Contract Law: Implied Terms and Transfers

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Questions and Answers

What is implied regarding the transferor's rights in a contract for the transfer of goods?

The transferor can delegate the contract to another party.

The transferor must provide after-sales service.

The transferor must provide a warranty for all goods.

The transferor has the right to transfer ownership of the goods. (correct)

Which implied term applies when goods supplied are described?

The goods must be delivered within a set timeframe.

The goods will correspond with the description provided. (correct)

The goods must be accompanied by a receipt.

The goods are guaranteed to last for a year.

What condition is implied about the quality of goods supplied in the course of a business?

The goods should be sold below market value.

The goods must be of exceptional quality.

The goods should be of satisfactory quality. (correct)

The goods must meet ISO standards.

What does an implied term state when a buyer informs the supplier of the goods' purpose?

The goods will be fit for the expressed purpose. Signup and view all the answers

What is implied about the performance of work or service done in the course of business?

The work must be done with reasonable care and skill. Signup and view all the answers

What is implied if no time for performance has been agreed upon for a service?

The service will be carried out within a reasonable time. Signup and view all the answers

What occurs if a price for work or service has not been fixed?

A reasonable sum will be charged. Signup and view all the answers

Which type of terms are sections 13-15 of the SGSA considered to be?

Innominate terms Signup and view all the answers

What is the time limit for the short-term right to reject non-perishable goods?

30 days after delivery Signup and view all the answers

Which of the following is NOT a possible remedy for a consumer if the short-term right to reject has been lost?

Full refund of the price Signup and view all the answers

When goods do not conform to the contract, how long is the seller responsible within the delivery timeframe?

6 months from the date of delivery Signup and view all the answers

Under the CRA 2015, what is implied if no price has been fixed for a service or work?

A reasonable price will be paid Signup and view all the answers

Which section implies that the service/work will be carried out with reasonable care and skill?

s 49 Signup and view all the answers

If no time for performance has been fixed in a services contract, what is implied under the CRA 2015?

The service will be performed within a reasonable time Signup and view all the answers

What is the main governing legislation for the statutory rights related to services contracts?

Consumer Rights Act 2015 Signup and view all the answers

Which of the following describes a key limitation of the Consumer Rights Act 2015?

There is limited scope to restrict the trader’s liability Signup and view all the answers

What must be established to identify a sale by description?

The buyer relied on the seller's description. Signup and view all the answers

Which of the following illustrates a sale by description despite the buyer having inspected the goods?

A buyer examines a car advertised as a 1961 model but later discovers it is made of parts from different years. Signup and view all the answers

What rights does a buyer have if a term implied by the SGA 1979 is breached?

The buyer can terminate the contract and reject the goods. Signup and view all the answers

What is required for a buyer to affirm a contract after a breach?

The buyer can choose to keep the goods and sue for damages. Signup and view all the answers

What can a buyer do if they find the goods defective after purchase?

Terminate the contract and reject the defective goods. Signup and view all the answers

What does strict liability in the context of breach of contract imply?

The buyer does not need to prove seller fault. Signup and view all the answers

What is a potential remedy for a buyer if the goods received do not match the description?

They can sue for damages while keeping the goods. Signup and view all the answers

In the context provided, what validates a sale by description?

The buyer’s reliance on the seller’s description being reasonable. Signup and view all the answers

What is the legal term for a breach due to not fulfilling express terms in a contract?

Condition breach Signup and view all the answers

Which term explains the requirement for work to be done with reasonable care and skill?

Implied term under s 49 of the CRA 2015 Signup and view all the answers

What statutory right allows a party to require repeat performance for a breach?

s 11 of the CRA 2015 Signup and view all the answers

Under which circumstance is it more advisable to sue for breach of a contract?

For serious issues requiring rectification Signup and view all the answers

What classification of terms governs obligations varying based on the specific circumstances of a contract?

Innominate terms Signup and view all the answers

Which of the following is NOT a type of contractual term?

Covenant Signup and view all the answers

In a breach of contract scenario, what is the most likely remedy sought for failure to perform the contract as described?

Replacement of goods Signup and view all the answers

What does s 11 of the CRA 2015 emphasize regarding the goods supplied in a contract?

Goods must conform to the description Signup and view all the answers

What does the term 'condition' imply in a contract?

It allows for immediate termination of the contract upon breach. Signup and view all the answers

In the case of Schuler v Wickman Machine Tool Sales Ltd, what was the main issue at hand?

Deciding if the term described as a 'condition' was intended to be interpreted strictly. Signup and view all the answers

What is one advantage of classifying terms into conditions and warranties?

It provides certainty about termination rights. Signup and view all the answers

What potential unfair outcome can arise from classifying terms strictly as conditions?

Minor breaches may lead to termination of the entire contract. Signup and view all the answers

Which legal statute provides specific rules for the sale of goods contracts?

Consumer Rights Act 2015 Signup and view all the answers

What was a significant factor when the court made its decision in Schuler v Wickman?

The intent behind labeling a term as a condition. Signup and view all the answers

Why might a party label a term as a 'condition' in a contract?

To clearly communicate the importance of the term in contract performance. Signup and view all the answers

What is typically expected if a term in a contract is classified as a warranty?

The breach of the term is considered minor and cannot end the contract. Signup and view all the answers

What is the main focus of the guidelines in Schedule 2 of the 1977 Act?

Establishing the reasonableness test for exemption clauses Signup and view all the answers

Which factor is crucial in determining the reasonableness of an exemption clause according to Schedule 2?

The relative strength of the bargaining positions of the parties Signup and view all the answers

In a scenario where both parties have equal bargaining power, what is likely to happen regarding exemption clauses?

It will be easier to show that the exemption clause is reasonable. Signup and view all the answers

What influence does the customer's opportunity to choose a contract without an exemption clause have on reasonableness?

It can suggest that the exemption clause might be reasonable. Signup and view all the answers

According to the content, what is the impact of risk on pricing in business contracts?

The greater the risk to the supplier, the higher the price. Signup and view all the answers

What might indicate that experienced businessmen have made a reasonable agreement?

They negotiated under equal bargaining power. Signup and view all the answers

In the assessment of the reasonableness of an exemption clause, what role does pricing play?

Pricing can reveal the allocation of commercial risk. Signup and view all the answers

What does the court typically take into account when assessing exemption clauses beyond the guidelines in Schedule 2?

The overall circumstances surrounding the agreement Signup and view all the answers

What is the primary purpose of awarding damages in a contract breach?

To compensate the claimant for loss suffered Signup and view all the answers

What happens if a claimant has not suffered any loss in a breach of contract case?

Only nominal damages will be awarded Signup and view all the answers

In the case of Obagi v Stanborough, what was the outcome related to the breach of contract?

Nominal damages were awarded due to no actual loss Signup and view all the answers

What should a party consider before bringing a breach of contract claim for nominal damages?

The risk of incurring higher legal costs than the damages awarded Signup and view all the answers

Which of the following statements about punitive damages is true in breach of contract cases?

They can only be awarded in tort cases and not in purely contractual claims Signup and view all the answers

When calculating damages, what criterion is used to determine the award?

The loss suffered by the claimant Signup and view all the answers

What must be established for damages to be awarded in a breach of contract?

Actual loss suffered by the claimant due to the breach Signup and view all the answers

What is an essential consideration for a claimant before pursuing a breach of contract claim?

Whether they can prove their actual loss from the breach Signup and view all the answers

What principle did Lord Denning emphasize regarding pre-contract expenditure in Anglia TV v Reed?

Pre-contract expenditure should be considered as foreseeable losses. Signup and view all the answers

In Omak Maritime Ltd v Mamola Challenger Shipping Co, why could the owners not recover damages for wasted expenditure?

They successfully mitigated their losses by re-chartering the vessel. Signup and view all the answers

What is typically required for a claimant to obtain damages due to a breach of contract?

Evidence that they have suffered loss because of the breach. Signup and view all the answers

When might a court choose to award damages on a reliance loss basis instead of an expectation loss basis?

If expectation losses are too difficult to quantify or speculative. Signup and view all the answers

What is the purpose of the mitigation rule in contract law?

To require parties to minimize losses after a breach has occurred. Signup and view all the answers

What type of losses does the claimant seek when claiming on a reliance loss basis?

Expenses incurred in reliance on the contract. Signup and view all the answers

In what circumstances might a court consider a reliance loss claim too speculative?

When future earnings are uncertain and lack firm evidence. Signup and view all the answers

What significant conclusion can be made from Omak Maritime Ltd v Mamola Challenger Shipping Co regarding claimants who mitigate losses?

They may not recover damages if they successfully mitigate their loss. Signup and view all the answers

What type of damages can be awarded in a contract for pleasure, entertainment, or enjoyment according to Lord Denning MR?

Compensation for mental distress and disappointment Signup and view all the answers

How did the judge initially assess the damages in Mr Jarvis's case?

By finding the difference in value between what he paid and what he received Signup and view all the answers

What was the final amount awarded to Mr Jarvis by the judge?

£31.72 Signup and view all the answers

Why is the assessment of damages for mental distress considered challenging according to Lord Denning MR?

It involves subjective experiences that vary per individual Signup and view all the answers

What aspect of a holiday contract did Mr Jarvis primarily seek compensation for?

The lack of advertised facilities and enjoyment Signup and view all the answers

What reasoning does Lord Denning MR provide to justify awarding damages for distress in a contract?

Loss of enjoyment in leisure and entertainment contracts is significant Signup and view all the answers

What limitation does Lord Denning MR suggest is outdated regarding damages for mental distress?

That mental distress is only compensable in tort cases Signup and view all the answers

In the case discussed, what was Mr Jarvis's primary expectation from the holiday he booked?

To enjoy all the promised facilities Signup and view all the answers

What was the primary reason the defendants were held liable in Parsons v Uttley Ingham?

The defective installation of the food hopper caused foreseeable harm. Signup and view all the answers

In Victoria Laundry v Newman Industries, why were the claimants not compensated for the profit on lucrative contracts?

Such profits fell outside the normal business activities. Signup and view all the answers

What principle did Scarman LJ indicate regarding losses in Parsons v Uttley Ingham?

All losses of the same type, even if more severe, are recoverable. Signup and view all the answers

How did the Court of Appeal classify the underwriting losses in Brown v KMR Services Ltd?

As of the same type as originally contemplated. Signup and view all the answers

What challenge did Stuart-Smith LJ acknowledge regarding loss categorization?

Categorizing losses, particularly with financial implications, can be difficult. Signup and view all the answers

According to the principles established in Parsons v Uttley Ingham, what can be said about losses that exceed initial expectations?

They may still be recoverable if of the same type as contemplated. Signup and view all the answers

How is the distinction between types of loss illustrated in Victoria Laundry v Newman Industries?

By relating normal business profits to extraordinary profits from specific contracts. Signup and view all the answers

What overarching theme can be perceived from the cases discussed, including Parsons v Uttley Ingham and Victoria Laundry v Newman Industries?

Contractual liability can extend to unexpected levels of loss if they are of the same kind. Signup and view all the answers

Why did the court grant an injunction in the case of the defendant being a film actress?

The defendant would have other means of earning money. Signup and view all the answers

What was a main reason the court refused to grant the injunction in Page One Records v Britton?

It would force the group to retain their former manager. Signup and view all the answers

What does the case suggest about a person's temptation to perform a contract?

Temptation doesn't force a person to fulfill the contract. Signup and view all the answers

In what context did the court refuse to grant an injunction regarding management contracts?

The group needed flexibility in their management. Signup and view all the answers

What is indicated about the personal nature of duties in a management contract?

The personal nature of duties affects the enforceability of contracts. Signup and view all the answers

How did the court assess the ability of the defendant to earn in different spheres?

The court determined she had means to succeed elsewhere. Signup and view all the answers

What was a potential criticism of the court's decision regarding employment in other capacities?

It was overly optimistic about job prospects. Signup and view all the answers

What does the term 'enjoined' refer to in a legal context?

Preventing a party from taking certain actions. Signup and view all the answers

What primary factor will the court consider when deciding to grant an injunction regarding a contract stipulation against working for another party?

The length of time for which the injunction is requested Signup and view all the answers

In which scenario would a claim in restitution most likely arise?

When money has been paid, but the consideration has failed Signup and view all the answers

Why might an injunction not be granted when enforcing a term of a contract?

It could seriously affect the party’s career Signup and view all the answers

What is the main purpose of a restitution remedy?

To prevent unjust enrichment of one party at another's expense Signup and view all the answers

When might a restitution claim be unavailable despite evidence of unjust enrichment?

When there is a formal contract in place Signup and view all the answers

Which of the following situations is NOT likely to lead to a claim in restitution?

A legally binding contract that has been fulfilled Signup and view all the answers

What is the likely consequence if an injunction compels a party to work for the original employer against their will?

The injunction will likely not be granted Signup and view all the answers

What type of situation can result in a restitution claim involving work done or goods delivered?

Failure to compensate for work completed Signup and view all the answers

Study Notes

Learning Outcomes

Students should understand the difference between express and implied terms in contracts, how they are classified, and the link with remedies for breaches.
Students should be able to explain how terms are implied into contracts, specifically focusing on the Sale of Goods Act 1979, the Supply of Goods and Services Act 1982, and the Consumer Rights Act 2015.
Students should be able to explain and discuss the roles of common law and statutes in regulating exemption clauses in both consumer and business contracts.
Students should be able to use a structured and analytical approach to advise clients on the impact of exemption clauses.

Contents of a Contract

Contracts have terms that define the obligations of the parties.
Understanding the extent of obligations is crucial if problems arise.
A real-life example illustrates this. A holiday booking in Cornwall is used to demonstrate how terms determine the extent of obligations. A hotel booking for 5 nights with a sea view room, and the hotel confirming the booking but then only having a room available for 2 nights and facing a busy road, constitutes a breach of contract. The remedy is usually monetary compensation.

Identifying Express Terms

Express terms are those specifically agreed upon by the parties, either in writing or orally.
Parties are generally free to agree on any terms they choose, although there are restrictions.
An example, Ashtons decorating a café, is used to illustrate express terms:
- The service to be performed
- Price
- Materials to be used for different parts of the decorating
- The methods that will be used to apply each layer of paint.

Implied Terms

Implied terms are not explicitly stated but are understood to be part of the contract.
This is often done by courts in disputes or through specific legislation.
Parties might not explicitly agree to all terms due to shared understanding of standard practices or previous consistent dealings.

Terms Implied by the Courts

Courts imply terms based on local custom or trade usage, e.g., an allowance for seed or work done in the last year of tenancy, even if not mentioned in the lease.
They may also imply terms based on a previous course of dealings between the parties.
Terms are implied to achieve business efficiency or because a reasonable person would expect them, often referring to the "business efficacy" or "officious bystander" tests.

Terms implied by Statute

The Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982 stipulate implied terms for sales of goods and services.
Key implied terms include those pertaining to satisfactory quality, fitness for purpose, and correspondence with description.
The Consumer Rights Act 2015 affects consumer contracts.

Remedies for Breach of Implied Terms

Remedies for breach of contract are covered in Chapter 4.
Basic rights and remedies for breach of contract terms include damages and rejection of non-conforming goods if a term implied by the SGA 1979 is broken. Possible remedies for breach of implied terms are covered in Chapter 4.

Exemption Clauses

Exemption clauses attempt to limit or exclude liability for breaches of contract or torts if a breach occurs.

Incorporation of Exemption Clauses

Clauses are incorporated into the contract by signature, notice, or a consistent course of dealings.
A signed document usually incorporates all its clauses, whether read or not.
Providing notice before a contract is made is important.
A reasonable person would expect the presence of terms in a given document, such as a ticket.

Construction of Exemption Clauses

To be effective, an exemption clause must precisely cover the breach or damage alleged.
The contra proferentem rule means that an unclear or ambiguous clause is interpreted against the party relying on it.
An exemption clause can cover liability for negligence if explicitly mentioned. Otherwise, courts must determine if the wording is broad.

Unfair Contract Terms Act 1977

The Act clarifies when exemption clauses are invalid for businesses.
It deals with limiting or excluding liability arising from a breach of an implied term.
The reasonableness test is crucial in applying UCTA 1977, which determines whether the clause is fair.
The burden of proof is on the party seeking to rely on the exemption clause.
The Act does not apply to trader-to-consumer contracts now dealt with under the Consumer Rights Act 2015.

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Description

This quiz focuses on the implied terms in contracts for the transfer of goods, including conditions related to quality, performance, and remedies available to consumers. Test your understanding of the Sale of Goods Act and the Consumer Rights Act of 2015 as they relate to the supply of goods and services.