Express and Implied Terms Lecture 6 PDF

Preview

Summary

Download Express and Implied Terms Lecture 6 PDF

Description

Express and Implied Terms Representations and Terms EXPRESS TERMS What becomes an express term? A pre-contractual statement may become a term or it may be a mere representation. Remedies: Terms – action for breach Representation – action for misrepresentation THE BASIC TEST A Term of the contract? Parties’ intention Heilbut, Symons & Co v Buckleton Buckleton bought shares but later it became apparent that the rubber company wasn’t doing well and in fact couldn't be classified as a rubber company HL decided that there was a term in the contract that it was a rubber company that Buckleton had bought shares in. Objective Intention Oscar Chess Ltd v Williams: - About a medical procedure - Natural reversal process - Concluded that the doctor did not promise long lasting success Denning LJ in Oscar Chess Ltd v Williams: 'It is sometimes supposed that the tribunal must look into the minds of the parties to see what they themselves intended. That is a mistake... The question of whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice.’ Illustration – Thake v Maurice INDICATORS OF INTENTION Not a test, just aids to establish intention Importance of the statement It may be clear to both sides that a certain factor was very important to one of the parties in the decision to contract. A statement on that factor, by the other party, may then well be found to have been intended as a term. Bannerman v White (1861) 10 CBNS 844 - Bannerman was a brewery, used sulphur free hops - White was supplier said they were free of sulphur but were in fact not - Did the contract state the term that the hops must be free of sulphur - The importance of the hops without sulphur

- it was abundantly clear that they would not purchase the hops if it was treated with sulphur Reliance An indication that a statement by one party, can be relied upon, and need not be verified, may indicate that it should be regarded as a term. Schawel v Reade, Lord Moulton 'The essence of such warranty is that it becomes plain by the words, and the action, of the parties that it is intended that in the purchase the responsibility of the soundness shall rest upon the vendor; and how... could a vendor more clearly indicate that he is prepared and intends to take upon himself the responsibility of the soundness than by saying: "You need not look at that horse because it is perfectly sound", and sees that the purchaser thereupon desists from his immediate independent examination.' Contrast Ecay v Godfrey (1947) 80 Lloyd's LR 286 Relative knowledge of the parties Which of the two parties was in the best position to know or ascertain the truth of a statement made. The court will be more inclined to find that the statement is a term if it was made by the person in the best position to have ascertained its truth. Oscar Chess v Williams [1957] 1 WLR 370 Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623. IMPLIED TERMS - Terms implied in fact - Terms implied in law - Terms implied by custom TERMS IMPLIED BY FACT Basically looking for what the parties (objectively) intended. But that is not the test. Narrower tests are used 'BUSINESS EFFICACY TEST' Under the ‘business efficacy’ test the implication of the term must be 'necessary to give the transaction such business efficacy as the parties must have intended' Bowen LJ in The Moorcock (1889) 14 PD 64 The term must be required to make the contract workable. 'OFFICIOUS BYSTANDER TEST' 'Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if while the parties were making their bargain an officious bystander were to suggest some express provision for it in the agreement, they would testily suppress him with a common 'Oh, of course.' Shirlaw v Southern Foundaries Ltd [1939] 2 KB 206, per Mackinnon LJ at 227. OBJECTIVE SEARCH FOR INTENTION A NEW TEST? In a Privy Council decision, Lord Hoffmann indicated a new approach: that the test should simply be the objective search for the parties’ intention. - Attorney General of Belize v Belize Telecom Ltd [2009] 2 All ER (Comm) 1.

The approach would have put implying terms on the same basis as interpreting terms. However, in Marks and Spencer plc v BNP Paribas Securities Services Trust [2016] AC 742 the Supreme Court reasserted the ‘business efficacy’ and the ‘officious bystander’ tests, and disposed of any idea that the implication of terms in fact is to be treated in the same way as construing the written terms. THE BASIS OF THE IMPLICATION IS INTENTION SO... Knowledge Spring v National Amalgamated Stevedores and Dockers Society [1956] 1 WLR 585 Would both parties have agreed to the term?Liverpool City Council v Irwin [1976] 2 All ER 39 Several possible formulations of implied term, detailed express terms Trollope & Colls v North West Hospital Board [1973] 2 All ER 260 TERMS IMPLIED IN LAW Can be implied by statute E.g. Sale of Goods Act 1979: s14 – Satisfactory quality, reasonable fitness for the buyer’s particular purpose. But those implied terms are just a matter of what the particular statute says. We are concerned with terms implied in law at common law. Terms implied in law are not based on the intention of the parties except a term will not be implied in law if there is an express contrary term. Distinguish terms implied in law and in fact. Liverpool City Council v Irwin Liverpool City Council v Irwin, Lord Cross: 'When it implies a term the court is sometimes laying down a general rule that in all contracts of a certain type sale of goods, master and servant, landlord and tenant, and so on - some provision is to be implied unless the parties have expressly excluded it... Sometimes however there is no question of laying down any prima facie rule applicable to all cases of a defined type... Here... the court... must be able to say that the insertion of the term is necessary to give... 'business efficacy' to the contract and that if its absence had been pointed out at the time both parties - assuming them to be reasonable men - would have agreed to the insertion.' TWO BASIC REQUIREMENTS FIRST REQUIREMENT Contract of a defined type El Awadi v Bank of Credit and Commerce International [1989] 1 All ER 242 National Bank of Greece v Pinios Shipping, Lloyd LJ: 'Can the present case be brought within a defined type? If we were concerned with the ordinary relationship of banker and customer the law would imply certain obligations ...But we are not here concerned with the ordinary relationship of banker and customer. We are concerned with a carefully drawn oneoff contract between three parties, made for a particular purpose in special circumstances, and apparently making full provision for that purpose. I cannot imagine a contract which it would be more difficult to fit into a 'defined type'. SECOND REQUIREMENT It has been put in terms of ‘necessity’ but it encompasses much broader issues than any normal use of that word would imply

Scally v Southern Health and Social Services Board. Lord Bridge: ‘A clear distinction is drawn ... between the search for an implied term necessary to give business efficacy to a particular contract, and the search, based on wider considerations for a term which the law will imply as a necessary incident of a definable category of contractual relationship’. Crossley v Faithful & Gould (referring to Peden ((2001) 117 LQR 459), Dyson LJ said: ‘It seems to me that rather than focus on the narrow concept of necessity, it is better to recognise that to some extent at least, the existence and scope of standardised implied terms raise questions of reasonableness, fairness and the balancing of competing policy considerations.’ TERMS IMPLIED BY CUSTOM There may be contractual terms which are customary in a particular trade, profession or locality. If the contract is one falling within the custom then the customary terms will be implied unless the contract evidences a different intention. Hutton v Warren (1836) 1 M&W 466 £2,500 was reintroduced following the end of the war....