Topic 5: Contract terms

Question 1

Define ‘express terms’

Answer 1

Terms that are written into the contract by the parties themselves

Question 2

Define ‘implied terms’

Answer 2

Terms that the law recognises as part of the contract but the parties did not write them

Question 3

When might a term of a contract be implied?

Answer 3

If it is necessary to give effect to the business intentions of the contract

As a matter of policy, the law might imply a term into certain classes of contract

Question 4

What is the case giving precedent for an implied term being added to the contract if necessary to give effect to the business intentions of the contract?

Answer 4

The Moorcock (1889)

Question 5

Briefly outline the facts and outcome of The Moorcock (1889)

Answer 5

Owners of a riverside jetty contracted with ship owners to allow them to unload there
To do this, the ship owner needed to land the ship on the river bed
The river bed was unsafe and the owner’s ship was damaged
This made nonsense of the contract because they could only use it for their business purpose if their ship was not damaged
The parties did not think of this in their agreement bu the court implied a term that the owners would take reasonable car to make sure the jetty was safe

Question 6

What term is implied into landlord-tenant contracts? What is the case that establishes this?

Answer 6

An obligation on the part of the landlord to take reasonable care to keep communal parts of the building in reasonable repair

Liverpool City Council v Irwin (1976)

Question 7

What is an exemption clause?

Answer 7

A term of a contract that purports to exclude or limit liability

Question 8

What is an unfair term?

Answer 8

A term that imposes an onerous penalty or burden on the other party for breaching their obligations

Question 9

What case sets the precedent for unfair terms?

Answer 9

Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd (1989)

Question 10

Briefly outline the facts and decision in Interfoto v Stiletto

Answer 10

Stiletto were putting on a presentation and contacted Interfoto for some transparencies of 1950s photographs to use in the presentation
Interfoto sent 47 to choose from
The delivery note contained nine conditions at the bottom, one of which said that there will be a £5+VAT fee for every day the transparencies were retained beyond 14 days
Stiletto forgot about the transparencies and were sent a bill of almost £4,000

Held: this was an unfair term and required more notice than was given

Question 11

What three requirements must an exemption clause or potentially unfair term meet in order to be enforceable?

Answer 11

(a) Properly incorporated into the contract
(b) Interpreted as covering the loss claimed
(c) Not rendered unenforceable by UCTA 1977 or CRA 2015

Question 12

What are the three methods by which a term can be incorporated into a contract?

Answer 12

(a) Signature
(b) Notice
(c) Course of dealing/trade custom

Question 13

What was established in L’Estrange v Graucob (1934)?

Answer 13

If the claimant has signed the contract, it will be taken objectively that they intended to be bound by all the terms in the contract

Question 14

What was established in Curtis v Chemical Cleaning Co (1951)?

Answer 14

An exemption clause is only enforceable up to the extent that it is misrepresented to the customer

Question 15

What is the leading case on incorporation by notice?

Answer 15

Parker v South East Railway Co (1877)

Question 16

What is the general rule for incorporation by notice?

Answer 16

A party will be bound by a term if the person or company relying on the exemption clause has taken reasonable steps to bring the term to the claimant’s attention, regardless of whether the claimant is actually aware of the term

Question 17

Briefly outline the facts and decision in Parker v South East Railway Co (1877)

Answer 17

Parker had paid for a ticket to leave his bag at the railway cloakroom
On the back of the ticket were printed terms, one of which read that the company excluded liability over £10 for loss of packages
Parker suffered loss over £10 and claimed not to have read the terms on the back of the ticket

Held: it was not necessary for Parker to have read the terms, as the company had taken reasonable steps so that the term had been incorporated into the contract

Question 18

When must notice of a term be given? Give precedent

Answer 18

Before the contract is entered into

Olley v Marlborough Court Ltd (1949)

Question 19

Briefly outline the facts and decisions of Olley v Marlborough Court Ltd (1949)

Answer 19

An exemption clause was contained in a notice on the bedroom wall of a hotel
The guest formed the contract at the reception desk prior to going to his bedroom

Held: term not incorporated because the guest was notified too late

Question 20

What was established in Thompson v London, Midland and Scottish Railway Co (1930)?

Answer 20

A term can be incorporated into a contract as long as the other party has notice of the existence of the terms

Question 21

Briefly outline the facts and decision of Thompson v London, Midland and Scottish Railway Co (1930)

Answer 21

Passenger purchased a ticket for rail travel from the company
Passenger was issued with a ticket, which stated that the conditions could be found in the full timetable (which cost a fifth of the price of the ticket)
Passenger was injured and the company refused to pay damages, saying that there was a clause exempting liability for personal injury caused by negligence and that this formed part of the contract with the passenger

Held: the term had been incorporated into the contract between the company and the passenger. It was enough that the passenger had notice of the existence of the terms

Question 22

How are onerous/unusual terms dealt with with regard to incorporation by notice? Give precedent

Answer 22

A greater degree of notice is required in order for the term to be incorporated into the contract

J Spurling Ltd v Bradshaw (1956)

Question 23

What is the case giving precedent for incorporation by course of dealing/trade custom?

Answer 23

Hardwicke Game Farm v Suffolk AA (1969)

Question 24

What is incorporation by course of dealing/trade custom?

Answer 24

If a term has not been incorporated by signature or notice, it might be incorporated by course of dealing because it is reasonable to assume that the contract operates on the same terms as the previous ones

Question 25

How do the courts decide how a term should be interpreted?

Answer 25

The objective test, i.e. how the reasonable person would understand the document as a whole, given the knowledge available to the parties at the time of contracting

Question 26

In which case was the objective test for interpretation of terms established?

Answer 26

Investors Compensation Scheme Ltd v West Bromwich Building Society (1998)

Question 27

What is the contra proferentem rule? In which case was it established?

Answer 27

Any benefit of any ambiguity should be given to the party who did not draft the clause

Canada Steamships Lines v The King (1952)

Question 28

What are the two statutes that regulate terms of a contract?

Answer 28

Unfair Contract Terms Act 1977

Consumer Rights Act 2015

Question 29

In which type of scenario does each statute apply (UCTA and CRA)?

Answer 29

UCTA: business-to-business contracts
CRA: business-to-consumer contracts

Question 30

Which section of UCTA do the following clauses fall under:

(a) Negligence
(b) Breach of contract
(c) Implied terms?

Answer 30

(a) s 2
(b) s 3
(c) s 6

Question 31

What is the reasonableness test in UCTA?

Answer 31

The party seeking to rely on the clause must prove that the term was a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made (s 11)

Question 32

What are the Schedule 2 guidelines of UCTA designed to do?

Answer 32

Give factors to be considered when determining reasonableness

Question 33

Briefly outline the facts and decision in Goodlife Foods Ltd v Hall Fire Protection Ltd (2018)

Answer 33

D provided a fire detection and suppression system for a fire in C’s frozen food factory

Repair costs were covered by a warranty

D was not required to maintain the system, and had no further contact with C’s premises after installation

There was a very wide exclusion of liability, excluding “all liability for loss or damage arising to property or goods directly or indirectly resulting from negligence or malfunction of the systems or components”

D offered to provide insurance against those risks if C paid more, which C refused to do

On D’s quotation for the system were their standard terms and conditions and both businesses were of equal bargaining strengths

Held: the term was reasonable under UCTA s 2(2) and s 11 reasonable test

Question 34

Define ‘trader’

Answer 34

A person or company acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf

Question 35

Define ‘consumer’

Answer 35

An individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession

Question 36

What does Part 1 of CRA 2015 govern?

Answer 36

Attempts to exclude or restrict liability under one of the terms implied into the sale of goods/supply of services contract by the Act

Question 37

What does Part 2 of CRA 2015 govern?

Answer 37

Any term that excludes liability for death or personal injury resulting from negligence (void)
Any term that is assessed as unfair (void)

Question 38

What is the legal consequence for any term purporting to exclude liability for death or personal injury resulting from negligence?

Answer 38

It is void

Question 39

How do the courts assess the unfairness of a term?

Answer 39

If it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer

Question 40

Briefly outline the facts and decision in ParkingEye v Beavis (2015)

Answer 40

C overstayed in a retail car park where there was free parking for two hours
Notices imposed an £85 charge for overstaying

Held: although there was some imbalance in rights, the consumer was notified of the charged and agreed freely to it by leaving their car there

Question 41

When can a term not be assessed for unfairness under CRA?

Answer 41

If it identifies the main subject matter of the contract or the assessment is in relation to the appropriateness of the price payable under the contract for the goods or services supplied