terms Flashcards

1
Q

types of terms

A

Contract terms may be conditions or warranties. Both conditions and warranties can be either expressly agreed between
the parties during their negotiations (express terms) or
implied into a contract by statute, by the courts or by custom
and usagage(implied terms)

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2
Q

TERMS VS. REPRESENTATIONS

A
  1. what is representation
    Statements of fact or law made during the negotiations for
    a contract will either be** incorporated** into the contract itself as terms (if the parties intended the statements to form part of the contract) or not incorporated (if they were made to
    induce the other party to enter into the contract). These latter
    statements are known as representations.
  2. Whether a statement is a term or representation will be determined by the intentions of the parties, viewed objectively, that is, from the perspective of a reasonable person,having regard to the conduct of the parties.
  3. The courts will take the following factors into account when determining whether a statement is a term or a representation:
    * **The importance **of the statement (from the perspective
    of the party to whom it was made). In other words, would that party have entered into the contract if it wasn’t for
    the statement? If the answer is no (in other words, if the term is fundamental to that party), then the statement is
    more likely to be a term of thecontract.
    * At what stage in the contract negotiations the statement was made. If a statement is made at the time of the contract, it is more likely to be viewed as a term; if made during preliminary negotiations, it is more likely to be viewed as a representation.
    * Whether the party making the statement had any specialist **knowledge or information **or a particular skill. If a sellermakes a factual statement that should be within the scopeof their knowledge, intending that the buyer will act on thestatement, it is much more likely that thestatement would
    be viewed as a term of the contract. If, however, the sellermakes a statement of belief of which they have no direct
    knowledge, it is more likely to be a representation.
  4. The distinction between the two types of statement is important because if the statement turns out to be untrue, the remedy available to the innocent party will differ depending
    whether there has been a breach of a term or** a false representation** (known as a ‘misrepresentation’). If the statement
    is viewed as a term, then any failure to comply with the term will be a breach of contract and, therefore, the innocent party may be able to claim damages. However, if the statement
    is a misrepresentation and has not been incorporated into the contract, the remedy will depend whether the misrepresentation was made innocently, negligently, or fraudulently.
    Damages may still be available, but the amount recoverable is likely to be less than for a breach of contract.
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3
Q

conditions and warranties

A
  1. The distinction is important, as how a term is classified will determine the remedies
    available to an innocent party in the event that the term is
    breached. Breach of a condition will give the innocent party
    the option of terminating the contract
    .
  2. If it is unclear at the outset whether a term is a condition or warranty, it falls into a
    third category,** innominate terms,**
  3. Note that whether a term is a condition or a warranty
    is not determined merely by the label given to the term in the
    contract: the courts will look behind any label to **the actual
    effect of the term **on the operation of the contract as a whole .
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4
Q

conditions

A

1. A condition is a term that is so fundamental that it is said to
go to the root of the contract. If a condition is breached, the
contract does not work without it. A breach of a condition is
sometimes referred to as a ‘
repudiatory breach
’, because a
party who breaches a condition is effectively repudiating the
contract altogether. For this reason, the innocent party has
the option to terminate the contract and claim damages for
their loss.**

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5
Q

warranties

A

a warranty is a term that is incidental or collateral
to the main terms of the contract. Because it does not go to
the root of the contract, any breach is regarded by the courts
as less serious. Consequently, the remedies available to an innocent party in respect of a breach of warranty are fewer and
they do not have the option to bring the contract to an end.

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6
Q

innominate terms

A
  1. An innominate term is a term as to which it is unclear at the
    outset whether it is a condition or warranty, as it has not been
    designated as either a condition or a warranty and when the
    contract is concluded it is not clear how severe the consequences of a breach would be.
  2. If the term is then **breached,
    the courts will look at the effect of the breach **of the term to determine what remedy should be available to the innocent
    party.
  3. if the breach of such a term results in the innocent party losing substantially the whole of the benefit of the contract, it will be treated akin to a condition,
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7
Q

‘Time of the Essence’

A
  1. What are the innocent party’s rights if the other party does
    not perform its obligations when required by the contract?
    The answer depends whether time is ‘of the essence’ of the
    obligation in question. If time is of the essence in respect of
    an obligation, that obligation is a condition and late performance entitles the innocent party to terminate the contract.
    If time is not of the essence, it is a warranty, and the innocent
    party’s only remedy is to claim damages.
  2. Many contracts will
    make it clear whether time is of the essence of a particular
    obligation. There is a general presumption in commercial
    contracts that time will be of the essence for delivery if a time
    for delivery has been agreed.
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8
Q

express terms

A
  1. Whether the contract is oral or written, a term will form part of
    the contract only if the parties have reasonable notice of it.
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9
Q

The Parol Evidence Rule

A
  1. If contract is written, a rule known as the ‘parol evidence
    rule’ exists to help decide whether evidence of terms outside
    the written contract can be taken into account so as to alter
    the written terms.
  2. There is a general presumption that external evidence cannot add to, subtract from, contradict, or
    vary the terms of a written contract.
    This is true whether the external evidence is written (for example, correspondence
    between the parties) or oral.
  3. There are several exceptions to
    this rule, particularly implied terms (see below) or if there is a
    secondary (collateral) contract
    . In the latter case, the courts could find that there were two contracts between the parties:
    the first contract which has been reduced to writing, and a
    second oral collateral contract. A further situation in which
    the parol evidence rule will not apply is if the court finds that
    the contract was always partly written and partly oral, so that
    the oral terms always formed part of the contract.
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10
Q

implied terms

A
  1. A term that is implied into a contract will be equally as binding on the parties as if it had been expressly agreed between
    them. In the same way as express terms, it will constitute
    either a condition, a warranty, or an innominate term
    2.exception to Parol evidence rule
    3.contract terms can be implied by:
    (1) statute
    (2) court
    (3)custom and usage
    (4)a course of dealing between parites
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11
Q

implied terms by statute

A
  1. The main sources of terms implied by statute are the Sale of
    Goods Act 1979 (‘SOGA’ or ‘SGA’), the Consumer Rights Act
    2015 (‘CRA’), and the Supply of Goods and Services Act 1982
    (‘SGSA’).
    2.SOGA
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12
Q

Sale of Goods Act

sale between businesses

A
  1. implied terms
    An important term implied by the SGA is that the seller has a
    legal right to sell the goods in question, i
    n other words, that
    the seller has title to them. If the seller does not have title,
    then there is no consideration and, therefore, there is no valid contract. The SGA also implies terms requiring that goods:
    * Match any **description **applied to them by the seller;
    * In a sale by a business, be of satisfactory quality; and
    * In a sale by a business, be **fit for any particular purpose **
    made known to the seller by the buyer.
    2.satisfacotry quolity
    Meaning of Satisfactory Quality
    The SGA defines what is meant by satisfactory quality and
    includes a requirement that the goods in question be fit for
    the purpose for which such goods are generally used and
    free from minor defects, and also safe and durable.
  2. SGA Implied Terms Are Conditions
    The SGA categorises these implied terms as conditions of
    the contract. Thus, if the conditions are breached, the buyer
    is entitled to terminate the contract, reject the goods, and
    refuse to pay the price, but it must return the goods. However, if the breach is so slight that it would be unreasonable
    for the buyer to reject the goods, the breach is treated as a
    breach of warranty rather than a breach of condition
  3. Excluding Liability for Breach of the SGA Implied Terms
    The Unfair Contract Terms Act 1977 (see 7.3, below) makes
    it difficult for a seller to exclude liability for breach of these
    implied terms.
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13
Q

Sale of Goods and Service Act

sale between businesses

A
  1. SGSA implies terms for example, that the supplier (if it is a business) will carry out the service within a reasonable time (if no time is agreed) and with reasonable care
    and skill.
  2. These terms are ‘innominate’ terms rather than
    conditions, so if they are breached, the court will determine
    the remedy on the basis of the seriousness of that breach
  3. In relation to goods supplied as part of the supply of services, the SGSA implies conditions similar to
    those implied in the SGA.
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14
Q

Consumer Rights Act 2015 (‘CRA’)

A
  1. Like the implied terms under the SGA, the CRA has provisions
    requiring that all goods supplied under a consumer contract
    (including digital content) should:
    * Match their description;
    * Be of satisfactory quality; and
    * Be fit for purpose
  2. A big difference from the SGA
    is that liability for a breach of the implied terms cannot be excluded or limited at all.
  3. Under the CRA, there are implied terms that services should
    be:
    * Carried out with reasonable care and skill;
    * Completed in accordance with any information which
    the consumer relies on, for example, price quotations;
    * Completed for a reasonable price (if no price has been
    expressly agreed); and
    * Completed within a reasonable time (if no timescale has
    been expressly agreed).
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15
Q

terms implied by court

A
  1. The courts are reluctant to interfere with the presumed intentions of the parties but are prepared to imply terms into contracts if necessary to give them what is known as ‘business efficacy’, that is, to make them work in a way that reflects the parties’ intentions and expectations. These terms are known as terms implied in fact. The courts are likely to imply a term only if the term to be implied is so obvious to a reasonable person that it goes without saying. (This test is also known as the ‘officious bystander’ test.)
  2. the test used by the courts when deciding whether to imply a term in fact is very stringent.
    The test is not whether it is ‘reasonable’ to imply the
    term. A term will be implied only if it is necessary for the
    contract to work as intended. Remember also that the
    courts are very unlikely to imply a term which contradicts the express terms of the contract.
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16
Q

terms implied by cusotm and usage

A
  1. If there is an industry or market standard in respect of the
    particular area where the parties to the contract are dealing,
    this may be enough to imply terms into the contract that are
    normal for that particular industry or market.
  2. However, a custom can also be excluded by an express term of the contract agreed between the parties, and
  3. a term will not be implied by custom or usage if it contradicts an express term in the contract.
    (1) Cases in which there is a mechanism agreed between
    the parties to resolve uncertainties. An example of this
    would be a clause which leaves an important matter
    undecided but allows it to be determined unilaterally by
    one of the parties or by a third party, or possibly by an arbitrator.
17
Q

terms implied in course of dealing

A

If the parties have contracted on the same terms (usually
standard form terms and conditions) on several occasions,
enough to show a** regular** and** consistent** course of dealings, then the courts will imply the same terms into a contract between the parties if, for example, the usual terms and conditions were not supplied in error.

18
Q

incomplete agreements

A
  1. Without a reasonable degree of certainty, the contract is unlikely to be enforced, as it would be impossible to conclude that the parties had the same intention—
    in other words the required ‘meeting of minds’ evidenced by
    offer and acceptance would be missing
  2. where the courts will not get involved
    a. If the court is unable to conclude that the parties intended to be bound without its intervention, it is unlikely to get involved, and thus the contract will not be binding on the parties.
    b. agreements to agree
    The use of the words ‘to be agreed’ (or similar) in relation
    to an essential term is likely to prevent any contract coming
    into existence because it is uncertain.
  3. when courts will get involved
    a. resolving uncertainty
    If the courts are satisfied that the parties intended to be bound by the terms of the contract as they stand, they are likely to try to give effect to this intention
    i.Cases in which there is a mechanism agreed between
    the parties to resolve uncertainties.
    ii. Commercial cases in which the parties are familiar with
    the trade in question
    iii. Cases of contracts for future performance over a period
    of time in which the parties leave matters to be adjusted
    in the working out of their contract.
    iv.Cases in which there has been partial performance or in
    which one of the parties has made an investment on the
    basis of the agreement
    **b. statutory assistance **
    The Sale of Goods Act 1979, the Supply of Goods and
    Services Act 1982, or the Consumer Rights Act 2015 may
    provide assistance if a contract is incomplete in its terms.

c. serving uncertain terms
If the courts are unable to find sufficient certainty to enforce
a term, they may be able to sever (remove) the uncertain
term from the agreement and allow enforcement of the
remainder. The test in each case is whether the term can
be severed without affecting the substance of the bargain
between the parties.

19
Q
A