CONTENTS OF A CONTRACT Objectives: Terms v Representations Types of Terms Parol Evidence Rule

1. CONTENTS OF A CONTRACT Objectives: Terms v Representations Types of Terms Parol Evidence Rule Exemption or Exclusion Clauses

2. Terms v Representations Representations Not part of the contract. Pre-contractual statements. Part of the negotiation process. Might have induced other party to enter into contract. Terms Part of the contract. Promises that parties have contracted to undertake.

3. Distinguishing Terms and Representations Four Tests Where the statement is of such major importance that the promisee would not have entered into the agreement without it = TERM. Bannerman v White [1861]. Where there is a gap between the statement and the making of the contract, = REPRESENTATION. Routledge v McKay [1954]. But note: Schawell v Reade [1913].

4. Where the statement is verbal and the agreement is subsequently in writing and the statement is absent from agreement = REPRESENTATION. Routledge v McKay [1954]. Where one of the parties to an agreement has special knowledge or skill, then statements made BY them = TERMS, but statements made TO them = REPRESENTATIONS. Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965]. Oscar Chess Ltd v Williams [1957].

5. Types of Terms Four Types of Terms Conditions Fundamental part of contract, essence of contract. Failure to perform will leave contract meaningless. Breach gives innocent party right to: Terminate contract and refuse to perform their part of it; or Honour contract and sue for damages. Poussard v Spiers and Pond (1876)

6. Warranties A minor obligation, not vital to overall contract. Failure to perform will not destroy contract. Breach only gives innocent party right to sue for damages once has completed his part of contract. Breach DOES NOT give right to terminate contract. Bettini v Gye (1876)

7. Innominate Terms Choice of remedy determined by seriousness of breach. If breach deprives innocent party of substantially the whole benefit of contract, then right to repudiate (terminate) contract will be permitted, even if term appears to be a warranty.

8. If breach does not deprive innocent party of whole benefit of contract, then will not be permitted to repudiate contract but must settle for damages, even if term appears to be a condition. Cehave v Bremer (The Hansa Nord) [1976]. Implied Terms By Statute Under Sale of Goods Act 1979 and Supply of Goods and Services Act 1982, terms relating to description, quality and fitness for purpose all implied into sale of goods and services contracts.

9. Terms implied by the courts Where it is necessary to give business efficacy to the contract. Courts use “officious bystander” test. The Moorcock [1889]. Terms implied by custom But note a custom cannot override an express term of an agreement. Les Affreteurs Reunis v Walford [1919]

10. Parol Evidence Rule If all the terms of a contract are in writing then presumption is that no evidence supporting a different oral agreement will be allowed to vary those written terms. Hutton v Watling [1948]. Presumption can be rebutted and so evidence supporting a different oral agreement can be introduced if it can be shown that written terms were not all the terms agreed by the parties. Re SS Ardennes [1951].

11. Another way in which the courts avoid the effect of the parol evidence rule is to establish that the verbal discussions constituted a collateral contract. City and Westminster Properties Ltd v Mudd [1959].

12. Exemption or Exclusion Clauses Clauses that attempt to remove or limit the liability of a party in breach of contract. Whether these clauses are valid depends on the following: Has the clause been incorporated into the contract? Does the clause effectively cover the breach? Is the clause valid under the Unfair Contract Terms Act [1977] and the Unfair Terms in Consumer Contracts Regulations 1999?

13. Incorporation To be effective an exclusion clause must constitute a term of the contract. There are three ways of incorporating such a clause: By signing the contract L’Estrange v Graucob [1934]. Unless other party was misled into signing contract – Curtis v Chemical Cleaning and Dyeing Co [1951]. By notice Other party must have actually known of clause or must have been given sufficient notice of it.

14. For notice to be adequate, document outlining the exclusion clause must be an integral part of the contract and must be given at time contract is made. Chapelton v Barry UDC [1940] Olley v Marlborough Court Hotel [1949]. The greater the exclusion, the greater degree of notice required. Thornton v Shoe Lane Parking Ltd [1971] Interfoto Picture Library Ltd v Stiletto Programmes Ltd [1988].

15. By Custom Where the parties have had previous dealings on the basis of an exclusion clause, then that clause may be included in later contracts. See Spurling v Bradshaw [1956]. Must show that other party had actual knowledge of exclusion clause.

16. Effective cover of breach Clause must satisfy following rules: Contra Proferentem Rule Any uncertainties or ambiguities in the exclusion clause will be interpreted AGAINST party seeking to rely on it. See: Andrews v Singer [1934] Hollier v Rambler Motors [1972]

17. Doctrine of Fundamental Breach In limited circumstances, it is impossible for a clause to exclude liability if fundamental breach of contract has occurred.

18. Valid under UCTA 1977 and UTCCR 1999? UCTA 1977 Will not allow a contract term to exclude liability for death or personal injury caused by negligence (S.2 & 5). Will allow a term to exclude liability for other types of loss caused by negligence providing the term satisfies the requirement of reasonableness (S.5).

19. If you are a consumer dealing with business, then UCTA prevents the business from excluding its liability for breaches of terms implied under SOGA 1979 (description, fitness, satisfactory quality etc.) (S.6(2) UCTA 1977). If a person is NOT dealing as a consumer, liability for breach of statutory terms can be excluded providing excluding term is reasonable (S.6(3)). UTCCR 1999 Provide that consumers will not be bound by unfair terms.

20. Unfair Terms = Terms which have not been individually negotiated; and Which, ‘contrary to the requirement of good faith’, cause a significant imbalance between the rights and obligations under the contract to the detriment of the consumer.