Law of Contract PDF

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Tutor - Alex
Subject - Contract Law
All Seminar and Lecture notes from 2017/2018...

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EXPRESS TERMS Two parties agree on the contract, but disagree on the terms Express Terms – a promise or obligation that has been specifically mentioned by the parties e.g. agreeing to sell a car – giving the car and giving the money Trying to work out which express or implied terms make up the contract ant tell us what the parties obligations are Definition of Express Terms "...those terms which are actually recorded in a written contract or openly expressed at the time the contract is made." CASE - H Beale, Chitty on Contracts (31st, Sweet & Maxwell, 2014), Ch 13, para 001 Express terms can be made in many ways e.g. being written down in a written contract Principles to work out whether or not the term is incorporated 1. If it is in a signed written document, it is almost certainly an express term L'Estrange v E Graucob Ltd There was an exclusion clause which she signed in the contract, but she didn’t read the contract Bound by the contract An exclusion clause is a term of the contract which in some ways tries to limit or restrict one parties’ liability RATIO - If it is in a signed written document, it is almost certainly an express term 2. Other written terms can be incorporated if they are on a contractual document Chapelton v Barry UDC Hire of a deckchair that he fell through due to it being faulty Barry council said they had an exclusion clause for not paying if someone gets hurt Barry council argues that the EC was part of the contract as it was on the back of the receipt Just because it looks like an express term it does not mean it’s incorporated RATIO - Other written terms can be incorporated if they are on a contractual document 3. Other written terms can be incorporated if they are in time Olley v Marlborough Court Ltd Stays in a hotel Olley sues the hotel when somethings go missing

Hotel had an EC (in the hotel room) which was a legal notice for accepting no responsibility Contract is formed at the reception when you pay the money It was not incorporated as it was too late – as the deal had been done RATIO - Other written terms can be incorporated if they are in time

4. Other written terms can be incorporated if reasonable notice has been provided Thornton v Shoe Lane Parking More controversial a term is, the more you have to do to bring it to the other parties’ attention C said the car park doesn’t have to pay anything Hadn’t done enough to bring it to the attention of the customer Hadn’t provided enough notice Only arises when the parties both agree there is a contract RATIO – other written terms can be incorporated if reasonable notice has been provided Express Term Breach of contract claim OR Mere Representation Misrepresentation claim only Not everything that is said in negations is an express term 5 - A representation is a term when the parties objectively intend it to be (The test - Whether or not the parties intended to be a term) Heilbut, Symons and Co v Buckleton RATIO - A representation is a term when the parties objectively intend it to be 6. More likely to be a term if it is of clear importance to the represented Bannerman v White Purchase of the hops Buyer asked seller if sulphur had been used Sulphur had been used in production Buyer sues seller Was it a rep or intended to be an express term? (’no sulphur’) Court held it was a contractual term as it was important to the buyer (the representee) RATIO – More likely to be a term if it is of clear importance to the represented

7. More likely to be a term if the representor has special knowledge Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd Seller had special knowledge Knowledge was not right Was the comment a rep or an express term? Court said that the seller should have known as he was an expert – more likely that he objectively intended them to be express terms of the contract RATIO - More likely to be a term if the representor has special knowledge 8. More likely to be a term if the representor accepts responsibility for the truth of the statement Schawel v Reade Seller is selling a horse Seller says to buyer that the horse is sound He said they buyer could stop examining it Is the promise that the horse is sound an express term? Court said It was because the S said to the B to stop checking it RATIO – More likely to be a term if the representor accepts responsibility for the truth of the statement 9. Less likely to be a term if the representative has greater equal knowledge Oscar Chess Ltd v Williams The one buying the car is the expert Tells him the age of the car and it was wrong Was the rep of the age of the car to be sued upon? Court said that the It was unlikely it be a term because the buyer was the expert RATIO – Less likely to be a term if the representative has greater equal knowledge 10. Less likely to be a term if the representee was encouraged to verify it Ecay v Godfrey Seller says the boat is sound but to send a surveyor and to check it for himself Seller is not taking responsibility Seller did not intend for it to be a term RATIO – Less likely to be a term if the representative was encouraged to verify it 11. Less likely to be a term if there is a delay between statement and contract

Entrepreneur Pub Co v East Crown Ltd Too long What is said during talks will fade away RATIO - Less likely to be a term if there is a delay between statement and contract 12. Less likely to be a term if it is not contained within the written contract Routledge v McKay If there is a written contract but it’s not in it RATIO – Less likely to be a term if it is not contained within the written contract UNLESS 13. It is of the upmost importance Evans & Son Ltd v Andrea Merzario Ltd IMPLIED TERMS "In addition to the terms which the parties have expressly adopted, there may be other terms imported into the contract, these latter being generally known as 'implied terms'." Halsbury’s laws, vol 22 (2012) para 364 Implied Terms – promises or obligations that are not specifically mentioned but which are part of the contract e.g. the car being burned out when it arrives When is a term implied? There are 4 definitions – Fact Most common way a term will be implied A term is implied by fact if the parties objectively intended it to be – Business Efficacy test, Officious Bystander test Court tries to look at what the parties said or did to see if they intended it to be part of the contract Law Only apply to contracts of a sufficiently common type – employment contracts (similar terms), leases If there's a term normally included but isn't included in the contract, it will be implied – standardised implied terms

Custom Include a term if it’s the type of term normally included, in that type of trade, or normally between the two particular parties Statute Takes areas where parties need protection, and the law will say in a contract in that particular type then that term is included – sale of goods act, there is an implied term that the goods will be of a satisfactory quality 1. FACT Court tries to look at what the parties said or did to see if they intended it to be part of the contract The business efficacy test (The Moorcock) A term will be implied if it’s necessary to make the contract work Between ship owner and owner of Warf Warf owner says ship owner can moor his ship there for money Wasn’t suitable for mooring - it damaged the ship Owner of ship sued Warf owner No express term breached There was an implied term that the Warf wasn’t suitable for mooring Court agreed that there was an implied term RATIO - The contract wouldn't work without it – moor your ship where it can’t be moored Shirlaw v Southern Foundaries (The Officious Bystander Test) A term will be implied if it’s so obvious it will go without saying Imagine they are negotiating their contract and there's someone eves dropping in the corner Imagine if he says to the 2 parties, don’t you need a term –that is obvious- that both parties agree that it’s a term RATIO - It must be obvious that both parties would agree to the term at the time the contract was made

2. LAW Liverpool City Council v Irwin A block of flats and a lease Lease didn't’ specify whose responsibility it was to maintain communal areas Court said it was sufficiently common, and that the landlord is normally responsible RATIO –

3. CUSTOM British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd Contract hires for a digger Digger gets stuck and its damaged as a result of it Who is responsible for the tab of the damage of the digger? Owner or hirer? Didn’t say anything in the contract about it Court had to imply something It is the hirer’s responsibility to pay for the damage Why? – hirer is normally responsible in this type of industry Hirer had hired the digger many times before and it had said in writing that the hirer would be responsible Parties intended that the hirer would be responsible RATIO 4. STATUTE Courts aren't interested in what the statue says that they have to - Sale of Goods Act 1979 - Supply of Goods and Services Act 1982 Where the terms are too uncertain, there is no contract Scammell & Nephew Ltd v Ouston Where so much uncertainty – there is no contract, no amount of implied terms will help, the court RATIO - Where the terms are too uncertain, there is no contract

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The court will imply missing terms in order to make the contract workable insofar as such terms represent the objective intentions of the parties The court will interpret vague terms so as to make the contract workable insofar as such terms represent the objective intentions of the parties The court will not write the agreement for the parties

Contract Terms – Let the Buyer Beware -

This is the starting point in law – responsibility on the buyer If you can’t agree a term, then it’s the buyer’s problem For the buyer to make their own investigation – either send a surveyor or to persuade the seller to make some contractual promises on the terms PMT have decided – purchases need protection

1. Terms implied into B2B Contracts Arcos Ltd v EA Ronaasen & Son

- A contract for the sale of a quantity of wooden staves for making barrels described the staves as being 1/2 an inch thick. - Some of the staves delivered were not 1/2 an inch thick but very slightly out. - There was nothing wrong with the quality of the wood and they could still be used for the intended purpose of making barrels. - The buyer rejected the goods as the price of wood had fallen and he could purchase them cheaper elsewhere. - The purchasers were entitled to reject the goods under s.13 as they were not as described. RATIO - Terms implied into B2B Contracts 2. Not all words used to describe a product fall within s.13 Sale of Goods Act 1979 Ashington Piggeries Ltd v Christopher Hill Ltd -

Ashington (D) asked Chris (P) to package mink food in accordance with formula D made Ingredients were to be supplied by P and be of the best quality Minks P got sick from the food. P brought action claiming price of goods. Claim brought against another corporation because of the ingredient delivered was contained a dangerous toxin RATIO - Not all words used to describe a product fall within

Reardon Smith Line Ltd v Hansen-Tangen -

Involved sale of ship – When delivered one party didn’t want it so said it didn’t correspond with the description RATIO - Not all words used to describe a product fall within

3. There is no sale by description where the parties do not intend reliance on the description Harlingdon and Leinster Enterprises v Christopher Hull Fine Art

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The claimant purchased a painting from the defendant for £6,000 The painting was described in an auction catalogue as being by German impressionist artist Gabrielle Munter

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Both the buyers and the sellers were London art dealers. The sellers were not experts on German paintings whilst the buyers specialised in German paintings The purchasers sent their experts to inspect the painting before agreeing to purchase After the sale, the buyers discovered that the painting was a fake and worth less than £100 They brought an action based on s.13 Sale of Goods Act in that the painting was not as described RATIO - There is no sale by description where the parties do not intend reliance on the description

4. "Satisfactory quality" includes fitness for all the purposes for which goods of the kind in question are commonly supplied Grant v Australian Knitting Mills Ltd

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The appellant contracted dermatitis of an external origin as the result of wearing a swollen garment which. - When purchased from the retailers, was in a defective condition, owing to the presence of excess sulphites which, it was found, had been negligently left in it in the process of manufacture, claimed damages against both retailers and manufacturers RATIO - "Satisfactory quality" includes fitness for all the purposes for which goods of the kind in question are commonly supplied Attorney General of Belize v Belize Telecom RATIO - The implication of a term is an exercise in the construction of the contract as a whole. The background facts should have been admitted as evidence to interpret the articles in this particular situation British Crane Hire Corporation Ltd v Ipswich Plant Hire RATIO - The term relating to risk was not incorporated into the contract as the defendant was unaware of it at the time the contract was made, however, the court implied the term into the contract as both parties were in the business of plant hire and it was known to both that the use of such terms was prevalent in the trade. Hutton v Warren RATIO - The court implied a term into the tenancy providing for compensation for the work and expenses undertaken in growing the crops. The term was implied as it was common practice for farming tenancies to contain such a clause. Liverpool City Council v Irwin

RATIO - The House found it to be an implied term of a tenancy agreement that the lessor was to be responsible for repairing and lighting the common parts of the building of which the premises formed part. M&S v BNP RATIO - Express words would be needed to imply a term that rent paid in respect of a period that runs post a conditional break date should be repaid after the break takes effect. Shell UK Ltd v Lostock Garages Ltd RATIO - The court refused to imply a term in fact as it was not a necessary term to imply as the contract made business sense without it, nor was it obvious that Shell would have agreed to it. They also refused to imply a term in law. Whilst the term may be a reasonable one to include it lacked sufficient certainty. Shirlaw v Southern Foundaries RATIO - It must be obvious that both parties would agree to the term at the time the contract was made. The Moorcock RATIO - The court implied a term in fact, that the river bed would be safe for mooring. The court introduced the business efficacy test e.g. the term must be necessary to give the contract business effect. If the contract makes business sense without the term, the courts will not imply a term. -

Statute

English law implies terms via fact, law and custom Terms are implied if a statue requires them to be so Implied in common law if they have been noted in prior cases Or if they meet he four tests (Law) Test 1 – they must belong to a definable category or contractual relationship which is of common occurrence Test 2 – they must relate to a matter not dealt with in the contract Test 3 – they must be a legal incident of that kind of/category of relationship Test 4 – the term must meet the threshold of necessity (Fact) Terms are implied in fact if they are necessary, and if they satisfy the test for determining that they belong in that particular contract – officious bystander test (Custom) Terms can be implied by custom if that term is part of standard usage or custom in the field or market within which the parties are operating

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S3 – SGSA 1982 - goods must match the description S4 - SGSA 1982 - goods must be satisfactory to the parties S13 - SGSA 1982 – reasonable care and skill S12 SGA 1972 – S13 SGA 1972 – goods must match description S14 SGA 1972 – satisfactory quality and fit for purpose S15 SGA 1972 – must match sample

Fact -

What did the parties intend? Officious bystander test – Shirlaw case Very likely Business efficacy test – Moorcock case Most likely

Custom -

All about common practice Industry e.g. British Crane case Between the parties e.g. British Crane case

Law -

All about common contracts, of a standard form and look similar Employment contracts Lease contracts Hutton v Warren Liverpool Council Case

CONDITIONS "…go so directly to the substance of the contract or, in other words, are so essential to its very nature that their non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all." Wallis, Son & Wells v Pratt & Haynes [1910] 2 KB 1003, per Fletcher at 1012 Poussard v Spiers & Pond RATIO - Madame Poussard was in breach of condition and Spiers were entitled to end the contract. She missed the opening night which was the most important performance as all the critics and publicity would be based on this night

WARRANTY "...the less important terms of a contract, or those which are collateral to the main purpose of the contract, the breach of which by one party does not entitle the other to treat his obligations as discharged." H Beale, Chitty on Contracts (31st, Sweet & Maxwell, 2014), Ch 12, para 031 Bettini v Gye RATIO - Bettini was in breach of warranty and therefore the employer was not entitled to end the contract. Missing the rehearsals did not go to the root of the contract.

INNOMINATE "There are, however, many contractual undertakings of a more complex character which cannot be categorised as being "conditions" or "warranties,"...[o]f such undertakings all that can be predicated is that some breaches will and others will not give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and the legal consequences of a breach of such an undertaking, unless provided for expressly in the contract, depend upon the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertaking as a "condition" or a "warranty." Hongkong Fir Shipping v Kawasaki [1962] 2 Q.B. 26 per Diplock LJ at 70 Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd RATIO - The defendants were liable for wrongful repudiation. The court introduced the innominate term approach. Rather than seeking to classify the term itself as a condition or warranty, the court should look to the effect of the breach and ask if the breach has substantially deprived the innocent party of the whole benefit of the contract.

S13 SGA 1972 – goods must match description S14 SGA 1972 – satisfactory quality and fit for purpose S15 SGA 1972 – must match sample BREACH “A breach of contract is committed when a party without lawful excuse fails or refuses to perform what is due from him under the contract, or performs defectively or incapacitates himself from performing" - Treitel - A breach is where one party, without lawful excuse, fails to comply fully or at all with an express or implied term

(Before you can say there is a breach, you need to find a term that hasn't been complied with) Anticipatory Breach -

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Where a party indicates in advance that he/she will not perform his/her obligations, the other party need not wait for the breach Hochster v De La Tour RATIO - Where a party indicates in advance that he/she will not perform his/her obligations, the other party need not wait for the breach Anticipatory breach is different – one person gives indication that they longer want to perform their terms of the contract, but they address their none compliance for the future. Fault party – doesn’t need to express that fact they are going to breach they contract, however the...