Chapter 12

1. Chapter 12 Terms

2. What are the Express Terms: “Mere Representations” or “Warranties”? • Introduction and Terminology – Very Important • Broadly, "warranty" means a term having contractual effect: more narrowly, it denotes a contractual term, any breach of which will give rise to an entitlement to damages. “Mere representation” means something less than this.

3. How does one determine whether a given statement amounts to a contractual term? • Symons & Co v Buckleton (1913) • “The intention of the parties can only be deduced from the totality of the evidence and no secondary principles of such a kind can be universally true” • Thake v Maurice (1986)

4. The Respective Positions of the Parties • Oscar Chess v Williams (1957) • Dick Bentley Productions Ltd v Harold Smith Motors Ltd (1965) • Bank of Ireland v Smith (1966)

5. Express Acceptance / Rejection of Responsibility • Schawel v Reade (1913) • P looking at a horse, the defendant said “you need not look for anything: the horse is perfectly sound”. • Lord Moulton felt that there could not be a clearer example of an express warranty save where the word “warranty” was actually used.

6. Ecay v Godfrey (1947) • a “pretty dicky” boat (per Lord Goddard) was described as “sea-going and capable of going overseas, in excellent condition and with a sound hull”. • However, before the sale the defendant recommended that the plaintiff have the boat surveyed and this mitigated against holding the description to be a warranty

7. Significance of the Purported Term / Representation • Gill v. Cape Contracts Ltd (1985) • D required around 40 insulation engineers to complete a contract in the Shetland Islands. P’s were basically “head hunted” and gave notice to H&W who were then their employer. The Shetland opportunity fell through. • “I do not believe that the plaintiffs would have terminated their employment with Messrs. Harland & Wolff, had they been offered no more than a reasonable expectation of obtaining employment."

8. The Stage at Which the Statement Was Made • Bannerman v White (1861) • A prospective buyer of hops asks if sulphur was used in their treatment saying that if it had, he would trouble to ask the price. • He was told no sulphur had been used and bought the hops but it had been used in a small portion of the hops (5 of 300 acres). The buyer did not pay, and was sued for the price. It was found (by a jury) that the statement was intended to be part of the contract.

9. Routledge v McKay (1954) • D and P were discussing the possible sale of D’s motorbike • D relying on the registration book said on the 23 October that the bike was a 1942 model. • On 30 October a written contract was made up which did not refer to the date of the model (which ended up being 1930). The buyer ultimately failed at the Court of Appeal in an action for damages. Why? The time between the statement and contract proved important here.

10. Schawel v Reade (1913) • The case was put the jury by asking “did the defendant at the time of the sale represent to the plaintiff that it was fit for stud purposes”.

11. Reduction to Writing • Relevance?

12. Reliance • Questionable relevance • It is certainly the case that reliance is required when suing in tort for negligent misstatement or misrepresentation • Attwood v Small (1838) • One for a debate

13. Specifity • As Clark points out: • “Sales ‘puffs’ of this type are at times difficult to disentangle from claims by the seller about the efficacy of goods, and the more specific the assertion, the more likely it is that the statement will be given contractual status.”

14. Implied Terms

15. Implied by Law • Implied in Fact • Methodology • Tradax Ireland Ltd v Irish Grain Board (1984 ) • Sweeney v Duggan (1997)

16. Implying Terms on the Basis of Custom & Practice • Did a particular custom exist in an area such that a particular term would be implied as a matter of course? • O’Reilly v Irish Press • K of E of chief sub-editor – claimed custom in Industry that would get 6 months notice • TJ rejected on facts – held you can incorporate by custom, but needs be well-known and generally acquiesced in – otherwise could not say parties tacitly agreed to be bound by it • O’Connail v Gaelic Echo – custom that reporters entitled to holiday pay…. • How do you prove it? PE rule..exception…

17. Carroll v Dublin Bus (2006) • Clarke J considered a custom or practice within Dublin Bus that in certain cases drivers returning after illness would be rostered to work suitable to their “new condition”. • Plaintiff contended for a much wider practice that Clarke J actually found but nevertheless, it was found to be an implied term that if a chief medical officer recommended the driver as suitable to a particular route, and such route was available and there was no good reason not to assign the driver, he should be so assigned with this entitlement being limited to a “reasonable period”.

18. Implying Terms on the Basis of the Business Efficacy Test • Again, focus is what is in the parties minds • You have business people – you assume that in their minds is the desire to make contracts which make business sense • One test is that terms which give contracts “business efficacy” may be implied

19. The Moorcock • P rented jetty from D – low tide exposed ship to rocks…probably poor jetty • Sued saying K said jetty would be safe to use or that D would take R care to ensure safety of berth – D denied these were terms • Ct implied them – • Would imply terms from presumed intention of parties with the object of giving the transaction such efficacy as both parties must have intended it to have • Not easy to apply…sure from the ship-owners side it seems easy, but the berth owner? Why would he have said “of course, yes, that term makes perfect sense…?” • Is it really about intention of parties?

20. Tett v Phoneix Property • Pre-Emp cl – i.e. cannot transfer sh to non-sh.holders if existing ones willing to buy – price to be set by auditors • No details re procedure to exercise pre-e rights – nothing about notice of intention to sell • CA; terms would be implied to give it business efficacy • In particular – term requiring sh to take r steps to give notice of intention to sell to those entitled under pre-e cl • One way of looking – would express terms of contract be rendered entirely ineffective without the term?

21. Necessity or sensibility? • Murphy Buckley & Keogh v Pye • D agreed to retain P as exclusive selling agents (i.e. would not use other agents)– commission based • D found a Pr with no involvement of P – P claimed implied term that D would not do this to deprive P of commission (or that it would be paid in such circs) • SC rejected • Not necessary for efficacy of K – sure it, would be a common and advisable term from perspective of P – but that’s not enough • Also K was quite express about when commission was payable – THAT was their intention – just trying to get around it here

22. Ward v Spivack • P = sales agents for D – got commission • But no term about this entitlement if terminated – i.e. would they get commission re customers they introduced B4 termination? • SC said no term • Not enough that parties probably would have agreed had they been asked at the time • Needed “something approaching certainty”

23. Sweeney v Duggan (1997) • Plaintiff argued that it was an implied term in his contract of employment that the defendant (who had an interest in the company who was the plaintiff’s employer) would procure employers liability insurance to cover risks to the plaintiff. • The Supreme Court rejected this argument holding that the contract of employment “would and did operate effectively without any such term” and held that it was not required under the business efficacy test…

24. Officious Bystander Test • Shirlaw v Southern Foundries Ltd (1939) • “Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if while the parties were making their bargain, an officious bystander were to suggest some express provision for it in the agreement, they would testily suppress him with a common ‘Oh, of course’.”

25. Kavanagh v Gilbert • Auctioneer would not sign N/M after sale • Was there an implied term he would do it? • Held there was…

26. Terms Implied by Law • By statute • By the constitution? • By common law • Liverpool County Council v Irwin (1976) • Siney v Dublin Corporation (1980) • Mahmud and Malik v BCCI (1998)

27. Mahmud and Malik v BCCI (1998) • Arose from collapse of Bank of Credit and Commerce International SA in the summer of 1991. • Two employees who lost their jobs claim that their association with B.C.C.I. placed them at a serious disadvantage in finding new jobs as it was alleged that the bank operated in a corrupt and dishonest manner in which the plaintiffs were not involved and that they were nonetheless stigmatised by reason of their previous employment by B.C.C.I., and that they suffered loss in consequence.

28. The parties agreed that the contracts of employment of these two former employees each contained an implied term to the effect that the bank would not, without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. It is beyond doubt that this term is now implied into employment contracts. • Will look back on again for Damages

29. Conditions and Warranties (Relative Importance of Contractual Terms) • Consequences • How do we know? • First, we look and see what language the parties have used. If they describe a term as either, then so it is? • Second, assuming the language is not giving us clear answers, we ask can we decide what the parties intended the term to be? • Third, if we still have no clear answer we might get some assistance in the law which may tell us that particular type of term is a condition or a warranty. You don’t need to be too concerned with this – just know that in certain areas the law will say whether something is a condition or a warranty (e.g. certain aspects of admiralty etc).

30. At least that was the theory… • The seaworthiness clause • Hong Kong Fir Shipping Co. Ltd v Kawasaki (1962) • Upjohn L.J. noted that the “seaworthiness” clause could be breached by the slightest failure to be fitted “in every way” for service, ie if a nail was missing from one of the timbers of a wooden vessel or if proper medical supplies were missing.

31. Facts: • Charterers hired a ship for 24 months. It could not be used for five weeks, as it needed repairs to the value of £21,400 during the journey to Japan. When the vessel arrived in Japan another £37,000 was spent on further repairs to make the vessel seaworthy and the repairs took another 15 weeks. The ship was out of service for a total of 20 weeks. The charterers repudiated the contract and claimed that “seaworthiness” was a condition of the contract.

32. Court of Appeal’s Approach • Diplock LJ • Upjohn LJ • So lets reformulate the approach we take - The Hansa Nord (1975)

33. Irish Telephone Rentals Ltd v Irish Civil Service Building Society Ltd (1991), • P attempted to rescind a contract for the supply of a defective telephone system. Costello J. found that the telephone system was not of merchantable quality. He referred to Lord Diplock’s test in the Hong Kong Firs Case and applied the test to the facts before him. He held that the delays in communication due to the defective telephone system were serious and on that basis the plaintiff was entitled to rescind the contract.