4 Terms Flashcards
Why are standard form contracts difficult?
They can lead to ‘unfair surprise’, lack negotiability - ‘take-it-or-leave-it’ and can be ‘substantively unfair’.
Exemption clauses are common and demonstrate all of these problems.
What are the two types of terms?
Express terms - those set out in the contract.
Implied terms - those read into the contract in court.
What is the parole evidence rule?
The parties cannot introduce extrinsic evidence in court which discloses an ambiguity or adds to the terms of the contract.
This is because the contract has been carefully boiled down by the parties. If parole evidence was usable then freedom of contract would be damaged.
What is a collateral term?
An assurance which is collateral to the main terms, often made orally.
It must have induced the claimant to consent if it is to be collateral to the contract.
In what ways can terms be incorporated into a contract?
Signature.
Reasonable notice of the written term.
Previous dealing or custom.
What is the law on signatures for incorporation of terms?
Once a person has signed to the terms of a contract they are bound even if they have not read or understood it - L’Estrange v Graucob [1934].
Spencer argues that a person should not be bound by a signed document if the other party knew that they were inducing them into a situation they would not want.
What is the law on Reasonable Notice for the incorporation of terms?
Adequate notice must be given when a term is in a document. It must be given before contract formation in a document intended to have contractual effect - Denning - Thornton v Shoe Lane Parking [1971].
Red Hand Rule - the more unreasonable a clause is the greater notice must be given - Denning - Interfoto Picture Library v Stiletto Visual Programmes [1989].
In what ways can terms be implied?
From custom.
From the facts of the particular contract.
By law.
What is the test for implying terms through custom?
The custom must be certain, notorious, recognised as binding, reasonable and consistent with express terms.
What are the 3 tests for implying terms through fact?
Business Efficacy - the implied term must be necessary to give the transaction business efficacy.
‘Officious Bystander’ - Shirlaw v Southern Foundries [1926] - the term to be implied is something so obvious it goes without saying.
Cumulated Test - the term to be implied must include the above tests, be reasonable, clearly expressible and not contradictory to express terms.
What did Lord Hoffmann say in AG of Belize v Belize Telecom [2009]?
Implying terms in fact is an exercise in the construction of the contract as a whole.
What are some examples of terms implied in law?
The employee will serve diligently, loyally and with reasonable competence.
The employer will not require the employee to act unlawfully.
The employer will provide safe premises and take reasonable care not to endanger the employee’s health - Johnstone v Bloomsbury Health Authority [1992].
*The parties cannot contract out of terms implied in law.
In Crossley v Faithful & Gould Holdings [2004] the CA approved a number of considerations for implying terms, what are they?
Whether the proposed term is consistent with the existing law.
How it would affect the parties.
Wider issues of fairness in society.
What is a good example of a statute which implies terms into contracts and what are some of these implied terms?
Sale of Goods Act 1979.
- The seller has title to sell the goods.
- Goods sold correspond to their description.
- Goods sold in the course of business are of satisfactory quality.
How are terms interpreted?
By the meaning which the document would convey to a reasonable person having the background knowledge which would have been available to the parties at the time of formation.
The approach is purposive not literal - Pink Floyd v EMI [2010].
