Week 5- Contract terms and legislative control of unfair terms Flashcards
Facts and significance of L’estrange v Gracob 1934?
Facts- the plaintiff had purchased a slot machine (cigarettes) for her café, for which the vendor had contractually excluded ‘Any express or implied, condition, statement of warranty, statutory or otherwise is expressly excluded’. The vending machine did not work, and the claimant sought to reject it under the Sale of Goods Act for not being of merchantable quality. The plaintiff wanted damages for breach of an implied warranty that the machine was fit for the purposes for which it was sold. The exclusionary clause was written in faint small print which prevented the plaintiff from realising it, although there was no evidence of actual misrepresentation by the defendants.
Significance- Had to be contended whether the clause excluding all warranty was part of the contract. The document signed here was headed “sales agreement”, and she could not avoid the application of such a contract just by pleading that she did not read the document properly; it was regrettably small print but nonetheless she had signed it
Scrutton LJ: “In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents.”
- “When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.”
This rule remains good law, although in modern day contexts, it is often done digitally.
What qualifications are added to the signature rule?
Reasonably obvious that it was intended to have contractual implications
Procured under fraud or duress or misrepresentation doesn’t allow defendant to rely on these terms
Facts and significance of Curtis v Chemical cleaning co 1951?
Facts- The plaintiff took her wedding dress to a cleaner’s and was asked to sign a form which she was told excluded liability for damages to beads. However, it actually excluded liability for all damage caused however, and the dress was returned badly stained.
Significance- Whilst in L’Estange the signing of a form which otherwise does not appear to be a contract of sale can be valid, even where the Plaintiff fails to make themselves aware of its contents, misrepresentation as to the contents of the contract by the defendant, or fraud, will void any such contract. The defendant could not rely on this exclusionary clause as it was falsely portrayed to the plaintiff.
- Any behaviour by words or conduct can amount to false representation if it is capable of misleading the existence of extent of misrepresentation; this misrepresentation fell short of fraud but nonetheless it superseded the signature rule.
- Somervell LJ: “What was conveyed to the plaintiff, in my view, was that there were certain risks, in this case beads and sequins, which the defendants were not prepared to accept. She was asked to sign this document and she thought that its purpose was to exempt them from liability for beads and sequins, and that alone. That, I think, plainly is a misrepresentation.”
LJ Denning: “In my opinion any behaviour, by words or conduct, is sufficient to be a misrepresentation if it is such as to mislead the other party about the existence or extent of the exemption. If it conveys a false impression, that is enough. If the false impression is created knowingly, it is a fraudulent misrepresentation; if it is created unwittingly, it is an innocent misrepresentation; but either is sufficient to disentitle the creator of it to the benefit of the exemption.”
The above two cases show that, unless fraud or misrepresentation of a term of contract is made out, a failure to read a term of contract will not negate a signature which otherwise would prove assent to all terms contained within the contract.
What is the reasonable notice rule?
What is required?
Incorporating written terms through notice- Written terms within a contract must 1) be given before or at the time of the contract being concluded 2) be contained within a document intended to have contractual effect 3) reasonable steps must have been taken to advert the contracting parties to the terms- subjective knowledge of the claimant is irrelevant/
Sufficient notice that a reasonable person would have been aware of the notice of the terms
Facts and significance of Olley v Marlborough Court ltd 1949?
Facts- The hotel had failed to incorporate a notice which attempted to exclude liability for lost or stolen property in the hotel, because the contract was made at the front desk, but the notice was provided in the rooms of the hotel. The plaintiff’s furs were stolen, but they weren’t aware of the term until they entered their room and saw the notice.
Significance- representation of a term can’t be made after a contract comes into existence and be enforced as part of the original contract. The disclaimer could not be relied upon by the hotel; the hotel may hope that the plaintiff is bound by the notice retrospectively, but they must further express their agreement to this, which is rare.
“The only other point in the case is whether the hotel company are protected by the notice which they put in the bedrooms, “The proprietors will not hold themselves responsible for articles lost or stolen, unless handed to the manageress for safe custody.” The first question is whether that notice formed part of the contract. Now people who rely on a contract to exempt themselves from their common law liability must prove that contract strictly. Not only must the terms of the contract be clearly proved, but also the intention to create legal relations – the intention to be legally bound – must also be clearly proved. The best way of proving it is by a written document signed by the party to be bound. Another way is by handing him before or at the time of the contract a written notice specifying its terms and making it clear to him that the contract is on those terms. A prominent public notice which is plain for him to see when he makes the contract or an express oral stipulation would, no doubt, have the same effect. But nothing short of one of these three ways will suffice.”
Facts and significance of Thornton v Shoe lane parking 1971 regarding onerous and unusual terms being incorporated?
Facts- the plaintiff drove his car into a new automatic car park which he’d never been to before. A notice gave all the costs of tickets, as well as a notice that cars were “parked at their own risk”; the ticket which the plaintiff was provided said it was “subject to conditions”, which were contained opposite the ticket machine, expressed as 8 long terms in which one said that the garage were not responsible for injury to customers. The plaintiff was involved in an accident in the garage whereby he was injured.
Significance- held on appeal that the garage was liable for the damages because the garage had not done what was reasonable to make customers aware of the terms excluding liability for injury, due to the onerous and unusual term which sought to be relied upon.
Lord Denning: “None of those cases has any application to a ticket which is issued by an automatic machine. The customer pays his money and gets a ticket. He cannot refuse it. He cannot get his money back. He may protest to the machine, even swear at it. But it will remain unmoved. He is committed beyond recall. He was committed at the very moment when he put his money into the machine. The contract was concluded at that time. It can be translated into offer and acceptance in this way: the offer is made when the proprietor of the machine holds it out as being ready to receive the money. The acceptance takes place when the customer puts his money into the slot. The terms of the offer are contained in the notice placed on or near the machine stating what is offered for the money. The customer is bound by those terms as long as they are sufficiently brought to his notice before-hand, but not otherwise. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late.”
“Mr. Machin admitted here that the company did not do what was reasonably sufficient to give Mr. Thornton notice of the exempting condition. That admission was properly made. I do not pause to inquire whether the exempting condition is void for unreasonableness. All I say is that it is so wide and so destructive of rights that the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way.”
In this case, the imposition of special and unusual terms are to be judged in the circumstances as to whether the defendant has reasonable undertaken the job of making the consumer aware of such terms of exclusion.
Facts and significance of Interfoto picture v stiletto visual programme 1988?
Reliance on Lord Denning’s red-hand rule.
Facts- defendants ordered photographic transparencies from the claimants, not having dealt with them before. The claimants duly sent them 47 transparencies, together with a delivery note which contained a number of conditions. Condition 2 stated that a holding fee of £5 per day was payable for every day the transparencies were kept in excess of 14 days. The defendants put the transparencies to one side and forgot about them. They eventually returned them after approximately one month. The claimants then sent the defendants an invoice for £3,783.50, which the defendants refused to pay.
Significance- Dillon LJ held that particularly onerous or unusual terms were not held to have been incorporated into the contract unless it was given special notice/ attention.
Bingham LJ held too that the clause was not valid as well “whether it would in all the circumstances be fair (or reasonable) to hold a party bound by any conditions… of an unusual and stringent nature… The defendants are not to be relieved of that liability because they did not read the condition, although doubtless they did not; but in my judgment they are to be relieved because the plaintiffs did not do what was necessary to draw this unreasonable and extortionate clause fairly to their attention.” Further policy reasons made out by Bingham related to ‘fair dealing and showing up your cards’.
-The defendants were entitled to a £3.50 per week per holding of the transparencies.
It must therefore be proved by the contracting party looking to incorporate such an usual clause has fairly and reasonable brought this to the attention of the other party- disputable because, as a business entity, it may be reasonably expectable that they would advert themselves to all such clauses in the contract of sale.
What is the course of dealing doctrine?
That from previous dealings between companies, you ought reasonably to be aware of the particular terms upon which I deal, even though you have not signed them nor have been given notice of.
Facts and significance of McCutcheon v MacBrayne regarding course of dealings in the absence of notice?
Facts- a ferry belonging to the defendants sank and the claimant’s car was lost. In the resulting action by the claimant, the defendants sought to rely on an exclusion clause contained in a risk note which, contrary to their usual practice, they had not asked the claimant’s brother-in-law (who made the arrangement for the shipping of the claimant’s car) to sign.
Significance- it was held that a failure to ask for a written contract accepting an exclusion of liability was contrary to regular practice; the risk note was not signed, so the defendants could not rely on the exclusion of liability for damage to property.
Lord Reid: “The only other ground on which it would seem possible to import these conditions is that based on a course of dealing. If two parties have made a series of similar contracts each containing certain conditions, and then they make another without expressly referring to those conditions it may be that those conditions ought to be implied. If the officious bystander had asked them whether they had intended to leave out the conditions this time, both must, as honest men, have said “of course not”. But again, the facts here will not support that ground. According to Mr. McSporran, there had been no consistent course of dealing ; sometimes he was asked to sign and sometimes not. And, moreover, he did not know what the conditions were. This time he was offered an oral contract without any reference to conditions, and he accepted the offer in good faith.
Strict approach by Lord Devlin, has been criticised- Lord Devlin imposed a higher test for incorporated terms via course of dealing, requiring that consistent and regular dealings will only assist the defendant where there is actual subjective knowledge of the terms for the plaintiff during all these previous dealings, only then may it be incorporated as part of the contract by course of dealing.
What 4 ways can terms be implied?
1) Statute- can instigate legislation which provides implied terms for contracts, as done in the sale of goods act and CRA 2015. They rest on policy rather than party intention
2) By custom- contracts may incorporate custom in the market, trade or locality of which the contract is relevant to, unless the custom is inconsistent with express terms of the contract.
3) Terms implied by common law: 1) terms implied in fact, which means that the term is being “implied as a matter of fact to give effect to what the court perceives to be the unexpressed intention of the parties.” 2) implied in law- implied into all contracts of a particular type eg contracts of employment or contracts between landlords and tenants.
4) Implied in fact to give effect to the objective intention of the parties.
S12-15 of the Sales of Goods act- what implied terms do each section set out?
It is an implied condition of a contract for the sale of goods that the seller has the right to sell the goods (s 12(1)) and there is an implied warranty that the goods are free from charges or incumbrances in favour of third parties (s 12(2)). There is also an implied condition that goods sold by description shall correspond with the description (s 13(1)) and that goods sold by sample shall correspond with the sample (s 15). In the case of a seller who sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of satisfactory quality (s 14(2)), except in relation to defects drawn to the buyer’s attention before the contract was concluded or, in the case where the buyer examines the goods, as regards defects which that examination ought to reveal (s 14(2C)). Finally, where the seller sells goods in the course of a business and the buyer makes known to the seller any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose (s 14(3)). The function of these implied terms is not to give effect to the intention of the parties but to provide some protection for the expectations of purchasers, particularly, in the case of the Consumer Rights Act 2015, consumer buyers.”
In a non-consumer contract, how does a seller exclude liability for implied terms?
How does this differ to those attempts to exclude liability for implied terms under consumer contracts?
s6(1)(a) of the UCTA 1977 can be invoked to exclude the implied terms arising under the Sale of goods act if the term satisfied a requirement of reasonableness.
Per section 31(1)(a) of the CRA 2015, , a term of contract to supply a good is not binding on a consumer to the extent that it would exclude or restrict a traders liability arising under… s9 (goods to be of satisfactory quality- an implied term under the same act)
Liverpool CC v Irwin 1977 facts and significance regarding implied terms implied by law?
Facts- Three 15-storey tower blocks were built in Everton, Liverpool in 1966. Each had 70 units, a stairwell, two lifts, and a rubbish chute. Mr and Mrs Irwin were tenants from July 1966. The common parts were vandalised, the lifts did not work, the stair lights failed, the chute was blocked, lavatory cisterns blocked and overflowed. The blocks became nicknamed “The Piggeries”. The tenants, conducting a rent strike, refused to pay rent. In an action by the council to eject them, they counterclaimed that the council was in breach of a duty to keep the common parts of the estates in decent repair.
Significance- The court implied a term of expectation to use reasonable care in maintaining the common areas of the property, although this duty was not breached. It was implied as a matter of law due to the relationship between landlord and tenant.
Lord Denning MR-“But it is certainly an implied obligation to use reasonable care. It was distinctly so held by Lush J. in Dunster v Hollis [1918] 2 KB 795 , and his ruling has never been doubted since. It has been accepted by all the textwriters and by the Law Commission [Report on Obligations of Landlords and Tenants (Law Com. No. 67)], paragraph 114 (c). In the latest edition of Woodfall, Landlord and Tenant, 27th ed. (1968), p. 657, it is stated thus:
“Where the lessor retains in his possession and control something ancillary to the premises demised, such as a roof or staircase, the maintenance of which in proper repair is necessary for the protection of the demised premises or the safe enjoyment of them by the tenant, the lessor is under an obligation to take reasonable care that the premises retained in his occupation are not in such a condition as to cause damage to the tenant or to the premises demised.”
That proposition has been accepted for nearly 60 years: and I am surprised to hear it now said that the landlord is under no contractual obligation to the tenant at all. Seeing it so plainly existed before 1957, I do not think that the OLA 1957 (which cleared up the law of tort) took away this contractual obligation. The only question to my mind is the extent of the obligation.”
What this shows is that the test, where a court seeks to imply a term by a matter of LAW, is less stringent and depends on the courts view on the relationship between the parties eg landlord and tenant, and based off of this relationship, WHETHER IT IS REASONABLE TO IMPLY SUCH A TERM IN ALL CONTRACTS OF THIS TYPE (GOVERNING THIS RELATIONSHIP)
What are the requirements for the test for a term implied by fact as Per Lord Simon?
Which two are tests- 2 and 3
1) It must be reasonable and equitable (the term, not the result) 2) It must give business efficacy to the contract 3) it must be so obvious that it ‘goes without saying’ 4) it must be capable of clear expression 5) it must not contradict any express term of the contract
Why must the test be somewhat strict in implying terms as a matter of fact?
It is one thing to construe the words which have been used in the contract in a particular way, but quite another to imply words that a court believes they have accidentally omitted from the contract.
It is tempting to imply terms just because a more advantageous outcome could be achieved.
Facts and significance of The Moorcock 1889 regarding implied terms of fact?
Facts- The ship owners of the Moorcock contracted for a space at the docks to unload their cargo. Their ship was damage when the hull hit a ridge, as a result of the tide going down. It was contended whether there was an implied term of warranty for damage to the ship by the harbour operators.
Significance- It was found in favour of the ship owner that the defendants should have taken reasonable steps to ascertain the condition of the riverbed by the jetty; had they done so, they would have realised the very hard ridge which damages the vessel. and could have warned the plaintiffs. The claimant claimed for an implied term that the owner would take reasonable care with regards to the jetty, and they had breached this obligation.
. An implied term may be “necessary to give the transaction such business efficacy as the parties must have intended”.
Bowen LJ said:
“In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events as it must have been in the contemplation of both parties that he should be responsible for in respect to those perils or chances.
What does Lord Hoffmann suggest the test for business efficacy/ implied terms in Belize v Belize?
What is the starting point for this question?
“There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?” NOT WHETHER THIS IS RESULTS IN A MORE REASONABLE OUTCOME
“The most usual inference is that nothing is to happen… the loss lies where it falls”
