chair collapsed
Courts- cannot rely on the exclusion clause where the ticken was unintended to have contractual effect
Parker v South Eastern Railway
The defendant must have taken reasonable steps to bring the notice to the attention of the other party
Can a term be incorporated by a course of dealing?
Henry Kendall v William Lillico- yes
McCutheon v David Macbrayne
For terms to be incorporated into a contract by course of dealing: 1. the course of dealing must be consistent, and 2. the parties must have actual knowledge of the terms during the course of dealing
