Express and implied terms, SofG,
UCTA.
Implied Terms and
Exclusion Clauses
Contents
Terms establishing the contract.
Express terms.
Implied terms.
Representations.
Exclusion Clauses.
Warrantee and Innominate terms
Sale of Goods Act
Unfair Contract Terms Act
Introduction
Once a contract has been formed, it then
becomes necessary to identify the terms of the
contract.
The terms of the contract impose the
obligations on each party.
Before identifying what type of terms there are
we must first distinguish mere
representations, which are not considered
to be terms.
Terms
What are Terms and what are
Representations.
Representations are NOT part of the
contract.
Contracts contain both implied and express
terms.
Terms
Different terms have different levels of
significance for the contract.
The distinction is important for the remedies
which can be claimed under breach.
Terms are included to restrict liability –
exclusion clauses.
Express terms
A contract can be made by….
WORDS which are:
–Written
–Spoken
–Partly written/spoken
These are express terms
Express Terms
Outlined expressly in the offer – what the
key elements are.
Terms which the offeror will accept to be
bound by.
Clearly outlined so all parties know of the
terms.
Representations
Negotiations – not all expressions will form
part of the contract.
Breach of a term – Breach of contract.
Breach of a representation – No breach.
Tests developed to identify which is which.
Tests
1) Relative degrees of parties knowledge –
Oscar Chess v Williams [1957] 1 All ER 325
A private seller of a car obtained £290 in part exchange on
the basis that it was a 1948 model. It was in fact, a 1939
model. The registration book had been fraudulently altered
by a previous owner, but the seller was innocent of this.
The price of a 1939 model was considerably lower. The
plaintiff motor dealer would still have been prepared to buy
the car, but at a lower price had they known the true facts.
The Court of Appeal held, by a majority, that the statement
was not a term of the contract. The main reason for this
decision was that the seller had no special knowledge as to
the age of the car, while the buyers were car dealers, and
so in at least as good a position as the seller to know
whether the statement was true.
Tests
2) Reliance shown to be placed on the statement –
Bannerman v White (1861) CB(NS) 844
The buyer of hops asked whether sulphur had
been used in their cultivation. He added that if it
had he would not even bother to ask the price. The
seller assured him that it had not. This assurance
was held to be a condition of the contract. It was of
such importance that, without it, the buyer would
not have contracted.
Tests
3) Strength of the statement –
Schawel v Reade [1913] 2 IR 64
The defendant told the plaintiff, who required a
horse for stud purposes, that the animal was
'perfectly sound'. A few days later the price was
agreed and, three weeks later, the plaintiff bought
the horse. The statement was held to be a term of
the contract, but here the defendant, who was the
owner of the horse, would appear to have had
special knowledge.
Tests
4) The time at which the statement was
made.
What is the ‘test’ for inclusion of
a term?
The test is objective
Based on intention and underpinned by the
notion of freedom of contract BUT…
Reasonable reliance and expert knowledge
Representations v Terms
The question of whether a statement made
by a party is a term or a mere
representation is important because the
statement’s classification has implications
when determining the issues of breach and
remedies.
Representations v Terms
• Characteristics of terms
• contractual force: binding
• promissory
• breach of a term: remedy of damages and/or rescission
depending on type.
• Characteristics of representations
• not contractually binding
• usually a statement made by one party to the other
party before the contract is formed
• breach of a representation: typical remedy damages
• contract remains in force unless there is a
misrepresentation.
Representations v Terms
• How do the courts distinguish between a term
and a representation?
The courts attempt to give effect to the parties intentions, and they do
this using the objective test. The courts ask :
What would a reasonable person believe to be the parties intentions in
regard to the contractual force of the statement.
• Why is the distinction important?
The major reason for the distinction is the type of remedy that is
available. For breach of a term damages are available as a remedy.
With a breach of a representation no remedy is available unless it was
made fraudulently/negligently.
Oral Contracts
• With oral contracts the terms of the
contract will be determined by the words
actually used by the parties when the
contract was made.
• This is a question of fact and will be
determined by the court. The presence of
witnesses will often be crucial.
Implied Terms
By the courts –
The moorcock [1889]
Shirlaw v Southern Foundaries [1939]
Types of Term
Conditions –
Most important terms – go to the heart of the
contract.
Breach allows the injured party to end the
contract.
Types of Term
Warranty –
Not as fundamental a term as a condition.
The injured party can claim damages but
MUST go ahead with the contract.
Bettini v Gye [1876].
Types of Term
Innominate Terms –
Clarification difficult – other way of
identifying the term needed.
Hong Kong Fir v Kawasaki [1962]
Exclusion Clauses
Definition “a contractual exclusion clause is
a term of the contract whereby one party
seeks to exclude or restrict a liability or
legal duty which would otherwise arise”.
Exclusion Clauses
Can be by -
Contract
Notice (signs)
Reasons - Freedom of contract
Restricted due to power relations.
Exclusion Clauses
Rules –
Must be part of the contract
(Olley v Marlborough [1949])
(Thornton v Shoe Lane Parking [1971])
Must be incorporated into the contract
(Chapelton v Barry [1940])
Exclusion Clauses
(McCutcheon v David MacBrayne [1964])
(L’Estrange v Graucob [1934])
(Thompson v LMS Railway [1930])
(Spurling v Bradshaw [1956])
(Andrews v Singer and Co [1934])
Types of Terms—Conditions and
Warranties
1) Condition
• A condition is a statement/term that forms an
essential part of the contract. It is a term that
goes to the root of the contract.
• Breach of a condition entitles the innocent
party to claim damages and rescind (terminate)
the contract: Associated Newspapers v Bancks.
Types of Terms—Conditions and
Warranties cont…
2) Warranty
• A warranty is a term of the contract that is
not essential and does not go to the root of
the contract.
• A breach of a warranty entitles the
innocent party to damages only. The
innocent party is not entitled to rescind
the contract: Bettini v Gye.
Exclusion Clauses: the Position at
Common Law
• An exclusion clause is a term of the contract that
limits or excludes a liability from one party that
they would otherwise be subject to.
• The function of an exclusion clause is to limit or
exclude liability for breach of an express/implied
term, or even negligence in a contract.
• The courts approach to interpreting such a clause
is to interpret them narrowly.
A) Signed Documents
• L’Estrange v Graucob
• Tilden Rent-A-Car Co v Clendenning
• Le Mans Grand Prix Circuits Pty Ltd v
Iliadis
B) Unsigned Documents: Ticket
Cases
• With an unsigned document, an exclusion clause
will be binding only if the clause was brought to the
notice of the customer. This notice must be
reasonable notice and is determined objectively
by the courts.
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Parker v SE Railway
Thompson v LMS Railway Co.
Baltic Shipping v Dillon
Thornton v Shoe Lane Parking.
C) Contractual Document
• The document containing the exclusion clause
must be of a contractual nature before the courts
will hold the exclusion clause to be binding. To
determine whether a clause is a contractual
document the courts employ the reasonable person
test and ask:
– Would a reasonable person expect such a document to
contain an exclusion clause or would it merely represent
a receipt or voucher?
– Causer v Browne.
D) Time of Notice
• If notice of the exclusion clause is not given
until after the contract has been completed,
the exclusion clause will not be binding:
Olley v Marlborough.
E) Previous Course of Dealing
• If the customer has had previous dealings
with the defendant, the court will more
readily infer knowledge of the exclusion
clause. If the customer knows about the
clause through his previous dealings then
he/she will be bound by it:
Henry Kendall & Sons v William Lillico.
F) Effect of Misrepresentation
• If the effect/scope of the exclusion clause has been
misrepresented to the customer then the exclusion
clause is not binding:
Curtis v Chemical Cleaning Co.
G) Contra Proferentum Rule
• The contra proferentum rule is a rule of
interpretation used by the courts. The rule
provides that the courts will interpret the exclusion
clause against the party relying on the clause:
Elder Smith Goldsbrough Mort Ltd v McBride
White v John Warwick & Co Ltd [1953] 1 WLR
1285.
H) Scope of the Exclusion Clause
• The scope of the exclusion clause is limited to only
acts performed within the scope of the contract.
• The exclusion clause will not exclude liability for
acts occurring outside the contract, AND the scope
of the exclusion clause is a matter of
construction/interpretation by the court:
Darlington Futures Ltd v Delco Australia P/L
Sydney City Council v West.
Exclusion Clauses: The Position under
Statute Law
• Given the view that exclusion clauses are
generally considered to be unfair to
consumers, legislation has been enacted to
modify the operation of exclusion clauses in
relation to the sale of goods/services.
• This is especially the case for the implied
terms in the Sale of Goods Acts of the
various states and the TPA.
• See: s 68 TPA.
SGA - Definitions
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Definition of ‘sale of goods’ - s.2(1)
Meaning of ‘goods’ - s.61(1)
Meaning of ‘sale’
SGA - Implied Terms
Ss. 12-15 most important and relevant.
S. 12 - Title to goods
Rowland v Divall [1923]
s. 13 - Description of goods
Harringdon v Christopher Hull [1991]
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SGA - Implied Terms
S. 14(2) - Quality of the goods
Bartlett v Sidney Marcus [1965]
S. 14(3) - Fitness for purpose
Grant v Australian Knitting Mills [1936]
S. 15 - Sale by sample
Godley v Perry [1960]
UCTA [1977]
• S. 2 (1) A person cannot exclude or
restrict his liability for death or personal
injury resulting from negligence.
• S. 2 (2) Cannot exclude liability for
negligence unless it is reasonable.
• Ss. 6 and 7 – Reference to SGA [1979].
UCTA [1977]
• S. 12 - Dealing as a consumer.
• A person who makes a contract NOT in
the course of business.
• With a person who DOES make the
contract in the course of business.
• The goods supplied or transferred are of a
type which are ordinarily supplied for
private use or consumption.
UCTA [1977]
• Schedule 2 • The following will be considered to assess
the resonableness of exclusion clauses.
• The strength of the bargaining positions.
• Whether any inducement was given.
• Whether the customer knew or should
have known about the existence of the
term.
UTCCR [1994]
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Extends UCTA [1977]
Invalidates terms which are unfair.
Requires plain English is used.
Challenge by Consumer Organisations.
Consumer Protection Act
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The liability is Strict (means you only have to establish that the product caused the
damage - no negligence, wrongful inattention etc needed).
Criminal Law: S. 10 - Criminal offence to supply goods which are not reasonably safe.
Consumer Protection Act
Part 1 - adds to common law rights
To bring a successful claim the plaintiff must establish 1) A product contained a defect
2) The plaintiff suffered damage
Consumer Protection Act
3) The damage was caused by the defect
4) The defendant was either
a producer
an own-brander
an importer / supplier into the EU
of the product
Consumer Protection Act
• Product • Contained in s.1 (2) - includes goods, electricity
gas - but not land, primary agricultural produce
and unprocessed game.
• Consumer Protection Act
• Damage • Can be claimed for death, personal injury, and
loss and damage to property. The property must
be • 1) The type ordinarily intended for private use or
consumption
Consumer Protection Act
Damage –
2) Intended by the plaintiff mainly for his own
private use, occupation or consumption.
Damages must exceed £275 (which is the
damage caused by the defective product not
the product itself).
Consumer Protection Act
Defences If the defect is due to compliance with any
EU rules this is a defence
If the defendant did not supply the goods
Consumer Protection Act
Defences If the defendant did not supply the goods in
the course of a business
The defect did not exist in the product at the
time it was supplied by the defendant