Law- Seminar 5- Terms of a contract

what are contracts composed of?

Various terms, each differing in importance,

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Terms have to be distinguished from what?

Mere statements or representations that aren't intened to be an integral part of the contract,

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Why are terms of a contract of great significance to the parties?

As they establisg their various rights and liabilities,

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In determining whether or not a statement forms part of the contract, what do the courts have to regard?

The intention of the parties,

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What case shows this and describe it.

Bannerman v White- Where a statement that sulphur had not been used in the treatment of hops before a sale was held to be a term of the contract, the breach of which discharged the defendant from liability to take the hops,

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For collateral contracts/ warranties, what are courts sometimes prepared to do based on a colleteral contract and a main contract?

They are sometimes prepared to treat a statement that is not a term of the contract as a contract that is collateral to the main statement,

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What case can be used to show this and how does this link to collateral contracts?

Esso Petroleum v mardon, -When Esso made an action for monies owed them for petrol sipplied, Mardon counter-claimed for damages for a breach of collateral warranty.

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What did the court decide?

The court decided the statement by Esso was a warranty which ha been breached, and in addition they were liable for negligent misrepresentation,

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For the parol evidence rule,what is the rule?

"it is firmly established as a rule of law that parol evidence cannot be admitted to add to, vary or contradict a deed or other written instrument"

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Based on this, where parties have reduced their contract into writing, qhat question arises?

Arises as to whether or not evidence external to the contract may be adduced to establish the existence of a term or to explain the words used in the document,

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What is the purpose of this rule?

To promote certainty and save time in the conduct of litigation. However, the rule was subject to many exceptions,

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The parol evidence rule had changed and external evidence as to the construction of a document is what?

Inadmissible where it is first established that the document accuratley reports the entire agreement,

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However, how can this conclusion only be reached?

By admitting, examining all extrinsic evidence,

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what are the three types of terms?

-Conditions, -Warranties, -Intermediate (innominate terms)

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What is a condition?

A statement of fact or a promise which forms an essential term of a contract.

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What happens if he statement turns out to be false, or broken?

The contract will be regarded as being repudiated or breached in such a way it will no longer be required to be performed, and the innocent party will be discharged,

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What case is used to show this and give the facts?

Behn v Burness-Stated in a contract of charterparty that the ship was now in the port of Amsterdam. The fact that the ship was not at the port at the date of the contract discharged the charterer from further performance of the contract,

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What are contingent conditions?

They are conditions that provide that a contract will not take effect until the condition is fulfilled.

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Therefore, what is the operation of the contract dependent on?

A fulfilment of the condition

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Give an example with this with Pym v Campbell?

Pym agreed to sell a 1/8 in his machine to Campbell and a written document was signed. Following inspection, Campbell didn't honour the written agreement.

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What did the court decide?

There was no breach- The agreement evidenced a requirement of satisfaction by Campbell, therefore there could be no agreement as Campbell was not satisfied,

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What is a warranty?

Defined as an agreement or promise which relates to the subject matter of a contract and is not an essential part of the contract but collateral

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Give an example of this with Bettini v Gye?

B contracted with G, director of Royal Italian Opera in London for exclusive use of hsi services as a singer for 3 months- Be at London at least 6 days before commencement of rehearsals, but only arrived 2 days before. G refused to go on with contrac

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What did the court decide?

it was held that having regard to the length of the contract and the nature of performances to be given, the rehearsal cluse wasn't vital to the agreement and not a condition, but merely a warranty so breach didn't lead to contract ending,

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How has intermediate or innominate terms developed by courts?

The traditional distinction of terms into conditions and warranties has fallen out of judicial favour,

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What is emphasis now placed on?

A more flexible test that bases the ight of termination on the seriousness of the breach and its consequences,

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What case is intermediate terms illustrated in?

Hong Kong Fir Shipping v Kawasaki Kisen Kaisha

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Describe the hong kong fir shipping v Kawasaki kisen kaisha case.

Ship chartered to the defendants for a 2 year period. Agreement-ship would be seaworthy through hire. Problem developed with engine of ship. Ship out of service for a 5 week period, and then a further 15 week period. breach of condition?

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How did the court approach this?

The defendanrs were liable for wrongful repudiation. The court introduced the innominate term. Instead of seeking to classify the term itself as a condition or warranty, the court look to the effect of the breach,

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Did the court decide the breach deprived the innocent party substantially?

No-20 weeks out of a 2 year contract period did no substantially deprive the defendants of a whole benefit and therefore they wre not entitled to repudiate the contract,

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For what happens when a term is broken, where the failure of performance is not a breach of a condition but an innominate term, what right does the innocent party have?

They have the right to discharge from further performance will depend on the seriousness and the consequences of the breach,

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What happens if the failure of performance or breach deprives the innocent party of the whole benefit he was intended?

He will be discharged from the performance of his obligations,

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For distinguishing between intermediate terms and conditions, what does the classification depend on?

Court making a value judgement as to the commercial significance of the term in question,

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When is a term more likely to be classed as intermediate?

if it is capable of being borken in a manner that is trivial and can easily be remedied by damages and is also capable of being broken in a way that is so fundamental it undermines the contract,

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Describe the Bunge Corportation v Tradax case.

Contract for the sale of 5000 tons of soya. 5% more or less required the buyers to give 15 days notice, -gave 13 days notice, -Sellers repudiated the contract and awarded damages for losses,

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What did the court decide?

15 day notice was an intermediate term and the breach of the term didn't entitle the seller to repudiate the contract as the breach didn't go to the root of the contract. On appeal, term was a condition on grounds it was commercial,

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it is safe to say that the courts will categorise a term to be an intermediate term unless what four things?

1) Categorised by statute as a condition, 2)Categorised by judicial decision as a contract 3) Designated by the contract as a condition, 4) Implied as being a condition from the circumstances

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An innocent party can lose the right to treat the contract as discharge in what event?

in the event of the other party's breach where he waives or affirms the contract in spite of the breach,

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For incorporation of terms into a contract, what are the two types of terms in a contract?

1) Some terms are agreed between parties e.g. Parties were specifically aware of them 2) Implied terms where parties have no inserted themselves,

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For agreed terms, if a person signs a document with contractual terms, what does this mean? Does it matter if they haven't read it?

It means they are bound by them, even if the person didn't read the document and is ignorant of their precise legal effect,

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Give a case which shows being bound by terms even if the person was unaware of some terms?

L'estrange v Graucob

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Describe the l'estrange v Graucob case.

Claimant purchased a cigarette vending machine for her case- Signed order form which in small print said 'Any express or implied, condition, statement of warranty, statutory or otherwise is expressly excluded'- Machine didn't work and sought to rejec

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What did the court decide?

it was held that in signing the order form she was bound by all terms contained irrespective if she read the form or not,

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If the document is not signed, what decides whether or not those terms will form part of a contract?

it depends if adequate notice was given

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For such terms to be binding, when should notice be given?

At the same time the contract was formed,

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What case determined this with parking tickets?

Thornton v Shoe Lane Parking

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A person may be bound by an exclusion cause if there is what?

A course of dealing between the parties

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which case is use to show this?

Henry Kendall ltd v william lillico ltd

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Describe the Henry Kendall ltd v William Lillico ltd case.

Feeding stuff sold by merchants to a farmer. IT was defective. Merchants brought in suppliers, and then they brough in their suppliers, a long chain. Purchases followed a sold note- the buyer took responsibility for any latent defects-never read

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What did the court decide?

They decided that a reasonable seller in the circumstances would have had a good cause to assume the buyer agred to the term-

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Is communication of terms different in ticket and receipt cases?

No- terms of a contract in such tickets and receipts must be communicated to the other party

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What case created rules for such cases?

Parker v South Eastern Railway

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Describe th Parker v South Eastern Railway case.

P put bag in coat check and recieved paper ticket. On back of ticket it said company weren't responsbiel. P went back no bag. P never saw notice on ticket- was be bound by these conditions?

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For their rules, if a person receiving a ticket didn't know there was writing on the ticket, will they be bound by the conditions?

No they wont be bound,

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If a person receiving the ticket didn't see there was writing on the back, will they be bound?

No they wont be bound by the conditions

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If a person knows or believes the writing contained conditiosn are they bound?

Yes

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If a person knows there was writing but not that they contained conditions, will they be bound?

Yes but where the delivery of the ticket is reasonable notice that the writing contained conditions

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Therefore for the Parker v South Eastern Railway case, if the party has done all they can to bring the terms to the other partys notice, will he be bound by an exclusion term?

Yes a person may be bound by an exclusion term, even if he is ignorant,

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The question whether all that is reasonably necessary to give notice is a question fo what?

Fact

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What case is used to show this?

Thompson v London Midland and Scottish railway co

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Describe the Thompson Midland and Scottish railway co?

Claimant injured when stepping off train. Railway displayed prominent notices on platforms excluding liability and ticket stated subject to terms and conditions on platform. Claimant illiterate and argued clause not brought to her attention,

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What did the court decide?

Clause was incorporated- There is only a requirement to take reasonable steps to bring the clause to the attention of a reasonable person. There was no duty to ensure traveller aware so unsuccessful in claim,

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if a term is unusual, what is required?

Special measures are required to bring it to the notice of the other party,

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Give an example of this distinction with what case?

Interfoto Picture Library v Stilletto Visual Programmes

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Describe the Interfoto Picture Library v Stiletto case

Claimant ran photo librarary- transparencies given to defendant. Package of photos contained odcument- if kept longer than 14 days, £5 + VAT holding fee per photo a day. Defendant didn't read and failed to return for 6 weeks- Holding fee of £23,783

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What did the court decide?

Term was incorporated into the contract. Where a term is particularly onerous the person seeking to rely on the term must take greater measures to bring it to the attention of the other party,

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If a ticket or receipt refers to the notice for conditions, can they uphold this?

Yes where an exhibited notice such as those exhibited at a left-luggage counter contains conditions, they can become part of the contract where the ticket or receipt refers to the notice,

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Give a case where there was no mention of an exclusion clause and describe it?

Olly v Marlborough Court- Booked into hotel. Contract made at reception desk with no mention of exclusion clause. In room on back fo door a notice excluded liability for stolen property- Her fur coat was stolen

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What did the court decide?

Notice was ineffective- Contract had already been made by the time the claimant had seen the notice so not part of contract,

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Are terms excluding liability subject to any acts even if incorporated?

Yes they are subject to the Unfair contract Terms Act 1977

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What are five reasons why terms might be implied into a contract?

1) Officious bystander, 2) Business efficacy, 3) Standardised terms in common relationships 4) terms implied by custom 5) Terms implied by contract

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How does what case describe whatan officious bystander term is?

Shirlaw v Southern Foundries-"something so obvious that if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it....they would testily suppress him with a common 'oh, of course',

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For business efficacy, where a parties to a contract either through bad drafting or forgetfulness fail to incorporate certain terms neccessary, what may the court do?

Imply yhese terms into the contract in order to give the business efficacy to the contract,

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Describe when thi happened in the Moorcock

A ship owner and a jetty owner contracted to allow a steamship to be discharged and loaded at a jetty. Ship was damaged adn grounded at low tide.

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What implied term should have been in the contract for business sense?

That the berth was reasonably safe for the purpose of loading and unloading

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Therefore what did the court decide?

Held that the parties must have intended to contract on the basis the jetty was safe for the vessel at low tide

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For standardised terms in common relationships, why might terms become standardised>

As a result of judicial intervention and implied into all contracts of that nature in absence of a contrary intention,

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what case is used to show these 'standardised' terms in a block of flats?

Liverpool city council v irwin

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Describe the case.

LCC owned block of flats in which defendant was tenant. Common parts of flats, lifts, staircases had fallen into disrepair. Rent strike implemented. LCC wanted to evict- agreement didn't mention obligation to repairs

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What did the court decide?

Court agreed with defendant to imply a term that the council had an obligation to repair the common parts of the flats. Rose as a legal incident in contracts of a defined type between landlord and tenant and landlord should take reasonable care,

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For terms implied by custom of locality or trade usage, what can the court imply it in a contract?

Where the party asking for that term can prove it,

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What must the custom be?

Notorious, certain and reasonable

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Give an example with Mount v Oldham Corporation

An obligation to give a terms notice of an intention to withdraw child from a private school or pay a terms fee in lieu was implied by custom.

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Give some more examples of common usage for implied terms?

Bakers dozen, rabbit trade 1000 means 1200

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For terms implied by contract, for example are contracts for sale of goods regular?

yes- regular occurrence/ everyday,

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The Sale of Goods Act 1979 implies what into every contract of sale?

They impy certain conditions and warranties into every contract of sale, for example that the goods are fit for purpose,

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Howeve,r when can these implied terms by excluded by parties?

By an express term or by a course of dealing with them

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Law- Seminar 5- Terms of a contract

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