contract terms (general and specific to consumer contracts)

• Contract Terms

  General and Specific to Consumer Contracts
• General Terms to Consumer Contracts

  Express or Implied Terms
• Types of Terms

  Condition, Warranty, Innominate Term
• Express and Implied Terms

  Express term - Terms of a contract are what both parties have agreed to e.g. the bus fare costs £2.

  Implied terms - there are not expressly discussed between parties but are terms that both parties would have intended to be included e.g. the bus journey may require you to stand up for the duration of the travel.
• Types of Terms

  The type of each individual term depends on the evidence of the term in the contract
• Types of Terms - Condition

  A condition is a term in a contract that is so central and important to a contract that a breach of that term may allow the contract to be repudiated (ended). A judge may impose a remedy of 'rescission' (a remedy that places the parties back in their pre-contractual positions).
• Condition - Poussard v Spiers and Pond (1876)


  • An actress agreed to perform the lead role but failed to attend the first few performances. Her role was given to an understudy and the actress was no longer allowed to take on the role. This is because the actress had broken a key condition in her contract by failing to turn up, therefore the contract was ended.
• Types of Terms - Warranty

  A warranty is a minor term of the contract. A breach of a warranty will allow a claim for damages (compensation), however the contract will remain in place. There is no right to repudiate (end) the contract.
• Warranty - Bettini v Gye (1876)


  • A singer was contracted to perform a series of concerts and attend 6 days of rehearsals. He failed to attend the first 3 rehearsals and was replaced by another singer. He was no longer allowed to sing. Due to this just being a breach of warranty, the concert organiser should not have repudiated the contract. Therefore, the singer was awarded damages for loss of earnings for the breach.
• Types of Terms - Innominate Term

  When a term in a contract is neither a condition or a warranty, it instead is called an innominate term. The consequences of a breach of an innominate term will depend on the severity of the breach; its severity will determine whether to treat the term like a condition or a warranty.
• Innominate term - Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962)


  • The defendants charted a ship from the claimants for two years. A term in the contract required that the ship should be 'in every way fitted for ordinary cargo service'. However, the ship was not fully seaworthy, and was out of service for 18 weeks for repairs. The defendants repudiated the contract. The Courts assessed whether the innominate term was a condition or warranty and decided that the breach was just of a warranty, so only damages were awarded.
• Is It A Term, Or Just Mere Representation?


  Distinguishing between a term and a representation is important to determine the appropriate remedy.

  If a statement is a term, there will be a breach of contract.

  If a statement is merely a representation, there will be a claim for misrepresentation.
• Is It A Term, Or Just Mere Representation?

  • Importance: If a statement is obviously important, it will be seen as a term of a contract.
  • Special Knowledge or Skill: The level of skill held by an individual will affect whether it is a representation or a term.
  • Time Lag: If a contract is made some time after the negotiations, and it does not refer to a statement made during those negotiations, it is likely that the statement will not become a term of the contract.
  • Written Contracts: The Courts tend to presume that everything the parties wanted to include is written as a term of the contract.
• Importance - Couchman v Hill (1947)


  • An auction catalogue stated that a cow was not pregnant, which was confirmed by the auctioneer and the farmer selling the cow. In fact, the cow was pregnant and died whilst giving birth. The initial statement, of the cow not being pregnant, was important to the purchaser, so it was taken as a term rather than a representation.
• Special knowledge or skill - Oscar Chess v Williams (1957)


  • A private seller of a car believed the car was a 1948 model. The car was actually much older. This statement was not a term, just a representation, because the seller lacked knowledge and skill.
• Special knowledge or skill - Dick Bentley v Harold Smith Motors (1965)


  • A car dealer stated that the car had done 20,000 miles. The car had actually done 100,000 miles. Even though the statement was not written in a contract, this was still taken to be a term of the contract, not a representation, due to the experience expected of a car dealer.
• Time Lag and Written Contracts - Routledge v Mackay (1954)


  • Both parties were private individuals and relied on the registration documents of the vehicle. A contract was made later and did not refer to the date of the vehicle. The time gap between the negotiations and the written contract was important in showing that the information held a lack of importance, so was just a mere representation and not a term.
• Terms Implied Through Common Law


  Terms Implied Through Business Efficacy and the Officious Bystander Test: The Courts will imply a term into a contract if the term is necessary to make sure that the contract works on a business-like basis. There is a two-part test for this:
• Terms Implied Through Business Efficacy test

  The business efficacy test looks at whether the term is necessary to make the contract effective.
• Business Efficacy test - The Moorcock (1889)


  • The claimants moored their ship at the defendant's wharf on the River Thames. At times, the when the tide used to go out, the ship would come into contact with the river bed. The ship became damaged due to uneven surfaces and rocks on the river bed. The claimant sought damages from the defendant. The Courts implied a term in fact, that the river bed would be safe for mooring. The business efficacy test meant that the term was necessary to be implied for it to make 'business sense'.
• Terms Implied Through Officious Bystander Test

  The officious bystander test looks at whether the parties would have agreed that the suggested term, was obviously going to be in the contract.

  Implied terms reflect the clear intention of the parties and is assessed considering what a reasonable person would have understood the intention to be.
• Officious Bystander Test - Shell UK ltd v Lodstock Garage Ltd (1977)


  • Shell supplied petrol and oil to Lostock, who in return agreed to buy these products only from Shell. Shell later supplied petrol to other garages at a lower price as part of a price war. This forced Lodstock to sell at a loss. Lostock argued that there was a term in the contract that Shell would not abnormally discriminate against it. This argument failed as Shell would never have agreed to such a term.
• Officious Bystander Test - Egan v Static Control Components (Europe) Ltd (2004)


  • The Courts decided that a reasonable person would assume that signed guarantee for an existing debt would still apply to future debts.
• Terms Implied Through Common Law

  Terms Implied Through Custom: Local customs will be implied into contracts.
• Terms implied through custom - Hutton v Warren (1836)


  • Local custom meant that at the end of an agricultural lease, a tenant farmer was entitled to an allowance for seed and labour of the land. The Court decided that the terms of the lease must be viewed in light of this custom.
• Terms Implied Through Common Law

  Terms Implied By Prior Dealings Between the Parties: Prior conduct of the parties may indicate terms to be implied.
• Terms implied by prior dealings between parties - Hillas v Arcos (1932)


  • A contract between two parties included an option clause, allowing the purchase of more goods in the following year for a set price. The next year the sellers refused this sale. The Courts decided that, while the option clause lacked specific detail, it was implied that it would be on the same terms as the previous contract.
• The Consumer Rights Act 2015

  The Consumer Rights Act 2015 brings together rights and remedies available to consumers when making a contract with a business. In consumer contracts, terms are implied in the contract and 'rights' are given to the consumer; this imposes a corresponding duty on the trader. The Act applies to contracts and notices between a consumer and a trader.
• Terms Implied Into A Contract to Supply Goods


  • Section 9 - The Right of Satisfactory Quality - the goods meet the standard of what a reasonable person would consider satisfactory (Rogers v Parish) - if the defects were brought to attention before the contract was made it will not apply.
• Remedies for the Breach of a Term Implied Into A Contract to Supply Goods


  • Section 20 - The Short-Term Right to Reject - this must be exercised within 30 days of the delivery of the goods. Exercise of this right must be made clear to the trader by the consumer. The consumer must indicate they are rejecting the goods and terminating the contract, in which they will be entitled to a refund. The trader must bear any reasonable costs of returning the goods.
• Terms Implied Into A Contract to Supply Services


  • Section 49 - Reasonable Care and Skill - The trader must perform the service with reasonable care and skill. Contracts for service include things such as carrying out building work or repairs to an item. The standard of care the trader has to meet is the standard of a reasonable person. This is decided on a case-by-case basis. (Wilson v Best Travel)
• Remedies for the Breach of a Term Implied Into A Contract to Supply Services


  • Section 55 - The Right to Require Repeat Performance - the trader must perform the service again, to the extent necessary to complete its performance in accordance with the contract. The trader must do this within a reasonable time and must bear any necessary costs incurred.
• Consumer and Trader

  Consumer - an individual acting for purposes that are wholly or mainly outside the individual's trade, business, craft or profession.

  Trader - a person acting for purposes relating to that person's trade, business, craft or profession, whether acting personally or through another person acting in the trader's name or on the trader's behalf.
• Terms implied into a contract to supply goods


  • Section 10 - The Right of Fitness for Particular Purpose - the consumer makes it known to the trader any particular purpose for which the consumer is contracting for the goods, creates an implied term they are fit for purpose (Baldry v Marshall) - if the purchaser has a particular sensitivity not known to the seller, then as long as the goods are fit for purpose there is no breach.
• Terms implied into a contract to supply goods


  • Section 11 - The Right Relating to Description - the description must include any statutory information relating to the goods. This can be implied description e.g. when goods are on display. The goods must match any model that has been sent. (Beale v Taylor)
• Remedies for the Breach of a Term Implied Into A Contract to Supply Goods


  • Section 23 - The Right to Repair or Replacement - if s.20 is not exercised they have the right to repair or replacement - a replacement has to be identical. If an item is no longer available, replacement would be impossible. This must occur within a reasonable time and without significant inconvenience to the consumer.
• Remedies for the Breach of a term implied into a contract to supply goods


  • Section 24 - The Right to a Price Reduction or the Final Right to Reject - if s.23 does not bring satisfaction, the consumer can ask for a price reduction or use their final right to reject to claim a full refund. The trader can only have one attempt at repair or replacement for the consumer to have this right.
• Remedies for the breach of a term implied into a contract to supply goods


  • Section 19(14) and (15) - If a breach arises within the first 6 months from delivery, the breach is presumed to have been there at the time of delivery. The trader would have to prove otherwise. If a fault develops after 6 months, the consumer must prove that the product was fault at the time of delivery.
• Terms implied into a contract to supply services


  • Section 52 - Performance Within a Reasonable Time - The service must be performed within a reasonable time, if the contract has not expressly fixed a time for when service needs to be performed. What is a reasonable time is a question of a fact which will depend on the circumstances.
• Remedies for the breach of a term implied into a contract to supply services


  • Section 56 - The Right to a Price Reduction - This right allows for a reduction in price to the consumer by an appropriate amount. This may result in the trader giving a refund, up to the full contract price. This remedy is available where s.55 is impossible, or the trader cannot do s.55 within a reasonable time.