Week 5 and 4 : Exemption Clauses and Statutory implied terms - Lecture slides and relevant cases Flashcards
What do the terms of a contract outline?
They outline the specific legal duties and obligations of each party. This forms the foundation of a contractual relationship.
What are the two main types of contractual terms?
Express terms and implied terms.
What are express terms?
Terms explicitly agreed upon by both parties, this can be done orally or in writing. These terms outline the essential elements of the contract.
What are implied terms?
Terms that are not explicitly stated but are still applied by courts and statues to ensure contract functionality and fairness
what is a pre contractual statement
a statement made during negotiations that may or may not become a binding term
what is a ‘term of the contract’
a binding statement within the contract that if proven untrue entitles the misled party to remedies to breach
what is the business efficacy test
a principle where courts imply terms necessary for the contracts practical purpose
what is an exemption clause?
a clause in a contract that seeks to exclude a parties liability in contract breach situations
what is the difference between exclusion clauses and limitation clauses?
exclusion clauses remove all liability whereas limitation clauses’ cap liability to a certain amount
What are the 3 main legal requirements that validate exemption clauses
it must be incorporated as a term
it must cover the loss
it must not violate the unfair contract terms act 1977 or the consumer rights act 2015
what are the 3 main methods of incorporating an exemption clause into a contract
signature
notice
consistent and frequent dealing
How is an exemption clause incorporated by signature
If a party signs a contract they are generally bound by all its terms, even if they did not read it
What are the 2 cases related to incorporation of terms by signature?
L’Estrange v. Graucob 1934 - vending machine - point of law: if a contract is signed they are generally bound by its terms even if they were not read
Curtis v. Chemical cleaning & dyeing co 1951 - dress - point of law: If an exemption clause is misrepresented then it cannot be relied upon as it is relying on the description given
How is an exemption clause incorporated by notice
terms are valid if the non-drafting party receives reasonable notice of the term prior to contract formation
What is the red hand rule - cite related case
Lord denning -the more unreasonable a clause is the greater degree of notice must be given
Spurling vs Bradshaw 1956 - incorporation by frequent and consistent dealings.
- point of law: if you would have been aware of a term from previous contracts it can form part of new
- red hand rule
(case also applies to frequent and consistent dealings)
What are the cases relevant to incorporation by notice/ degree of.
Thompson v. LMS Railway (1930) - platform slip - point of law: only reasonable notice needs to be given not actual
Chapleton v. Barry UDC (1940) - deckchair - point of law: any terms must be on a contractual document and notice must be given before contract formation
How are exemption clauses incorporated by previous dealings
frequent and consistent past dealings between parties can imply the inclusion of certain terms in the contract
What cases are related to incorporation by notice - timing
Olley v. Marlborough (1949) - stolen coat - point of law: for notice to effectively implement an exemption clause it must be given prior to contract formation
Chapleton v. Barry UDC (1940) - deckchair - point of law: Notice of an exemption clause must occur prior to contract formation or it will be rendered un-enforceable + exemption claues must be on a contractual document
How may an adequately noticed individual avoid being bound to the exemption clause considering time
If the individual was notified after the contract was formed then the exemption clause is invalid
what does it mean if the judge ‘calls an obiter’
it is something said in passing that is non-essential to case resolution
this is the other side of an case e.g if he had done this then he would have a case for this
What is the case related to frequent and consistent dealings to incorporate terms into a contract
Hollier v. Rambler Motors (1972) - garage fire - point of law: there must be frequent and consistent dealings prior to contract formation to allow an exemption clause to be implied
What are the main controls protecting consumers from overuse of exemption clauses?
Judicial control e.g the contra proferentem rule
Statutory control e.g UTCA 1977 CRA 2015
What does the contra proferentem rule do?
It interprets any ambiguous terms against the party that drafted the contract.
What is a key case example for the contra proferentem
Andrews v. singer 1934 - new car actually used car
point of law: Any ambiguity or misrepresentation will be interpreted/ construed against the person who attempted to include the term
How do courts generally view limitation clauses in comparison to exclusion clauses
Courts are more lenient with limitation clauses since they cap liability as oppose to holistic removal of it
What is a key case example for limitation clauses
Ailsa Craig Fishing Co v. Malvern Fishing Co 1983
- Boat damaged but limitation clause
point of law: Courts are less hostile to limitation clauses as opposed to exemption clauses
Are clear and unambiguous exemption clauses enforceable in serious breaches
Yes, clear exclusion clauses are generally upheld even in serious breach cases
What is the purpose of UCTA 1977
UCTA 1977 ensures fairness in B2B contracts by setting limits on exemption clauses, especially where bargaining power is unequal
What does section 2 of UCTA state : list the rules it underlies
1977 UTCA section states that clauses that exclude liability for death or personal injury are void
It also underlines rules for determining reasonableness
: bargaining strengths and alternate supply
: inducement
: whether the clause only applies when buyer fails to meet a condition
: whether the buyer knew or should’ve known about the term
Does the UTCA apply to all individuals? - if an individual has a high value item who does the insurance responsibility fall on?
No, only to businesses dealing with business. Consider what classifies a business
The insurance falls on the individual, it does not make practical sense for a business to have to insure the potentially high and variable costs of their every one of their consumers personal belongings (context specific)
What is the reasonableness test under UTCA
1977
A test that assesses if a clause is fair based on factors like bargaining power and risk positioning ability (insurance)
What is the key case example for the reasonable test
Woodman v. Photo Trade processing LTD (wedding photos) 1983
The case was ruled in the claimants favour, the point of law is The question of who is in the best position to insure against the risk of loss created by the breach.
What is the focus of the consumer rights act
2015
The CRA mandates fair, clear and transparent terms for consumers in B2C contracts
What is the main difference between the CRA and SOGA
CRA 2015
SOGA 1979
CRA applies exclusively to B2C contracts whereas the SOGA act applies to B2B
What factors are considered in UTCA’s reasonableness test
bargaining strengths, inducements, prior knowledge and whether the goods were custom made
What case demonstrates the assessment of reasonableness in exemption clauses
Woodman v. Photo trade processing LTD 1981 - wedding photos
point of law: The bargaining strengths of the parties and whether the buyer could have used an alternative supply.
Define what statutory implied terms are
they are provisions automatically included by the law to protect purchasers by ensuring minimum standards for quality, safety and functionality
What is the purpose of the 1979 SOGA
The SOGA (1979) governs B2B sales of goods. it defines key rights and obligations for buyers and sellers
What transaction does the CRA 2015 apply to
B2C - business to consumer transactions.
List the 4 key provisions of the SOGA 1979
S.2 - specifies the sale of a godd involves the transfer or agreement to transfer the goods in exchange for consideration (price)
S.12 - implies the seller has the right to sell the goods
S.13 - States the goods must correspond to their description
S.14 - implies that the goods must be of satisfactory quality and fit for purpose
What remedies are available for breaches of which sections of the SOGA
The available remedies include:
Price reduction
Repair
Replacement
Refund/Reject
These are available for breaches of S.13 and S.14
Which case is relevant to S.13 - satisfactory quality and seen goods
Grant v. Australian Knitting Mills 1936 - wooly underwear
Point of law: even if goods have been seen they must still be of satisfactory quality
Which case is relevant to S.13 Experts
Harlingdon & Leinster v. Christopher Hull fine art 1990
German painting
Point of law: there can’t be a sale by description if the buy hadn’t relied on description
What is the case related to S.13 - description matching the good
Moore v. Landauer 1921
peach tins
point of law: goods must exactly match their description
What is required for goods to be considered of satisfactory quality under S.14 SOGA
goods must match any applied description
defects (examination)
Price
defects (minor)
defects (hidden)
durability
What is the fitness for purpose requirement under S.14(3) SOGA (buyer)
If the buyer informs the seller of a specific purpose for the goods, the goods must be fit for that purpose
What is the case relevant to satisfactory quality and fit for purpose under S.14 - packaging
Geddling v. Marsh 1920 - water bottles
point of law: all goods sold under the contract are covered by law, including packaging
Name the case relevant to S.14 fitness for purpose and regarding contaminated goods
Wilson v. Rickett Cockerill 1954
Coalite
Point of law: goods contaminated with another substance are unsatisfactory
Name the case relevant to instructions on packaging concerning S.14
Wormell v. RHM agriculture 1986/7
dead crops
Point of Law: unclear instructions can consider a product unsatisfactory. Instructions are considered part of the packaging
Explain how price may affect the expectation of Satisfactory quality. (relevant case?)
Higher priced goods create a reasonable expectation of quality
Rogers v. Parish (Scarborough) LTD (1987) Range rover case
point of law: the more you pay the better quality you can expect
Typhoid in Milk
what part of the soga does this case concern
Frost v. Aylesbury Dairy Co. LTD 1905
point of law: suppliers have strict liability and cannot say reasonable care has been exercised
Under S.14 goods must be of quality and fit for purpose
List the two cases related to S.14 Satisfactory quality - defects
Bartlett v. Sydney marcus LTD 1965
serious clutch issue
Point of law: if defects have been brought to the buyer’s attention a buyer is deemed to have accepted accordingly
Wren v. Holt 1903 - beer
A buyer takes goods subject to patent defects which should have been discovered during examination
Can minor defects affect satisfactory quality. cite a case also
Minor defects can render goods unsatisfactory if they impact the items use or value
Jackson v. Rotax Motor & cycle co LTD 1910
point of law: would the defects prevent the goods from being reasonably sold on
What is the case relevant to S.14 SOGA Hidden defects
Godley v. Perry 1960
Catapult
Point of law - hidden defects that cause safety issues are not minor defects
what is the standard for durability under s.14 soga 1979. link a relevant case
Mash & Murrell v. Emmanuel 1961
Potatoes
goods should be durable and last for a reasonable amount of time
What does s.14(3) Soga 1979 imply if a buyer makes a specific purpose known for the good. - link the relevant case
If a buyer specifies a purpose the goods must be fit for that purpose.
Manchester Liners v. Rea 1922.
Point of law: if the buyer makes the purpose for buying the good known then the seller must sell it accordingly
Link the case relevant to using goods for their normal purpose.
Priest v. Last 1903
Hot water bottle
Point of law: where goods are to be used for normal purposes the buyer does not need to make the use known to the seller
what case demonstrates this point of law: when the buyer indicates a specific purpose or purposes for good use the seller must meet the expectations
M/S Aswan Engineering Establishment v. Lupdine LTD 1987
What case is linked to the point of law: The buyer must reasonably rely on the skill and judgement of the seller.
Slater & Slater v. Finning 1996
Camshaft
What is the Officious bystander and the business efficacy test - link a related case
Officious bystander - is used to determine if a non expressly stated term is so obvious that it should be a part of the contract
Business efficacy - is used to introduce terms (non expressly stated) which are deemed important to make a contract meaningful
The moorcock - 1889
Point of law - if a contract makes business sense without a term the courts will not imply a term
