Express and implied terms

1. Express and implied terms

2. Objectives • Explain the difference between representations and terms. • Explain the concept of express terms. • Understand implied terms, including those implied by fact and statute. • Explain the incorporation of exclusion clauses and the provisions of the Unfair Contract Terms Act 1977. • Explain other terms, including conditions, warranties and innominate terms.

3. Terms • The terms of a contract set out the obligations on the parties under the agreement. • Terms can be express, which are laid down by the parties themselves, or implied which means that terms are assumed by the courts or by statute. • Terms can also be classified according to their importance: conditions, warranties and innominate terms. • Terms should be distinguished from mere representations, which have no liability attached to them because they have just induced a party to enter into the contract. However, if a representation has been false and has wrongly induced the other party to enter the contract, then this is a misrepresentation and will attach liability. • Terms should also be distinguished from mere opinions which have no liability attached to them either. The other party’s opinion is no more valid than our own and we cannot rely on it. However, if an opinion has come from an expert, we are entitled to rely on it and so the opinion of experts are said to attach liability.

4. Importance of terms Conditions • A condition is a term of a contract which is so important to the contract that a failure to perform the condition would render the contract meaningless. • If a condition has been breached, then the claimant is entitled to the fullest range of remedies – damages or repudiation or both. • Any term implied by statute is also regarded as a condition, in terms of the effect of its breach. Cases: • Poussard v Spiers and Pond (1876) • The MihalisAngelos (1970) • Bunge Corp v Tradax Export SA (1981)

5. Importance of terms Warranties • A warranty is a term of a contract which is minor. • If a warranty has been breached, the injured party can sue for damages, but not repudiation. • Warranties are regarded as obligations that are secondary to the major purpose of the contract. Case: • Bettini v Gye (1876)

6. Importance of terms Innominate Terms • An innominate term is a term of a contract, which cannot be identified as either warranties or conditions, and so are identified as innominate until the contract has been breached. • The idea is that a contract will only be repudiated in the event of a breach if it is fair to both sides. • It is uncertain what the remedy will be until the extent of the breach has been considered and the judge declares the appropriate remedy. Case: • Hong Kong Fir Shipping Co Ltd v Kawasaki Ltd (1962) • Schuler AG v Wickman Machine Tool Sales Ltd (1973) • Reardon Smith Line v Hansen Tangen (1976)

7. Express Terms In order to be a term of the contract, the statement must be incorporated. This is usually straightforward where a contract is in writing as the terms are the ones that are written in the document. • The importance attached to the representation – Bannerman v White (1861) • Special knowledge or skill – Oscar Chess Ltd v Williams (1957) • Timing of the statement c Routledge v McKay (1954) • Agreements in writing –Routledge v McKay (1954)

8. Implied Terms Terms Implied by Fact These are terms which are not laid down in the contract, but which it is assumed both parties would have intended to include if they had thought about it. • Equitable Life Assurance Society v Hyman (2000) • The courts will consider whether the proposed term would be: • reasonable and equitable • capable of clear expression • compatible with any express terms of the contract • so obvious that it “it goes without saying” – officious bystander test • necessary to give business efficacy to the contract – the business efficacy test Officious bystander test: Shirlaw v Southern Foundries (1926) Business efficacy test: The Moorcock (1889) There has also been further guidelines set out in: BP Refinery (Westernport) Property Ltd v Shire of Hastings (1978)

9. Implied Terms Terms Implied in Law These are terms which the law says have to be included, irrespective of the wishes of the parties. Liverpool City Council v Irwin (1977) A landlord who lets property containing several homes in one building is under an implied obligation to provide proper access to the individual homes. There are also other terms implied in such contracts as employment contracts: Spring v Guardian Assurance plc (1994) Malik v Bank of Credit and Commerce International (1997)

10. Implied Terms Terms Implied in Law Consumer Rights Act 2015 ss9-11: Supply of Goods Replaced the Sale of Goods Act 1979, the Unfair Terms in Consumer Contracts Regulations 1999 and the Supply of Goods and Services Act 1982 All goods should be: s9 – of satisfactory quality – not faulty or damaged – this is judged by what a reasonable person would consider satisfactory. s10 – fit for purpose – should be fit for the purpose they are supplied for as well as any specific purpose made known to the retailer. s11 – as described– must match any description, models or samples shown at the time of purchase. Note: “goods” also includes digital contentsuch as downloads, software and pre installed content.

11. Implied Terms Terms Implied in Law Consumer Rights Act 2015 s20, s23: Bringing a Claim You must bring the claim against the retailer, not the manufacturer. Date of Purchase s20 gives the consumer a legal right to reject goods that are of unsatisfactory quality, unfit for purpose or not as described to get a full refund, but this is limited to within 30 days of purchase. 30 days s23 provides that you have to give the retailer one opportunity to repair or replace any goods if you are outside the 30 days. If the attempt to repair is unsuccessful, you can then claim a refund or a price reduction. If a fault is discovered within six months of purchase, it is presumed to have been there since purchase, unless the retailer can prove otherwise. If the fault is discovered after six months, the burden is on the consumer to prove that the product was faulty at the time of delivery. You have six years to take a claim to the small claims court. 6 months

12. Implied Terms Terms Implied in Law s28: Delivery Consumer Rights Act 2015 • The retailer is responsible for the goods until they are in the possession of the consumer – this means they are liable for the service provided by the couriers they employ. • If a retailer fails to deliver within 30 days, you have the right to terminate the purchase and get a full refund, even if the timing of the delivery was not essential.

13. Implied Terms Terms Implied in Law Consumer Rights Act 2015 ss49-52:Supply of Services This includes services for dry cleaning, entertainment, work done by professionals (solicitors, estate agents, accountants), building work, fitted kitchens, double glazing and home improvements. All contracts for servicesmust do the following: s49–the trader must perform the service with reasonable care and skill. s50–information which is said or written is binding where the consumer relies on it. s51–where the price is not agreed beforehand, the service must be provided for a reasonable price. s52–unless a time scale has been agreed, the service must be carried out within a reasonable time.

14. Implied Terms Terms Implied in Law Consumer Rights Act 2015 s55, s56 Bringing a Claim You must bring the claim against the trader If the service does not satisfy the criteria: • s55The trader should either redo the element which is inadequate or perform the whole service again at no extra cost. • s56where repeat performance is not possible, the consumer can claim a price reduction. This could be up to 100% of the cost and the trader should refund the consumer within 14 days of agreeing that a refund is due.

15. Implied Terms Terms Implied in Law Consumer Rights Act 2015 s62Unfair contract terms An unfair term under the Act is not binding on the consumer. If a consumer thinks a term is unfair, they should complain to the trader. Key terms of a contract may be assessed for fairness, unless they are prominent and transparent. Examples of unfair terms under the Act include: • fees and charges hidden in the small print. • something that tries to limit the consumer’s legal rights. • disproportionate default charges • excessive early termination charges.

16. Implied Terms Terms Implied in Law Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 • This Act covers shopping online and brings into force the Consumer Rights Directive from the EU. It also supersedes the Distance Selling Regulations. • It requires traders to give certain information before entering into a contract. • The Act covers all contracts entered into after 13 June 2014. • It covers the sale of goods online, over the phone, from a catalogue or face to face somewhere that is not the business premises of the trader (e.g. your home).

17. Implied Terms Terms Implied in Law Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 Key information which a trader must provide: • A description of the goods, services or digital content, including how long any commitment will last on the part of the consumer. • The total price of the goods, service or digital content or the manner in which the price will be calculated. • How the consumer will pay for the goods or services and when they will be provided. • All additional delivery charges and other costs. • Details of who pays the cost of returning items if there is a right to cancel. • Details of any right to cancel – the trader also needs to provide, or make available a standard cancellation form to make cancelling easy. • Information about the seller, including their geographical address and contact details and the address and identity of any other trader for whom the trader is acting. • Information on the compatibility of digital content with hardware and other software that the trader is aware of.

18. Implied Terms Terms Implied in Law Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 Cancelling goods or services • Cancellation rights under the Act are more generous than if you bought goods or services from a shop. • Your right to cancel starts the moment the consumer places their order and ends 14 days from the day the goods are received. • There is then a further 14 days to actually send the goods back. • The trader then has another further 14 days to give a refund from the date they receive the goods or the consumer providing evidence of having returned the goods.

19. Implied Terms Terms Implied in Law Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 Cancelling goods or services • The exceptions to the rules on cancellations are for: • CDs, DVDs or software if the seal has been broken on the wrapping • Perishable items • Tailor made or personalised items.

20. Implied Terms Terms Implied in Law Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 Cancelling goods or services • Cancelling services – the consumer has 14 days to cancel, though they may have to pay for any service they have used up to the point of cancellation. • Cancelling digital content – the consumer must acknowledge that once a download has started, they will lose their right to cancel. Retailers must not supply digital content within the 14 day cancellation period, unless the consumer has given their consent.

21. ActivityApply the consumer laws to the following scenarios. • You buy a mobility scooter and use it frequently over the course of five months. By the end of this time, you notice that the battery is not performing properly or retaining the charge for long. The trader performs a repair but a scooter continues to perform poorly so you choose to reject it and get a refund. • You buy a toaster but find a week later, when you try to use it for the first time, that it won’t turn on and the bread won’t stay down. The toaster is not of satisfactory quality. • You are planning to do some DIY and looking to buy a new power drill. You have a particular model in mind and discuss the requirements with the salesperson, including the need to drill masonry. The salesperson agrees that the drill and the included bits are suitable for the task. However, when you try to drill a wall using the new drill, you find that it is not suitable to use effectively for masonry.

22. ActivityApply the consumer laws to the following scenarios. • You download a free game which involves building a virtual world and you build up some virtual currency in the game through your normal game play. You then buy some additional virtual currency in order to make an in-app purchase. The item is faulty and does not appear in your virtual world. • You pay to download a TV series which is described as containing all 13 episodes. When you download it, you find that the final episode is missing. • You buy an app for organising music and photos, but when you start to use it, you find that it has a bug that causes it to delete your music and photos. • Your contract with a catering service to provide a buffet for your birthday for 6pm on a given Saturday. You pay £25 per head for the service. There is a clause in the contract stating that the maximum discount for any service problem caused by the supplier is £70. However, the buffet is delivered late, at 10pm, as the party is ending.

23. ActivityApply the consumer laws to the following scenarios. • A trader is contracted by you to decorate a room for a party. You inspect the work the day before it is due to be finished and say that it is not in line with the colour scheme you agreed with the trader’s assistant. The trader phones the assistant, who agrees that you did specify the colour scheme. • You sign up to a mobile phone contract for £20 a month. After you agree to the deal you discover that you neighbour has got the same package for £15. You challenge the firm, arguing that their deal is unfair. • You purchase a SoarPrice airlines ticket and see a phrase on the last booking screen that “extra fees may apply”. You tick the box next to it and book your ticket. But when you arrive at the airport, you find that you have to pay an excess baggage fee.

24. Exclusion Clauses Common Law controls • The courts have found two ways to regulate exclusion clauses: • Has the clause been incorporated into the contract: • This can be done in three ways: • - by signature • - reasonable notice • - previous cause of dealing • 2. Does the clause cover the alleged breach?

25. Exclusion Clauses Common Law controls Incorporation • By signature - if a document is signed at the time of making the contract, its contents become terms of that contract, regardless of whether they have been read and understood: • L’Estrange v Graucob (1934) • By reasonable notice– if separate written terms are presented, those terms only become part of the contract if it can be said that the recipient had reasonable notice of them: • Parker v South Eastern Railway (1877) • Previous course of dealing– if two parties have previously made a series of contracts between them, and those contracts contained an exemption clause, that clause may also apply to a subsequent transaction, even if the usual steps to incorporate the clause had not been taken: • Spurling v Bradshaw (1956)

26. ActivityConsider whether the following exclusion clauses have been successfully incorporated. • A notice placed on the counter in a shop. • A notice contained in a signed contract. • A notice contained in a delivery note where the parties have regularly dealt on the same terms. • A notice posted on a hotel bedroom wall. • A notice contained in a receipt. • A notice on the back of a cloakroom ticket. • A notice posted on the machine at the entrance to a car park.

27. Exclusion Clauses Unfair Contract Terms Act 1977 • This is an Act which imposes limitations on exemption clauses and controls the use of clauses excluding or limiting liability for breach of a contract, where one of the parties is a consumer. • s12– a party is “dealing as a consumer” where they are not making the contract in the course of a business. Thus, a contract between two consumers is not dealt with by the Act. • The Act does not apply to contracts concerning land, employment, intellectual property, or contracts concerning insurance.

28. Exclusion Clauses Unfair Contract Terms Act 1977 Provisions of the Act • s2– Liability for negligence – Liability for death or personal injury resulting from negligence cannot be excluded – any clause which attempts to do this, will be rendered ineffective. • s3– Liability for non-performance – applies where there exists a standard form contract. The provisions are subject to the reasonableness test in s11 and provide restrictions on the ability to: •  - Exclude or restrict liability for breach of contract • - Provide substantially different performance to that reasonably expected  • - Provide no performance at all • s6 - Exclusion of liability in contracts for the sale of goods – clauses that are implied by statute such as those in the Consumer Rights Act 2015 cannot be excluded.

29. Exclusion Clauses Unfair Contract Terms Act 1977 Provisions of the Act • s11 – Test of reasonableness • The court should ask itself whether the term in question is a “fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made”. • Schedule 2 provides the factors for the court to consider in applying the reasonableness test. • The factors are: • a) The strength of the bargaining positions of the parties taking into account alternative suppliers available to the purchaser. • b) Whether the customer received an inducement to accept the term – for example, whether they were given the opportunity to pay a higher price without the exclusion clause. • c) Whether the customer knew or ought to have known of the term and whether such terms are in general use in a particular trade. • d) Where exclusion relates to non-performance of a condition whether it was reasonably practicable to comply with the condition.e) Whether the goods were made or adapted to the special order of the customer.

30. Exclusion Clauses Unfair Contract Terms Act 1977 • Key Cases: • George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd (1983) • Granville Oil & Chemicals Ltd v Davies Turner & Co Ltd (2003) • Britvic Soft Drinks Ltd v Messer UK Ltd (2002) • Photo Production v Securicor (1980)