Introduction to Contract Terms PDF

Introduction to Identifying Terms PLS I – week 5  Identifying terms How do you determine what terms form part of the contract? What if parties want to contract with one another but want to do so on their own terms? What is stated within the contract? What if there...

Introduction to Identifying Terms PLS I – week 5  Identifying terms How do you determine what terms form part of the contract? What if parties want to contract with one another but want to do so on their own terms? What is stated within the contract? What if there are matters which are not expressly stated? Can every eventuality realistically be accommodated under a contract? What if reference is made to terms contained elsewhere? What if the parties had contracted in the past? How are these terms to be interpreted?  ‘Battle of the forms’ Which terms govern a contract? Consider the use of standard forms or non-negotiated terms of business Both parties purport to contract with one another But, on their own standard terms and conditions What happens when there are competing terms? Or, what happens when a dispute arises? Is there a contract? Consensus? What terms (and whose terms) will form part of the contract? Offer and acceptance analysis ‘Battle of the forms’ - Case 1 Buyer places purchase order (using buyer’s standard terms) Seller acknowledges this by sending their own standard form (containing seller’s standard terms) Seller delivers goods to the buyer Buyer accepts delivery Has a contract been concluded? If so, on whose terms? ‘Battle of the forms’ - Case 2 Buyer places order for tyres (using their own standard terms/printed form) Seller delivers goods without any written acceptance, but delivery note(s) and subsequent invoice(s) have their own terms on which are different to the buyer’s terms. Has a contract been concluded? If so, on whose terms? Identify the point in time the contract is concluded  ‘Battle of the forms’ ‘Last shot analysis’ Case 1: Uniroyal Ltd v Miller & Co Ltd 1985 SLT 101 Case 2: Continental Tyre & Rubber Co Ltd v Trunk Trailer Ltd 1985 SC 163 Best approach? See English case – see Lord Denning, Butler Machine Tool Co v Ex-cell-o Corp 1 ALL ER 965 “the better way is to look at all the documents passing between the parties and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points, even though there may be differences between the forms and conditions printed on the back of them.”  ‘Battle of the Forms’ How will the courts deal with situations when one party indicates that they made it clear from the outset that particular terms would have to operate, and that these terms would prevail over any contrary terms suggested? Position - once a counter-offer comes in that destroys the original offer including that term. Yet we now have Lord Malcolm in Specialist Insulation Ltd v Pro- Duct CSOH 79 taking the line that where one party indicated that it could only be regarded as departing from its quoted terms if it explicitly agreed so in writing, then that was the basis on which all subsequent negotiations should be viewed.  Express Terms: Examples What are express terms? Look through the following examples: Entire agreement clause Arbitration clause Jurisdiction clause Force majeure clause Restrictive covenant Liquidate damages or penalty clause Exclusion clause  What type of Clause? Significance? Neither party will be liable for inadequate performance to the extent caused by a condition (for example, natural disaster, act of war or terrorism, riot, labour condition, governmental action, and internet disturbance) that was beyond the party’s reasonable control.  What type of Clause? Significance? For a period of [X Months] after your Termination Date, you will not engage in business with or be in any way interested in any person, firm, company or organisation that conducts [Restricted Business] within the [Restricted Area], either personally or by an agent, whether on your own or in association with another person/organisation.  What type of Clause? Significance? The management accepts no liability for any article lost on the premises’ …..  What type of Clause? Significance? In the event of delay in [type of project] completion, the [performing party] shall pay liquidated damages to [the owner] in the amount of [£ amount per day/week, etc.] [or] ["X" percent of the total contract price per day/week, etc.]. The parties agree that liquidated damages as described in this Agreement are a genuine estimate of [the owner’s] foreseeable damages and are [the owner’s] sole remedy for such delay. Delays caused by Force Majeure events or by actions of [the owner] shall not constitute a delay resulting in the payment of liquidated damages.  What type of Clause? Significance? A dispute having arisen between the parties concerning [ X ], the parties hereby agree that the dispute shall be referred to and finally resolved by arbitration under the Y Rules. The number of arbitrators shall be [N]. The seat, or legal place, of arbitration shall be [City and/or Country].  What type of Clause? Significance? This Agreement, and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it or its subject matter or formation, shall be governed by, and construed in accordance with, the laws of [ Country ]. Each Party irrevocably agrees that the courts of [ Country ] shall have exclusive jurisdiction to settle any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with this Agreement or its subject matter or formation.  What type of Clause? Significance? This Agreement constitutes the entire agreement of the parties relating to the subject matter addressed in this Agreement. This Agreement supersedes all prior communications, contracts, or agreements between the parties with respect to the subject matter addressed in this Agreement, whether oral or written.  Application of Contract (Scotland) Act 1997 What is an entire agreement clause? A clause which clearly states that the contract in which it appears represents the whole of the agreement between the parties “The purpose of an entire agreement clause is to preclude a party to a written agreement from threshing through the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim…... Opinion of the Sheriff Appeal Court in Anwar & Anwar v Britton & Barclay 2018 SAC (Civ) 27  Contract (Scotland) Act 1997 What if there is no express entire agreement clause? s1(1) Where a document appears….to comprise all the express terms of a contract or unilateral voluntary obligation, it shall be presumed, unless the contrary is proved, that the document does… comprise all the express terms of the contract or unilateral voluntary obligation. s1(2) Extrinsic oral or documentary evidence shall be admissible to prove, for the purposes of subsection (1) above, that the contract or unilateral obligation includes additional express terms (whether or not written terms) s1(3) Notwithstanding the foregoing provisions of this section, where one of the terms in the document …is to the effect that the document does.. comprise all the express terms of the contract or unilateral voluntary obligation, that term shall be conclusive in the matter.  Introduction to Principles of Interpretation Aim? To give effect to the common intention of the parties Objective approach (Surrounding circumstances) - Ascertaining the intentions of the parties – what did they mean in the circumstances? Literal approach - ‘Ordinary meaning of words’- what words are actually used? Common sense? (Commercially sensible construction) - Interpretation away from absurd results Contra proferentem - when interpreting an ambiguous term (for example) an exclusion clause, courts interpret it against the proferens (the party seeking to rely on the clause).