Lecture 5 Express Terms Implied Terms

Lecture 5
Express Terms
Implied Terms
Introduction to Terms
TERMS
EXPRESS
ORAL
IN WRITING
IMPLIED
FACT
LAW
INCORPORATION
SIGNED
UNSIGNED
COURSE OF DEALING REFERENCE
STATUTE
TRADE USAGE
Puff
• Sales talk
• Not intended to be taken seriously
• No contractual force
‘Mere’ Representation
•
•
•
•
•
•
•
Factual statements
Induce entry into contract
Not guaranteed by the maker
No contractual force
May be remedy in tort if fraudulent
May be common law damages if negligent
May be statutory remedy for misrepresentation
of misleading/deceptive conduct
Term
• The maker of the statement intends to
guarantee its truth
• If found to be a term, a pre-contractual
statement takes effect as an express term
• Breach gives rise to damages
Objective test
Hospital Products Ltd v United States
Surgical Corp (1984) 156 CLR 41 at 61:
‘the conclusion a reasonable person in the
position of the person to whom the
statement was made would have reached’
Deciding the intention of the parties
1.
2.
3.
4.
Time of statement
Content of statement
Existence of written memorandum
Relative knowledge and expertise of the
parties
Time of Statement
• Only an indication, not conclusive
• Shorter the period between the making of
the statement and entry into the contract,
the more likely the statement will be found
to be promissory in nature
• Implication being that a reliance on the
truth of the statement induces entry into
the contract
Content of statement
• The more significant the content, the more
likely it is a term
• Couchman v Hill
Existence of Written Memorandum
• Where there is a written memorandum of
the contract:
– Included – good indication it is a term
– Not included – good indication it is not a term
Relative knowledge and expertise
of the parties
• Oscar Chess Ltd v Williams
• Dick Bentley Productions v Harold Smith
(Motors)
Collateral Contracts
Two party collateral contract:
A enters into the main contract with B
because of a promise made by B in
relation to the subject matter of the main
contract, or some other inducement.
Collateral Contracts
Three-party collateral contract:
A enters into a contract with C after a
statement by B – that statement takes
effect as a collateral contract between A
and B, the consideration for which is A’s
entry into the main contract with C.
The uses of collateral contract
•
•
•
where the main contract is illegal, the
collateral contract may be enforceable
even if the main contract isn’t;
where the contract is required to be
evidenced in writing, the collateral
contract may not need to be, and thus
may be enforceable;
if it’s a three-party collateral contract, the
privity rule of contract is avoided.
Elements
JJ Savage & Sons v Blakney (1970) 119
CLR 435:
Must establish three elements:
1. That the statement was intended to be
relied on;
2. That there was reliance by the party
alleging the existence of the contract;
3. That the maker of the statement intended
to guarantee its truth.
Introduction to Terms
TERMS
EXPRESS
ORAL
IN WRITING
IMPLIED
FACT
LAW
INCORPORATION
SIGNED
UNSIGNED
COURSE OF DEALING REFERENCE
STATUTE
TRADE USAGE
Incorporation by signature
L’Estrange v Graucob: by signing a document the party
indicates an intention to be legally bound by the terms
therein, regardless of whether they know what they are.
Toll v Alphapharm: if the party knows the document
contains contractual terms and signs, they are bound.
Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB
805: rule in L’Estrange will not apply where the effect of
signing is misrepresented by the other party.
Non est factum: ‘this is not my act’ (eg Petelin v Cullen
(1975) 132 CLR 355 at 359-360).
Incorporation by notice
Balmain New Ferry Co v Robertson (1906) 4
CLR 379 per Griffith CJ:
(approving Parker v SE Railway)
‘…sufficient for the defendants to prove that
they had done what was reasonably
sufficient to give the plaintiff notice of the
conditions of admittance …’
Tickets
1. Did the person who received the ticket
know that there was writing on it?
2. Did that person know that the ticket
referred to terms?
3. Did the party relying on the terms do what
was reasonable to bring notice of the
existence of the terms?
Incorporation by Course of Dealing
Course of dealing between the parties must have
been:
1. Consistent
2. Sufficiently long
Cases
Henry Kendall v William Lillico [1969] 2 AC 31.
J Spurling v Bradshaw [1956] 1 WLR 461.
Recap
TERMS
EXPRESS
ORAL
IN WRITING
IMPLIED
FACT
LAW
INCORPORATION
SIGNED
UNSIGNED
COURSE OF DEALING REFERENCE
STATUTE
TRADE USAGE
Implied Terms
IMPLIED IN
FACT
LAW
COMMON LAW
TRADE USAGE
STATUTE
BP Test
From BP Refinery v Shire of Hastings (1977) 180 CLR 266
at 283:
For a term to be implied, the following conditions must be
satisfied:
1. it must be reasonable and equitable;
2. it must be necessary to give business efficacy to the
contract;
3. it must be so obvious that it ‘goes without saying’;
4. it must be capable of clear expression;
5. it must not contradict any express term of the contract.
Implied by Law
Common Law
2 step process:
1. Category of contract?
2. Is the term necessary for this type of
contract?
Implied by Custom and Usage
Must be:
1.
2.
3.
4.
Notorious
Certain
Legal
Reasonable