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Terms of the contract. Flashcards

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1
Q

What are contracts about?

A

Allocating the risks of an obligation, this must be understood at the time the contract was made.

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2
Q

What can certainty lead to?

A

Unfairness.

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3
Q

What is only contained in the contract?

A

Terms.

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4
Q

How can a term get into the contract?

A

Either expressed or implied.

> By statute.

> By common law.

> From local custom of trade usage.

> From prior course of dealing.

> In fact.

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5
Q

What are terms?

A

The enforceable elements of the contract.

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6
Q

What is not always incorporated into the contract?

A

The pre-contractual discussions.

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7
Q

What is a representation?

A

Anything discussed pre-contract.

Some of those representations will become the terms of the contract and become enforceable, others never become enforceable.

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8
Q

What are misrepresentations?

A

False statements made leading up to the contract.

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9
Q

What are catergorization of terms?

A

Once determined what the terms are, decide what category they fall under, breaching each category has different consequences.

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10
Q

How can contracts be made?

A

Easily, without special requirements of formality or form. However, this can make it difficult to establish the terms.

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11
Q

What is the primary test for incorporation of the term?

A

The contractual intention of the parties at the time of contracting. This is determined case by case.

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12
Q

How is the intention determined?

A

It is the representations made which they intended to be enforceable/contractual liability.

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13
Q

Give an example of a mere puff.

A

Bold statements in advertising are not seen as being intended to result in contractual liability.
Lambert v Lewis (1982).
Injury caused on the trailer, described as being fool proof. Yet he had maintained the trailer. Hyperbolic statements will not become contract terms.

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14
Q

What do cases provide?

A

Indications, not answers.

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15
Q

Jacobs v Batavia and General Plantations Trust [1924]
Rule of law?

A

No distinction between oral and written contracts. Both can be enforced, yet proof does matter (easier to prove existence of written contract). This is the parol evidence rule, where written contract is preferred.

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16
Q

What is a collateral contract?

A

Written with a side oral contract.

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17
Q

Why can conditions precedent be highly important?

A

It is the reason the party entered into the contract, because of the exchange of promises in a particular contract for future behaviour.

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18
Q

What must the nature of a contract not depend on?

A

‘Any formal agreement of the words, but (must depend) on the reason and sense of the thing as it is to be collected from the whole contract.’
-Glaholm v Hays [1874]

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19
Q

What are warranties?

A

A term of the contract, it constitutes a promise or guarantee, which if broken automatically entitles the claimant to damages.

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20
Q

What are secondary terms?

A

They govern smaller matters of the contract (notice condition etc), these flow from the contract and aren’t conditions.

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21
Q

What is the reality about contracts?

A

Problems will arise, yet not every problem will result in breach as will place too much risk on one side of the contract.

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22
Q

What is an example of there being too much risk for one party?

A

One party drafting the contract, and other party just accepting can cause problems as it does not fall under bargaining.

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23
Q

What are expressed terms?

A

Where the parties negotiating the contract, express and explicitly make an agreement.

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24
Q

How are a lot of contract cases made?

A

Through implication. The terms are implied, entering through a process of implication independent of the parties themselves. This process is separate to an agreement.

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25
Q

What are the several routes of implication?

A

> By statute.

> By common law.

> From local custom of trade usage.

> From prior course of dealing.

> In fact.

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26
Q

What are terms implied by statute?

A

Contract as a vehicle to impute terms into the relationship, the state knows that in the relationship between parties there is a contract. The statute intervenes putting terms into the contract, to protect on of the parties.

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27
Q

What is an example of terms implied by statute?

A

Legislation will often use existence of a contract in a relationship as a means of regulating the contract.
Ø Hardlingdon and Leinsteer Enterprises Ltd v Christopher Hull Fine Art Ltd (1991).

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28
Q

What are terms implied by common law?

A

The law claims there must be obligations here, law itself fills in contract due to you failing to express the terms. This is only done in certain circumstances).
Liverpool City Council v Irwin [1977] AC 239.

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29
Q

What are terms implied by custom?

A

Ongoing relationship between parties, with prior and frequent contracts, the time something goes wrong there is no paperwork. If they are both aware of the customary terms, those terms become part of the contract via the custom of the contract. Same industry

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30
Q

What are terms implied by course of dealing?

A

Not part of same industry, yet history of transactions. The time something goes wrong, this is then impliedly agreed based upon awareness of prior dealings.)

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31
Q

What are terms implied by fact?

A

Facts of deal, do not allow a certain thing not to be addressed.

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32
Q

What is the exclusion clause?

A

To exclude liability for certain losses.

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33
Q

What is the officious bystander test?

A

Where a term is not explicitly included because it is so obvious that it goes without saying.

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34
Q

What are notice cases?

A

Where agreement is signed on the dotted line.

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35
Q

Who are exclusion clauses often written y?

A

One party to escape liability.

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36
Q

What is incorporation?

A
  • Right time
    * Right place
    * Special cases.
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37
Q

What is the best way of showing intention?

A

A signed document.

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38
Q

When will notices not suffice?

A

If they are not seen before the contract is signed.
They must be brought to the buyer’s attention, if they are to be incorporated into the contract.

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39
Q

What is the battle of the forms?

A

This is when two people try to impose standard terms on each other.

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40
Q

What does onerous mean?

A

Imposing heavy obligations. Any terms which are unusual, not always exclusion clauses.

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41
Q

What is an example of a clear notice of onerous terms?

A

The red hand rule.
The more unreasonable a clause is, the more notice the person must be given.

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42
Q

What is the problem with automated contracts?

A

Not a bargaining, and no sufficient notice can be given.

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43
Q

When can an implication not be made?

A

If a term is not expressed in a contract, there is only one other way in which it can come into it and that is by implication. No implication can be made against a party of a term which was unknown to him.

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44
Q

What are problem terms?

A

Ø Limitation and exclusion clauses.
Penalty clauses and liquidated damages clauses.

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45
Q

What are limitation clauses?

A

Ones that seek to limit the extent of one party’s liability under a contract.
* They will often seek to ‘limit’ the maximum liability under a particular head of damage.
That limitation will often be a maximum sum of money.

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46
Q

What are exclusion clauses?

A

Ones that seek to exclude entirely a form of liability, of one party, for a breach of the contract.
* An exclusion of all liability under a certain head of damage is an even great restriction as all potential damage is excluded.
* Problematic as often let the owner who breached the contract to escape liability.

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47
Q

How are limitation and exclusion clauses limiting?

A

They are often see as allowing a powerful party to avoid their ‘normal’ obligations

48
Q

What is the normal rule of contractual interpretation based on?

A

The parties’ intention at the time of drafting.
“What a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101

49
Q

What stricter rule is applied to exclusion clauses and how it is interpreted?

A

The term will be construed against the party seeking to rely on it to exclude liability.
* That is especially the case where there is perceived to be an imbalance of bargaining power and one party has imposed the exclusion on the other.
Where both parties are of equal power, and are apportioning risk, the clauses are more likely to be upheld - Photoproduction v Securicor.

50
Q

What are the three stages for exclusion of negligence?

A
  • Express reference to negligence?
    • Are the words used wide enough to cover liability for negligence?
    • If the words used are wide enough, could the party desire protection from some other form of liability. If he could, and that ground is not so fanciful or remote, it is likely that the words will be taken to refer to the non-negligent liability only?
      If you do explicitly state about negligence, this makes it more onerous (red hand rule).
51
Q

What questions determine what the terms of the contract are?

A

Is a statement a term of the contract or merely a representation?
Can any other terms be implied into the contract?
If a statement is a term of the contract, is it a condition, a warranty or an innominate term?

52
Q

What is part of the contract?

A

Terms, not representations.

53
Q

Why are representations floating?

A

◊ Made around the time of the contract.
◊ Can give rise to damages.
Affect the validity of the contract.

54
Q

What happens if the statement is a term of the contract?

A

Allows automatic rights to damages.

55
Q

What happens if it is a false representation?

A

> No automatic rights to damages.
There may still be a right to damages, yet the usual remedy is to unravel the contract (recission) and even this remedy can be lost if the third party’s rights are affected.

56
Q

What is the parol evidence rule?

A

A written contract cannot be supplemented by oral terms.; the written document is final.

57
Q

What are entire agreement clauses?

A

Makes it clear that the written contract contains all the terms, so the oral statements are representations.

Yet extra terms can still be implied into an otherwise entirely written agreement if they give the contract business efficacy.

58
Q

What is a No Oral Modification Clause (NOM)?

A

Any variations also have to be in writing and signed. It was held by the Supreme Court (2018) that NOM agreements prevent subsequent oral agreements from becoming a term.

59
Q

What often happens when the parties’ intention is unclear to the court?

A

The courts will look at what is the most suitable remedy and then decide whether the statement is a warranty or a representation.

60
Q

What is the recission of the contract?

A

A legal remedy that allows a party to cancel a contract and restore the status quo e.g misrepresentation, mistake, anything making it invalid/unfair.

61
Q

When are collateral warranties used?

A

1) To evade the rule of law.
2) They can form a term relating to the party’s conduct in the run up to the contract.
It is not necessary to add the prefix ‘collateral’ to this type of warranty, because it can still be a warranty in the main contract.

62
Q

What are terms implied in fact?

A

Terms actually intended but not expressed.

63
Q

What are terms implied in law?

A

Implied not because they are intended by the parties but inserted by the courts or legislature because they think it is a good idea.

64
Q

What is the test of necessity according to Lord Hoffman?

A

Although there is an obvious term missing which is necessary to make the contract work, the reasonable person would understand the agreement to include such a term (Belize Telecom).

65
Q

What is a condition?

A

A vital term of the contract which will give a right to terminate the breach, along with a right to damages. Both can be applied at the same time.

66
Q

What is an innominate term?

A

The nameless term. It is an intermediate or hybrid term because sometimes its breach gives a right to termination and sometimes it only gives a right to damages, depending on how serious the consequences of the breach are.

67
Q

What is an innominate term?

A

○ An attempt to avoid the rigidity of the twofold distinction between conditions and warranties.
However, parties may not know if they can only terminate after the breach.

68
Q

How can delay to terminate sometimes harm the innocent party?

A

1) Delay can mean the right to terminate is lost, because it can be treated as evidence of an intention to affirm the contract.
2) Yet the innocent party Is given a reasonable amount of time to consider their options.
3) Even without evidence of affirmation, the right to terminate the contract can still be lost.

69
Q

Who gave the leading judgement in The Moorcock?

A

Lord Esher.

70
Q

What was the decision in Oscar Chess v Williams?

A

The statement that the car was a 1948 model was a representation not a term, as the buyer was in a better position than the seller to confirm this.

71
Q

What was the decision in Bannerman v White?

A

It was held that the buyer’s requirement that the hops should not be sulphur-treated was a term of the contract, not a representation.

72
Q

What is the requirement for a trade usage to be binding on any person contracting in that particular trade or market?

A

The term must be certain, notorious and reasonable.

73
Q

What does ‘Necessary’ mean?

A

It does not have the same meaning in an implication at common law as it has in an implication in fact.

74
Q

The Moorcock concerned what method of implication?

A

In fact.

75
Q

Who came up with the ‘officious bystander’?

A

The “officious bystander” test was invented by Scrutton LJ in Reigate v. Union Manufacturing. Mackinnon LJ should take the credit for defining the test with the term “officious bystander” test.

76
Q

Which case is authority for the existence of innominate terms?

A

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (The Hong Kong Fir).

77
Q

Lister v. Romford Ice & Cold Storage Ltd is a leading case on which method of implication?

A

At common law.

78
Q

What are terms?

A

Part of the contract, unlike representations.

79
Q

Why are representations ‘floating’?

A

◊Made around the time of the contract. ◊ Can give rise to damages.
Affect the validity of the contract.

80
Q

What gives automatic right to damages?

A

If the statement is a term of the contract.

81
Q

When is there no automatic right to damages?

A

False representation.

There may still be a right to damages, yet the usual remedy is to unravel the contract (recission) and even this remedy can be lost if the third party’s rights are affected.

82
Q

What does a representation not give?

A

Contractual Damages.

-A term of the contract, it constitutes a promise or guarantee, which if broken automatically entitles the claimant to damages.

83
Q

What are limitation clauses?

A

Ones seeking to limit the extent of one party’s liability under a contract and under a particular sum of money.

84
Q

What are exclusion clauses?

A

Seek to exclude entirely a form of liability, of one party, for a breach of the contract.

85
Q

Why are exclusion and limitation clauses often shunned by the courts?

A

They are often see as allowing a powerful party to avoid their ‘normal’ obligations

86
Q

How are exclusion clauses interpreted?

A

Based on the party’s intention at the time of the contract. This is compared to what a reasonable person would have done.

87
Q

What is the stricter rule of interpretating exclusion clauses?

A

The term will be construed against the party seeking to rely on it to exclude liability.

That is especially the case where there is perceived to be an imbalance of bargaining power and one party has imposed the exclusion on the other.

88
Q

When is the court more likely to uphold an exclusion clause?

A

Where both parties are of equal power, and are apportioning risk.

89
Q

What is true about ‘necessary’?

A

It does not have the same implication in common law as it has in an implication in fact.

90
Q

What happened in Bannerman v White?

A

It was held that the buyer’s requirement that the hops should not be sulphur treated was a term of contract, not a representation.

91
Q

Who gave the leading judgement in Moorcock?

A

Lord Esher

92
Q

What method of implication did the Moorcock concern?

A

In fact.

93
Q

What case is authority for existence of innominate terms?

A

Hong Kong Case.

94
Q

What happened in Oscar Chess v Williams?

A

The statement that the car was a 1948 model was a representation not a term as the buyer was in a position to confirm this.

95
Q

What correctly lists the requirement for trade usage to be binding on any person contracting in particular trade/market?

A

The term must be certain notorious and reasonable.

96
Q

What method of implication is Lister?

A

At common law.

97
Q

What case is an example of warranties?

A

Schuler v Wickman

98
Q

What is an inomninate term?

A

An intermediate term. Whether it can give rise to termination depends on the seriousness. Once the term has been breached the court can then decide whether it should be a condition or warranty.

99
Q

What case is an example of terms implied by statute?

A

Harlingdon v Christopher Hull Fine Art.

100
Q

Example of terms implied by common law?

A

Liverpool v Irwin

101
Q

Example of implication by law?

A

Lister v Romford

102
Q

Example of course of dealing?

A

Hollier v Rambler

103
Q

Example of implication by custom?

A

Perry v Barnett and British Crane Hire v Ipswich.

104
Q

Example of business efficacy test?

A

Moorcock.

105
Q

What is business efficacy test?

A

Asks whether the term was necessary to give business efficacy, would the contract make business sense without it?

106
Q

What is an example of the officious bystander test?

A

Regiate v Union Manufacturing and Shirlaw case

107
Q

What shows implication remains contested area of law?

A

Belize Telecom and Marks and Spencer’s cases.

108
Q

In Liverpool City Council v. Irwin did the House of Lords agree with the reasoning of the Court of Appeal?

A

Nope!

109
Q

What is there no examples of?

A

Implication by PRIOR course of dealing.

110
Q

What is an example of representations?

A

Dick Bentley Productions v Harold Smith and Harlingdon case.

111
Q

What is an example of notice cases?

A

L’Etrange v F Gracoub
Olley v Malborough
Parker v South Eastern Railway
Thompson v London Midland

112
Q

What is an example of place and method of incorporation?

A

Chapelton v Barry

113
Q

Clear notice of onerous terms?

A

J Spurling Ltd v Bradshaw
Inferto Picture Library Ltd v Stiletto Visual Progarammes.
Photo Production Ltd v Securicor Transport Ltd.

114
Q

Automated contracts?

A

Thornton v Shoe Lane Parking

115
Q

Course of dealing and knowledge?

A

McCutcheon v David MacBrayne Ltd {

116
Q

Exclusion of liability for negligence?

A

Canada Steamship Lines Ltd v R

Contract Law (13 decks)

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