Contract terms

What are contract terms

The terms are its contents and represent what the parties agree to do or provide under it. Both parties will have obligations under the contract. Contract terms can be expressly agreed by the parties or implied by the law.

What happens if terms are broken?

 The innocent party can claim compensation for a breach of contract and may also be able to end the contract, depending on the type of term broken

What are expressed terms

 Agreed by the parties when the contract was negotiated

What can expressed terms be

Can be:

• Verbal statements made by one party to another

• Written or contained in a signed document

• Included in a notice that was available to be seen before the contract was made

What are verbal statements

• During negotiation parties may make various verbal statements (representations) to induce the other party to contract which if false are misrepresentations. 

• Only statements that are sufficiently significant will be incorporated into the contract as a term

What are the factors that are taken into account

• Importance of the statement

• Special knowledge or skill of the person making the statement

• The time between making the statement and making the contract 

Importance of the statement + case

The more importance attached to a statement by either party the more likely it will be a term. (Bannerman v White where buyer said they would not buy hops if they had been treated with sulfur)

Special knowledge or skill + case

Statement by an amateur is more likely to be seen as a term than one made by an amateur with no special expertise on the matter. (Dick Bentley v Harold Motors where mileage of a car was a term of the contract even though it was not written as the car dealers were experts and said 20,000 instead of 100,000)

What is The time between making the statement and making the contract

If the time between negotiation and formation is too long that term may not be incorporated (Routledge v Mckay where a term on the bikes age was not a term due to lapse of time as the contract was written a week later )

What is the written or signed evidence parole rule

presumed written contract contains everything the parties wanted to include as terms of the contract

What is the exception to this + case

The rule can only be displaced if it is clear outside evidence was meant to form part of the contract:(Couchman v Hill attempt to rely on written contract failed due to the importance of verbal assurance)

What is said about signing a written document containing contractual + case + exception

If you signs a written document containing contractual terms you are bound by the even if you didn't read them (L’Estrange v Graucob)

Exception: is the signature is obtained by fraud or misrepresentation

What must the document be + case

Document must be contractual (Grogan v Robin Plant Hire where a timesheet was not seen to be contractual)

What is incorporation by notice

Written terms may become a contract by listing them on a sign, handing over a ticket or indicating where to find them

Written term will become part of the contract if the document is contractual

What steps must be taken + case

Reasonable steps must be taken to bring the terms to attention of the other party e.g Thompson v LMS Railway where even an illiterate person was held for this as the railway had done all they could have)

What is said surrounding reasonable notice

Reasonable notice must be given before or at the time of contracting e.g Thornton v Shoe Lane Parking where the term could not be enforced as it was communicated after the contract had been formed)

What is said for implied times staute + section

Under the Consumer Rights Act 2015 Parliament made it necessary to imply certain terms into all contracts for the sale and supply of goods and services to ensure fairness between businesses and consumers.

Under s.2(3) CRA 2015 a Consumer is “an individual acting for purposes that are wholly or mainly outside that of individual trade, business, craft or profession”

What is said for Goods to be of Satisfactory Quality + section

s.9 Goods to be of Satisfactory Quality (s.34 for digital media)

(1) Every contract to supply goods is treated to include a term that the quality of the goods must be satisfactory

(2) Should meet standards that a reasonable person would find satisfactory, taking into account price,description and other relevant factors

(3) quality includes state and condition but also

1. Fitness for all usual purpose

2. Appearance and finish

3. Freedom from minor defects

4. Safety

5. Durability

(4) If any defects were brought to attention of C then there is no breach

What is said for Goods to be fit for a particular purpose + section

s.10 Goods to be fit for a particular purpose (s.35 for digital media)

If a consumer makes a particular purpose known to the trader for buying the goods, then the contract will include a term that the goods must be reasonably fit for purpose

Exception: if C did not rely on skill/judgement of the trader

What is said for Goods as described + section

s.11 Goods as described (s.36 for digital media)

Goods must meet description that was given (eg. packaging and labels)

What are the remedies

s.20 Short term right to reject

Consumer must state within 30 days, refund must be given within 14, reasonable costs of returning rejected goods are borne by the trader

s.23 Right to repair or replacement

Can insist on repair or replacement of faulty goods within reasonable time (trader can reject either method if disproportionate in price), if fault arises within first 6 months it is presumed to have been there when purchased.

s.24 right to price reduction or final right to reject

Only if attempt to repair or replace have been unsuccessful, consumer has right within 6 months for a full refund or to keep goods with price reduction

Under s.31 CRA traders cannot exclude or restrict any of these statutory rights

What are the contracts for supply of services

s.49 services must be performed with reasonable care and skill

s.50 Anything said or written by the trader to the consumer regarding the trader or service is an implied term 

s.51 consumer must pay reasonable price if the price has not been agreed in advance

s.52 is a time window is not stated the service must be completed within reasonable time

s.55 if service does not conform to the contract consumer may be entitled to have the service redone if possible

s.56 price reduction may also be available

s.57 trader cannot exclude or restrict any of the statutory rights

What can do the courts do

Courts can imply terms if they have been left out by mistake or because one or both parties thought they were so obvious it would not need to be included

Courts are cautious about implying terms so that they do not rewrite the parties contract to reflect freedom of contract

Case for courts

Marks and Spencers v BNP Paribas where M&S were not entitled to a repayment of rent as they should have made sure it was in the contract, a term should not be implied in a commercial contract just because it is fair.

Situations where a Court will imply a term

• Business efficacy test

• Officious bystander test

• Terms implied by a course of dealings 
  

What is the business efficacy test + case

The court implies a missing term when it is necessary to make the contract work

Only implied if without the term the contract would lack commercial or practical sense

(The Moorcock where it was implied that the boat would dock safely as otherwise it would make no sense)

What is the official bystander test + case

The term was so obvious that an officious bystander would overhear and suggest terms that both parties would agree to

(Shell v Lostock Garage where shell would not have agreed that they would never abnormally discriminate against Lostock)

What are terms implied by a course of dealings + case

• If parties have previously dealt on standard terms a court would imply these when it is clear both sides would have them in mid

• (British Crane Hire v Ipswich Plant Hire where both parties knew it was their usual practice for Ipswitch to pay if they needed recovery)