Terms of the contract Flashcards
3 types of statement
1- mere puff: no legal significance/effect
2- representations: statements of fact or law which induce the making of the contract which the parties do not intend to be binding
3- terms: statements of fact which the parties intend to be binding
Mere puffs
No legal effect.
Refers to exaggerated statements or sales talk made during or prior to negotiations that are not intended to be taken seriously or relied upon by the parties.
What test to be applied to decide whether a statement is a representation or a term?
Objective test, reasonable person.
5 factors to decide whether a statement is a representation or a term
1- importace of statement
(party considered it so important that it would not have entered into the contract)
2- timing
(statement made at the time of contracting> early stages of negotiation)
3- lapse of time between making the statement and contracting
4- reduction of the contract into writing
(if significant, incorporate into terms by writing)
5- exclusive access to info or special knowledge as compared with the other party
6- assumption of responsibility
what is the effect of ‘entire agreement’ clause?
Prevent oral terms/statements from being binding.
Also called ‘boilerplate clause’.
What is the condition for incorporation of a term BY NOTICE?
Terms can be incorporated if reasonable steps are taken to bring them to the C’s attention.
But for particularly onerous terms are subject to the RED HAND RULE.
What is the red hand rule?
In order to incorporate a particularly onerous/adverse term by notice, it must be sufficiently and clearly brought to the attention of the other party.
Eg. printingin red ink with a red hand
What is the timing requirement for reasonable notice for incorporation by notice?
Reasonable notice must be given BEFORE or AT THE TIME OF contracting.
Incorporation by course of dealing is possible if the course of dealing was:
1- consistent over time
2- regular
What are terms implied in fact?
1- Trade or professional customs
=> well-known customs of that trade/profession
2- Business efficacy
=> ie. without the term, the arrangement would be unworkable for its intended objective,
=> that reasonable person would not enter into that business agreement
3- A course of dealing between the parties
=> regular and consistent over time
What are terms implied in law?
1- at common law
2- by statute
- SGA 1979 (B2B contract)
- SGSA 1982 (B2B contract)
- CRA 2015 (B2C contract)
Implied terms by statute in B2B contracts
1- Sale of Goods Act (SGA 1979)
* description
* satisfactory quality
* fit for particular purpose
* correspondence with the sample
2- Supply of Goods and services (SGSA)
* services provided with reasonable care and skill
What liabilities cannot be excluded under SGA and SGSA?
death / personal injury
Exclusion is VOID.
Condition or warranty?
SGA 1979
* correspondence with description
* satisfactory quality
* fit for particular purpose known to seller
* bulk must correspond with the quality of sample
CONDITION
But if the breach is so slight, the only remedy will be damages.
How can liability under SGA/SGSA be excluded?
(other than death/PI ofc)
If it complies with the REASONABLENESS requirement.
Reasonableness requirement for exclusion - factors to consider
1- strenght on bargaining power
2- whether customer received an inducement5
3- whether customer knew or ought to reasonably have known of the existence of the term
4- whether goods were manufacture, adapted, or processed to meet the needs of the customer
What are the terms implied under SGSA 1982?
For hire of goods:
- same as SGA
For supply of services:
- reasonable care and skill
- within a reasonable time
- payment of a reasonable charge
implied terms under SGSA for supply of services; condition or warranty or innominate term?
INNOMINATE TERM
The claimant hired a deck chair. Having paid for the hire, he was given a ‘ticket’. On the back of the ticket there were additional terms and conditions.
Are they binding?
These were held not to be binding, because the ticket was not intended to have contractual effect –an observer would have understood it to be only a receipt.
Does SGA and SGSA applies to customer contracts?
NO
What does satisfactory quality mean for goods (under SGA)?
1- Fitness for all the purposes for which goods of the kind in question are commonly supplied
2- Appearance and finish;
3- Freedom from minor defects;
4- Safety; and
5- Durability
Is the implied term below from SGA a condition or warranty?
’ The goods will be suitable for any purpose made known to the seller. ‘
CONDITION
What contracts for the transfer of property in goods include under SGSA 1982?
1- A contract of sale of goods;
2- A hire purchase agreement;
3- A contract under which the property in goods is or is to be transferred in exchange for trading stamps;
4- A transfer made by deed for which there is no consideration other than presumed
consideration; and
5- A contract intended to operate by way of security.
In the case of contracts for transfer of goods or the hire of goods, under s 11 a supplier may
negative or vary the terms set out in this section, subject to the provisions of the UCTA 1977, subject to (…)
Reasonableness proviso
To which contracts CRA 2015 apply?
B2C Contracts.
=> deals with consumer contracts for goods, digital content, and services.
Definition of ‘consumer’
A ‘consumer’ is defined as ‘an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession’.
Conditions implied applying to consumer contracts for the sale of goods are;
1- Goods should be of a satisfactory quality
2- Goods should be reasonably fit for any purpose which the consumer makes known to the trader that the consumer intends to use the goods for; and
3- Where goods are sold by description the goods should match that description.
What is satisfactory quality for digital content?
the ‘quality of digital content is satisfactory if it meets the standard that a
reasonable person would consider satisfactory’.
Such a reasonable person would take account of matters of description and price together with ‘all other relevant circumstances’, including circumstances including ‘any public statement about the specific characteristics of the digital content made by the trader, the producer or any representative of the trader or producer’
statutory rights of a consumer under a services contract
1- That the service is performed with reasonable care and skill
2- That (where a price has not been agreed) a reasonable price is to be paid
3- That (where a time has not been fixed) the service is provided in a reasonable time
Remedies for consumers under CRA 2015
- The short term right to reject;
- The right to repair or replacement;
The right to a price reduction or the final right to reject.
The short term right to reject under CRA
available to the consumer for 30 days running
from the time
(i) that ownership has passed
(or, in the case for hire or the like, possession has been transferred) and
(ii) the goods have been delivered and
(iii) in cases where the trader is required to install the goods or to take other action to enable the consumer to use the
goods, the trader has notified the consumer that the required steps have been taken.
(CRA 2015) The right to repair or replacement is available UNLESS
repair or replacement is either impossible or
disproportionate
(ie. it imposes an unreasonable cost on the trader relative to the other remedies and the interests of the consumer)
Is the consumer entitled to both a price reduction and final rejection?
NO, either one of them only.
Remedies for breach of contracts for digital content terms implied
- The right to repair or replacement; and
- The right to price reduction.
Under CRA, remedies for contracts for services are:
1- repeat performance (within reasonable time and without significant inconvenience to the consumer)
2- price reduction (where impossible or in breach of repeat performance)
Condition or warranty?
Condition is an important term ‘going to the root of the contract’.
Q: Did the parties intend at the time of contracting, that any breach of that relevant term would give the innocent party the right to election?
- If yes, it’s a condition.
- If clearly no, warranty.
- If not clear, innominate term
What is the test for innominate term?
Do the consequences of the breach deprive the innocent party substantially the whole benefit of the contract?
- if minor effect = treated as warranty
- if serious effect = treated as a condition
If the court cannot determine the parties’ intention, or determines that their intention was that not every breach would lead to the right to terminate, then the court is likely to decide that the term is innominate, and apply the test from Hong Kong Fir.
Remedy for breach of condition
- right of election (repudiate or affirm)
and - damages
Remedy for breach of warranties
Damages only
The term in question in Hong Kong Fir was that the ship being hired was, ‘in every way fitted for ordinary cargo service’. This is a clause that could be breached in a variety of ways, ranging from the minor to significant.
Condition, warranty or innominate term?
Does the breach deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract?
If the answer to this question is ‘yes’ then the term will be treated as a condition and the innocent party is entitled to treat the contract as repudiated and claim damages. If the answer is ‘no’ the innocent party is entitled to claim damages only.
Sale of Goods Act 1979 - ss 12-15
conditions
unless a slight breach, in that case only remedy available would be damages.
Supply of Goods and Services
Act 1982 - s13
innominate term
(reasonable care and skill)
