Unit 3: Contents of a Contract Flashcards
Enzo bought a new computer from Nixons Ltd for his personal use at home. Two weeks later the computer broke down due to a manufacturing fault.
Which ONE of the following is CORRECT?
A) Nixons Ltd will not be in breach of the term implied by s9 of the Consumer Rights Act 2015 if it could not reasonably have known of the defect.
B) Nixons Ltd is in breach of the terms implied by ss 9 and 10 Consumer Rights Act.
C) Enzo will not be able to exercise the short term right to reject the computer as he will be deemed to have accepted it.
D). Enzo may be entitled to reject the computer and get a refund; but he cannot require Nixons Ltd to repair or replace it free of charge.
CORRECT ANSWER B
As Enzo bought the computer for his personal use the Consumer Rights Act will apply.
A is not correct as s9 Consumer Rights Act imposes strict liability.
B is correct. Section 9 is the implied term regarding satisfactory quality and s10 is fitness for purpose.
C is not correct as the short term right to reject lasts for 30 days. Acceptance is a bar to rejecting goods under the Sale of Goods Act.
D is not correct because the remedies of repair and replacement are available under the Consumer Rights Act.
Tom, a builder, built three new greenhouses for Talbots Garden Centre. He did not do the job with reasonable care and skill with the result that the roof of one of the greenhouses collapsed, causing damage to Talbots’ plants. The contract contains an exemption clause.
Is the following statement TRUE or FALSE?:
Tom is in breach of s13 of the Supply of Goods and Services Act 1982 but can rely on the exemption clause provided the clause is incorporated into the contract, covers the breach or damage that has occurred and satisfies the reasonableness test.
TRUE
Section 2(2) of the Unfair Contract Terms Act 1977 provides that the exemption clause is valid if reasonable.
Which one of the following cases decided that if the exemption clause is unusual or unduly onerous then the party relying on the clause must take greater steps to draw it to the attention of the other party?
A) Chapleton v Barry Urban District Council
B) Curtis v Chemical Cleaning & Dyeing Co
C) Parker v S.E. Railway
D) Thornton v Shoe Lane Parking
CORRECT ANSWER D
In that case Denning referred to a statement he had made earlier to the effect that some clauses he had seen would need to be printed in red ink with a red hand pointing to them or something equally startling in order to be incorporated.
Paul ordered new machinery from Buildco Ltd for use in his business and to be delivered on 14 December. Buildco were three months late delivering the machinery. The signed contract contains a clause stating that Buildco will not be liable for late delivery of the machinery.
Which ONE of the following is WRONG?
A) Buildco has broken an express term of the contract. Section 3 of the Unfair Contract Terms Act 1977 will apply to the exemption clause if Paul is dealing on Buildco’s written standard terms of business.
B) If s3 of the Unfair Contract Terms Act 1977 applies the exemption clause will be void.
C) If s3 of the Unfair Contract Terms Act 1977 applies the exemption clause will be valid if reasonable.
D) If s3 of the Unfair Contract Terms Act 1977 does not apply, the exemption clause will be valid.
CORRECT ANSWER B - only statement that is not correct since s3 makes the clause subject to the requirement of reasonableness.
Is the following statement TRUE or FALSE?
Under the Consumer Rights Act 2015 a trader cannot exclude liability for failure to carry out work with reasonable care and skill but may limit liability if it is reasonable to do so.
FALSE
Under the Consumer Rights Act (s57) a term of a contract to supply services is not binding on the consumer if it would exclude or otherwise limit the trader’s liability arising under the implied term that the service would be performed with reasonable care and skill (s49 Consumer Rights Act).
Nixons Ltd sold Deirdre a laptop for use at home. The laptop was faulty due to a manufacturing defect. There is a clause incorporated into the contract stating that Nixons will not be liable for any fault, howsoever caused.
Which ONE of the following statements is WRONG ?
A) Nixons will be in breach of ss 9 and 10 Consumer Rights Act.
B) Liability for breach of ss9 and 10 Consumer Rights Act cannot be excluded, but may be limited if it is reasonable to do so.
C) Liability for breach of the terms implied by ss9 and 10 Consumer Rights Act cannot be excluded or restricted.
D) Goods to be of satisfactory quality and to be reasonably fit for purpose are non-excludable ‘rights’ under the Consumer Rights Act.
CORRECT ANSWER B
Gillberts Ltd contracted to install a new central heating system for ACJ Ltd at its offices. Gillberts’ employee, John, did the work. Because of John’s negligence the system overheated and one of the pipes cracked. This caused damage to some floor covering and furniture at the offices .
Which ONE of the following is WRONG ?
A) ACJ Ltd could sue Gillberts Ltd for breach of s13 of the Supply of Goods and Services Act 1982.
B) ACJ Ltd could sue John for breach of s13 of the Supply of Goods and Services Act 1982.
C) ACJ Ltd could sue Gillberts Ltd in the tort of negligence.
D) ACJ Ltd could sue John in the tort of negligence.
CORRECT ANSWER B
A, C and D are correct. B is not correct, as John is not a party to the contract so could not be sued for breach of s13 SGSA 1982.
Is the following statement TRUE or FALSE?
In a business-to-consumer services contract, if the service is not carried out with reasonable care and skill the consumer may require repeat performance or a price reduction.
TRUE
ss54- 56 Consumer Rights Act 2015.
Gillberts Ltd contracted to install a new central heating system at the offices of ACJ Ltd. Gillberts’ employee, John, did the work. Because of John’s negligence the system overheated and one of the pipes cracked. This caused damage to some floor covering and office furniture. A clause in the contract stated: “Gillberts Ltd will not be liable for any damage howsoever caused unless reported to Gillberts within one week”.
Which ONE of the following is WRONG ?
A) Gillberts could rely on the exemption clause if it is incorporated into the contract, covers the breach and damage that has occurred and is found to be reasonable.
B) By virtue of the Contracts (Rights of Third Parties) Act 1999 John could rely on the exemption clause if it is incorporated into the contract, covers the breach and damage that has occurred and is found to be reasonable
C) John could not rely on the exemption clause.
D) John will not be liable for breach of s13 Supply of Goods and Services Act even though he was negligent.
CORRECT ANSWER B
John could not rely on the clause, as he is not a party to the contract. The Contracts (Rights of Third Parties) Act 1999 does not help him, as the conditions stated in s1 are not satisfied.
TRUE or FALSE?
Section 1 of the Contracts (Rights of Third Parties) Act 1999 allows a third party to rely on an exemption clause in a contract provided the contract expressly provides that he may or the clause purports to confer a benefit on him and provided he is named in the clause.
FALSE - The third party does not have to be named provided he is identified by class or description e.g. employee.
A client bought a new computer from a commercial retailer for his personal use at home. Three weeks later the computer broke down due to an inherent manufacturing fault. When the client reported the problem the retailer denied liability on the basis it had effectively excluded liability: there was a clear notice at the payment point which said ‘The Seller accepts no liability for defective goods unless the defect is reported within 7 days of purchase’.
Which ONE of the following statements best describes the client’s potential legal position in relation to the retailer?
A) The retailer will not be in breach of the statutory implied term of satisfactory quality as it could not reasonably have known of the defect.
B) The retailer would be liable for breach of the terms of quality and fitness implied by statute.
C) The client will not be able to exercise the short term right to reject the computer as the client will be deemed to have accepted it.
D) The client may be entitled to reject the computer and get a refund; but he cannot require the retailer to repair or replace it free of charge.
E) The retailer will not be liable for breach of any statutory implied terms as the fault was not reported with seven days of purchase.
CORRECT ANSWER B
As the client bought the computer for his personal use from a trader the Consumer Rights Act will apply. Section 9 is the implied term regarding satisfactory quality and s10 is fitness for purpose. Both terms will have been breached due to the inherent defect and liability cannot be excluded or restricted.
A is wrong as s9 Consumer Rights Act imposes strict liability.
C is wrong as the short term right to reject lasts for 30 days. Acceptance is a bar to rejecting goods under the Sale of Goods Act.
D is wrong because the remedies of repair and replacement are available under the Consumer Rights Act (CRA).
E is wrong because the terms implied by ss9 and 10 CRA are non-excludable (s31 CRA) and so the retailer will be liable.
Your client, a sole trader, employed a large national construction company (the Company) to build a small extension to his business premises. The work was carried out negligently by one of the Company’s employees and this resulted in damage to the premises and loss of profit. The Company admits liability for breach of contract but is seeking to rely on the following exemption clause which was included in the small print on the order form signed by your client:
‘Neither the Company nor its employees shall be liable for any damage to property or injury to the person howsoever caused.’
Which ONE of the following statements best explains the client’s legal position in relation to the Company and/or the employee who was negligent?
A) The Company and the employee will be entitled to rely on the exemption clause to exclude liability for damage to the premises but not for the loss of profit.
B) The employee was not a party to the construction contract and so only the Company will be entitled to take the benefit of the exemption clause if it is valid at common law and under statute.
C) Neither the Company nor the employee will be entitled to rely on the exemption clause: as a matter of construction it is not purporting to exclude negligence liability.
D) The exemption clause was incorporated in the contract but probably would be ineffective as it is purporting to exclude liability for personal injury caused by negligence.
E) The Company and the employee are jointly and severally liable for breach of contract and the client would be awarded damages for both the property damage and loss of profit.
CORRECT ANSWER D
The clause was incorporated by signature. Under the Unfair Contract Terms Act negligence liability for personal injury cannot be excluded. It is possible to exclude liability for damage caused by negligence as long as it is reasonable to do so. When considering reasonableness the clause has to be judged as a whole and it is significant that the parties were not businesses of equal bargaining power. This also explains why Statement A is wrong: the clause would not satisfy the reasonableness test.
Statement B is wrong: third parties may take the benefit of exemption clauses if named or otherwise identified as a member of a group in the clause but only to the same extent as the contracting party seeking to rely on the clause- Contracts (Rights of Third Parties) Act.
Statement C- whilst clear wording is needed to exclude negligence liability (contra proferentem rule) arguably ‘howsoever caused’ is extends to negligence as the words suggest liability may arise other than just under the contract.
Statement E is wrong as the employee is not a party to the contract and so could not be liable for breach.
A client advertised his second-hand car for sale in a local shop. The stated price was £8,000 and the car was described as being in good working order. A neighbour went to inspect the car and bought it for the advertised price without first taking it for a test drive. The next day the car broke down. The neighbour has been reliably informed that there is a serious problem with the camshaft and wants to reject the car, get a refund and claim damages.
Which one of the following statements best describes the client’s legal position?
A)
The client will not be in breach of any statutory implied terms as to the quality or reasonable fitness for purpose of the car.
B)
The general rule is ‘buyer beware’ and so the client will not be in breach of contract.
C)
The client is in breach of contract but the neighbour cannot reject the car: the only remedy will be damages.
D)
The client is not liable for breach as it would be irrebuttably presumed there was no intention to create legal relations.
E)
The client will be not liable for breach of contract as the car was second-hand and satisfactory quality as implied by statute is a relative standard.
CORRECT ANSWER A
It was a consumer to consumer sale of goods so the Consumer Rights Act does not apply. Satisfactory quality and fitness for purpose is only implied into contracts for the sale of goods under the Sale of Goods Act where goods are sold in the course of a business. This also explains why Statement E is wrong.
Statement B- the general rule is ‘buyer beware’ but the client misdescribed the car and so will be in breach of the term implied by the Sale of Goods Act into all sales by description that the goods will correspond with their description.
The implied term as to description is a condition and so the neighbour may potentially reject the car. This explains why Statement C is wrong.
Statement D- it is not irrebuttably presumed that there is no intention to create legal relations in social circumstances. In any event the normal presumption would no doubt be rebutted on the facts.
A client company (the Client) entered into a written contract with another company (the Company) which was drafted by a director of the Company. One particular term of the contract was specifically defined as a ‘condition’. The term provided that over a long period, one of two named representatives of the Client would visit the Company every week. There was no provision to substitute other representatives and no provision for the Company to say a visit was inconvenient. One week the Company did not receive a visit as agreed and sought to terminate the contract.
Which ONE of the following statements best describes the legal position?
A) The term breached was defined as a condition and so the Company was entitled to terminate for any breach (however small).
B) The parties could not have intended the particular term to be a ‘condition’ in the legal sense and so damages would be the only remedy for breach.
C) Commercial contracts cannot be terminated for breach of a condition if the breach is so slight it would be unreasonable to terminate.
D) As the contract was between two companies and had been reduced into writing and signed the definition of the term as a ‘condition’ would be conclusive.
E) Terms in contracts drafted by non-lawyers are neither conditions nor warranties: the remedy for breach will always depend on the seriousness of the breach.
CORRECT ANSWER B
On the face of it the contract had not been drafted by a lawyer and the parties must have known the term would be breached at some time or another. Consequently, they could not have intended one breach to justify terminating the contract- Schuler v Wickman.
The fact the term had been defined as a condition would not be conclusive in the circumstances; hence statements A and D are wrong.
Statement C- a very slight breach of a condition is only a bar to rejecting goods in a commercial contract for the sale of goods (s15A Sale of Goods Act).
Statement E is wrong. As a matter of construction particular terms may have been intended to be warranties or conditions in the strict legal sense.
A client took his heavy goods vehicle (HGV) into the garage for a service. New brakes were fitted but as the client drove the HGV back to the depot the brakes failed. As a result the HGV was damaged and the client was injured. As yet the cause of the brake failure is unknown.
The contract with the garage does not contain any express terms about the quality of the new brakes or the level of service in fitting them but purports to exempt the garage from liability ‘for any loss or damage caused by defective parts or workmanship howsoever caused’.
Which of the following statements best describes the client’s potential legal position in relation to the garage and/or the employee who fitted the brakes?
A) If the brakes were inherently defective the garage will not be in breach of contract because there are no express terms promising that the brakes would be of a certain quality.
B) If the brakes were not fitted properly the client can sue either the garage or employee for breach of the statutory implied term to carry out work with reasonable care and skill.
C) If the client sues the garage for breach of contract, the garage will be liable for the personal injury but will not be liable for damage to the HGV if the exemption clause is reasonable.
D) If the client sues the garage for breach of the implied term to exercise reasonable care and skill the garage will be liable for damage to the HGV and the personal injury as the exemption clause does not specifically refer to negligence.
E) If the brakes were inherently defective and the garage is sued for breach of the implied terms as to quality and fitness the garage will be liable for the damage to the HGV and the personal injury caused.
CORRECT ANSWER C
Whatever the breach (s4 or 13 SGSA) the exemption clause will be subject to the reasonableness test (s7 UCTA or s2(2) UCTA). The clause is not purporting to exclude liability for personal injury. A is wrong. Notwithstanding that there were no express terms regarding the quality of the brakes fitted, terms as to quality and fitness fall to be implied under statute. The relevant statute would be the Supply of Goods and Services Act. The contract was one for work and materials.
B is wrong as the client does not have a contract with the employee. D is wrong. Although very clear words are needed to exclude liability for negligence ‘workmanship howsoever caused’ is likely to cover it. The garage will be liable for the personal injury in any event as the clause is not purporting to exclude liability for it. E is wrong. The garage will be liable for the personal injury because, as a point of construction, the clause does not exclude liability for personal injury (contra proferentem rule). The garage will only be liable for the damage to the HGV if the clause does not pass the reasonableness test.
