Terms

Question 1

Ace Paper v Fry

Answer 1

Ratio: Where genuinely ambiguous provisions exist, business common sense should be used as a method of interpretation.

Question 2

Ailsa Craig v Malvern Shipping

Answer 2

Ratio: Where liability is limited, but not excluded, the clause should generally be given its ordinary meaning (i.e. it is to be construed less harshly than an exemption clause).

Question 3

Arnold v Brittan

Answer 3

Ratio: It is usually appropriate to use the natural meaning of words in a contract, even where it makes the results onerous/expensive for a party.

Question 4

Balmoral Group v Borealis

Answer 4

Ratio: A specific purpose made known to the seller will apply even if the item is fit for its general purpose (under s.14(3) SGA 1979/ s.10 CRA 2015).

Facts: A material generally used for oil tanks was unfit for the specific purpose made known to the seller, which the seller assured the buyer it was fit for.

Question 5

Bannerman v White

Answer 5

Ratio: The intention of the parties as to whether a statement is a term or a representation can depend on the importance placed upon the statement by the other party.

Facts: When asked, the seller assured the buyer that hops being supplied had not been treated with sulphur. In fact, they had been.

Question 6

Beale v Taylor

Answer 6

Ratio: The implied condition that goods will correspond with their description will apply even if the goods have been inspected prior to purchase.

Facts: A car described as a 1961 model had been rebuilt from an older model. The buyer had inspected the car before purchasing it.

Question 7

Bettini v Gye

Answer 7

Ratio: A warranty is a less important term of the contract which does not ‘go to the root’ of the contract.

Facts: An opera singer contracted for three months missed six days of rehearsals due to illness, and was replaced with a new singer. The breach was held not to be a condition: missing rehearsals did not ‘go to the root of the contract’. The employer could not therefore terminate the contract.

Question 8

British Crane Hire v Ipswich Plant

Answer 8

Ratio: Where is it normal trade custom, a term can be implied into a contract where there is a sufficiently regular and consistent course of dealing.

Facts: A crane hired from the claimants sank into a marsh. A term that the risk remained with the hirer had not been expressly incorporated into the contract, but was held to be incorporated impliedly because both companies were in the plant hire industry and this was a common term of those companies’ contracts.

Question 9

Canada Steamship Lines v R

Answer 9

Ratio: Established the Canada Steamship Test for excluding liability for negligence through a contract. 1. Does clause specifically refer to negligence or a synonym of negligence? If yes, court must give effect to clause. 2. If not, is the clause wide enough to cover negligence? 3. If yes, is the clause too wide?

Question 10

Chapelton v Barry UDC

Answer 10

Ratio: Notice of exemption clauses must be given on a document that has contractual effect, before or at the time of contracting. Receipts are not contractual documents.

Facts: A receipt for deck chair hire had an exemption clause on it. Mr Chapelton injured himself on a tried deck chair. The court held that because the receipt was given after offer and acceptance, it could not have contractual effect.

Question 11

City of Westminster v Mudd

Answer 11

Ratio: The parol evidence rule, which prevents a party adducing extrinsic evidence to clarify the terms of a contract, can be avoided for collateral contracts.

Question 12

Curtis v Chemical Cleaning

Answer 12

Ratio: Signature binds, including exemption clauses, unless obtained by fraud or misrep.

Facts: A dry cleaner stated that they would not cover damage to beads or sequins on a wedding dress and asked the customer to sign a contract containing an exclusion clause. The clause actually excluded all liability. The customer then signed the contract, received a stained dress back and sued for damages. Held that, because there had been a misrep, the contract was not binding on the customer.

Question 13

Dick Bentley v Harold Smith

Answer 13

Ratio: Specialist knowledge can be a factor as to whether a statement will be a term or a representation.

Facts: Mr Smith was a car specialist who sourced a car for Dick Bentley. It had been driven for substantially more miles since an engine refit that Mr Smith stated. The statement about the mileage was held to be a term since the seller had specialist knowledge.

Question 14

George Mitchell v Finney Lock Seeds

Answer 14

Ratio: ‘On its natural and ordinary meaning, does the clause cover the breach, whether fundamental or otherwise?’ If not, then the liability has not been excluded.

Facts: A limitation on an invoice excluded liability for defective seeds up to the cost of replacing the seeds. The court had to consider whether the limitation clause was reasonable, based on its construction. They held that the clause did not cover the breach in question.

Question 15

Grogan v Robin Meredith Plant Hire

Answer 15

Ratio: Where the document has no contractual effect, e.g. a timesheet, a signature will not be binding.

Question 16

Harry Kendal v William Lillico

Answer 16

Ratio: 3-4 times a month over a period of 3 years = regular and consistent dealings.

Question 17

Hollier v Ramblers Motors

Answer 17

Ratio: A course of dealings must be regular and consistent.

Facts: 3 or 4 times in 5 years is not regular.

Question 18

Hong Kong Fir v Kawasaki

Answer 18

Ratio: Test for innominate term: does the breach deprive the innocent party of substantially the whole benefit of the contract? If, yes it is a condition. If no, it is a warranty.

Facts: A ship chartered for two years was unfit for use for 20 weeks. A term of the contract provided that it would be fit for use at all times throughout the charter. Held that this did not deprive of substantially the whole benefit of the contract.

Question 19

Hopkins v Tanqueray

Answer 19

Ratio: Only information in a catalogue is a term in auction sales.

Facts: The defendant told the claimant there was no need to check the horse he intended to buy at auction the next day as it was sound. The claimant relied on this. Held that this representation was not part of the contract.

Question 20

Houghton v Trafalgar Insurance

Answer 20

Ratio: Ambiguity in a clause will be construed contra proferentem - i.e. against the party seeking to rely on the clause.

Facts: An exemption clause in an insurance contract was interpreted against the insurer as it was ambiguous as to whether the ‘load’ in a car referred to a weight or to a number of people.

Question 21

Inntrepreneur Pub Co v East Crown

Answer 21

Ratio: 1. Reduction into writing can be a factor as to whether a statement will be a term of the contract or a mere representation. 2. Possible to contract into the parol evidence rule using an ‘entire agreement clause’.

Question 22

Irish Bank v Camden Market Holdings

Answer 22

Ratio: The first step in a dispute over a term is to interpret the express terms. A pleaded implied term must not (whether linguistically or in substance) contradict any express term of the contract.

Facts: The pleaded term, that the bank would not to anything to hinder Camden Market’s marketing of the premises, was substantively inconsistent with the Bank’s wide power to deal with the loan and disclose information.

Question 23

Interfoto v Stiletto

Answer 23

Ratio: If a term is particularly onerous, it should be drawn to the other party’s attention - ‘big red hand’ rule.

Facts: The defendants borrowed photos from the claimant’s photo library. A holding fee charged on late return of approximately £24,000 was claimed after a six week delay. Held that not enough had been done to bring this highly onerous term to the claimant’s attention.

Question 24

J Evans and Sons v Andera Merzario

Answer 24

Ratio: The parol evidence rule can be avoided for contracts that are not wholly written.

Facts: The defendants gave oral assurance that they would carry goods below deck for the claimant. They did not and the goods were swept overboard.

Question 25

Jacobs v Batavia

Answer 25

Ratio: Established the parol evidence rule: extrinsic evidence may not be adduced to change the construction of, and so vary, a written contract.

Question 26

L’Estrange v Graucob

Answer 26

Ratio: Signature is binding, regardless of whether the contract has been read or not.

Question 27

Liverpool CC v Irwin

Answer 27

Ratio: Certain terms may be implied by statute, regardless of the intentions of the parties.

Question 28

Marks and Spencer plc v BNP Paribas

Answer 28

Ratio: Business necessity or the officious bystander test is required for a term to be implied into a contract. Lord Neuberger: Terms will only be implied where necessary, not merely because it appears fair or because the parties would have agreed if it had been suggested to them. Lord Sumption: Business necessity means that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.

Facts: M&S terminated a lease, which required advance rent and fees to be paid. M&S sought repayment of part of the rent, but were unsuccessful in arguing that a term should be implied in such situations.

Question 29

McCutcheon v MacBraybe

Answer 29

Ratio: Dealings must be both regular and consistent for terms to be incorporated by course of dealings.

Facts: Sometimes signing an exemption clause is not consistent.

Question 30

Monarch Airline v London Luton Airport

Answer 30

Ratio: For limb 1 of the Canada Steamship test ‘any act or omission, neglect or default’ is wide enough to cover negligence.

Question 31

Olley v Marlborough Court Hotel

Answer 31

Ratio: Notice of exemption clauses must be given before or at the time of contracting.

Facts: A notice in a hotel room excluded liability for lost items. However, the contract has been formed at the reception desk and so the notice could not be seen prior to contracting.

Question 32

Oscar Chess Ltd v Williams

Answer 32

Ratio: Specialist knowledge can be a factor as to whether a statement will be a term or a mere representation.

Facts: Oscar Chess accepted a car trade-in deal on the issuance that the car was a 1948 model. The car turned out to be a 1939 model but Williams had not known this when he had made the statement based on the log book which turned out to be a forgery. Held to be a representation because Oscar Chess had specialist knowledge and Williams did not.

Question 33

Parker v South-Eastern Railways

Answer 33

Ratio: Reasonable steps must be taken to draw the other party’s notice to any exemption clause.

Facts: SE Railways printed terms on the back of a ticket excluding liability for lost items. This was deemed to be sufficient notice and so binding whether it had been read or not.

Question 34

Persimmon Homes v Ove Arup and Partners

Answer 34

Ratio: 1. The contra preferentem rule now has a very limited application when interpreting commercial contracts negotiated between parties of equal bargaining power. 2. The guidelines in Canada Steamship are now more relevant to indemnity clauses than to exemption/exclusion clauses such as this.

Facts: Ove Arup provided consultancy services for a developer. When asbestos was later found, the developer claimed against Ove Arup. The claim failed because the court upheld the limitation of liability clause which excluded liability for any claim in relation to asbestos as it was clear both in language and in terms of common business sense.

Question 35

Petrotrade v Texaco

Answer 35

Ratio: Five times in thirteen months is consistent and regular enough to incorporate terms by course of dealings.

Facts: Basic terms were agreed over the phone. Petrotrade later argued the their standard terms had been incorporated by a consistent course of dealing. Court held that they had been.

Question 36

Photo Productions v Securicor

Answer 36

Ratio: 1. An exemption clause is a term ‘which excludes or modifies an obligation’. 2. The court should not interfere is the exemption has been negotiated by the parties.

Question 37

Poussard v Spiers

Answer 37

Ratio: A condition ‘goes to the root of the contract’.

Facts: An opera singer contracted to sing for three months missed the first four nights due to illness and was replaced by another singer. The breached term was held to be a condition as she had missed the critical opening night, so the defendant was entitled to terminate the contract.

Question 38

Priest v Last

Answer 38

Ratio: Goods being ‘of satisfactory quality’ includes those goods being generally fit for purpose.

Facts: A hot water bottle, bought from the defendant, burst and scalded the claimant’s wide. The claimant had not specified the purpose as it was simply used for its ordinary purpose.

Question 39

Routledge v McKay

Answer 39

Ratio: The timing of the statement can affect the intention to make a term or a representation.

Facts: A statement was made about the age of a motorcycle that was for sale two days before the purchase was completed. As two days had passed between the statement and the purchase this was held to be a representation.

Question 40

Saunders v Anglia Building Society

Answer 40

Ratio: Fraud can prevent a signature from binding but non est factum should not be too widely applied.

Facts: An old lady signed over her interest in her property on the basis of misrepresentations made to her. She pleaded non est factum but this was not allowed since the deed was similar to what she expected to sign, although not identical.

Question 41

Schawel v Reade

Answer 41

Ratio: Assumption of responsibility can be a factor as to whether a statement is a term or a representation.

Facts: Claimant purchased a horse on the assurance that it was suitable for the purposes specified by the claimant, and that no inspection was necessary. The horse turned out to be unsuitable. The assurance was held to be a contractual term.

Question 42

Shirley v Southern Foundries

Answer 42

Ratio: Developed the officious bystander test. If the hypothetical officious bystander would answer ‘oh, of course’ to the question of whether the term was to be implied, then it will be implied.

Facts: Following a change of ownership of an iron foundry, the new board changed the articles of association in order to sack the MD. It was held that there was an implied term against this in his employment contract.

Question 43

The Moorcock

Answer 43

Ratio: Introduced the business efficacy test. If the term is necessary to give the contract business meaning, then it will be implied. If the contract makes sense without it, it will not be implied.

Facts: The claimant leased a wharf to moor his ship on the Thames. When the tide went out the ship was damaged as it hit the riverbed. He successfully claimed damages on the basis that the contract impliedly required the wharf to be in water sufficiently deep for safe mooring.

Question 44

Thompson v London, Midland and Scottish Railway

Answer 44

Ratio: 1. Reasonable steps are all that are required to give notice. 2. An exemption clause can be incorporated by reference to another document.

Facts: The railway had signs and leaflets excluding liability for inert. An illiterate woman was still bound by them as the railway had taken reasonable steps to give notice of the exclusion clause.

Question 45

Thornton v Shoe Lane Parking

Answer 45

Ratio: Notice of exemption clauses must be given before or at the time of contracting.

Facts: A parking machine printed exemption clauses on the back of its tickets, but as Thornton did not receive the ticket until after he had contracted, the exemption clause was not effective.

Question 46

Wells v Devani

Answer 46

Ratio: An implied term cannot be used to fill a gap in an incompletely drafted contract. Implied terms are general in concept and cannot be used to replace missing KPIs and contractual triggers.

Facts: Devani, an estate agent, agreed to sell flats for Wells. They had orally agreed how the commission would be calculated, but not what would trigger its payment. Wells refused to pay on exchange of contracts. The court held that the failure to agree the trigger event made the contract incomplete and an implied term could not be added to make it complete.

Question 47

White v Warwick

Answer 47

Ratio: For Limb 2 of the Canada Steamship test, if the head of injury could be based on anything other than negligence, negligence cannot be presumed to be excluded.

Facts: The claimant was injured when a bicycle he had hired from the defendants developed a fault due to the defendant’s negligence. An exemption clause attempted to limit liability. It read ‘nothing in this agreement shall render the owners liable for an personal injury’. Court held that contractual liability was excluded but liability in negligence was not excluded.

Question 48

Wood v Capita Insurance Services

Answer 48

Ratio: In ascertaining the objective meaning of contractual language, the court must consider the contract as a whole and give more or less weight to elements of the wider context. In balancing the indications given by the language and the practical implications of competing constructions, the court must consider the quality of the drafting of the clause and the possibility that a side may have agreed to something which, in hindsight, was not in his interest.

Facts: An indemnity clause in a detailed agreement for the sale and purchase of shares in an insurance broking company stated that loss caused by mis-selling which arose from a claim or complaint by a customer to the regulator would be covered. The court held that it was clear that the indemnity did not apply where the company had referred itself to the regulator and so dismissed the buyer’s argument that more weight should be given to the context.

Question 49

Rice v Great Yarmouth Boat Club

Answer 49

Ratio: An innominate term is one which can be broken in so many different ways and with such varying consequences that the parties cannot be taken to have intended that any breach shall entitle the innocent party to terminate the whole contract.

Question 50

Lombard North Central v Butterworths

Answer 50

Ratio: Court will usually give effect to the intentions of parties in classifying terms. Not always - Schuler v Wickman

Question 51

The Milalis Angelos

Answer 51

Ratio: An ‘expected readiness to load clause’ = a condition

Question 52

Bunge v Tradax

Answer 52

Ratio: If time of performance is of the essence, it will be a condition.

Question 53

Charles Rickards Ltd v Oppenheim

Answer 53

Ratio: Time can become of the essence by the innocent party serving notice that it is so.

Question 54

Harvey v Ventilatoren Fabrik Oelde

Answer 54

Ratio: Incorporation cannot be by reference if the defendant knows the claimant cannot read the clause.

Question 55

Henderson v Stevenson

Answer 55

Ratio: Where a document does not have clear words on the face of it, directing attention to an exemption clause, it is unlikely to be incorporated/

Question 56

Sugar v London, Midland and Scottish Railway

Answer 56

Ratio: If clauses have been rendered illegible, it is unlikely they will be considered incorporated.

Question 57

Chemical Transport v Exnor Craggs Ltd

Answer 57

Ratio: Signature will incorporate onerous clause except in extreme circumstances.

Question 58

Andrews Bros v Singer

Answer 58

Ratio: Contra Proferentem Rule - any ambiguity in a clause will be construed against the proferens.

Question 59

K/S Victoria Street v House of Fraser

Answer 59

Ratio: Courts are now less likely to use contra proferentem in commercial contracts.

Question 60

St Albans City Council v International Computers Ltd

Answer 60

Ratio: Even where a party’s general terms have been subject to negotiation, they are still ‘standard terms’ for the purpose of UCTA.

Question 61

Commercial Management Ltd v Mitchell Design and Construct Ltd

Answer 61

Ratio: If limitation clauses are from one party’s standard terms, even if other clauses are negotiated or come from the other party, UCTA will apply.

Question 62

The Flamar Pride

Answer 62

Ratio: If bespoke alterations are made to a party’s standard terms, UCTA will not apply.

Question 63

Stewart Gill Ltd v Horatio Myer and Co Ltd

Answer 63

Ratio: Sch 2 should be considered when applying reasonableness test.

Question 64

Henderson v Stevenson

Answer 64

Ratio: An EC will not be incorporated if it is on the back of something and there is no reference to it on the front.