Terms

Question 1

How do you determine the type of contract?

Answer 1

1 - identify parties (ALWAYS business to business)

2 - decide if it is a sale of goods or supply of services

Question 2

What are the 3 types of statements?

Answer 2

Term, representation, mere puff

Question 3

What is mere puff?

Answer 3

An exaggerated / promotional statement which a reasonable person would expect to have no legal effect.

Question 4

What is representation? Is it legally binding?

Answer 4

A statement made , that can be proved at the time of contracting, which induces the formation of the contract.
Potentially legally binding

Question 5

What is a term? What are it’s key attributes?

Answer 5

A promissory statement of fact, intended to be legally binding, which forms part of the contract.
Clear and certain.

Question 6

How do you distinguish a term from a representation?

Answer 6

A statement made during negotiations for the purpose of inducing the other party to enter the contract is, prima facie, interpreted as a binding term.
Unless the other party can demonstrate that it is unreasonable for him to be bound by it

Question 7

How do courts determine whether parties intended statements to be binding?

Answer 7

Importance, 
timing, 
term reduced to writing, 
special skill or knowledge, 
assumption of responsibility

Question 8

How do you test for importance when determining whether a party intended a statement to be binding?

Answer 8

‘But for’ the statement would the party have formed the contract?

Question 9

How do you test for timing when determining whether a party intended a statement to be binding?

Answer 9

Made at the time of contracting: likely to be a term.

Delay between the time the statement is made and the time of contracting: more likely representation

Question 10

What are the rules for ‘term reduced into writing’ when determining whether a party intended a statement to be binding?

Answer 10

where an oral statement is written into an agreement it will be a term (Inntrepreneur v East Crown), failure to reduce it into writing will not automatically make it a representation (Birch v Paramount Estates)

Question 11

How do you test for special skill/knowledge when determining whether a party intended a statement to be binding?

Answer 11

Expert always loses.
From expert to non = term (Dick Bentley)
From non to expert = representation (Oscar Chess v Williams)

Question 12

How do you test for assumption of responsibility when determining whether a party intended a statement to be binding?

Answer 12

Where a vendor guarantees the quality of an item for sale, this may constitute a term if his guarantee discourages the buyer from performing further checks on the item for himself (Schawel v Reade)

Question 13

Definition of an express term

Answer 13

A term in a contract which has been expressly communicated and agreed by the parties

Question 14

Express terms - What is the parole evidence rule?

Answer 14

Extrinsic evidence may not be admitted to vary, contradict or interpret the terms of a written contract (Jacobs v Batavia)

Question 15

Express terms - What are the 3 exceptions of the parole evidence rule?

Answer 15

Exception 1: contract is not wholly written (Evans v Merzario) - i.e. where there is some oral assurance

Exception 2: collateral contracts (Symons v Buckleton)

Exception 3: onerous terms - big red hand (Interphoto v Stiletto)

Question 16

Express terms - what is the entire agreement clause?

Answer 16

Parties may exclude terms not expressly included in the agreement by including an entire agreement clause in the contract (Intrepeneur Pub v East Crown)

Question 17

Definition of an implied term? Implied by fact or law?

Answer 17

A term not expressly agreed by the parties that is inferred into the contract by the courts.
Both.

Question 18

Implied by fact - what are circumstances where the term is implied?

Answer 18

Not when the parties have expressly and unambiguously excluded it (Trollope Colls v North West Regional Hospital Board)

Course of dealing:
Where a previous course of dealing was regular and consistent (McCutcheon v MacBrayne)

Trade and professional customs (British Crane Hire v Ipswich Plant)

Business efficacy (The Moorcock)
Implied to give business efficacy where the parties would have intended it to exist
Officious bystander test: term prima facie so obvious that if an officious bystander were to suggest it should be included both parties would respond ‘oh, of course’ (MacKinnon J, Shirlaw v Southern Foundries per McKinnon J)
- Don’t blindly follow, context important (Ultraframe v Tailored Roofing Systems)
- Test’s purpose to identify the parties’ ultimate intention (AG of Belize v Belize Telecom)
Both parties must be aware of the term that is to be implied into the contract (Spring v National Amalgamated Stevedores)

Question 19

Implied by law - what two ways is a term implied by law?

Answer 19

Common law:
Courts will imply terms at common law to standardize or give effect to certain contractual relationships for policy reasons or out of necessity (Liverpool CC v Irwin)

Statute:
SGA 1979 amd SGSA 1982

Question 20

SGA 1979

Answer 20

s12 - title: Where the seller lacks title to the goods, the buyer is entitled to reclaim the full purchase price paid (Rowland v Divall)

s13 - correspondence with description (Arcos v Ronaasen)
Advertisements may constitute descriptions of the goods (Beale v Taylor)

s14(2) - satisfactory quality: 14(2B)a (a): fitness for all purposes (Priest v Last), e) durability (Lambert v Lewis per Lord Reid)

s14(3) - fitness for a particular purpose: Doesn’t apply where the buyer is in a position of superior knowledge about the defect than the seller (Balmoral Group v Borealis)

s15 - Sale by sample: The goods will be free from any defect Godley v Perry

Question 21

SGSA 1982

Answer 21

s13 - reasonable care and skill
s14 - reasonable time
s15 - reasonable consideration
The terms implied by s 13 SGSA 1982 are not classified by the Act. Treitel states that such terms are innominate terms

Question 22

What do you do after you have worked out express/implied terms?

Answer 22

Determine whether the term has been breached and how it has been breached

Question 23

What ways can terms be categorised?

Answer 23

Condition, warranty or innominate terms.
The court will generally give effect to the parties’ description of the term (Lombard v Butterworths) unless it leads to an ‘unreasonable result’, or just down to court to decide (Schuler v Wickman)

Question 24

What is a condition?

Answer 24

Term that goes to the ‘root of the contract’ (Poussard v Spiers)

Question 25

What remedies do you get for a breach of condition?

Answer 25

Immediate right of election to:
Affirm and continue and claim damages (White & Carter v McGregor) - UNLIKELY
Terminate and claim damages immediately (Hochster v De La Tour)
Must notify the party in breach of decision to terminate (Viotl v Norelf)

Question 26

What is a warranty?

Answer 26

Term which is less important than a condition, and does not go ‘to the root’ of the contract (Bettini v Gye)

Question 27

What remedies do you get for a breach of warranty?

Answer 27

Right to claim damages only. Primary contractual obligations remain
C must mitigate loss stemming from breach

Question 28

What is an innominate term?

Answer 28

A term which is not classified as either a condition or a warranty when the contract was formed

Question 29

How does one decide how an innominate term should be treated?

Answer 29

Court determines whether the breach deprives the claimant of ‘substantially the whole’ benefit of the contract, what is the seriousness of the consequences of the breach? (Hong Kong Fir v Kawasaki)
If yes: term treated as a condition
If no: treated as a warranty

Question 30

What are expected readiness to load clauses?

Answer 30

Commercial terms categorized as conditions (Mihalis Angelos). HK Fir doesn’t apply (Bunge Corporation v Tradax)

Question 31

What are time for performance clauses?

Answer 31

(Bunge v Tradax) clauses specifying time or performance of completion not automatically condition.
Turned into condition by:
(a) Adding the phrase ‘time is of the essence’ to the clause, or
(b) after a breach occurs, by the claimant serving notice that time is of the essence

Where the contract does not specify a time for performance, a term will be implied that performance is to take place within a reasonable time (s 14 SGSA 1982)

Question 32

Statutory terms

Answer 32

SGA 1979
Conditions
S 12 – s 12(5A)
S 13 – s 13(1A)
S 14 – fitness for purpose (s 14(6))
S 15 – Sample (s 15(3))
Ss 13-15 not conditions if the breach is so slight that it would be unreasonable to reject the goods (though they may be warranties) (s 15(1)(b))
S 15A only applies to business contracts

SGSA 1982
Innominate terms

Question 33

Can a supplier contract out a term implied under the SGSA?

Answer 33

Yes - subject to s 16.
Any exclusion will be subject to reasonableness test under UCTA 1977.
Liability for death and personal injury sustained through personal injury can never be excluded.

Question 34

Can a seller contract out implied terms under SGA?

Answer 34

Right of a seller to exclude liability under ss 12-15 is governed by s 55 UCTA 1977
S 12 SGA can’t be excluded or restricted (s 6(1) UCTA)
Ss 13-15 SGA can’t be excluded against any person acting as a consumer (s. 6(2) UCTA)
Can be excluded against a person dealing otherwise than as a consumer, if reasonable (s 6(3) UCTA)

Question 35

Define exemption clause

Answer 35

A contractual term ‘which excludes or modifies an obligation … that would otherwise arise under the contract by implication of law’ (Per Lord Diplock LJ Photo Productions v Securicor)

Question 36

What three points must an exemption clause satisfy?

Answer 36

• Incorporation (is the EC part of the contract?)
• Construction (is the clause effective in excluding/limiting liability?)
• Statutory controls (above mebe?)

Question 37

EC - what are the 3 types of incorporation?

Answer 37

Signature
Reasonable Notice
Consistent and regular course of dealing

Question 38

EC - incorporation - what is signature.

Answer 38

signature will bind the signing party (L’Estrange v Graucob), it’s immaterial whether the signing party reads the document or not (per Scrutton LJ)

Question 39

EC - incorporation - signature - 3 exceptions

Answer 39

Exception 1: where document is not contractually binding (Grogan v Robin Meredith Plant)

Exception 2: misrepresentation of the clause
Exemption clause will be invalid where one party misrepresents its meaning (Curtis v Chemical Cleaning).
If orally misrepresented the meaning of the clause to the other party, cannot rely on incorporation of an EC (Axa Sun Life Services plc v Campbell Martin Ltd and others).

Exception 3: where defence of non est factum applies
Where a party signs a contract and is mistaken as to its meaning or effect, they will not be bound by the contract, which will be rendered void, provided that they are mistaken through no fault of their own

Question 40

EC - incorporation - reasonable notice

Answer 40

The proferens (person seeking to rely on the exemption clause) must take reasonable steps to bring the term to the other party’s notice (Parker v South Eastern Railways). If these have been taken it doesn’t matter if they don’t read it

Question 41

RN - Will an EC be incorporated if illegible?

Answer 41

No (Sugar v London Railway)

Question 42

RN - handing document referring to a term to someone unable to read?

Answer 42

If they are aware of this, not reasonable notice (Harvey v Oelde)

Question 43

RN - EC on reverse of document?

Answer 43

If an exemption clause is on the reverse of a document, the document must clearly refer to it on its face (Henderson v Stevenson)

Question 44

RN - can a term be incorporated by reference to another document?

Answer 44

Yes - (Thompson v London Railway)

Question 45

RN - When must notice of the EC be given to the other party?

Answer 45

before or at the time of contracting (Olley v Marlborough Court)

Thornton v Shoe Lane Parking - Denning distinguishes between where a ticket is purchased in a face-to-face transaction as opposed to a machine. Machine needs clear notice nearby stating what exchanging money brings, ticket is too late.

Question 46

RN - what about notice for onerous clauses?

Answer 46

Greater notice required (Thornton v Shoe Lane Parking; Interphoto v Stiletto)
Particularly onerous clauses must be brought to the other party’s attention through extra measures – ‘big red hand’ rule (Spurling v Bradshaw, per Denning LJ)

Question 47

RN - in what form must notice containing exemption clause be?

Answer 47

must have contractual effect (not be mere receipt)
A document merely evidencing contractual performance is insufficient (Grogan v Meredith)
It will have contractual effect if:
The nature of the document is the sort to contain contractual terms, and
The circumstances are such that delivery of the document constitutes reasonable notice to the individual that terms are contained therein, or
The document is one that could reasonably be expected to have contractual force by either:
The person to whom it was handed (Chapelton v Barry – held it was mere receipt; no indication that people were entering into contracts when they bought the chairs) or
A reasonable person

Question 48

`EC - incorporation - what is course of dealing? What is considered regular?

Answer 48

Clause may be incorporated through a course of dealing if the course is both consistent and regular (McCutcheon v MacBrayne)
3 or 4 times in a month for 3 years was sufficiently regular (Harry Kendall v William Lillico)
3 or 4 times over 5 years was not sufficiently regular (Hollier v Rambler Motors)

Question 49

EC - construction

Answer 49

Construed contra proferentem.
Test: the clause must cover the breach ‘on its natural and ordinary meaning’ (George Mitchell v Finney Lock Seeds, per Lord Bridge) – Rules:

Contra proferentem:
Where ambiguity exists it will be interpreted against the proferens (party seeking to rely upon it) (Andrews Brother v Singer)
Rule applied less rigorously where the clause merely limits, rather than excludes, liability (Ailsa Craig Fishing v Malvern Fishing)

Question 50

EC - construction - exclusion of liability for negligence? What does negligence mean? And test.

Answer 50

Negligence here means: a breach of duty of care in tort; or a breach of a qualified contractual obligation, i.e. s 13 SGSA 82

To exclude negligence clause must satisfy the test in Canada Steamship Lines (per Lord Morton). HIH Casualty & General Ins v Chase Manhattan Bank – these are not rigid rules, rather broad guidelines.

1. Does the clause specifically refer to negligence or a synonym of negligence (Monarch Airlines v London Luton Airport)?
   E.g. ‘any act or omission, neglect or default’
   If yes, the clause will exclude negligence
2. If no, is the clause wide enough to cover negligence?
   E.g. ‘any liability’ / ‘any loss howsoever caused’
   If negligence is the only liability being excluded the clause will pass the test (Alderslade v Hendon – negligence the only liability that arose)
3. If yes, is the clause too wide?
   Where the clause can be determined to be based on excluding or limiting a ground other than negligence the clause will be determined to cover that ground and not negligence, unless the other ground is so fanciful that it is unreasonable to believe the proferens to have expected the clause to cover it (White v Warwick c.f. Alderslade v Hendon)
   Where a clause covers liability for both a contractual duty and tortious negligence, it will only exclude liability under the contract, not his liability in tort

Question 51

EC - construction - can they exclude liability for fundamental breach?

Answer 51

Yes (Photo Productions v Securicor Transport) provided that:
The clause can be interpreted as covering the breach, and
It’s compliant with statutory regulation

Question 52

EC - construction - can they exempt 3rd parties from liability?

Answer 52

Yes - (s 1(6) Contract (Rights of Third Parties) Act 1999)

See Privity

Question 53

EC - statutory regulation

Answer 53

If validly incorporated and construed, an exemption clause must also comply with the requirements imposed by statutory regulation

Unfair Contracts Terms Act 1977 (UCTA)

Question 54

What are the requirements for UCTA to apply?

Answer 54

Business liability s1(3) - clause must exempt business liability.
Exemption clause s13 - UCTA only applies to ECs.
Clauses may be individually or non-individually negotiated.??

Question 55

What type of liability is covered by UCTA?

Answer 55

Tortious and contractual

Question 56

Where does the burden of proof lie in UCTA?

Answer 56

On the proferens.

Question 57

UCTA: exclusion of liability for negligence

Answer 57

(s 1)
Negligence includes the breach of:
S 1(1)(a): Any obligation to take reasonable care or exercise reasonable skill in the performance of the contract;
(b): Any common law duty to take reasonable care or exercise reasonable skill
(c): The common duty of care imposed by the Occupiers’ Liability Act 1957

Can never exclude liability for death or personal injury resulting from negligence (s 2(1))
Negligence may be excluded for other damage so far as it is reasonable (s 2(2))

Question 58

UCTA: excluding contractual liability

Answer 58

(s 3)
Where one contractual party is a consumer or a party deals on the other’s written standard terms of business, neither party can (s 3(1)):
Exclude or restrict liability by reference to any contract term when he himself is in breach of contract (s 3(2)(a)), or
Claim, unless the contract term satisfied the reasonableness required, to be entitled to (s 3(2)(b)):
S 3(2)(b)(i) to render a contractual performance substantially different from that which was reasonably expected of him, or
(ii) to render no performance at all in respect of the whole or any part of his contractual obligation

Question 59

UCTA: excluding liability for implied terms

Answer 59

(s 6)
S 12 SGA may never be excluded / restricted (s 6(1)(a))
Ss 13-15 SGA may never be excluded or restricted against consumers (s 6(2)(a)) but may be excluded / restricted against business in so far as it is reasonable (s 6(3))

Question 60

UCTA: reasonableness test

Answer 60

(s 11 and sch 2)

Test: a term will be reasonable where it was or ought reasonably to have been, known or in the contemplation of the parties when the contract was made (s 11(1))
What is ‘reasonable’ depends on the circumstances of the case (George Mitchell v Finney Lock Seeds)
Burden of proof: on the person claiming the term is reasonable to prove it is (11(5))
11.2non-exhaustive list of guidelines for court in sch 2
11.4 limitation clauses: specific consideration
Court to have regards to 4.1 resouces of proferens
4.b whether proferens could have insured - st Albans v International computers Ltd

Sch2 Guidelines – reasonableness depends on:
(a) The relative strength of the parties’ bargaining positions at the time of contracting
A clause is more likely to be reasonable where the parties had equal bargaining power (Watford Electronics v Sanderson)
(b) Whether the customer received an inducement to agree to the term
(c) Whether the customer knew or ought reasonable to have known of the existence and extent of the term - notice
(d) Whether the exemption clause relies upon some condition not being complied with and if it was reasonable to expect - condition precedents
(e) Whether the goods were manufactured, processed or adapted to the special order of the customer

Consumer (s 12(1))
A party will be ‘consumer’ if he satisfies both of the following criteria:
He does not make the contract in the course of business or hold himself out as doing so (s 12(1)(a))
A contract which is incidental to a party’s business must be carried out with sufficient regularity to be determined to be ‘in the course of business (R & B Customs Brokers v United Dominions Trust)
The other party makes the contract in the course of business (s 12(1)(b))
Additionally, if the contract is governed by the law of sale of goods or hire-purchase or by s 7, the goods in the contract must be a type ordinarily supplied for private use or consumption

Question 61

What are the 2 exceptions to assumption of responsibility?

Answer 61

Exception 1: where the vendor encourages the buyer to perform checks (Ecay v Godfrey)
Exception 2: where the vendor is not authorised to make the guarantee/waited a day (Hopkins v Tanqueray)

Question 62

What is a collateral contract?

Answer 62

Where an oral contract can be shown to be a separate collateral contract to the main written contract, the parol evidence rule will only apply to the main contract, not the collateral

Question 63

Who can a collateral contract exist between?

Answer 63

Both parties to the main contract (City of Westminster v Mudd)
One party to the main contract and a third party (Shanklin Pier v Detel Products)