chapter 6 contents

Understanding Express Terms

Definition:

Express terms are the terms of a contract which the parties have explicitly agreed to, either orally or in writing. These may relate to price, description, payment, performance obligations, and more.

General Rule:

• If a contract is formed, then the terms explicitly agreed upon by the parties are legally binding.

• Express terms can be found in written contracts, oral agreements, or implied through conduct.

Straightforward Examples:

• Buying an item in a shop: item + price are express terms.

• Signing a loan agreement: amount borrowed, interest, repayment terms.

2. Incorporation of Terms

This refers to how the terms become part of the contract. It is particularly relevant when dealing with small print, standard terms, or situations where no formal signed contract exists (e.g. tickets, brochures, websites).

Legal Methods of Incorporation:

2.1 Incorporation by Signature

• Rule: If a party signs a contract, they are bound by all terms in that document, even if they have not read them.

• Includes online agreements where users tick a box stating they have read and agree to terms.

• Only exceptions:

  • If the term is illegible or misleading

  • If the term is onerous and not fairly brought to attention

  • If there has been misrepresentation (see Ch. 11)

Leading Case: L’Estrange v Graucob [1934]

• Party who signed was bound by terms even though they had not read them.

2.2 Incorporation by Reasonable Notice

• Applies when the contract is not signed.

• The party relying on the term must prove that reasonable notice was given before or at the time the contract was made.

Factors courts consider:

• Nature of the document: Is it a document one would reasonably expect to contain terms (e.g., contract vs. receipt)?

• Timing: Notice must be given before or at the time of contract formation, not afterwards (e.g. on an invoice).

• Onerous or unusual terms: The more burdensome a term, the more effort is required to bring it to attention.

  • Must be prominently displayed (e.g. in red ink, capital letters).

• Legibility: The term must be legible and comprehensible.

• Reference to the terms: If on the back of a ticket or document, the front must clearly refer to the presence of terms (e.g. “See overleaf”).

Case Examples:

• Olley v Marlborough Court Hotel [1949]: Notice of exclusion clause in hotel room was too late — not incorporated.

• Thornton v Shoe Lane Parking [1971]: Ticket with terms received after contract concluded at ticket machine — terms not incorporated.

• Parker v South Eastern Railway Co [1877]: Court said a party could be bound if they had reasonable notice, even if they didn’t read the terms.

2.3 Incorporation by Previous Consistent Course of Dealing

• Applies where parties have dealt regularly and consistently on the same terms in the past.

• The more regular and consistent the past dealings, the more likely it is that standard terms are incorporated — even if terms are provided post-contract (e.g., via invoice).

Requirements:

• Dealings must be frequent and consistent.

• Both parties must be aware of the standard terms being used each time.

Case Example: Spurling v Bradshaw [1956]

• Course of previous dealings was enough to incorporate a term.

Summary of Situations:

3. Summary of Incorporation of Terms

4. Classification of Terms

Once a term is determined to be incorporated, it must be classified to determine the appropriate remedy upon breach.

4.1 Why Classification Matters

• For damages, classification is irrelevant — all breaches entitle the innocent party to claim damages.

• For termination, classification is crucial. Only a breach of certain types of terms entitles a party to terminate the contract.

4.2 Traditional Classification

(i) Condition

• A term that goes to the root of the contract.

• Breach entitles the innocent party to:

  • Terminate the contract, and

  • Claim damages

• Even if the breach is minor, termination is allowed.

Case Example: Poussard v Spiers (1876)

• Condition breached where lead singer failed to appear at the start of a performance season.

(ii) Warranty

• A minor term of the contract.

• Breach does not allow termination.

• Innocent party can only claim damages.

Case Example: Bettini v Gye (1876)

• A singer missed rehearsal (not performance) — breach of warranty, not condition.

4.3 Innominate (Intermediate) Terms

• Where the contract does not classify the term as either condition or warranty.

• Courts adopt a 'wait and see' approach.

• Classification depends on the effect of the breach:

  • If it deprives the innocent party of substantially the whole benefit → Termination + Damages

  • Otherwise → Damages only

Case Example: Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962]

• Breach of seaworthiness clause (engineers unqualified). Court assessed the seriousness of breach, not its label.

4.4 Mislabelled Terms in Practice

• In practice, contract drafters may mislabel terms as "conditions" or "warranties".

• The courts will look at substance over form:

  • If a layperson drafted the contract, label is not conclusive.

  • If drafted by lawyers, label is given more weight.

4.5 Judicial Classification

Some terms have been judicially classified as a matter of law, such as:

• "Expected ready to load" clauses in shipping contracts are typically treated as conditions.

5. Example in Employment Context

Example:
Ruhi, a teacher, is dismissed without notice for alleged gross misconduct. Her contract entitles her to three months’ notice. If she proves that the misconduct allegation was untrue, her employer is in breach.
→ Remedy: Damages for wrongful dismissal = 3 months' net salary.

6. Summary Diagram – Classification of Terms

1. Introduction to Implied Terms

Definition:

An implied term is a provision not expressly agreed by the parties but which the law or the courts incorporate into the contract to reflect the presumed intentions of the parties, support commercial efficacy, or protect statutory rights.

Rationale:

Contracts are often incomplete. Terms are implied to:

• Give business efficacy to a contract.

• Reflect trade custom or the nature of the relationship.

• Ensure fairness, especially in statutory consumer protections.

Example Scenarios:

• You buy an alarm clock; it stops working immediately. No express warranty was agreed, but it's implied that the goods will be fit for purpose.

• A builder lays foundations using sand. You didn’t specify concrete, but it’s implied that reasonable care and skill must be used.

2. Categories of Implied Terms

Four main sources:

3. Terms Implied at Common Law

3.1 Terms Implied by Custom

• Must reflect a well-established and legally recognised usage within a trade, industry, or locality.

• Must be notorious, certain, and reasonable.

• Cannot contradict express terms.

Key Rule: If an express term conflicts with custom, the express term prevails.

3.2 Terms Implied in Fact

• Applied where a term is necessary to make the contract work.

• Must be so obvious that “it goes without saying”.

• Standard Test: Business efficacy test and the officious bystander test.

Case Law:

• The Moorcock (1889): Jetty owner implicitly promised it was safe to dock. The term was implied for business efficacy.

• Shirlaw v Southern Foundries [1939] (MacKinnon LJ): If an officious bystander had suggested the term during negotiations, both parties would have agreed to it as obvious.

3.3 Terms Implied in Law

• Imposed in all contracts of a particular type, regardless of the parties’ intentions.

• Applied to employment contracts, landlord-tenant agreements, and insurance contracts.

• Focus is on policy and fairness, not consent.

Examples:

• Employment: Employer must provide a safe working environment.

• Employee must act honestly and loyally.

4. Terms Implied by Statute

Statutory implication is now one of the most common and important methods of implying terms into commercial and consumer contracts.

4.1 Sale of Goods Act 1979 (SGA 1979) – Business-to-Business Contracts

Note:

• Strict liability: Seller liable even if unaware of the defect.

• Conditions: Buyer may reject goods and terminate for breach, subject to acceptance and triviality exceptions.

4.2 Supply of Goods and Services Act 1982 (SGSA 1982)

Applies to business-to-business contracts for services, and contracts for work and materials.

4.3 Consumer Rights Act 2015 (CRA 2015) – Business-to-Consumer Contracts

Applies to all consumer contracts for goods, services, and digital content.

CRA 2015 – Remedies for Breach

Under s 19 CRA 2015, if goods do not conform to ss 9–11:

1. Short-term right to reject (ss 20 and 22):

   • Within 30 days of purchase/delivery/installation.

   • Full refund.

2. Right to repair or replacement (s 23):

   • Must be provided within a reasonable time.

3. Right to price reduction or final right to reject (s 24):

   • Partial refund based on usage.

Key Notes:

• The 30-day period does not apply to perishable goods.

• If breach arises within 6 months, goods are presumed to be non-conforming at delivery, unless the seller proves otherwise.

• These rights are in addition to common law right to damages.

CRA 2015 – Services Remedies

Under s 54 CRA 2015, where services breach s 49 (reasonable care and skill), s 52 (timing), or an express term:

1. Repeat Performance (s 55) – If reasonable to do so.

2. Price Reduction (s 56) – If repeat performance is impossible/unreasonable.

5. Practical Examples

6. Summary Chart: Statutory Implied Terms

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