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CONTENTS OF A CONTRACTCONTENTS OF A CONTRACT

Objectives:Objectives:

1.1. Terms v RepresentationsTerms v Representations

2.2. Types of TermsTypes of Terms

3.3. Parol Evidence RuleParol Evidence Rule

4.4. Exemption or Exclusion ClausesExemption or Exclusion Clauses

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Terms v RepresentationsTerms v Representations

1.1. RepresentationsRepresentations

i.i. Not part of the contract. Not part of the contract. ii.ii. Pre-contractual statements.Pre-contractual statements.iii.iii.Part of the negotiation process. Part of the negotiation process.

Might have induced other party to Might have induced other party to enter into contract.enter into contract.

2.2. TermsTerms

i.i. Part of the contract.Part of the contract.ii.ii. Promises that parties have Promises that parties have

contracted to undertake.contracted to undertake.

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3.3. Distinguishing Terms and Distinguishing Terms and RepresentationsRepresentations

i.i. Four TestsFour Tests

i.i. Where the statement is of such Where the statement is of such major importance that the promisee major importance that the promisee would not have entered into the would not have entered into the agreement without it = TERM. agreement without it = TERM. Bannerman v White [1861Bannerman v White [1861].].

ii.ii. Where there is a gap between the Where there is a gap between the statement and the making of the statement and the making of the contract, = REPRESENTATION.contract, = REPRESENTATION.Routledge v McKay [1954Routledge v McKay [1954]. ]. But note: But note: Schawell v Reade [1913]Schawell v Reade [1913]..

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iii.iii. Where the statement is verbal and Where the statement is verbal and the agreement is subsequently in the agreement is subsequently in writing and the statement is absent writing and the statement is absent from agreement = from agreement = REPRESENTATION.REPRESENTATION.Routledge v McKay [1954Routledge v McKay [1954].].

iv.iv. Where one of the parties to an Where one of the parties to an agreement has special knowledge or agreement has special knowledge or skill, then statements made skill, then statements made BYBY them them = TERMS, but statements made = TERMS, but statements made TOTO them = REPRESENTATIONS.them = REPRESENTATIONS.Dick Bentley Productions Ltd v Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965].Harold Smith (Motors) Ltd [1965].Oscar Chess Ltd v Williams [1957].Oscar Chess Ltd v Williams [1957].

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Types of TermsTypes of Terms

1.1. Four Types of Terms Four Types of Terms

i.i. ConditionsConditions

Fundamental part of contract, essence of Fundamental part of contract, essence of contract. Failure to perform will leave contract. Failure to perform will leave contract meaningless. Breach gives contract meaningless. Breach gives innocent party right to:innocent party right to:

i.i. Terminate contract and refuse to Terminate contract and refuse to perform their part of it; orperform their part of it; or

ii.ii. Honour contract and sue for damages.Honour contract and sue for damages.

Poussard v Spiers and Pond (1876)Poussard v Spiers and Pond (1876)

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ii.ii. WarrantiesWarranties

A minor obligation, not vital to A minor obligation, not vital to overall contract. Failure to overall contract. Failure to perform will not destroy contract.perform will not destroy contract.

Breach only gives innocent party Breach only gives innocent party right to sue for damages once has right to sue for damages once has completed his part of contract. completed his part of contract. Breach Breach DOES NOTDOES NOT give right to give right to terminate contract.terminate contract.

Bettini v Gye (1876)Bettini v Gye (1876)

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ix.ix.Innominate TermsInnominate Terms

Choice of remedy determined by Choice of remedy determined by seriousness of breach.seriousness of breach.

If breach deprives innocent If breach deprives innocent party of substantially the whole party of substantially the whole benefit of contract, then right to benefit of contract, then right to repudiate (terminate) contract repudiate (terminate) contract will be permitted, even if term will be permitted, even if term appears to be a warranty.appears to be a warranty.

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If breach does not deprive innocent party If breach does not deprive innocent party of whole benefit of contract, then will not of whole benefit of contract, then will not be permitted to repudiate contract but be permitted to repudiate contract but must settle for damages, even if term must settle for damages, even if term appears to be a condition. appears to be a condition.

Cehave v Bremer (The Hansa Nord) [1976Cehave v Bremer (The Hansa Nord) [1976].].

ix.ix. Implied TermsImplied Terms

By StatuteBy Statute Under Under Sale of Goods Act 1979Sale of Goods Act 1979 and and Supply of Supply of

Goods and Services Act 1982Goods and Services Act 1982, terms , terms relating to description, quality and fitness relating to description, quality and fitness for purpose all implied into sale of goods for purpose all implied into sale of goods and services contracts.and services contracts.

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Terms implied by the courtsTerms implied by the courts Where it is necessary to give Where it is necessary to give

business efficacy to the contract.business efficacy to the contract. Courts use “officious bystander” Courts use “officious bystander”

test.test. The Moorcock [1889The Moorcock [1889].].

Terms implied by customTerms implied by custom But note a custom cannot But note a custom cannot

override an express term of an override an express term of an agreement.agreement.

Les Affreteurs Reunis v Walford Les Affreteurs Reunis v Walford [1919][1919]

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Parol Evidence RuleParol Evidence Rule

1.1. If all the terms of a contract are in If all the terms of a contract are in writing then presumption is that no writing then presumption is that no evidence supporting a different evidence supporting a different oral agreement will be allowed to oral agreement will be allowed to vary those written terms. vary those written terms. Hutton v Hutton v Watling [1948]Watling [1948]..

2.2. Presumption can be rebutted and Presumption can be rebutted and so evidence supporting a different so evidence supporting a different oral agreement can be introduced oral agreement can be introduced if it can be shown that written if it can be shown that written terms were not all the terms terms were not all the terms agreed by the parties. agreed by the parties. Re SS Re SS Ardennes [1951Ardennes [1951].].

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3.3. Another way in which the Another way in which the courts avoid the effect of the courts avoid the effect of the parol evidence rule is to parol evidence rule is to establish that the verbal establish that the verbal discussions constituted a discussions constituted a collateral contract. collateral contract.

City and Westminster City and Westminster Properties Ltd v Mudd [1959Properties Ltd v Mudd [1959]. ].

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Exemption or Exclusion ClausesExemption or Exclusion Clauses

1.1. Clauses that attempt to remove or limit Clauses that attempt to remove or limit the liability of a party in breach of the liability of a party in breach of contract.contract.

2.2. Whether these clauses are valid depends Whether these clauses are valid depends on the following:on the following:

i.i. Has the clause been incorporated into Has the clause been incorporated into the contract?the contract?

ii.ii. Does the clause effectively cover the Does the clause effectively cover the breach?breach?

iii.iii. Is the clause valid under the Is the clause valid under the Unfair Unfair Contract Terms Act [1977Contract Terms Act [1977] and the ] and the Unfair Terms in Consumer Contracts Unfair Terms in Consumer Contracts Regulations 1999Regulations 1999??

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3.3. IncorporationIncorporationTo be effective an exclusion clause must To be effective an exclusion clause must constitute a term of the contract. There constitute a term of the contract. There are three ways of incorporating such a are three ways of incorporating such a clause:clause:

i.i. By signing the contractBy signing the contract i.i. L’Estrange v Graucob [1934L’Estrange v Graucob [1934]. Unless ]. Unless

other party was misled into signing other party was misled into signing contract – contract – Curtis v Chemical Cleaning Curtis v Chemical Cleaning and Dyeing Co [1951and Dyeing Co [1951].].

ii.ii. By noticeBy noticei.i. Other party must have actually Other party must have actually

known of clause or must have been known of clause or must have been given sufficient notice of it. given sufficient notice of it.

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ii.ii. For notice to be adequate, For notice to be adequate, document outlining the exclusion document outlining the exclusion clause must be an integral part of clause must be an integral part of the contract and must be given at the contract and must be given at time contract is made. time contract is made.

Chapelton v Barry UDC [1940Chapelton v Barry UDC [1940] ] Olley v Marlborough Court Hotel Olley v Marlborough Court Hotel [1949].[1949].

The greater the exclusion, the The greater the exclusion, the greater degree of notice required. greater degree of notice required. Thornton v Shoe Lane Parking Ltd Thornton v Shoe Lane Parking Ltd [1971][1971]

Interfoto Picture Library Ltd v Interfoto Picture Library Ltd v Stiletto Programmes Ltd [1988Stiletto Programmes Ltd [1988].].

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iii.iii. By CustomBy Custom

i.i. Where the parties have had Where the parties have had previous dealings on the basis previous dealings on the basis of an exclusion clause, then of an exclusion clause, then that clause may be included in that clause may be included in later contracts. See later contracts. See Spurling v Spurling v Bradshaw [1956Bradshaw [1956].].

ii.ii.Must show that other party had Must show that other party had actual knowledge of exclusion actual knowledge of exclusion clause. clause.

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4.4. Effective cover of breachEffective cover of breachClause must satisfy following rules:Clause must satisfy following rules:

i.i. Contra Proferentem RuleContra Proferentem Rule

i.i. Any uncertainties or Any uncertainties or ambiguities in the exclusion ambiguities in the exclusion clause will be interpreted clause will be interpreted AGAINSTAGAINST party seeking to rely party seeking to rely on it. See:on it. See:

i.i. Andrews v Singer [1934Andrews v Singer [1934] ] ii.ii.Hollier v Rambler Motors Hollier v Rambler Motors

[1972[1972] ]

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ii.ii. Doctrine of Fundamental Doctrine of Fundamental BreachBreach

i.i. In limited circumstances, it is In limited circumstances, it is impossible for a clause to impossible for a clause to exclude liability if exclude liability if fundamental breach of fundamental breach of contract has occurred. contract has occurred.

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5.5. Valid under UCTA 1977 and UTCCR Valid under UCTA 1977 and UTCCR 1999?1999?

i.i. UCTA 1977UCTA 1977

i.i. Will not allow a contract term to Will not allow a contract term to exclude liability for death or exclude liability for death or personal injury caused by personal injury caused by negligence (negligence (S.2 & 5S.2 & 5).).

ii.ii. Will allow a term to exclude Will allow a term to exclude liability for other types of loss liability for other types of loss caused by negligence providing the caused by negligence providing the term satisfies the requirement of term satisfies the requirement of reasonableness (reasonableness (S.5S.5).).

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iii.iii. If you are a consumer dealing with If you are a consumer dealing with business, then UCTA prevents the business business, then UCTA prevents the business from excluding its liability for breaches of from excluding its liability for breaches of terms implied under SOGA 1979 terms implied under SOGA 1979 (description, fitness, satisfactory quality (description, fitness, satisfactory quality etc.) (etc.) (S.6(2S.6(2) UCTA 1977). ) UCTA 1977).

iv.iv. If a person is If a person is NOTNOT dealing as a consumer, dealing as a consumer, liability for breach of statutory terms can liability for breach of statutory terms can be excluded providing excluding term is be excluded providing excluding term is reasonable (reasonable (S.6(3S.6(3)).)).

ii.ii. UTCCR 1999UTCCR 1999

i.i. Provide that consumers will not be bound Provide that consumers will not be bound by unfair terms. by unfair terms.

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ii.ii. Unfair Terms =Unfair Terms =

i.i. Terms which have not been Terms which have not been individually negotiated; and individually negotiated; and

ii.ii. Which, ‘contrary to the Which, ‘contrary to the requirement of good faith’, requirement of good faith’, cause a significant imbalance cause a significant imbalance between the rights and between the rights and obligations under the contract obligations under the contract to the detriment of the to the detriment of the consumer. consumer.