Control of Terms Flashcards
(31 cards)
Why is it justified to control terms (4)?
- terms might be obscured in the contract
- once a contract is made, it can’t be renegotiated
- often, we don’t read all the terms of a contract
- imbalance in bargaining power -> one party has greater bargaining strength than the other
2 cases supporting key concern [imbalance of bargaining power]
- George Mitchell v Finney Lock Seeds Ltd [1983]
- -> “All this was done in the name of “freedom of contract”. But the freedom was all on the side of the big concern […] No freedom for the little man […] The big concern said, “Take it or leave it.” The little man had no option but to take it” -> Lord Denning
- Suisse Atlantique
–> the customer either doesn’t have time to read the clauses, or doesn’t understand them. If they do, they’ll be told to take it or leave it, and every supplier will tell them that
What are Standard Form Contracts (SFCs)?
when are they most used?
- defined as pre-prepared agreements with standardised terms and conditions
- used repeatedly for similar transactions
What are eSFCs?
What impact do these have?
- electronic SFCs
- exacerbate the opportunities for stronger parties to exploit weaker ones
3 types of eSFCS
- ‘shrinkwrap’ contracts:
- used in software contracts
- bind a person to terms contained therein even if these terms cannot be seen or agreed to until the product is bought and opened
- ‘clickwrap’ contracts:
- where parties are bound by clicking ‘I agree’ or equivalent online
- ‘browsewrap’ contracts:
- where the terms for use of a website or downloadable product are posted on the website, typically as a hyperlink
- the site user is bound by simply using the product, such as by entering the website or downloading software
What are the benefits of SFCs?
- consistency
- efficiency
- makes it cheaper for businesses, which can then pass these savings on to customer
What are the disadvantages of SFCs?
- restrictions on parties’ intentions
- too broad
- no bargaining power -> allows exploitative behaviour
- cause problems for contract formation -> no negotiation
How does common law control terms?
Incorporation of terms
What does incorporation entail?
- A term must be incorporated into the contract if it is to form part of the contract
- If it is not incorporated, it is not binding
- Only if it is binding will subsequent issues of possible invalidity arise
What are the 3 methods of incorporation?
- Signature
- Reasonable notice of the written term
- Previous dealing or custom
How does a signature incorporate terms?
- the signature is proxy for consent
- the party is bound by them
Cases on incorporation and signature (3)
- L’Estrange v Graucob Ltd [1934]
- Grogan v Robin Meredith Plant Hire [1996]
- Curtis v Chemical Cleaning and Dyeing Ltd [1951]
When is reasonable notice used for incorporation?
- for contracts and agreements that have not been signed
- you give your agreement in other ways, such as through actions
Which 3 conditions must be met for incorporation by reasonable notice?
- Notice must be given at or before the contract is formed
- Notice must be given in a document intended to have contractual effect
- Reasonable steps must have been taken to bring the terms to the attention of the other party -> notice must also be reasonable
Which cases are useful for incorporation by reasonable notice? (6)
1: Olley v Marlborough Court Hotel Ltd [1949] & Thornton v Shoe Lane Parking [1971]
2: Chapelton v Barry UDC [1940]
3: Parker v South Eastern Railway Co (1877) & Thomson v LMS Railway Co [1930] & Sugar v LMS Railway Co [1941]
Which cases address controls on onerous or unusual clauses?
- Spurling v Bradshaw [1956]
- Interfoto Picture Library Ltd v Stiletto Visual Programmes [1989]
Which cases address the difficulty in identifying the onerous terms?
- AEG (UK) Ltd v Logic Resource Ltd [1996]
- O’Brien v MGN Ltd [2002]
When is previous dealing or custom used for incorporation?
- a way to incorporate terms because it is custom in a particular industry OR because the parties deal with each other so much that they can imply certain clauses
Which cases discuss previous dealing or custom for incorporation? (3)
- British Crane Hire Corporation v Ipswich Plant Hire Ltd [1975]
- McCutcheon v David MacBrayne Ltd [1964]
- Hollier v Rambler Motors (AMC) Ltd [1972]
Why did courts try to creatively interpret contracts?
Which case highlights this?
- in order to prevent contract-breakers from hiding behind exemption clauses to escape normal consequences of breach
- George Mitchell Ltd v Finney Lock Seeds Ltd [1983] -> Lord Denning -> if reading words with their normal meaning leads to an unreasonable result, judges will either reject this because it is against the main purpose of the contract, or will read the words in a way that leads to a reasonable result
Which 2 key developments changed the ‘creative interpretation’ approach?
Which 2 cases support this view?
- Legislation (UCTA 1977 & CRA 2015) -> created more direct ways to control unreasonable or unfair clauses
- courts are inclined to apply ordinary principles of construction to give effect to what the parties agreed
- Transocean Drilling UK Ltd v Providence Resources Plc [2016] explicitly states that courts should avoid ‘artificial approaches’ and give words their ordinary meaning
- Triple Point Technology Inc v PTT Public Co Ltd [2021] highlights that the court has changed its approach and that the modern view is to read words ordinarily
What is contra proferentem?
Where there is ambiguity in meaning, the term is interpreted against the party who is trying to rely on the term
Which case establishes that there needs to be genuine ambiguity for contra proferentem to apply?
Transocean Drilling UK Ltd v Providence Resources Plc [2016]
- in this case, the meaning of the clause was clear, so there was no need to interpret via contra proferentem
Which case discusses the ‘clear words’ rule?
is it still important?
Triple Point Technology Inc v PTT Public Co Ltd [2021]
- used to be very important
- far less relevant nowadays due to modern approach to interpretation
