Contents

Question 1

what are express terms?

Answer 1

Express terms are specific terms in a contract that are agreed upon by both parties and are usually written down. They outline the legal rights and responsibilities of each party to the contract

Question 2

How can an express term be incorporated into a contract? What is the effect of this?

Answer 2

A term may be incorporated into a contract in the following ways:
o Signature
o Reasonable notice before or at the time of the contract
o A previous consistent course of dealing

This allows for terms which have been expressly agreed to be incorporated and the small print (i.e. terms and conditions, notices)

Question 3

re: express terms

what is the effect of a signature?

Answer 3

parties will be bound by the contract they sign, this will include and terms and conditions inc. those which state ‘‘I have read and understood the terms and conditions overleaf’’ or where a box to this effects ticked

Question 4

what type of clause can be difficult to apply the incorporation principles to?

Answer 4

exemption clauses

Question 5

re: express terms

when will someone not be bound by a signed contract?

Answer 5

if the document has been misrepresentation

Question 6

re: express terms

when might the ‘reasonable notice’ principle apply?

Answer 6

This might apply when there are terms and conditions but a party has not necessarily signed something i.e.:
o Terms that are contained in notices at the point of sale
o Terms that are on the back of tickets

Question 7

re: express terms

what is the general position in relation to the ‘reasonable notice’ principle?

Answer 7

The general position is that the party who wants to rely on the terms needs to have given reasonable notice at or before the time of the contract

If reasonable notice has been given, then the term will be regarded as incorporated

If reasonable notice has not been given, then the term will not be incorporated

Question 8

re: express terms

what will the court consider when deciding if reasonable notice has been given?

Answer 8

o The nature of the document - would a reasonable person expect there to be a contract?
o Timing - the notice must have come before the contract (i.e. at quotation) and not afterwards (i.e. on an invoice)
o Onerous terms - the more onerous the term, the more a party should do to bring it to the other party’s attention.
o The exemption clause must be legible
o If the term is on the back, there should be words on the front i.e. ‘see terms overleaf’

Question 9

re: express terms

give an example where the court held a term was not a term of a contract

Answer 9

re: reasonable notice and considering the nature of the document

a term on the back of a ticket that someone had been given after paying for the hire of a deckchair was held not to be a term of the contract. A reasonable person would simply have assumed that the ticket was proof of payment.

Question 10

re: express terms

explain the incorporation by a previous consistent course of dealing principle and the rationale

Answer 10

Terms can be incorporated by virtue of previous consistent dealings that were on exactly the same terms.

The premise is that by this stage of the dealings parties should be familiar with the T&Cs

Question 11

re: express terms

give 2 examples when incorporation will not be deemed to have taken place by a previous course of dealings

Answer 11

1. The parties have had three or four dealings over the last five years always on the same terms: The terms will not be incorporated. There will not have been sufficient dealings for the innocent party to remember the terms they contracted on in the past.
2. The parties have had lots of dealings in the past but there has been no consistency; sometimes, but not always, one party has been asked to sign a document containing terms: The terms will not be incorporated, whilst dealings might be regular, they haven’t been consistent.

Question 12

re: express terms

give an example when incorporation will be deemed to have taken place by a previous course of dealings

Answer 12

The parties have had dealings three or four times a year over a long period of time and a sale note has routinely been handed over, which sets out the seller’s standard terms and conditions.

Question 13

re: express terms

how are express terms classified and what are they?

Answer 13

Terms are generally classified as:
o Conditions (important terms)
o Warranties (minor terms)
o Innominate terms (i.e. a term that cannot be defined as a condition or warranty)

Question 14

re: express terms

why is it important to properly classify a term to a contract?

Answer 14

It is important to classify the term of the contract because this will depend on the remedy available to the claimant if there has been a breach

Question 15

re: express terms

what remedy is available if a condition has been breached?

Answer 15

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

Question 16

re: express terms

if there has been a breach of condition, what has usually happened?

Answer 16

A breach of a condition usually means that the innocent party has been deprived of the entire benefit of the contract in some way

Question 17

re: express terms

what is the difference between a condition and warranty?

Answer 17

conditions are the fundamental terms to the contract, they are the basis of the contract.

the warranties are the ancillary terms. They generally offer assurances and guarantees and are not as important as conditions.

Question 18

re: express terms

how do you identify a condition and warranty?

Answer 18

the contract may specifically say, however contracts can be drafted by lay persons who do not understand the significance of each terms.

in the latter, you need to look at al the circumstances to decide whether the parties could have intended that breach of the specific clause would lead to termination of the contract

also, some terms have been judicially recognised as being a condition or a warranty i.e. ‘expected ready to load’ clauses in charter parties (contracts to hire ships) are conditions

Question 19

re: express terms

what is the remedy for breach of warranty?

Answer 19

If a warranty is breached, then the only remedy available is damages

Question 20

re: express terms

what is an innominate term?

Answer 20

also called an intermediate term

this is a term which cannot be defined as a condition or a warranty. These are terms where there could be a spectrum of breaches.

Question 20

re: express terms

what remedy is available for breach of innominate terms?

Answer 20

Lord Diplock said with these types of terms you need to wait and see. Only if the breach of the term substantially deprives the party of the whole benefit he expected to get, we he be entitled to terminate the contract.

Otherwise, they will only be entitled to damages.

Question 21

re: express terms

what is the problem with innominate terms?

Answer 21

With these terms comes fairness but there is uncertainty in having to wait and see whether the breach in an ongoing contract is serious enough to justify the innocent party terminating the future performance of it

Question 22

what are implied terms?

Answer 22

terms which are so obvious they go without saying

Question 23

what is an example of an implied term?

Answer 23

If you buy something from a shop and it doesn’t work, you can take it back and return it. But the shop did not expressly promise that the goods would work and you did not check? You can return the goods because it goes without saying that the new goods would be fit for purpose and free from defects.

Question 24

what are the categories of implied terms?

Answer 24

o Terms implied by custom o Terms implied by fact o Terms implied in law o Terms implied by statute

Question 25

what is a term implied by custom?

Answer 25

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

Question 26

what is a term implied by fact?

Answer 26

A term where the parties have not expressly agreed something, but the contract would be unworkable without the relevant term i.e. something so obvious it goes without saying It is assumed that the parties have implicitly agreed it so as to make commercial sense of the contract

Question 27

what is a term implied by law?

Answer 27

A term will be implied if the law regards it as a necessary incident to a particular type of contract i.e.: o In an employment contract there is an implied duty on the employer to provide a healthy and safe environment for the employee to work in or an obligation for the employee not to disclose confidential information o The law sees this as an essential to an employee relationship

Question 28

what is a term implied by statute?

Answer 28

where a piece of legislation sets out the term that is to be implied (these are really a sub-category of terms implied by law)

Question 29

re: implied terms what are the three key statutes which imply terms?

Answer 29

o Sale of Goods Act 1979 o Supply of Goods and Services Act 1982 o Consumer Rights Act 2015

Question 30

re: implied terms what types of contracts does the Sale of Goods Act 1979 apply to?

Answer 30

business to business contracts for the sale of goods

Question 31

re: implied terms what types of contracts does the Supply of Goods and Services Act 1982 apply to?

Answer 31

business to business contracts involving: o Service contracts (i.e. furniture removal contract) o The supply of work and materials (i.e. to supply and fit a new kitchen)

Question 32

re: implied terms what types of contracts does the Consumer Rights Act 2015 apply to?

Answer 32

business to consumer contracts for the sale of goods and supply of goods and services

Question 33

re: implied terms what are the main implied terms under the Sale of Goods Act 1979?

Answer 33

12(1) that the seller has a right to sell the goods 13(1) that the goods will correspond with the description 14(2) & (2A) that the goods are of satisfactory quality. Goods will be of satisfactory qualify if they meet the standard that a reasonable person would regard as satisfactory, taking account of the description of goods, any price and all other relevant circumstances 14(3) if the buyer expressly or impliedly makes it known to the seller the purpose for which the goods are being bought, there is an implied term that the goods are reasonable fit for that purpose, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller

Question 34

re: implied terms what is the classification of the implied terms under the Sale of Goods Act 1979?

Answer 34

they are all conditions

Question 35

re: implied terms what liability is imposed by the implied terms under the Sale of Goods Act 1979? what is the effect? what are the exceptions to this?

Answer 35

These are all conditions and impose strict liability There are exceptions to this: o They have accepted the goods or intimated acceptance (i.e. they have kept them beyond a reasonable time without seeking to reject them); or o In relation to 13 & 14, the breach is so slight it would be unreasonable to reject the goods

Question 36

re: implied terms what is the best way to approach an SBAQ?

Answer 36

o What type of contract is in operation i.e. business to business? business to consumer? o What type of term has been breached o Then you can identify the remedy

Question 37

re: implied terms what are the main implied terms under Supply of Goods and Services Act 1982 in relation to work and materials contracts only? state the classification of the term. what type of liability do these impose?

Answer 37

2(1) the transferor has the right to transfer the property (condition) (3) the goods will correspond with the description (condition) 4(2) the goods will be of satisfactory quality (condition) 4(5) if the buyer makes known to the supplier their purpose for the goods (either expressly or impliedly) and reasonably relies on the supplier’s skill/knowledge, there is an implied term that the goods will be fit for that purpose (condition) these terms impose strict liability.

Question 38

re: implied terms what are the main implied terms under Supply of Goods and Services Act 1982 in relation to work & materials contracts and service contracts? state the classification of the term. what liability is imposed?

Answer 38

13. there is an implied term work will be carried out with reasonable care and skill (innominate term) 14. where no time for performance has been agreed, it is implied that work will be done within a reasonable time (innominate term) 15. if a price for work has not been fixed, there is an implied term that a reasonable sum will be charged (innominate term) these are not strict liability

Question 39

re: implied terms where applicable, what is meant by strict liability and what is the effect of this?

Answer 39

the seller will be liable, regardless of fault. This means that the buyer does not need to prove that the seller was at fault to receive damages

Question 40

re: implied terms what terms are implied by the Consumer Rights Act 2015 in relation to sale of goods and supply of goods under a goods and services contract? what liability do they impose?

Answer 40

9. the goods will be of satisfactory quality 10. if the buyer makes known to the supplier their purpose for the goods (either expressly or impliedly) and reasonably relies on the supplier’s skill/knowledge, there is an implied term that the goods will be fit for that purpose 11. the goods will correspond with the description 17. the seller has the right to sell/transfer the goods the terms impose strict liability.

Question 41

re: implied terms if there has been a breach of s9 - 11 of the Consumer Rights Act 2015, what remedies are available?

Answer 41

A consumer has rights to enforce terms about goods under s19 CRA 2015. This is a pecking order of remedies. If one is lost / not available then you move onto the next: o The short-term right to reject and get a full refund (ss20 & 22) o The right to repair or replacement (if appropriate) (s23) o The right to a price reduction and get a partial refund to reflect the consumer’s use of the goods (ss20)

Question 42

re: implied terms where there has been a breach of a term implied by the Consumer Rights Act 2015 and the consumer is seeking a remedy, what is the 'short-term right' and the time frame attached to it?

Answer 42

The short-term right to reject and get a full refund (ss20 & 22) Unless otherwise agreed, the time limits are: * Non-perishable goods - 30 days * Perishable goods - no longer than the goods could reasonably be expected to last

Question 43

re: implied terms where there has been a breach of a term implied by the Consumer Rights Act 2015 and the consumer is seeking a remedy, what is the time frame attached to the right to repair and right to a price reduction?

Answer 43

Unless otherwise agreed:  Non-perishable - 6 months from date of delivery  Perishable - where the goods did conform to the contract on the day of delivery (this can be difficult to prove)

Question 44

re: implied terms what impact does s19 Consumer Rights Act 2015 have on a consumer's common law right? What does this mean?

Answer 44

a consumer’s common law right to damages is unaffected by the rights under s19. in other words, they can exercise their rights under s19 and they can still exercise their common law right to damages. This is a remedy that allows a claimant to receive monetary compensation from a defendant who is responsible for causing loss or damage i.e. if they can get a refund and if they purchase a new item which is more expensive, they can claim the extra cost of the new item

Question 45

re: implied terms what terms are implied by the Consumer Rights Act 2015 in relation to goods and services contracts and service contracts? what liability do they impose? Give an example.

Answer 45

49. there is an implied term work will be carried out with reasonable care and skill 51. where no time for performance has been agreed, it is implied that work will be done within a reasonable time 52. if a price for work has not been fixed, there is an implied term that a reasonable sum will be charged these are strict liability. If there is a contract for goods and services between a trader and consumer, the trader cannot rely on the fact that there is a manufacturing defect (so the defect is the fault of the manufacturer, not the trader) to escape liability

Question 46

re: implied terms - consumer rights act 2015 what remedy is available to the consumer when the service/work does not conform with the contract?

Answer 46

S54 provides that where service/work does not confirm with the contract because of a breach of express term relating to the performance of the service/work or if there has been a breach of s49 (i.e. reasonable skill and can), the consumer has the right to:  require repeat performance (where reasonable); or  a price reduction If there is a breach of s52 (i.e. charge a reasonable sum) the consumer has a right to an appropriate price reduction.

Question 47

what is an exemption clause? What is their aim? Give an example.

Answer 47

These are clauses to exclude or limit liability for loss or damage in the event of failure to perform the contract properly i.e. if the goods are delivered late or the service is performed badly They seek to cut down the innocent party’s remedy and make it more difficult to enforce their legal rights

Question 48

to protect buyers from unfair terms, what protections are in place in relation to exemption/limitation clauses?

Answer 48

steps 1 and 2 are common law rules: 1) Incorporation 2) Construction 3) statutory controls

Question 49

when can the defendant rely on an exemption/limitation clause?

Answer 49

They will need to effectively clear three hurdles to be able to rely on the clause and exclude liability: 1) Incorporation - the clause must have been incorporated 2) Construction - the term must exclude the particular breach and damage it has caused 3) statutory controls

Question 50

what is meant by the construction stage in relation to exemption/limitation clauses? what rule applies?

Answer 50

i.e. as a matter of construction, is the clause purporting to exclude/limit liability for the particular breach and loss that breach has caused? The ‘contra proferentem rule’ applies. This means that if there is any ambiguity at all, the clause will be construed against the person seeking to rely on it. There is a strict application of this rule.

Question 51

what is the contra proferentem rule?

Answer 51

This means that if there is any ambiguity at all, the clause will be construed against the person seeking to rely on it. There is a strict application of this rule.

Question 52

re: exemption clauses what are the potential outcomes of the construction stage?

Answer 52

exemption clause specifically excludes/limits liability for the breach in question - consider the statutory controls and whether any of those impede the use of the exemption clause. If there is any ambiguity surrounding the exemption clause, it will fail at this hurdle.

Question 53

give 2 examples of when an exemption clause was not construed to cover the liability in question

Answer 53

Example 1 * Facts: Claimant’s car was being repaired at the defendants’ garage when it was damaged by fire caused by the defendants’ negligence. * Clause: ‘The Company is not responsible for damage caused by fire to customers’ cars on the premises.’ * Outcome: the exemption clause did not cover the liability in question. The clause was merely a ‘warning’ that D would not be liable. Example 2 * Facts: At the time of the accident there were six people in a car with seating accommodation for only five. * Clause: Car insurance policy excluded liability for damage ‘caused or arising whilst the car is conveying any load in excess of that which it was constructed for’. * Outcome: the exemption clause did not cover the liability in question. The court held that the word ‘load’ only applied where there was a specified weights that must not be exceeded i.e. lorries and vans

Question 53

re: exemption clauses what are the two main statutes which limit exemption/limitation clauses and what contracts do they apply to?

Answer 53

o Unfair Contract Terms Act 1977 - business-to-business contracts o Consumer Rights Act 2015 - business-to-consumer contracts

Question 54

re: exemption clauses what are the three possible outcomes when applying UCTA 1977?

Answer 54

There are three outcomes when applying UCTA: o UCTA has no effect on the clause o UCTA renders the clause void o The clause is subject to the ‘requirement of reasonableness’

Question 54

re: exemption clauses explain when UCTA would have no effect on a business to business contract

Answer 54

UCTA will have no effect on an exemption/limitation clause in a freely negotiated contract which excludes liability of an express term In this instance, the defendant could rely on the exemption clause to avoid liability.

Question 55

re: exemption clauses what is the reasonable test?

Answer 55

s11 UCTA = was the term fair and reasonable to be included at the time the contract was made, having regard to all the circumstances and taking into account what was known or out to have been known when deciding whether a term was reasonable, the court should have regard to the factors set out in Schedule 2.

Question 55

re: exemption clauses explain when UCTA will render the exemption/limitation clause automatically void

Answer 55

UCTA will render an exemption clause void in two instances: * If the clause purports to exclude negligence liability which causes death or personal injury (i.e. if, as a result of one party’s negligence, the other dies or is injured, the negligent party will be liable, regardless of any term in the contract) * If the clause purports to exclude/restrict liability for breach of the implied term regarding the seller’s undertaking of ownership of title

Question 56

re: exemption clauses UCTA 1977 stipulates types of clauses which are subject to the reasonable test, what are the main ones?

Answer 56

remember, this is to business to business contracts only exemption and limitation clauses which relate to: * s2 - clauses exempting liability for loss or damage caused by negligence. * s3 - clauses exempting liability for breach of an express term contained in the standard written terms of the person seeking to exempt liability NB: UCTA will have no effect on an express them that has been freely negotiated. s3 is different because it is looking specifically at the standard terms. * s6 & s7 - clauses exempting liability for breach of statutory implied terms relating to goods i.e. description, quality, fitness for purpose it is possible to exclude/limit liability in relation to the above issues, but it must be reasonable to do so

Question 56

re: exemption clauses when will a clause be subject to the 'reasonable' test?

Answer 56

If the clause is not an express term that was freely negotiated and is not automatically void, then the exclusion/limitation clause will likely be subject to the reasonable test

Question 57

re: exemption clauses what obligation is on the court in relation to schedule 2?

Answer 57

If the case involves the sale or supply of goods it is mandatory for the court to consider Schedule 2. In all other cases, the court should have regard to Schedule 2 The court simply have to consider schedule 2, it is not a list of determining factors. The court can also consider other factors that aren’t set out in Schedule 2.

Question 58

re: exemption clauses who must prove the exemption/limitation clause is reasonable?

Answer 58

The onus is on the defaulting party to show that the exemption clause is reasonable

Question 59

re: exemption clauses what are the schedule 2 factors?

Answer 59

* parties’ bargaining position (it will be more likely to argue the clause is reasonable if they are equal) * Did the customer receive an inducement to agree to the exemption clause? Could the customer have entered into a similar contract elsewhere without the exemption clause but chose not to? (if so, the court might be reluctant to interfere as they may have had good reason for accepting the clause, making it reasonable) * Whether the customer knew, or ought reasonably to have known of the existence and extent of the clause, taking into account any trade custom and previous dealings * If the clause states that the exemption clause will not apply if a condition is not complied with (this will depend on whether it was reasonable at the time of the contract to expect compliance with the condition would be practicable)

Question 60

re: exemption clauses what are other factors a court might consider when evaluative the reasonableness of an exemption/limitation clause?

Answer 60

o Whether the risk was insurable o The difficulty of the task i.e. if it was difficult or dangerous and there is a high right of failure, this would point towards the clause being reasonable o The nature of the parties’ dealings and negotiations

Question 61

re: exemption clauses what are some examples of when a court might consider an exemption/limitation clause to be unreasonable?

Answer 61

o if the clause excludes liability for defects in goods unless defects are notified to the supplier within 7 days of delivery (an unreasonable condition) o the seller is a large company that insists on selling goods on its own standard terms and conditions which contain exemption clauses similar to other suppliers o the exemption clause is buried in the small print

Question 62

re: exemption clauses what are some examples of when a court might consider an exemption/limitation clause to be reasonable?

Answer 62

o the seller agreed to reduce the price of goods if the buyer was prepared to accept the exemption clause o experiences businessmen enter into freely negotiated contracts including exemption clauses

Question 63

re: exemption clauses what is the difference between a limitation clause and exclusion clause?

Answer 63

limitation clause limits liability, while an exclusion clause excludes liability

Question 64

re: exemption clauses what is a limitation clause? Give an example.

Answer 64

a limitation clause limits liability for certain breaches, such as by capping the amount of damages that can be paid. A limitation clause might also restrict the types of losses that can be recovered or the remedies available

Question 65

re: exemption clauses what are the additional obligation on the court in relation to limitation clauses?

Answer 65

when considering the reasonableness of a limitation clause, the court should also have regard to: o The resources the defendant could expect to be available for them for the purpose of meeting the liability should it arise; and o How far it was open to the defendant to take out insurance cover

Question 66

re: exemption clauses what is the position regarding the main statutory implied terms under the Consumer Rights Act 2015 and exclusion/liability clauses in relation to service contracts? with this in mind, give examples of the types of clauses that would not be binding on the consumer

Answer 66

s49 reasonable skill and care - a trader cannot exclude liability for breach of this implied term. They cannot limit liability if it would prevent the consumer from getting a full refund. s51 (reasonable sum) and s52 (reasonable time) - these provisions do not apply where the contract stipulates a sum/time. If the contract does not state either of these things, the respective provisions will apply. Where these provisions apply, they cannot liability if it would prevent the consumer from getting a full refund. The position on limiting liability ensures the consumer can at least recover the full amount they paid if the trader doesn’t fulfill the agreed-upon standards. example of non-binding clauses: o Exclude or restrict a right or remedy in respect of liability for breaches of ss49 – 52; o Make a right or remedy or its enforcement subject to a restrictive or onerous condition; o Put a person at a disadvantage as a result of pursuing such a right or remedy; or o Exclude or restrict rules of evidence or procedure

Question 66

re: exemption clauses what is the position regarding the main statutory implied terms under the Consumer Rights Act 2015 and exclusion/liability clauses in relation to sale contracts? with this in mind, give examples of the types of clauses that would not be binding on the consumer

Answer 66

The implied terms (i.e. matching description, fit for purpose and reasonable skill and care) cannot be excluded or restricted; nor can a cause prevent an obligation or duty arising in the first place. In effect, they are essentially non-excludable rights because liability for breach cannot be excluded or limited by clauses in the contract examples of non-binding clauses: o Exclude or restrict a right or remedy for a breach of ss9 – 11; o Make such a right or remedy or its enforcement subject to restrictive or onerous condition; o Allow a trader to put a business at a disadvantage as a result of pursuing the right or remedy; or o Exclude or restrict rules of evidence or procedure

Question 67

re: exemptions clauses what is the position in relation to exemption clauses and third parties?

Answer 67

if an exemption clause seeks to protect someone who is not party to the contract, the general rule is that the exemption clause cannot protect a third party due to the privity rule however, if the third party is named or identified as a member of class intended to benefit from it, the third party can rely on the exemption clause to the same extent as the contracting party (CRTPA 1999)

Question 68

re: exemptions clauses what is an example of an exemption clauses covering a third party? what is the effect of this?

Answer 68

Jordan's car is negligently repaired by a mechanic at Car Care. Jordan is injured due to this. 8.1 Neither Car Care Ltd nor any of its employees will be liable for loss or damage to property howsoever caused (including negligence). 8.2 Neither Car Care Ltd nor any of its employees will be liable for personal injury, unless caused by negligence. o Jordan can sue Car Care for breach of contract. He would not sue the mechanic as there is no contract between them. o Jordan can sue the mechanic in the tort of negligence. The mechanic could rely on 8.1 to avoid liability by virtue of CRTPA 1999 (if it is incorporated and reasonable)

Question 69

when might a term labelled as a 'condition' not be conclusive in a contract?

Answer 69

Where a contract is drafted by a non-lawyer, they do not always understand the importance of the terminology. If one party breaches a 'condition' in a contract drafted by a non-lawyer, it could be argued the other party is not entitled to terminate the contract. If the term was one which the parties must have known would be breached at some time or another, it could be argued they could not have intended one breach to justify terminating the contract