Contract law Lectures: Terms of Contract

When is a term a contract?
Some terms are more important than others.
Express terms
Inducements and terms distinguished
The statements and intentions of the parties
Law of contract decides whether there is a condition or not
-Gill & Duffus SA v Societe…des Sucres SA (1985)
Two buyers were buying and selling sugar.
Defendant would name the port and ship where the goods would be loaded on by the 14th November. Buyers had an obligation to name the ship/ to name the port.
-The 14th Nov. came and went and party did inform seller what they wanted. Buyers walked away because buyers had not fulfilled their contractual obligations. They regarded the date as not only a term of the contract, but a condition.

-Courts will at the extent of the agreement.
Courts agreed with the sellers that the buyers had broken a fundamental condition of the contract (rather than a term).

L Schuler AG v Wickham Machine Tool Sales (1973)
Schuler was contracted to be the agent and visit and solicit orders from six clients.
When Schuler failed to visit all the clients, Wickham terminated the contract with Schuler. They said it had been a condition that these visits were carried out.
House of Lords decided that this had not been a condition/ simply referred to regular visits.

Express Terms
The nature of the statement
If both parties had intended the statement to be a term of the contract than it is.

-Howard Marine v Ogden (1978) (barges case)
Why was the weight of the barges not a term of the contract. HM did not intend tonnage to be a term of the contract.

-Bannerman v White (1861)
Two farmers buying and selling hop. Plaintiff told the defendant not to bother quoting a price if the hops were contaminated with sulphur. He was quoted a price and so he bought the hops. It turned out they were contaminated. Buyer won the case –even though no express terns had been made.
Have to convince the court that the other side also intended it be binding
Have to look at context/intention/relevance

-Routledge v Mckay (1954)
Seller was not a motorcycle dealer. Seller claimed it was a 1942 model. Deal goes ahead. It turns out it was not.

Oral statements later put into writing
J. Evans & Son v Merzario (1976)
Long standing relationship. Had always insisted that their gods were stored below deck. Industry practices changed and goods were now boxed and kept on deck. J. Evans rang Merzario and agreed that the traditional arrangement would continue.
However, it did not and the goods were lost overboard during a storm. Insurance would not cover it. Merzario said that the arrangement was not part of any contract.
-Court decided that the oral assurance overrode the printed conditions.

As a general rule, that which is written will trump which is spoken.

When is a term a term? à When it is important to both parties.
à Parties need to be aware of the terms.
à When it is highly important to the deal.
à before the contract has been concluded.

Incorporation of Written Terms
…into an oral contract;
“ticket” or “notice” cases:
Olley v Malborough Court (1949)
Mr and Mrs Olley checked into a hotel. Note on the back door “proprietors will not hold themselves responsible for personal belongings lost or stolen” –exclusion clause. At the time of this case, the phrase was capable of excluding the hotel owners.
While they were out their room was burgled. The hotel had left the master key out.
Hotel said that the exclusion cause exempted them from responsibility.
-Court had to ask when the contract was concluded. Anything you find after the contract had been made cannot incorporated into the contract. This contract had already been made when they agreed to take the room before, the couple saw the sign.

Thorton v Malborough Court (1971)
Interfoto Picture..v Stilletto Visual..(1988)

Conditions and Warranties
Bernstein v Pamson Motors (1987)
Once court has decided it is part of the contract, it must then decide whether it is an important or not.
-Promise that gets to the heart of the matterà condition
-Minor promise à warranty

Contrast Poussard v Spiers (1876)
Opera singer who didn’t show. Had to go to the rehearsals – she said this was a minor promise – she had still not not fulfilled the main condition of the contract and there was a possibility she might be able to attend the opening night. Organisers decided that she had committed repudiatory breach of contract. Courts agreed.

Contrast Bettini v Gye (1876) 1 QBD 183.
Italian Opera singer in London, didn’t turn up to rehearsals – It was accepted this was a breach of contract. The organisers rebutted the contract. Singer argued that this was not merited as he was still willing to attend the main concert. Court said it was not repudiatory breach.

Implied terms
Judicial terms…based on implication according to parties’ intentions.
The Moorcock (1889) per Bowen LJ
Cargo to be brought to wharf by ship and offloaded. However, the ship ran aground due to low tide in the wharf and was seriously damaged. Owners of the ship decided to sue the Wharf owners. What assumptions would you make in the agreement to use the wharf?
Ship owners assumed it was safe. Implied term that the ship would be safe.
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You can put words into your opponent’s mouth. Very useful judicial mechanism.
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In the interests of reasonableness
Court said business ethicacy was very important. Not sensible that a deal should collapse this way.

Once you are using words like ‘surely’ then are approaching the realm of implied terms.

Liverpool City Council v Irwin (1977) –limits to implied terms
Poor facilities in Council flat (block tenants) argue that the Council is in breach à so tenants withhold their rent.
The implied term is the minimum that need to be done for the contract to work.

The modern basis for implication of terms.
a) the intention of the parties; -implied term bases upon their behaviour (Jones v Assoc. Tunnelling Co. (1981)
b) business efficacy – we are going to imply that this jetty has enough water because there is no other way to make the deal work (The Moorcock 1889)
c) obvious consensus – 10th floor flat (Liverpool)
d) reasonableness; B.A.C. v Austin (1978) IRLR 332

Mrs Austin was a spot welder. Employer made available protective goggles.
Austin wore spectacles and could not wear the goggles. Austin asked her supervisors to provide her with a pair. After six weeks of nothing happening she left and then sued for constructive breach of contract.
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There may not have been an expressed term to provide this equipment and H & S regulations did not apply here. Nonetheless, a degree of risk was identified. Hence goggles were being given to some but not to others. In breach of an implied term to treat employees equally.

Statutory Implied Terms
Statute is a huge source of terms of contract

In employment…
-Equal pay Act 1970 (the “equality clause”)
-Employment Rights Act 1996
-right not to be unfairly dismissed
-redundancy payments
-maternity rights

In commerce…
Sale of Goods Act 1979
-s.12 title
Rowland v Divall (1923)


Divall -contract £334 (for sale of goods)
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Rowland - buys it contract then sells it for £400
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3rd party
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Police--------------------------àTrue owner

Although you may have possession, you cannot own stolen goods. Deed of title is never given.
The car had been stolen property, returned by the police to the true owner.
Rowland sought his money back from Divall
Divall was innocent of theft.
Implied term that the seller was the owner of the car.
Divall was therefore held to be in breach of promise he did not even know he had made.

-s.14 (2) quality
Crowther v Shannon Motor Co. (1975)Rogers v Parish (Scarborough) Ltd. (1987)