W6 Terms Flashcards by Sarah Bouzanis

What is a breach of contract?

Breach of a term duly incorporated into the contract

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What is not a term of a contract?

Mere puff
Representations that have not been incorporated into terms

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How do you determine a breach of contract?

1) Is there a contract?
2) What are its terms? Which are expressed, which are implied, how are they incorporated?
3) Was there a breach? Which term was breached and how?
4) What category of term was breached? Condition, warranty, or innominate?
5) What are the remedies?
6) Are there any defences?
7) Conclusion

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How can express terms be incorporated?

Timing - Routledge v Makay
Importance - Bannerman v White
Specialist knowledge/expertise - Dick Bentley v Harold Smith Motors
Checks - Schawel v Reade

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Routledge v Makay

Facts: Buyer told seller about a motorbike - 1942 model. A week later, agreed to sell, turned out it was a 1930 model. Buyer argued age was a contractual term. Court said no - too much time elapsed between statement and contracting (timing). Court also influenced by the fact that during the sale, it was recorded in writing, and the written document didn’t mention the age (no signifier of importance).

Significance: Terms - incorporated by timing

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Bannerman v White

Facts: Buyer was a hops-seller in London. Seller was a hops-producer in Kent. Buyer circulated a notice to their suppliers advising them to stop using sulphur. When contracting for this particular sale, Buyer told seller they wouldn’t contract if the hops for sale had been treated with sulphur. Seller assured them no sulphur had been used, as there hadn’t been any mould so hadn’t needed to use it. Statement made again when sample was produced. Sale happened - some hops had been treated with sulphur (5 acres out of 300). Sulphured and unsulpherd hops had been mixed together, so buyer rejected the whole lot upon delivery. Buyer argued breach of contract, court agreed - clear importance due to reiteration. Seller hadn’t knowingly made a misrepresentation, but did breach the contract, and the sulphur was a condition of the contract. In determining whether it was a warranty only or a condition as well, the judge compared it to a contract for peas where beans were delivered instead.

Significance: Terms - incorporated by importance. Sale by sample.

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Dick Bentley v Harold Smith Motors

Facts:Bentley buying a car. At some point, someone had dialled back the odometer. The court argued the buyer was less able to determine the true mileage, seller (car dealer) was the expert, and mileage was an express term of the contract.

Significance: Terms - Incorporated by specialist knowledge/expertise

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Schawel v Reade

Facts: Horse for sale for stud purposes. Buyer asked to check if it was sound for stud purposes; seller said “I assure you it’s fine, no need to check”. Court ruled that seller was adopting the risk in the truth of the statement, statement became a contractual promise.

Significance: Terms - incorporated by checks/overriding oral assurance

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Hopkins v Tanqueray

Facts: Sale of a horse at auction. Day before, buyer was looking him over and seller said “I assure you, he is perfectly sound”. Bought the horse at the auction the next day. Was unsound, tried to sue seller for breach of warranty. Court found that as the representation was made the day before (not during the auction process and thereby not to all potential buyers) it was not a warranty and not part of the contract. Also no ICLR at that time.

Significance: Terms - incorporated by checks, timing, and ICLR.

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What is the parol evidence rule?

Rule of evidence determining what a court can consider.
If a contract is a written contract, then extrinsic evidence is inadmissible. - Jacobs v Batavia

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Jacobs v Batavia

Facts: Sale of profit sharing deposit notes. Prospectus made a statement about how and when they’d be paid out, stating that the seller would set aside enough money upon sale of the whole trust to pay off the profit shares. Then failed to notify buyer when trust was sold and that his rights had become exercisable. Court found that the prospectus formed part of the contract and statements made in it were binding.

Significance: Example of parole evidence rule and incorporation by reference.

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What are the exceptions to the parol evidence rule?

Contracts not wholly written - J Evans v Merzario
Collateral Contracts - City of Westminster v Mudd
Onerous terms - Interphoto v Stiletto

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How do entire agreement clauses affect the parol evidence rule?

They apply it in the strictest sense. - Intrepreneur Pub v East Crown

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City of Westminster v Mudd

Facts: Mudd leased a shop from Westminster, occasionally slept in the shop. Lease up for renewal, new lease included provision preventing building being used for residential purposes/prohibiting sleep there. He asked about it, they said they wouldn’t enforce it. Later, they try to boot him for breach of contract. Court found a unilateral offer had been made “if you renew, we won’t enforce that provision”, which he accepted by signing.

Significance: Collateral contract (exception to parol evidence) and unilateral contract

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Interphoto v Stiletto

Facts: Interphoto was a pic library, leased transparencies to Stiletto with a late return fee. Stiletto returned them a month late - about £4k of late fees. Court said if a provision of a contract is particularly harsh, then the requirement is that it must be pointed out with particular care. There is a duty (proportionate to how onerous it is) for the writing party to draw it to the attention of the reviewing party

Significance: Parol evidence and onerous terms

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Inntrepreneur Pub v East Crown

Facts: Beer exclusivity agreement between pub and brewer. Verbal agreement to eventually let him out of it. “Entire agreement” clause in the contract made the parol evidence rule apply in the strictest sense. Court agreed with words on the page.

Significance: Parol evidence and entire agreement clauses - no overriding oral assurance in this case

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How can terms be implied?

By law - e.g. in statute or common law as necessary terms

In fact - gives business efficacy to a contract

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Liverpool CC v Irwin

Facts: Block of flats owned by local authority. Leases stated tenants are required to maintain their own flats. Nothing stating who had the obligation to maintain communal areas. Tenants argued it was landlord’s responsibility. Denning said a term can be implied if reasonable to do so. Denning was overruled in HoL - reasonability is not a high enough threshold. Only impose an implied term if it is necessary for the contract, i.e. if contract will fail without it. If contract fails/doesn’t exist for a different reason, then you can ignore this.

Significance: Term implied in law. Only impose an implied term if it is necessary for the contract, i.e. if contract will fail without it.

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The Moorcock

Facts: Ship owner and dock owner agreed to moor the ship at a dock. When tide went out, ship sank down and rested on seabed, refloated when tide came back in. Dock had a rocky seabed, ship was damaged. Court said a reasonable bystander would say that the dock being a safe berth for a ship was an obviously implied term of the contract.

Significance: Term implied in fact

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British Crane Hire v Ipswich Plant

Facts: Two crane companies had a partnership agreement, leased a crane to then lease to a customer, customer sank it. Obligation to extract the crane was unclear between owner vs lessor. Generally customer has obligation to ensure to return the machine. Taken as a convention.

Significance: Term implied in fact

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McCutcheon v McBrayne

Facts: Trying to ship a car to island in the Hebrides. Car owner had done this before, typically is asked to sign a disclaimer by the ferry. In this instance, wasn’t asked to sign a disclaimer. Car fell off the ferry, ferry said they weren’t responsible because of disclaimer, owner said he hadn’t signed one in this instance. Court argued if you do repeated business on same consistent terms, then those terms can be implied unless expressly repealed.

Significance: Term implied in fact

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Sale of Goods Act 1979

Implies terms related to:
s.12 Title
s.13 Description
s.14 Quality and fitness for purpose
s.15 Sample
Most of which are conditions

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Arcos v Ronaasen

Facts: Sale of wooden staves. On delivery, some were a fraction off the size. Buyer didn’t care, but due to market changes, could now get them cheaper elsewhere. Rejected the goods.

Significance: Example of sale by description being a condition, and the risks involved. S15A of Sale of Goods Act added as a response to stop people playing the market.

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Godley v Perry

Facts: Toy catapult. One in shop worked, the one delivered fell apart.

Significance: Example of sale by sample.

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Supply of Goods and Services Act 1982

Implies terms related to: s.13 Reasonable care and skill s.14 Within a reasonable time s.15 To pay reasonable consideration

What are the three categories of terms?

Conditions - Poussard v Spiers Warranties - Bettini v Gye Innominate - Hong Kong Fir

Poussard v Spiers

Facts: Contract for opera singer to sing in a series of performances. Also required to turn up to rehearsals before first performance. Singer was ill, missed some rehearsals. Manager of Opera House terminated the contract for breach. Opera Singer argued that singing was more important than rehearsal. Court said participation in rehearsal was clearly a condition - part of the root of the contract. Significance: Terms - condition.

Bettini v Gye

Facts: Opera singer – contract included nothing about rehearsals, just required to be in performances. Singer late for rehearsals, manager tried to terminate. Court found in this case that it was a warranty that they attend rehearsals, but wasn't a condition. Manager didn't have the right to terminate whole contract. Significance: Terms - warranty. Refutes Poussard v Spiers.

Hong Kong Fir

Facts: Charter of a ship. Charter included obligation of "seaworthiness". In itself is a strict requirement, but a ship can be unseaworthy in a variety of ways, both major (giant hole) and minor (failure to conform to minor regulations). Ship needed constant repair. Hirers tried to breach based on seaworthiness. Significance: Example of innominate term. Seaworthiness can be material or immaterial, thereby condition or warranty.

A parties' express intention is generally a _______

Condition - Lombard North v Butterworth

Lombard North v Butterworth

Facts: Lease of computer systems, contract said prompt payment was a condition. Buyers were late once by 1 day, entitling lessor to terminate contract and claim damages (loss of profits from ongoing lease). Significance: Example of parties agreeing that certain terms are conditions.

Schuler v Wickman Tools

Facts: Travelling salesman of motor tools to automotive companies. It was a condition that he would visit each major manufacturer at least once per month. Became onerous, he failed to do this, was sued for breach. Court said agreement of condition is persuasive, however court may consider the understanding at the time - was it intended as a condition per the strict legal definition? Look at unreasonability of consequences. Significance: Courts can overrule the categorisation in a contract.

Examples of conditions set by common law precedent

Expected readiness to load - The Mihalis Angelos Time of performance - Bunge v Tradax

The Mihalis Angelos

Facts: A charter for a ship was agreed with an expected loading date of around 1st July, and a cancelling clause if it was delayed past 20th July. Loading was delayed, contract cancelled, dispute ensued. Significance: Expected readiness clause is a condition of contract, breach of which entitles cancellation.

Bunge v Tradax

Facts: Sale of soy bean meal. Contract included a delivery deadline, with the buyer having to specify a port prior to that. Buyer failed to do so, argued that the clause was not a condition. Significance: Time of performance is a condition. Any obligation which must precede the performance (which must be on time) is thereby also a condition.

What is the effect of a breach of contract?

Innocent party has the right of election to either: End contract and claim damages or Affirm contract and claim damages

What is the effect of a warranty breach?

Contract remains, but damages stemming from breach are recoverable.

What is the effect of a breach of an innominate term?

Wait and see - dependent on effect of breach. Careful not to wrongfully repudiate (Hong Kong Fir)

What is a condition?

A term which goes to the root of the contract.

What is a warranty?

Important, but less important than a condition.

What is an innominate term?

A term that is unclear as to whether it's a condition or warranty, e.g. those implied by Supply of Goods and Services Act

How is an innominate term determined to be a condition?

Court will consider (Hong Kong Fir): - The harm done by the breach - Does it deprive the innocent party of substantially the whole benefit of the contract? - Did the innocent party jump the gone and wrongfully repudiate?

Routledge v Makay

Facts: Buyer was a hops-seller in London. Seller was a hops-producer in Kent. Buyer circulated a notice to their suppliers advising them to stop using sulphur. When contracting for this particular sale, Buyer told seller they wouldn't contract if the hops for sale had been treated with sulphur. Seller assured them no sulphur had been used, as there hadn’t been any mould so hadn’t needed to use it. Statement made again when sample was produced. Sale happened - some hops had been treated with sulphur (5 acres out of 300). Sulphured and unsulpherd hops had been mixed together, so buyer rejected the whole lot upon delivery. Buyer argued breach of contract, court agreed - clear importance due to reiteration. Seller hadn’t knowingly made a misrepresentation, but did breach the contract, and the sulphur was a condition of the contract. In determining whether it was a warranty only or a condition as well, the judge compared it to a contract for peas where beans were delivered instead. Significance: Terms - incorporated by importance. Sale by sample.

Bannerman v White

Dick Bentley v Harold Smith Motors

Facts: Horse for sale for stud purposes. Buyer asked to check if it was sound for stud purposes; seller said "I assure you it's fine, no need to check". Court ruled that seller was adopting the risk in the truth of the statement, statement became a contractual promise. Significance: Terms - incorporated by checks/overriding oral assurance

Schawel v Reade

Facts: Sale of a horse at auction. Day before, buyer was looking him over and seller said "I assure you, he is perfectly sound". Bought the horse at the auction the next day. Was unsound, tried to sue seller for breach of warranty. Court found that as the representation was made the day before (not during the auction process and thereby not to all potential buyers) it was not a warranty and not part of the contract. Also no ICLR at that time. Significance: Terms - incorporated by checks, timing, and ICLR.

Hopkins v Tanqueray

Facts: Sale of profit sharing deposit notes. Prospectus made a statement about how and when they'd be paid out, stating that the seller would set aside enough money upon sale of the whole trust to pay off the profit shares. Then failed to notify buyer when trust was sold and that his rights had become exercisable. Court found that the prospectus formed part of the contract and statements made in it were binding. Significance: Example of parole evidence rule and incorporation by reference.

Jacobs v Batavia

Facts: Mudd leased a shop from Westminster, occasionally slept in the shop. Lease up for renewal, new lease included provision preventing building being used for residential purposes/prohibiting sleep there. He asked about it, they said they wouldn't enforce it. Later, they try to boot him for breach of contract. Court found a unilateral offer had been made "if you renew, we won't enforce that provision", which he accepted by signing. Significance: Collateral contract (exception to parol evidence) and unilateral contract

City of Westminster v Mudd

Interphoto v Stiletto

Facts: Beer exclusivity agreement between pub and brewer. Verbal agreement to eventually let him out of it. "Entire agreement" clause in the contract made the parol evidence rule apply in the strictest sense. Court agreed with words on the page. Significance: Parol evidence and entire agreement clauses - no overriding oral assurance in this case

Inntrepreneur Pub v East Crown

Facts: Block of flats owned by local authority. Leases stated tenants are required to maintain their own flats. Nothing stating who had the obligation to maintain communal areas. Tenants argued it was landlord’s responsibility. Denning said a term can be implied if reasonable to do so. Denning was overruled in HoL - reasonability is not a high enough threshold. Only impose an implied term if it is necessary for the contract, i.e. if contract will fail without it. If contract fails/doesn't exist for a different reason, then you can ignore this. Significance: Term implied in law. Only impose an implied term if it is necessary for the contract, i.e. if contract will fail without it.

Liverpool CC v Irwin

The Moorcock

British Crane Hire v Ipswich Plant

Facts: Trying to ship a car to island in the Hebrides. Car owner had done this before, typically is asked to sign a disclaimer by the ferry. In this instance, wasn't asked to sign a disclaimer. Car fell off the ferry, ferry said they weren't responsible because of disclaimer, owner said he hadn't signed one in this instance. Court argued if you do repeated business on same consistent terms, then those terms can be implied unless expressly repealed. Significance: Term implied in fact

McCutcheon v McBrayne

Implies terms related to: s.12 Title s.13 Description s.14 Quality and fitness for purpose s.15 Sample Most of which are conditions

Sale of Goods Act 1979

Facts: Sale of wooden staves. On delivery, some were a fraction off the size. Buyer didn't care, but due to market changes, could now get them cheaper elsewhere. Rejected the goods. Significance: Example of sale by description being a condition, and the risks involved. S15A of Sale of Goods Act added as a response to stop people playing the market.

Arcos v Ronaasen

Facts: Toy catapult. One in shop worked, the one delivered fell apart. Significance: Example of sale by sample.

Godley v Perry

Implies terms related to: s.13 Reasonable care and skill s.14 Within a reasonable time s.15 To pay reasonable consideration

Supply of Goods and Services Act 1982

Poussard v Spiers

Bettini v Gye

Hong Kong Fir

Lombard North v Butterworth

Schuler v Wickman Tools

The Mihalis Angelos

Bunge v Tradax

W6 Terms Flashcards

(66 cards)