Unit 2- Contents of a Contract

Question 1

Distinguish between express/ implied term

Answer 1

Express- declared (orally or in writing)

Implied- through courts or statutory interpretation

Question 2

How do the courts imply terms into a contract?

Answer 2

Local customs (Hutton v Warren)

Past dealings between the parties (Spurling v Bradshaw)

Type of contract (LCC v Irwin and Another)

Presumed intentions of the parties. Use two tests

• Business Efficacy (The Moorcock)
• Officious bystander (Shirlaw v Southern Foundries Ltd)

Question 3

How is statute used to imply terms into a contract?

Answer 3

SGA- ss3, 13, 14

SGSA- 3, 4, 13, 14, 15

Question 4

Three ways an exemption clause can be incorporated into a contract?

Answer 4

Signature

Notice

Course of dealings

Question 5

Nuances of incorporating an EC into a contract by signature?

Answer 5

Must be a contractual document

Must be legible (L’Estrange- ‘regrettably small print’ was still legible’

Must not be misrepresented (Curtis v Chemical Cleaning Co)

Question 6

Nuances of incorporating an EC into a contract by notice?

Answer 6

Document and clause be a contractual in nature (Chapleton v Barry Urban District Council)

Claimant must have had actual or constructive notice (Parker v South Eastern Railway). Factors to consider when deciding if reasonable steps taken:

• Prominence
• Position
• Type of clause
• —-Onerous, must be clear- Thompson v Shoe Lane Parking
• —- Onerous clause at bottom of delivery note not enough (Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd)

Question 7

When must reasonable steps to incorporate an onerous clause by notice be taken?

Answer 7

Before the contract is finalised (Olley v Malborough Court Ltd)

Question 8

Case Law re. incorporating an EC into a contract by previous course of dealings?

Answer 8

Three to four times a month for five years sufficient dealings- Kendall case

Three to four times in five years not sufficient- Hollier v Rambler Motors

If previous course of dealings inconsistent then these course of dealings are not sufficient- McCutcheon v MacBrayne)

Question 9

When can course of dealings incorporation provide notice?

Answer 9

After contract has been finalised (Spurling v Bradshaw)

Question 10

Does the clause cover the breach and the damage alleged?

Answer 10

Contra preferendem- ambiguous clause will be interpreted against the party relying on it (Houghton v Trafalgar Insurance- overloaded car)

If excluding for negligence (Canada Steamship Lines)

• Terms must expressly exempt liability OR
• Terms must be wide enough to exclude liability

Very serious breach (Photo Productions Ltd)
- Only covered by clearly worded clauses

Question 11

To what does UCTA 1977 apply? (Statute references)

Answer 11

s2(2)- negligent breach resulting in personal property damage/ loss

s3- breach of express term through actions in the course of business

ss6/7- terms implied by SGA and SGSA

Question 12

To what does UCTA 1977 not apply? (Statute referenceS)

Answer 12

s2(1)- negligent breach resulting in death/ personal injury

Question 13

Where will you find the reasonableness test and guidelines relating to application?

Answer 13

s11 UCTA 1977

s11(4) UCTA 1977

Sch 2 UCTA 1977

Question 14

What is the reasonableness test?

Answer 14

Must have been fair and reasonable to include the exemption clause having regard to circumstances that:

• Were known
• Ought to have been known
• Were with the contemplation of the parties when the contract was made

Question 15

List the cases relating to the reasonableness test from UCTA (8)

Answer 15

Smith v Eric Bush 
St Albans City and District Council v International Computers Ltd
Schenkers Ltd v Overland Shoes Ltd
Stewart Gill Ltd v Horatio Myer & Co Ltd 
Watford Electronics v Sanderson CFL Ltd
Thomas Witter v TBP Industries 
Phillips v Hyland 
Emperor Navigation

Question 16

What factors should be considered according to Smith v Eric Bush when deciding whether a clause is reasonable?

Answer 16

• Were the parties of equal bargaining power?
• Would it be reasonably practicable to obtain the advice from an alternative source?
• How difficult was the task?
• What are the practical consequences?

Question 17

What factors should be considered according to St Albans City and District Council when deciding whether a clause is reasonable?

Answer 17

• Experienced commercial bodies free to make their own bargain?
• Was there an awareness of a limitation clause existing at the time the contract was made?
• Is the type of clause comma for the industry in question?
• Does the defendant have amply resources to the liability?

Question 18

Can claims be made against third parties?

Answer 18

Generally no due to privity of contract (Alder v Dickson) but there are two exceptions

1. Contracts (Rights of Third Parties) Act 1999
   - s1(1)(a): if contract expressly provides that he may acquire a benefit
   - s1(1)(b): the term purports to confer a benefit on him (doesn’t have to be specifically named)
2. Claim in the tort of negligence

Question 19

Should the whole exclusion clause be considered when deciding whether it is reasonable?

Answer 19

Yes- Stewart Gill Ltd v Overland Shoes Ltd

If it is in two parts, consider these separately (Watford Electronics v Sanderson)

Question 20

What does Thomas Witter v TBP Industries say?

Answer 20

A clause that excludes liability for misrepresentation could be read to include exclusion for fraudulent misrepresentation

Question 21

What happened in Phillips v Hyland?

Answer 21

Clause that was so wide it could potentially exclude liability for death/ injury (prohibited by UCTA) was void even though the actual possibility of death/ injury was very small

Question 22

What case gives a caveat to the ruling in Phillips v Hyland?

Answer 22

Emperor Navigation- the courts should not be too ready to focus on remote possibilities when deciding whether a clause fails