Terms of a Contract Flashcards
How do you incorporate a term?
- Terms = bind, contractual
- Representations = not bind, usually not contractual
-> ∴ breaching representation not a cause of action, can only claim misrepresentation - Incorporate term by:
1) Signature (L’Estrange v Graucob [1934]) (Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006])
-> Unless there is fraud or misrepresentation (Curtis v Chemical Cleaning Co (1951))
-> doesn’t matter if signatory not read document
2) By ‘reasonable notice (Thompson v LMS Railway [1930])
— The document must be something that is recognisable as a contractual document to the ‘reasonable person’ (Chapleton v Barry UDC (1940) -> i.e. not a receipt)
—The person entering the contract must have had ‘reasonable notice’ of the term
Also applied to electronic contracts (e.g. terms displayed on websites: Green v Petfre (Gibraltar) Ltd (2021); Parker Grennan v Camelot UK Lotteries (2023))
-> clicking ‘I accept’ is not signature
3) Previous dealings (British Crane hire v Ipswich Plant Hire [1975]) or Incorporation by Course of Dealing:
- Spurling v Bradshaw [1956]
- e.g Kendal v Lillico (1969) - 3 or 4 transactions per month over 3-year period
- But not in McCutcheon v MacBrayne (1964) - Dealings not consistent enough - no knowledge of terms
To incorporate terms this way, dealings must be:
a) sufficiently numerous
b) sufficiently frequent/regular
c) consistent (on same terms)
- Harder to do in consumer contract (Hollier v Rambler Motors (1972))
4) Common Understanding -> only apply to commercial (b2b) contracts
- British Crane Hire Corporation v Ipswich Plant Hire (1975):
-> Both parties were in machinery hire industry
-> Dealt together x 2 before
-> Lord Denning – ‘both parties knew quite well that this clause was a habitual part of the trade and were familiar with its contents’
How else can terms be incorporated?
1) In fact (implied by a court)
- Parties intended such terms to be part of contract but unnecessary to expressly state terms
e.g. To give contract “business efficacy”
- Term implied if supports commercial intention -> without the implication, the contract would be unworkable, lack commercial coherence (The Moorcock (1889))
e.g. The “officious bystander” test
- Term implied if it is “something so obvious it goes without saying” (Shirlaw v Southern Foundries [1939])
- In 2009, Lord Hoffman tried to replace 2 tests of terms implied in fact (business efficacy test and officious bystander test) with single test of construction (The Attorney-General of Belize v Belize Telecom Ltd) -> would give courts more power
-> SC in 2015 (M&S plc v BNP) disagreed with Lord Hoffman
-> essentially said freedom of contract -> not courts job to undo bad contracts
2) In law/custom
e.g. Term implied in law by the court
-> e.g. court implied term of “reasonable” (Liverpool City Council v Irwin [1977])
-> e.g. But courts only act when ‘necessary’ to do so (Lord Wilberforce in Irwin, HoL)
e.g. Terms implied in law by statute
-> some terms automatically implemented into contracts e.g. Sale of Goods Act 1979, CRA 2015
e.g. Terms implied in law by customs
-> If both parties in same industry, should know of existence of terms (British Crane Hire Corp v Ipswich Plant Hire [1975])
What statutes imply terms and when?
- b2b contracts - non-consumer sales - Sales of Goods Act 1979
-> S14(2) - the goods supplied under the contract are of satisfactory quality
-> S14(3) – where the seller sells goods … and the buyer, expressly or by implication, makes known to the seller… any particular purpose for which the goods are being bought, there is an implied term that the goods supplied under the contract are reasonably fit for that purpose’ - b2b contracts - non-consumer transactions - Supply of Goods and Services Act 1982
-> S4 – contracts for work and materials (S4(2)-quality, S4(4),(5) fitness)
-> S13 – ‘In a contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill’ - b2c contracts - CRA 2015
-> S14(2) - the goods supplied under the contract are of satisfactory quality:
—- S9(3) - fitness for all purposes for which goods of that kind are commonly supplied
- appearance and finish
- freedom from minor defects
- safety and durability
—- S9(4)… does NOT cover anything that makes quality unsatisfactory if
* specifically drawn to consumer’s attention before contract is made
* Where consumer examines the goods before the contract is made (and examination ought to reveal fault)
* Re samples – if reasonable examination of the sample would have shown up problem
-> S14(3) – where the seller sells goods … and the buyer, expressly or by implication, makes known to the seller… any particular purpose for which the goods are being bought, there is an implied term that the goods supplied under the contract are reasonably fit for that purpose’
-> ALSO, s62 requires all consumer contract terms and notices to be fair
Where could a term be + how do you include an onerous term?
- Parker v South Eastern Railway (1877) - on back of ticket
- Thompson v LMS Railway (1930)
-> clause 522 in the timetable, sold separately —> clause not on ticket itself but still incorporated as there was sufficient notice (subjective knowledge of the terms not required)
-> Also objective test, so ‘irrelevant that the actual party affected by the term may be blind, illiterate, or otherwise unable to understand’
–> matters whether terms are knowledgeable, accessible
–> in addition to reasonable notice, special attention (e.g. term in red ink) must be drawn to unusual clauses/onerous terms (‘Red Hand Rule’):
- Denning in Spurling v Bradshaw (1956) (obiter) and in Thornton v Shoe Lane Parking (1971)
- Picked up later in Interfoto Picture Library v Stiletto Visual Programmes (1989) –> e.g. clause - “holding fee of £5 + VAT per photo per day (fine for delayed return)” decided not binding by court ∵ clause too unusual -> exorbitant charge
- Onerous terms depends on context (Goodlife Foods Ltd v Hall Fire Protection (2018))
- Not applicable to signed contracts (Higgins & Co Lawyers Ltd v Evans [2019])
What are the types of terms?
- Conditions
-> Breaching a condition will end contract (termination) (‘repudiatory’ breach) - Warranties
-> Not automatically end contract but damages can be sought under breach of contract
-> If you breach a warranty and they terminate, they are at fault - Innominate terms
-> Vague terms
-> ‘unless the contract makes it clear (…) that a particular term is a condition or only a warranty, it is an innominate term’ (Lord Scarman in Bunge v Tradax)
-> Advantages/Disadvantages of innominate term:
· Flexibility for court: look at why a party might have wanted contract to end ✔
· Party uncertainty: hard for parties to regulate conduct ❌
· No remedies are available to the party that relied on Trade Puff
· No remedy for false opinions, unless with expert knowledge: Bisset v Wilkinson [1927] AC 177 (Exception: Esso Petroleum Co. Ltd v Mardon [1976] QB 801)
Deciding condition v warranty
- Often statute expressly states whether term is a condition or warranty e.g. the Sale of Goods Act 1979 s12: an implied term as to title is expressly stated, so should be a condition
- Also, parties can identify if condition or warranty
-> BUT, courts still have discretion over parties’ decision (L Schuler AG v Wickman Machine Tools Sales [1974]) - Court can look into importance of such a term in deciding condition or warranty
-> ALSO, seriousness of breach (“has substantially whole benefit been deprived?”) + time of breach (Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962]) - Assumption that any time limit will be a condition e.g C must deliver documents at 5.10pm (Union Eagle v Golden Achievement [1997])
