Lecture 7 PDF

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LECTURE 7: Implied Terms Terms expressly agreed by the parties are not the only source of contractual terms. Terms can also be implied into a contract by legislation or the courts. a. Terms implied by statute. s.14(2) of the Sales of Goods Act 1979 the term implied into every contract that goods sold will be of a satisfactory quality. ss13 – 15 SGA 1979 b. Terms implied by the courts. The courts are not in the habit of rewriting bad bargains. However, in certain limited circumstances the courts will imply a term not negotiated by the parties themselves. Custom Where a custom /trade usage is sufficiently notorious then that custom can be implied into a contract. 

Hutton v Warren (1836) 1 M & W 466

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British Crane and Hire Corp Ltd v Ipswich Plant Hire Ltd [1975] QB 303

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Exxonmobil Sales and Supply Corp v Texaco Ltd. [2004] 1 All ER 435 Express provision would have taken precedence over the term implied by virtue of a custom or trade usage. Entire agreements clauses have been also deemed to have this effect.

Terms implied in fact - From the outset be very clear that the courts do not rewrite bad bargains. They will however, imply terms into a contract where the facts necessitate such action in order to make the contract work.

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Moorcock (1889) 14 PD 64

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Investors Compensation Scheme Ltd v West Bromwich Building Society (no.1) [1998] 1 All ER 98 - in that it is not the courts role to make an agreement fairer or more reasonable but to ascertain the meaning of the contract , which may not be what the parties intended.

The Officious Bystander - a test whereby the courts will imply a term which is omitted from the contract. 

Shirlaw v Southern Foundries [1939] 2 KB 206: MacKinnon LJ: ‘ …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 supress him with a common ‘oh of course’

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Ashmore v Corp of Lloyd’s (no.2) [1992] 2 Lloyd’s Rep 620 - Again be careful the courts apply terms on the grounds that the facts demand them in very narrow terms

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Griggs Group Ltd v Evans [2005] FSR 31 - However the test does still have a role to play even when looked at independently of the concept of necessity discussed in the business efficacy test.

Terms implied by law. Certain contractual relationships exist which will impose identical obligations into all contracts of that type.  United Bank v Akhtar [1989] IRLR 507 - an employer uses an express power derived from the contract of employment. 

Liverpool City Council v Irwin [1977] AC 239 - the House of Lords provided that a term is implied into all landlord and tenant agreements that landlords should take reasonable steps to keep common parts in repair

CLASSIFICATION OF TERMS The classification of a term will determine the possible remedies and choices available to the innocent party to a breach. i)

A condition if an express term is one which goes to the root of the contract or is of fundamental importance to the parties. 

Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 - However, naming a term a condition may be evidential of an intention that a term should have such importance attached to it but is not conclusive.

 A breach of a term which is a condition gives the innocent party the choice to accept the repudiatory breach of the other party. 

Arcos Ltd . v Ronassen [1933] AC 470 - the status of the term is determined by the parties intentions at the time and the right to repudiate remains even if the consequences are minor,

Certain terms implied by statute also have the status of conditions  s.12 of the Sale of Goods Act 1979 or with regards to business to consumer contracts  s.14 of the Sale of Goods Act 1979 with regards to the goods sold not being of satisfactory quality. ii) Warranties This term is ancillary to the main ‘root’ of the contract. Statute can determine that an implied term be treated as a breach of warranty. This category focuses on the classification of the term in the light of the consequences of the breach.

Hong Kong Fir Shipping Co. Ltd v Kawasaki Ltd.[1962] 2QB 26....