Contract Law Chapter 6

6.1 Express Terms - Incorporation of Terms

• Terms may be incorporated into a contract in the following ways;

  • By signature,

  • By giving reasonable notice before or at the time of the contract

  • By a previous consistent course if dealing

Signature

• Generally if you sign a contract, you are bound by it

• However there are limited circumstances where a term will not be incorporated into a contract even if the document has been signed e.g;

  • The term is illegible

  • The term has been misrepresented and the innocent party relied on the misrepresentation

  • The term is unusual and onerous and not fairly and reasonably drawn to the attention of the other party

Reasonable Notice

• If reasonable notice for a term has been given, even if not signed then it will be seen as incorporated into the contract

• When deciding if there has been reasonable notice, the courts will consider;

  • The nature of the document - for example, is the document one on which a reasonable person would expect there to be contract terms

  • Timing - The notice must come before or at the time of the contract

  • Onerous Terms - the more onerous a term is, the more a party must do to bring it to the other’s attention

  • An exemption clause must be legible

  • If the terms are on the back of a document are there words on the front drawing attention to them

Previous consistent course of dealing

• For terms to be incorporated into a contract through previous dealing the parties must have had many regular dealings that were all on the exact same T&Cs

6.2 Classification of terms

• Classifying terms is important to be able to see what type of term has been breached

  • This is unless a claimant only wants damages then there is no need to do this as all breaches of contract award damages

• Terms are typically only classified as conditions (important terms) or warranties (minor terms)

• If a condition is breached prima facie, the innocent party can claim damages and terminate future performance of the contract

• If a warranty is breached the innocent party can only claim damages

• Written contracts may specifically identify which terms are conditions vs warranties

• However, if the contract is drafted by non-lawyers should be wary that just because the word ‘condition’ or ‘warranty’ is used - this does not mean that is the intended classification

• Some terms are pre-determined by statute as conditions

• Sometimes terms are not classified in advance - these are called Innominate Terms - denoted a ‘wait and see approach’ as the severity/legal consequences of breaching this term depend on the nature and severity of the breach (once it has happened)

6.2 Implied Terms

• 4 main categories of implied terms

  • Terms implied by Custom

  • Terms implied by Fact

  • Terms implied in Law

  • Terms implied by Statute

6.2 Implied Terms - Terms implied at Common Law

Terms implied by Custom

• A term may be implied if it reflects the well-known and legally binding customs of a particular trade

• However this implied term would not be included if it would contradict an express term of the contract

Terms implied in Fact

• A term may be implied even if the parties have no expressly agreed it but the contract would be unworkable without it

• Considered the parties have implicitly agreed to this to make commercial sense of their contract

Term implied in Law

• A term may be implied into a contract because the law regards it is a necessary part of that particular type of contract

6.2 Implied Terms - Terms Implied by Statute

• Some terms are implied by statute into business-to-business (B2B) contracts for the sale and supply of goods and services

  • Provided by the Sale of Goods Act 1979 12(1), 13(1), 14(2), 14(2A), 14(3)

  • ss 12,13 and 14 are considered conditions when implied into contracts - imposing strict liability (meaning does not have to be the sellers fault, simply the fact that the goods are not matching decription)

  • If breached, the innocent party can reject the goods and get a refund as well as a claim for damages

  • The only times the innocent party can’t reject the goods are;

    • where the buyer has accepted the goods, or

    • in relation to ss13 and 14, where the breach is so slight it would be unreasonable to reject the goods

• There are also two other main types of B2B contracts;

  • Contracts for a service/work

  • Contracts that involve both the supply of work and materials

• The statute that implies terms into these contracts is the Supply of Goods and Services Act 1982

• There are also terms implied into business-to-consumer contracts (B2C) for the sale of goods and supply of goods and services

• The statute is Consumer Rights Act 2015

• Rights are set out in s 19 of the CRA 2015 and if the goods do not conform to the contract because of a breach of ss9-11, the consumer has

  • a) the short-term right to reject and get a full refund (ss 20 and 22)

  • b) the right to repair or replacement (if appropriate) (s23)

  • c) the right to a price reduction or the final right to reject and get a partial refund to reflect the consumer’s use of the goods (ss 20 and 24)

• The consumer’s common law right to claim damages is not impacted by these implied terms under s19 CRA 2015 so if the remedies in s19 do not fully compensate the buyer for their losses they can also seek damages

• Unless agreed otherwise, the time limit for short-term right to reject non-perishable goods is 30 days after they have been bought, delivered or installed

• With perishable goods, the time limit is no longer than the goods could reasonably be expected to last

Consumers rights to enforce terms about services/work

• s 54 CRA 2015 provides that where a service/work does not conform to the contract because of breach of an express or implied term the consumer has the right to require repeat performance where reasonable, or a price reduction

• If the issue is performance within a reasonable time, the customer is only entitled to an appropriate price reduction