Terms Of Contract Flashcards
Conditions
central to the contract. A failure to perform this obligation would be to destroy the main purpose of the contract. E.g. when you buy a phone, you expect it to work.
If a condition is broken, the person suffering the failure is entitled to end the contract – repudiation. Rescission is different; this is an equitable remedy when a court places the parties back in their pre-contractual position. Poussard v Spiers and Pond (1876).
Warranty
minoR term in the contract, that if breached, does not end the contract – Bettini v Gye (1876). The difference between this and Poussard v Spiers and Pond (1876) is that the singer’s role was not central to the performance.
Innominate term
not clearly defined as a condition or a warranty. It depends until a breach has occurred – Hong Kong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd (1962). In other words, the court must decide, given the consequences of the breach whether it is a condition or warranty and apply the appropriate remedy then
Is a statement a representation or an actual
term of contract?
A representation is an accurate and factual description in a term of contract
A representation is a statement of fact which does not amount to a term of the contract but it is one that the maker of the statement does not guarantee its truth. This gives rise to no contractual obligation but may amount to a tort, for example misrepresentation.
In the negotiating phase, a factual representation can be put forward to appeal to the negotiating party.
A simple representation isn’t truth guaranteed. On the other hand, a fraudulent misrepresentation is a representation put forward as fact in a criminal attempt to induce a party into a contract.
An innocent misrepresentation genuinely believed to be factual but turns out to be false. This ain’t criminal bo..
A negligent misrepresentation is a false statement made before the party has checked its authenticity.
In order to work out whether a statement is a representation or a term of contract, the court will look at:
- The importance attached to it. (Couchman v Hill 1947)
- Special knowledge or skill of the person who made it. (Oscar Chess v Williams 1957) (Dick Bentley v Harold Smith Motors 1965)
- Time lag between making the statement and making the contract. (Routledge v Mackay 1954)
- Whether it is written in the contract or not.
Terms implied by statute (Contract)
• Statutory:
- Business-to-business contracts covered by: Sale of Goods Act 1979, Sale of Goods and Services Act 1982.
- Business and consumer contracts covered by: Consumer Rights Act 2015.
Terms implied by common law
• Common law:
- BUSINESS EFFICACY: This is when the courts will imply a term into a contract to make sure it works on a business-like basis. In other words, whilst the term may not be expressly in the contract, it is obviously implied. In other words, if a term can only be implied, if without it, the contract would lack coherence or not make business or commercial sense. (E.g. In The Moorcock (1889))
-OFFICIOUS BYSTANDER TEST: This is a term that is so obvious it goes without saying – Shell UK Ltd v Lostock Garage Ltd (1977), Egan v Static Control Components (Europe) Ltd (2004).
Since 2015 Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd, the Supreme Court clarified the law on implied terms in contracts. Only one of either the business efficacy or officious bystander tests need to be satisfied. It must be objective or obvious to any bystander who would be able to look at the terms of the contract.
TERMS IMPLIED BY CUSTOM: Some local customs survive in English law – Hutton v Warren (1836).
TERMS IMPLIED BY PRIOR DEALINGS BETWEEN PARTIES: These can also count – Hillas v Arcos (1932).
The Moorcock (1889) and Schawel (1913)
In The Moorcock (1889), it would have been an obvious term for the claimant to expect their ship to be safe and not destroyed.
Similarly in Schawel v Reade (1913), the claimant, buying a stallion for stud and being reassured by D that the horse was fit for stud, would have assumed that the stallion was indeed, fit for stud.
Who does the Consumer Rights Act
2015 refer to?
• This act brings together rights and remedies in relation to contracts between consumers and traders.
• It is very similar to the other two laws, but the definition is wider than existing definitions as it includes individuals who enter into contracts for a mixture of business and personal reasons.
• It also covers contracts involving digital content.
• Traders remain liable under this act in relation to third parties.
• It sets out implied terms in pre-contract information: total price + taxes, arrangements for payment, provision of contact details, etc.
Implied rights under Consumer Rights Act 2015
• Application of the implied rights with respect to the supply of goods: This specifically applies to sale, hire, hire-purchase and other contracts for transfer of goods.
• The right of satisfactory quality: Section 9. Goods need to be in a state that a reasonable person would find satisfactory given the description, price and so on. Similar to the Sale of Goods Act 1979, this doesn’t apply if the seller has previously been made aware of defects and so on. So, both case/common and statute law can be used here.
• The right of fitness for particular purpose: Section 10. Again, the same as the provision in the Sale of Goods Act 1979.
• The right relating to description: Section 11. The goods must match the description and relevant information provided. Information can be implied, as in, say, a picture or description.
Remedies for failure to provide the rights with
respect to supply of goods
• S 20 – short term right to reject.
- Must be exercised within 30 days.
- Trader will bear any reasonable costs.
- Consumer entitled to full refund within 14 days and refunded in the same means of payment originally used unless expressly agreed otherwise.
• S 23 – right to repair or replacement. More or less as above.
• S 24 – right to either a price reduction or a final right to reject. Only one attempt at repair or replacement is allowed and any refund is subject to deduction for use. E.g motor vehicles.
Implied rights with respect to supply of services and Remedies for failure to provide the rights with respect to supply of services.
• Implied rights with respect to the supply of services:
- S 49. Trader must perform the service with reasonable care and skill.
- S 52. Service has to be performed within a reasonable time where the contract does not express a specific time.
- Where no price is agreed, the trader has the right to be paid a reasonable sum.
• Remedies for failure to provide the rights with respect to supply of services.
- The consumer has the right to require repeat performance if the service was not carried out sufficiently the first time.
- The right to a price reduction, s 56.
The difference between exclusion and limitation clauses
An exclusion clause excludes any liability if something goes wrong. (E.g. in car parks, public places, etc.)
A limitation clause is not excluding liability but it’s putting a cap on the upper limit of damages.
Common law approach (exclusion + limitation clauses)
Firstly, under freedom of contract, both parties are free to engage in any sort of contract, even if one party is in a much stronger position.
• The courts therefore will consider three matters:
- Has the agreement been signed?
- Has any notice with the term in it been incorporated in the contract?
- Has the term been incorporated as a result of previous dealings of the parties?
Signing a contract
if the contract has been signed (even if not read), the exclusion clause can be relied on – L’Estrange v Graucob (1934).
