topic 3 - terms and conditions Flashcards
oscar v williams
facts:
- private seller sold car to dealer stating it was 1948 but it was actually 1939 - if known then only £175 for it but def honestly believed it was 1948 and def didn’t know that it had been altered
held: merely misrepresentation not a term of contract but if reverse then representations by experts are more likely to become terms of the contrct
warranty meaning
- binding promise
- word used in order to denote a term in contract as distinct from a vital term which is a condition
- statement which is a term of the contract that must be distinguished from innocent misrepresentation
bannerman v white
Key facts:
B offers hops (beer) for sale to W.
W asked if sulphur had been used in their treatment as brewers rejected the hops and B denied. ONLY POSSIBLE TO MAKE USABLE BEER FROM HOPS WITHOUT SULFURE TREATMENT. Expressly stated would not buy the hops if they had been treated
Was the representation that sulphur had not been used a term of the oral contract?
The hops were delivered and contained sulphur
B’s specific assurance was seen as a condition upon which the contract was entered.
W made it clear why the sulphur was important to him and therefore it was a term of the contract as B was aware that W would not buy the hops if sulphur was used
Decisions of the court:
Contractual term not a mere representation as particular emphasis on the fact c had communicated the significance and consequence of treatment to defendant, meaning reasonably aware of their importance
dick bentley v harold smith
Facts of the case:
Harold Smith (Motors) sold a car to Dick Bentley.
The car was said to have 20,000 miles as shown on the odometer. However, the odometer turned out to be broken and incorrect, which brings about the question of whether Harold Smith’s statement was a representation or a warranty.
Decisions of the court:
The court ruled that it was a warranty as it was the obligation of the defendant as they were in the position to at least know or to find out the true mileage.
glaholm v hays
Facts of the case:
Ship sailing from England to Trieste and transport cargo back to UK
Allowed 40 days for the delivery and 12 days for ddemurrage and delays
Plaintiff and def had a written contract including the clause “the vessel to sail from England on or before the 4th day of February next”
Vessel did not set sail on or before Feb 4
Def refused to perform under the contract and plaintiff brought suit for breach of contract
Def argued that language stating vessel was to sail on or before Feb 4 was a condition precedent and noncompliance with it excused def for performance
Decisions:
Breach of condition so therefore had the right to terminate the contract
Was a condition as it was the intention of the party for the ship to sail on a specific day
schuler v wickman
Facts of the Case:
S Co., a German company, entered into a contract with W Co., an English company, giving W Co. the sole rights to sell S Co.’s panel presses in England.
Clause 7 (b) provided that “it shall be a condition of this agreement” that W Co.’s representatives should visit six named firms each week to solicit orders.
W Co.’s representatives failed on a few occasions to do so.
S Co. claimed to be entitled to repudiate the agreement, on the basis that a single failure was a breach of condition, giving them an absolute right to treat the contract as at an end
issues:
Was the fact that a term was called a ‘condition’ conclusive?
Key points:
The fact that a term is labelled as a ‘condition’ is not conclusive in legally classifying the term as a condition instead of a warranty.
The inclusion of the word ‘condition’ is an indication of intention but is not conclusive
Whether the term of a contract is a condition depends on the intention disclosed by the contract as a whole
The more unreasonable a result the more unlikely it is that the parties intended it
Lord Reid (p251):
Legal def of condition: “A term the breach of which by one party gives to the other an option either to terminate the contract or to let the contract proceed and, if he so desires, sue for damages for the breach”
When is a term a condition:A term may be a condition giving the option to terminate because:
“it is of a fundamental character going to the root of the contract” or
“the parties have chosen to stipulate that it shall have that effect”
Held:
Held, that such a breach did not entitle S Co. to repudiate, since such a construction of the clause was so unreasonable that the parties could not have intended it.
Clause 7b was a warranty and calling it a condition did not make it so
legal definition of condition - lord reid schuler v wickman
“A term the breach of which by one party gives to the other an option either to terminate the contract or to let the contract proceed and, if he so desires, sue for damages for the breach”
When is a term a condition:A term may be a condition giving the option to terminate because:
“it is of a fundamental character going to the root of the contract” or
“the parties have chosen to stipulate that it shall have that effect”
bunge corporation v tradax export
Facts of the case:
Def was shipping plaintiffs good and clause 7 of contract stated that def had to give 15 days notice to shipping regarding readiness of ship
Def gave late notification that ship would not be ready and plaintiff stating clause 7 was a condition, argued that they could terminate the contract
Decisions:
HL held that plaintiff was correct
Lord Roskill: The use of the “innominate term” should not be used to allow escapes from bad bargains.
Where it is right to do so, terms will be construed as conditions for the sake of commercial certainty: This is especially so where the contract is part of a chain or string of contracts, or where it would be difficult for the court to quantify the amount lost by Plaintiff if termination were not permitted.
Dissenting opinion:
This case is distinct from Hong Kong Fir since there the CA’s reasoning was that a term which would almost certainly, and could very easily, be breached was unlikely to be considered as a condition.
However giving late notice can only be committed in one way and is easily avoided. Therefore Hong Kong Fir reasoning does not prevent clause 7 here from being regarded as a condition.
On the facts it was “clearly essential” that the notice be given in time.
hong kong fir v kawasaki kisen kaisha
The plaintiffs purchased a vessel and chartered it for a voyage from Liverpool to Osaka, Japan. Delays occurred during the journey due to the shipowners’ contractual breaches, prompting the charterers to cancel the charter-party, citing the vessel’s alleged unseaworthiness. The shipowners contested the cancellation, considering it a wrongful repudiation by the charterers.
Despite offering the vessel for hire after repairs, the charterers refused to continue with the charter, leading to its termination. The court found the charterers’ refusal to be wrongful and awarded damages to the plaintiffs.
Unseaworthiness is a very broad concept - it can be beached in very minor, or very serious ways
The term was found to be an innominate term - treated as a condition or a warranty
The charterer could repudiate if the breach deprived the promises substantially of the whole of the benefit he expected to gain from the contract
24 month charter in the contract but there was a 20 week delay
Whether or not a contract can be repudiated depends on the seriousness of the consequence of the breach
If you have been deprived from the substantial benefit of the contract then you can repudiate.
If the breach was relatively minor that the claimant can only pursue damages
If the parties set things out as conditions with clear definitions and intentions it will be respected in the court - particularly in commercial cases - There is value in certainty.
Innominate terms means there is no certainty about who is at risk and what the risk is
If there is multiple ways of breaching with too much risk allocated to one party a term will be deemed innominate
Decisions of the court:
Appeal dismissed
The judge determined that the vessel’s machinery was not initially inefficient or defective but required proper maintenance by an experienced engine-room staff due to its age. However, the vessel was considered unseaworthy upon delivery due to an insufficient and incompetent engine-room staff.
CA held that the contract would not be terminated since, given the time remaining on the charter and Defendant’s efforts to repair the ship, Plaintiff had “not been substantially deprived of the whole benefit” of the contract.
The term of “maintenance” was held to be neither a condition nor a warranty and was an “innominate” term that would only terminate the contract if its breach had such consequences serious enough to amount to the frustration of the commercial purpose of the venture.
Upjohn LJ: The parties can specify in a contract which terms are conditions and which stipulations.
harlingdon and leinster v christopher hull fine art ltd
Facts of the case:
C purchased painting from def for £6000
Painting described in auction being by German impressionist artist Gabrielle Munter.
Both the buyers and the sellers were London art dealers. The sellers were not experts on German paintings whilst the buyers specialised in German paintings.
The purchasers sent their experts to inspect the painting before agreeing to purchase.
After the sale the buyers discovered that the painting was a fake and worth less than £100.
They brought an action based on s.13 Sale of Goods Act in that the painting was not as described.
Held:
By sending experts to inspect painting this meant the sale was no longer by description.
S13 only applies to goods sold by dexcription and therefore buyers had no protection
liverpool city council v irwin
Facts of the case:
Tenants in a tower block went on rent strike in protest about the building condition, alleging a breach of duty to repair and maintain the property. They claimed duty to maintain the lifts, staircases and rubbish chutes.
There was no formal lease, and the ‘conditions of tenancy’ only contained the tenants’ obligations.
The council had made repeated efforts at considerable expense to keep the lifts in working order and to provide safe access to the maisonettes but their efforts had been frustrated by incessant vandalism
judge awarded nominal damages for breach of an implied duty to keep the common parts in repair
Key points:
The court will imply by law a term that is ‘necessary to the type of contract’
Lord Denning MR in the Court of Appeal held that a term should be implied based on a test of reasonableness
While the business efficacy and officious bystander tests are based on the parties’ intentions and are thus considered implication by fact, the necessity test is based on what the court deems to be necessary based on the nature of the parties’ relationship and is thus implied by law
The necessity test is wider than the business efficacy test: on the facts the House found that it could not imply a term based on business efficacy
However, the dividing line between the two tests are not clear
Held:
The court held there was an implied obligation to take reasonable care to maintain the common areas in a reasonable state of repair. Implied term was not breached on the facts
This was (reasonably) ‘necessary’ to give the contract is bilateral nature and reflect the relationship.
A contract cannot be binding without an exchange of promises or value. Not equal bargaining power.
The court implied into the contract that the stairs, lifts and rubbish chutes could not be the responsibility of the tenants as they were common areas of the building.
held, allowing the appeal, that where an essential means of access to units in a building was retained in the landlord’s occupation, then unless the obligation to maintain them was clearly placed on the tenants, the nature of the contract and circumstances required that it should be placed on the landlord.
The obligation, however, was to take reasonable care to keep the means of access in reasonable repair and usability with the recognition that the tenants had the responsibilities of a reasonable set of tenants, and there was not any breach of such obligation by the council.
lister v romford
During the course of his employment a lorry driver reversed over, and injured, his father who was assisting him. The father sued the employer as being liable for the negligent acts of their employee.
Held, by the HoL, there was an implied term in the contract of employment that the employee would perform their duties with reasonable car.
No term could be implied that the employer or insurer would indemnify the employee.
Was not a necessity of the contract to imply that term in order for the contract to function
Was this a decision on policy rather than necessity?
Competence is a fundamental part of the employee/employer relationship, but it was found that it was not a necessity for an employer to insure the employee for their own negligence
This case was a sign of the times.
How do you distinguish when it is a necessity and when it is not? There is no clear divide or rule of thumb to follow.
perry v bannet
facts: contract in bristol to buy shares in a bank and the shares had to be acquired on the london stock exchange. and bristol had to instruct london broker on the transaction
stock exchanged according to normal practice and rules of London stock exchange but void under other legislation which was not discussed in this vomtract
custom to ignore the legislation as it mad it difficult to operate in fast paced environment
both parties unaware of custom and could not be imputed into contract
hollier v rambler motors
Summary of the facts
A car was damaged in a fire while in a garage. The owner of the car claimed for the damage alleging that it was caused by the respondent’s negligence (owner of the garage).
The defendant sought to rely on an exclusion term in previous contracts used between the parties (3/4 over 5 years) in his appeal against a finding of negligence. No contract was signed on this occasion only an oral agreement.
Exclusion term - exempting liability
Decision – Court of Appeal
An invoice signed, sometimes hurriedly, on 3 or 4 previous occasions was not sufficient to imply an onerous term into a contract.
The invoice has the exclusion clause but on this occasion it was not signed and it was determined that there was insufficient course of dealing between the parties to imply the term for these reasons:
The nature the terms were presented - they were not brought to his attention or agreed upon
Not enough occasions - the longer history of contracts, the more likely a term can be implied in the future
There needs to be consistency in the contracts and the parties must be aware of the terms
henry kendall v williams
Summary of the facts
D’s ferry sank and the claimants car was lost due to employee negligence. Attempting to reclaim value for the loss the company contended that they were absolved from liability for negligence in accordance with the T&C displayed at their office.
Upon payment the customer received a receipt for the freight paid and a ‘risk note’ that had conditions of carriage on it and required signature. McCutcheon had signed the risk note on 4 previous occasions that contained an exclusion clause, but not on this occasion and the transaction was made by an agent on behalf of McCutcheon (his brother).
he was aware of conditions referred to in the past but not nature of those conditions. D attempted to imply the term by course of dealing.
Risk note - passengers, passengers’ luggage and livestock are carried subject to the conditions specified in the company’s sailing bills, notices and announcement
Decision
Held, that this was an oral contract and the conditions relied on were not imported into it so as to exempt the company from liability for negligence.
They could not be implied through a course of dealing because
In the absence of any contractual document, a consignor of goods cannot, by a course of previous dealing, be bound by conditions of which he is generally aware but the specific terms of which he has no knowledge
There was unequal bargaining power, British Crane Hire Corp Ltd v Ipswich Plant Hire [1975] QB 33 (more likely to imply course of dealing and custom of trade with commercial parties of equal bargaining power)
Not two commercial entities entering into a contract, one was private
One party is attempting to impose standard terms
Regularity and consistency
