Terms of Contract :  Common Law and  Statutory
The Distinction between Terms and Mere Representations   <ul><li>Statements that are made during the negotiations, leading...
Terms <ul><li>These are statements which form the express terms. If these are untrue the untruth constitute  breach of con...
<ul><li>Whether a statement becomes a term of the contract or not, it depends on the intention of the parties. </li></ul><...
a)  Importance of the statement to the parties <ul><li>Bannerman v White (1861), </li></ul><ul><li>White was considering b...
b) Special Knowledge and Skill <ul><li>Where a statement is made by someone who has  expert knowledge or skill  on the sub...
c)  The Time Lapse between Making the    Statement and Formation of the Contract <ul><li>If the interval is short the stat...
d)  Reducing the statement to writing. <ul><li>When a contract is written, but the statement was oral – the statement is n...
e) When the statement is incorporated in the   contract and is signed <ul><li>It is deem “term” of contract – Irrespective...
The ‘Parol Evidence’ Rule <ul><li>At the beginning, terms are clearly stated in the contract. </li></ul><ul><li>Then one o...
Justification of the Rule <ul><li>1. If the contract had been reduced to writing then it was supposed that things omitted ...
 
<ul><li>VALIDITY  </li></ul><ul><li>the contract is not valid because of mistake,  </li></ul><ul><li>misrepresentation, no...
<ul><li>5) WRITTEN AGREEMENT NOT INTENTED TO BE THE WHOLE AGREEMENT  </li></ul><ul><li>It is presumed that ‘a document whi...
<ul><li>7) VAGUE TERMS </li></ul><ul><li>Contract contains explain words, phrases or jargon that are ambiguous, or which, ...
Funny Terms in Apple Contract
 
Classification of Contractual Terms
<ul><li>Terms classified in accordance to its level of importance </li></ul><ul><li>Warranty </li></ul><ul><li>Condition <...
<ul><li>A condition is a major term which is vital to the main purpose of the contract.  </li></ul><ul><li>A breach of con...
<ul><li>A warranty is a less important term: it does not go to the root of the contract.  </li></ul><ul><li>A breach of wa...
<ul><li>Sometime it is impossible to classify a term neatly in advance as either a condition or a warranty.  </li></ul><ul...
<ul><li>In most contracts the primary obligations of the parties are contained in express terms. In addition there are ext...
<ul><li>The terms of a contract may have been negotiated against the background of the customs of a particular locality or...
<ul><li>The courts will be prepared to imply a term into a contract in order to give effect to the obvious intentions of t...
<ul><li>The 'officious bystander test'  </li></ul><ul><li>If while the parties were making their contract, an officious by...
<ul><li>• Sections 12, 13, 14 and 15 of the Sale of Goods Act 1979; </li></ul><ul><li>• Sections 13, 14 and 15 of the Supp...
The End
Activity- Quick Quiz <ul><li>Which of the following situations do you think is likely to contain a term? </li></ul><ul><li...
Quick Quiz - cont’d <ul><li>2.  Andrew is selling his caravan.  He describes it as a  ‘family caravan’.   It has one doubl...
Quick Quiz – con’t <ul><li>4)  Sid is selling his motorbike to Colin.  He tells Colin that the bike is ‘mechanically perfe...
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Contract Terms

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Contract Terms

  1. 1. Terms of Contract : Common Law and Statutory
  2. 2. The Distinction between Terms and Mere Representations <ul><li>Statements that are made during the negotiations, leading to a contract, can be either terms or mere representations. </li></ul><ul><li>Is the statement forms part of the contract? </li></ul>
  3. 3. Terms <ul><li>These are statements which form the express terms. If these are untrue the untruth constitute breach of contract . </li></ul>Mere representations <ul><li>These are statements which do not form part of the contract, but which help to induce the contract. </li></ul><ul><li>If these are untrue, they are misrepresentations </li></ul>
  4. 4. <ul><li>Whether a statement becomes a term of the contract or not, it depends on the intention of the parties. </li></ul><ul><li>To ascertain the intention , the court take into account :- </li></ul><ul><li>Importance of the statement to the parties </li></ul><ul><li>Special knowledge and skill </li></ul><ul><li>The time lapse between making the statement </li></ul><ul><li>and formation of the contract </li></ul><ul><li>Reducing the statement to writing. </li></ul><ul><li>When the statement is incorporated in the </li></ul><ul><li>contract and is signed </li></ul>
  5. 5. a) Importance of the statement to the parties <ul><li>Bannerman v White (1861), </li></ul><ul><li>White was considering buying hops from Bannerman – asked if they had been treated with sulphur - ‘ if sulphur has been used, I do not want to know the price’ – </li></ul><ul><li>B said there had been no such treatment – believing this to be true, a sale contract was made. </li></ul><ul><li>Later W discovered that sulphur had been used on some hops (5 out of 300 acres). </li></ul><ul><li>W refused to pay saying B had breached a term of the contract. </li></ul><ul><li>B sued for the price, </li></ul><ul><li>Held : the statement was a term of the contract. </li></ul><ul><li>Other case :- Couchman v Hill (1947) </li></ul>
  6. 6. b) Special Knowledge and Skill <ul><li>Where a statement is made by someone who has expert knowledge or skill on the subject in hand, the statement is deem a “term”. </li></ul><ul><li>Oscar Chess v Williams (1957) </li></ul><ul><li>Dick Bentley Productions v Harold Smith </li></ul><ul><li>(Motors) (1965) </li></ul>
  7. 7. c) The Time Lapse between Making the Statement and Formation of the Contract <ul><li>If the interval is short the statement is more likely to be a term </li></ul><ul><li>Routledge v Mckay (1954) </li></ul><ul><li>A motor cycle was actually registered in 1939 </li></ul><ul><li>but on a new registration book has wrongly stated it as 1941. </li></ul><ul><li>In 1949, the current owner, who was unaware of this inaccuracy, told the prospective buyer that the car was 1941 (as per the registration document) </li></ul><ul><li>The P bought the motor cycle a week later. </li></ul><ul><li>The S&P contract does not mention the age of the car. </li></ul><ul><li>Later he discovered that the car was actually 1939. He sued for breach of term. </li></ul><ul><li>Held : The lapse of time was too distance to create a binding relationship based on the statement. </li></ul>
  8. 8. d) Reducing the statement to writing. <ul><li>When a contract is written, but the statement was oral – the statement is not intended to form part of the contract  mere representation. </li></ul><ul><li>Routledge v Mckay (1954) </li></ul>
  9. 9. e) When the statement is incorporated in the contract and is signed <ul><li>It is deem “term” of contract – Irrespective of whether they have been read by the party signing. </li></ul><ul><li>L’Estrange v Graucob (1934) </li></ul><ul><li>A woman signed a hire-purchase agreement for a cigarette vending machine, without reading it. </li></ul><ul><li>The agreement contained, in very small print, a broad exemption from liability for the product. </li></ul><ul><li>The machine proved defective. </li></ul><ul><li>Held : Signing the contract meant that the woman was bound by the clauses. It is immaterial whether she read it or not – unless there is misrepresentation or fraud. </li></ul>
  10. 10. The ‘Parol Evidence’ Rule <ul><li>At the beginning, terms are clearly stated in the contract. </li></ul><ul><li>Then one of the party tried to show that the written document did not fully reflect the actual agreement. </li></ul><ul><li>He invoke oral representation made prior to the contract to add, vary or contradict the written terms in the contract. </li></ul><ul><li>He is against the ‘parol evidence’ rule. </li></ul>
  11. 11. Justification of the Rule <ul><li>1. If the contract had been reduced to writing then it was supposed that things omitted from the written document does not form part of the agreement. </li></ul><ul><li>2. Adding terms in after the written agreement leads to uncertainty. </li></ul>
  12. 13. <ul><li>VALIDITY </li></ul><ul><li>the contract is not valid because of mistake, </li></ul><ul><li>misrepresentation, no consideration, no </li></ul><ul><li>contractual intention, incapacity </li></ul><ul><li>IMPLIED TERMS </li></ul><ul><li>Terms that are although not mentioned in the contract, but they are implied terms </li></ul><ul><li>OPERATION OF THE CONTRACT </li></ul><ul><li>the contract is not put into operation yet – it is subjected to ‘condition precedent’. </li></ul><ul><li>Pym v Cambell (1856) </li></ul><ul><li>TRADE CUSTOM </li></ul><ul><ul><li>Hutton v Warren (1836) </li></ul></ul>
  13. 14. <ul><li>5) WRITTEN AGREEMENT NOT INTENTED TO BE THE WHOLE AGREEMENT </li></ul><ul><li>It is presumed that ‘a document which looks like a contract is the whole contract’, but this is rebuttable </li></ul><ul><ul><li>Couchman v Hill (1947) </li></ul></ul><ul><ul><li>Evans v Andrea Merzario [1976] </li></ul></ul><ul><li>6) CAPACITY OF THE CONTRACTING PARTIES </li></ul><ul><li>A person contracted in a capacity as an agent of a principle </li></ul><ul><ul><li>Humfrey v Dale (1857) </li></ul></ul>
  14. 15. <ul><li>7) VAGUE TERMS </li></ul><ul><li>Contract contains explain words, phrases or jargon that are ambiguous, or which, if taken literally, make no sense. </li></ul><ul><li>8) SUPPLEMENTAL AGREEMENT </li></ul><ul><li>The contract is contained in more than one document. </li></ul><ul><li>9) COLLATERAL CONTRACTS </li></ul><ul><li>City v Westmister Properties Ltd v Mudd (1959) </li></ul>
  15. 16. Funny Terms in Apple Contract
  16. 18. Classification of Contractual Terms
  17. 19. <ul><li>Terms classified in accordance to its level of importance </li></ul><ul><li>Warranty </li></ul><ul><li>Condition </li></ul><ul><li>Innominate </li></ul>Introduction
  18. 20. <ul><li>A condition is a major term which is vital to the main purpose of the contract. </li></ul><ul><li>A breach of condition will entitle the injured party to repudiate the contract and claim damages. </li></ul><ul><li>The injured party may also choose to go on with the contract and recover damages instead. </li></ul><ul><li>Poussard v Spiers (1876) </li></ul>Condition
  19. 21. <ul><li>A warranty is a less important term: it does not go to the root of the contract. </li></ul><ul><li>A breach of warranty will only give the injured party the right to claim damages; </li></ul><ul><li>he cannot repudiate the contract. </li></ul><ul><li>Bettini v Gye (1876) </li></ul>Warranty
  20. 22. <ul><li>Sometime it is impossible to classify a term neatly in advance as either a condition or a warranty. </li></ul><ul><li>Some undertakings may occupy an intermediate position </li></ul><ul><li>If the breach results in severe loss and damage, the injured party will be entitled to repudiate the contract </li></ul><ul><li>If the breach involves minor loss, the injured party's remedies will be restricted to damages. </li></ul><ul><li>Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha [1962] </li></ul><ul><li>The Mihalis Angelos [1971] </li></ul><ul><li>The Hansa Nord [1976] </li></ul><ul><li>Reardon Smith Line v Hansen-Tangen [1976] </li></ul>Innominate
  21. 23. <ul><li>In most contracts the primary obligations of the parties are contained in express terms. In addition there are extra terms may be implied into the agreement. </li></ul><ul><li>a) Terms implied by Custom </li></ul><ul><li>b) Terms implied by the Court </li></ul><ul><li>c) Terms implied by Statute </li></ul>Implied Terms
  22. 24. <ul><li>The terms of a contract may have been negotiated against the background of the customs of a particular locality or trade. </li></ul><ul><li>The parties automatically assume that their contract will be subject to such customs and so do not deal specifically with the matter in their contract. </li></ul><ul><li>Hutton v Warren (1836) </li></ul>Terms implied by Custom
  23. 25. <ul><li>The courts will be prepared to imply a term into a contract in order to give effect to the obvious intentions of the parties. </li></ul><ul><li>Sometimes the point at issue has been overlooked or the parties have failed to express their intention clearly. </li></ul><ul><li>In these circumstances, the court will supply a term in the interests of 'business efficacy' so that the contract makes commercial sense. </li></ul><ul><li>The Moorcock (1889) </li></ul>Terms implied by the Court
  24. 26. <ul><li>The 'officious bystander test' </li></ul><ul><li>If while the parties were making their contract, an officious bystander were to suggest some express provision, they would both reply, &quot;oh, of course.&quot; </li></ul><ul><li>Wilson v Best Travel [1993] </li></ul>
  25. 27. <ul><li>• Sections 12, 13, 14 and 15 of the Sale of Goods Act 1979; </li></ul><ul><li>• Sections 13, 14 and 15 of the Supply of Goods and Services Act 1982; and </li></ul>Terms implied by Statute
  26. 28. The End
  27. 29. Activity- Quick Quiz <ul><li>Which of the following situations do you think is likely to contain a term? </li></ul><ul><li>Jasvinder is a greengrocer. He puts a poster in his window, saying ‘The tastiest apples around’. </li></ul>
  28. 30. Quick Quiz - cont’d <ul><li>2. Andrew is selling his caravan. He describes it as a ‘family caravan’. It has one double bed and two couches on which it would be possible for other people to sleep. </li></ul><ul><li>3. Annie has been given a present of a computer that she cannot use, so she is selling it to Raj. Raj asks if it has a large memory and Annie says that she thinks it has. </li></ul>
  29. 31. Quick Quiz – con’t <ul><li>4) Sid is selling his motorbike to Colin. He tells Colin that the bike is ‘mechanically perfect’. In fact, the bike breaks down as Colin is leaving Sid’s house. </li></ul><ul><li>THE END </li></ul>

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