Control of Terms Flashcards
(20 cards)
How terms are incorporated into a contract
only one is required
1. Signature [L’Estrange]
2. Reasonable notice of the written term [Olley v Marlborough Court Hotel]
3. Previous dealings or custom [British Crane Hire Corporation v Ipswich Plant Hire = consistent and regular]
How terms are incorporated into a contract
Signature
- A proxy for consent [L’Estrange v Graucob Ltd – didn’t read exemption clause, but signed and was bound]
- Document must be one that could reasonably be expected to be a contract [Grogan v Robin Meredith Plant Hire]
- Not bound if induced by misrepresentation = Curtis v Chemical Cleaning and Dyeing Ltd
How terms are incorporated into a contract
Reasonable notice of the written term
- Notice must be given at or before the contract is formed = Olley v Marlborough Court Hotel Ltd
- document aimed to have contractual effect = Chapelton v Barry UDC
- The notice must be reasonable = reasonable steps [Parker v South Eastern Railway Co (said look at the back) vs. Sugar v LMS Railway Co (ticket watermarked)]
- Onerous or unusual clauses must be highlighted = Spurling v Bradshaw (red hand rule) + upheld in Interfoto Picture Library Ltd v Stiletto Visual Programmes (very high interest rate)
How terms are incorporated into a contract
Previous dealings
- if consistent and regular, then it may be incorporated
- British Crane Hire Corporation v Ipswich Plant Hire = previous dealings + expertise in their field, so knew the terms, as not unexpected, and they had equal bargaining power
- Vs. Depends on the context of the relationship = in McCutcheon v David MacBrayne Ltd they weren’t from the same industry and held dealings were not consistent and regular
- in Hollier v Rambler Motors it was C to B so power imbalance, so not consistent
Interpretation of exemption clauses
- If words in their natural meaning would give rise to an unreasonable result, judges can reinterpret the words = George Mitchell Ltd v Finney Lock Seeds Ltd
- If there is anything ambiguous then the court will decide in favour of the complainant = Triple Point Technology Inc v. PTT Public Co Ltd
- Limitation clauses are presumptively valid = Ailsa Fishing Co v Malvern Fishing [whilst exclusion of liability is regulated by statute]
Negligence liability
- something is wrong with the negligence
- Guidelines in Canada Steamship Lines v the King = clear express exemption is effective, if not express the court will consider if the words are wide enough to cover negligence, if so, can exemption cover liability other than negligence, if so, this is dangerous as excluding liability
- Although, these are only guidelines and Triple Point Technology v PTT argued to use the ordinary methods of contractual interpretation
UCTA
Are the terms reviewable?
- B to B - unfair terms are not reviewable, only exemption of liability for negligence [s.2] and breach of contract [s.3]
- duty-defying clauses may get round UCTA as they have an alternative, if the circumstances change, whilst defensive clauses are as they exclude liability, as the obligation has changed, and the alternative is ‘substantially different’ = s.3(2)(b)(i)] + this is determined based on the customer’s belief [Timeload Ltd v British Telecommunications plc]
UCTA
Exemptions of liability for negligence
Exemptions of liability for negligence (s2)
- Definition of negligence set out in s1(1) = includes breach of express or implied term to take reasonable care in performance of contract
- Test of reasonableness set out in s11 and Schedule 2
UCTA
Exemptions of liability for breach of contract - how to fall into scope
- To fall into the scope of s.3(1) you have to show that A dealt on B’s written standard terms of contract, then UCTA applies
- African Export-Import Bank v Shebah Exploration & Production Co Ltd = the term must be written, be the term of business, and it must be the other party’s standard term of business
UCTA
Exemptions of liability for breach of contract
= (s3)
- s.3(2)(a) = a party cannot restrict or exclude liability except if reasonable [s.11 and sch 2]
- s.3(2)(b) = the other party cannot claim to be entitled (i) to render the performance substantially different from what was reasonably expected OR (ii) to render no performance – except if the term satisfies the requirements of reasonableness
= Timeload Ltd v British Telecommunications plc = What was reasonably expected by the parties, rather than looking in the contract for intention, held that customer expects a service to continue, BT must have a substantial reason to terminate
UCTA
Is the term reasonable? = TEST
- outright invalid = excluding liability for death or personal injury caused by negligence [s.2(1)] - Reasonableness – Interpret all terms, even those mutually agreed upon = Photo Production Ltd v Securicor Transport
- s.11(1) = the test: ought reasonably to have been, known to or in the contemplation of the parties when the contract was made
- s.11(4)(b) = how far was insurance able to cover?
- s.11(5) = the presumption of unreasonableness: the burden of proof is on D to argue it was reasonable
UCTA
Reasonableness guidlines
Schedule 2 guidelines =
a) = the strength of bargaining power [as shown in Bates v Post Office due to their ‘strength of position]]
b) = induced to agree
c) = whether C knew or ought to have reasonably known of the existence/extent of the term
d) = whether compliance with the condition would be practicable
e) = whether the goods were adapted to the special order of the customer
CRA
- Business to Consumer
- Definition of a trader = Section 2(1) = acting for the purpose of trade
- Definition of a consumer = Section 2(3) = acting for the purpose wholly or mainly outside that individual’s trade
= interpreted in line with its purpose, this Act’s purpose was to protect consumers, so lenient
+ s.2(4) = the burden is on the trader to show that the other party is not wholly or mainly a consumer
CRA
Blacklisted terms
s.65(1) - terms that exclude or restrict liability for death or personal injury from negligence or s.31 - satisfactory quality, fit for a particular purpose, or goods to be as described
CRA
Are the terms unfair? = test
- Are the terms unfair [s.62]? = unfair terms are not binding [s.62(1)] and are under s.62(4) …
1. Contrary to good faith = ‘fair and open dealings’
2. Significant imbalance = the consumer has more obligations
= DG of Fair Trading v First National Bank Plc – so you have to look at the contract as a whole, which is supported by s.62(5)
CRA
caselaw + statute
- Parking Eye v Beavis = [consumer organisation] the charge for overstaying in a car park was not unfair, the court held that there was not a significant imbalance and consumers would individually agree to these terms if individually negotiated contracts, so not contrary to good faith
- s.62(5) = fairness is determined by (a) taking into account the nature of the contract and (b) by reference to all the circumstances
CRA
Grey listed terms
terms that may/likely be regarded as unfair – s.63(1): trader not having to perform obligations, the consumer is denied a dull redress, unfairly losing pre-payments, trader unfairly varies terms, determining price after contract is binding
CRA
clauses that are excluded from the unfairness test
- part 2 of the CRA controls ‘non-core terms’ by subjecting them to fairness
= s.64(1)(a) = core-term exemption: if a term is the main subject matter of the contract it cannot be assessed for fairness [or s.64(1)(b) where it is argued that the good is not in proportion to what you paid]
= Matei = the main subject matter is the ‘essential obligation of the contract’
– core terms excluded only if it is transparent and prominent [s.64(2)(1)]
CRA
core terms exluded if P
- Prominent = brought to the c’s attention in a way the average consumer would be aware of [s.64(4)]
= exemptions to the fairness test must be ‘strictly interpreted’ = Kásler
= regarding s.64(1)(b) [goods not proportional to payment]: OFT v Abbey National = consumers were charged for overdrawing, the court held in favour of the banks which was called a ‘bitter blow to consumers’ by Chen-Wishart – the restrictive approach in First National Bank was followed as all terms relate to the price
CRA
core terms exluded if T
– core terms excluded only if it is transparent and prominent [s.64(2)(1)]
- Transparent = expressed in plain and intelligible language and legible [s.64(3)]
