Module 4 - Terms - Lecture Version 2024.pptx

APPLIED CONTRACT LAW Module 4 Terms  “…the question whether a [contractual term] was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that [the statement or prom...

APPLIED CONTRACT LAW Module 4 Terms  “…the question whether a [contractual term] was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that [the statement or promise constitute a term] was intended, that will suffice” Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd 2 All ER 65 per Lord Denning MR at 67 CONTEXT How do we know what we agreed to? This Photo by Unknown Author is licensed under CC BY  01 EXPRESS TERMS 02 IMPLIED TERMS Module 4 03 CLASSIFICATION OF TERMS LEARNING OUTCOMES 04 PAROL EVIDENCE RULE 05 EXCLUSION CLAUSES 06 CONCLUSIONS & FURTHER READING READINGS AND KEY CASES Readings Chapter 4 4-050 to 4-060: Express Terms 4-160 to 4-230: Implied Terms 4-130 to 4-150: Classification of Terms 4-440 to 4-450: Parol Evidence Rule 4-090 to 4-110, 4-270, 4-460: Exclusion Clauses Key Cases Dick Bentley v Harold Smith Oscar Chess v Williams BP Refinery v Hastings Associated Newspapers v Bancks Van Den Esschert v Chappell Causer v Browne Thornton v Shoe Lane Parking La Rosa v Nudrill 1. EXPRESS TERMS 4-050 to 4- 060 What are express terms? Directly written or spoken ‘Representations’ v ‘terms’ (verbal or written, e.g. a brochure) Context Handbury v Nolan (1977) 13 ALR 339 (not in text) Timing of statements Stressed importance Skill or knowledge of the statement maker Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd 2 All ER 65 [4-060] Oscar Chess Ltd v Williams 1 All ER 325 [4-060] Puff, opinion, statements of intention This Photo by Unknown Author is licensed under CC BY 01 2. IMPLIED TERMS 4-160 to 4- 230 What are implied terms? NOT directly written or spoken, ‘Goes without saying’ Implied by FACT Common sense, context Conduct of the parties Prior dealings The party claiming they apply must prove it Implied by LAW Law (sometimes can be excluded) Trade usage or custom The party claiming they do NOT apply must prove it http://businesslawtips.blogspot.com/2016/04/ 01 02 03 04 2. IMPLIED TERMS 4-160 to 4- 230 Terms Implied by FACT Parties cannot expressly include ALL reasonable terms Terms can be implied to give efficacy, to give effect to the parties’ intentions or to complete the contract (fill in the blanks) Care must be taken because we are implying… Terms are not implied by fact if the contract expressly deals with a matter “Because the importation of the term rests on the presumed intention of the parties, it must yield to the actual intention embodied in express terms of the contract whether the contract be written or oral.” 01 Byrne v02 03 Ltd (1995) 185 Australian Airlines 04 CLR 410 at 440 per 2. IMPLIED TERMS 4-160 to 4- 230 Terms implied by FACT Onus on party claiming Becomes more difficult if a written contract is in place (parol evidence rule) (i.e. more likely for verbal contracts) Must be so obvious that it goes without saying (Byrne) The BP Test BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 [4-190] Reasonable and equitable; Gives business efficacy (no term will be implied if the contract works without it; Must be obvious so that is ‘goes without saying’; Must be capable of clear expression; and Must not contradict any express terms of the contract 01 02 03 04 2. IMPLIED TERMS 4-160 to 4-230 Apply in tests the BP Case: Equitable? Shire is no worse off if rates discounted. BP is worse & Shire better otherwise. Favours BP Efficacy? This is not necessary for the purchase. Not material Favours Shire Obvious? Is it obvious that the discount stays with the site for 40 years? Perhaps. Favours BP Expression? Is capable of clear expression. Merely a rates discount. Favours BP Contradict? There were no express terms dealing with the rates. Favours BP. 01 02 03 04  3. CLASSIFICATION OF 4-130 to 4- TERMS 150 Conditions A ‘material’ term Serious consequences of a breach Something that goes to the heart of the matter Something not easily rectified in the circumstances Bettini v Gye (1876) 1 QBD 183 (not in text) Poussard v Spiers (1875) LR 1 QBD 410 (not in text) HC Test Luna Park (NSW) v Tramways Advertising Pty Ltd (1938) 61 CLR 286 [4-130] And see Associated Newspapers Ltd v Bancks (1951) 83 CLR 332 This Photo by Unknown Author is licensed under This Photo by Unknown Author is licensed under (not in text) CC BY-SA CC BY-NC-ND 01 02 3. CLASSIFICATION OF 4-130 to 4- TERMS 150 Warranties Not to be confused with consumer ‘warranties’ Not a ‘material’ term Minor consequences of a breach Something that does not go to the heart of the matter Something easily rectified in the circumstances 01 02 CLASSIFYING THE KEY TERMS CONCEPTS CONDITION v WARRANTY? Parties often use the words ‘condition’, warranty’ and ‘terms’ interchangeably E.g. many contracts refer to their ‘Terms and Conditions’ Technically this is incorrect but in practice these names are not properly used The key therefore is to look at what the terms ARE rather than what they are called. Use the tests of a condition, for example, regardless of what its called BUT note that many contract do expressly list what they are to be conditions (or material breaches) So, if the parties expressly outline that something is deemed to be a condition in the true sense, then we must give effect This Photo by Unknown Author is licensed under CC BY-NC to this. IN REAL LIFE PRACTICAL IMPLICATIONS Contracts will often set out what the parties agree to be Conditions. They may call these ‘Conditions’ or ‘Material Terms’ Generally this means if they are breached, the other party can treat it as a breach of condition. They may include things that would not normally be a condition using the common law tests But if the parties agree, then this is what the courts will enforce Parties also call terms ‘warranties’ or ‘representations’ which, in a written contract actually refer to often serious terms (that would be a condition) At common law, we use the word ‘warranty’ to mean a minor thing and we use the word ‘representation’ to mean a non-binding thing. Once again we see the difference between theory and practice and also what we CALL something vs what it really IS. CC BY-NC This Photo by Unknown Author is licensed under 4. PAROL EVIDENCE RULE 4-440 to 4- 450 RULE Particularly where negotiations (especially verbal) result in a written contract If the contract is in writing and appears entire, it is assumed that all the terms of the contract are contained within it and therefore you cannot add anything to it The court will not accept parol (extrinsic) evidence of any other terms than what is in the contract All the important terms should be in the contract! This is not a ‘Black Letter’ rule (called the ‘4 corners rule’ in USA) 01 02 4. PAROL EVIDENCE RULE 4-440 to 4- 450 EXCEPTIONS Many… Partly Written and Partly Oral Contracts Van Den Esschert v Chappell WAR 114 (not in text) The ‘white ants’ case Also illustrates tests of a verbal statement Timing, stressed importance, skill or knowledge Note: oral cannot contradict written E.g. Henderson v Arthur 1 KB 10 (not in text) This Photo by Unknown Author is licensed under CC BY-SA 01 02 IN REAL LIFE PRACTICAL IMPLICATIONS Note that in many contracts we use an entire agreement clause: “This contract is the entire contract between the parties. This contract supersedes any prior contracts between the parties and no prior representations or negotiations are binding.” CC BY-NC This Photo by Unknown Author is licensed under 5. EXCLUSION CLAUSES 4-090 to 4-110, 4270 to 4-460 EXLCUSIONS / LIMITATIONS / DISCLAIMERS What are they and why are they used? Are they fair? The attitude of the courts and Contra Proferentum Requirements for use: Notice Timing Interpretation This Photo by Unknown Author is licensed under CC BY 01 02 03 04 5. EXCLUSION CLAUSES 4-090 to 4-110, 4270 to 4-460 NOTICE By Signature L’Estrange v F Graucob Ltd 2 KB 394 [4- 090] By Constructive Notice Tickets Causer v Browne VLR 1 [4-090] Signs Thornton v Shoe Lane Parking Ltd 2 QB 163 [4-090] Multiple documents (prior dealings) [all cases 4-100] La Rosa (next page) This Photo by Unknown Author is licensed under CC BY-SA 01 02 03 04 5. EXCLUSION CLAUSES 4-090 to 4-110, 4270 to 4-460 NOTICE Multiple documents (prior dealings) WA Case: La Rosa v Nudrill Pty Ltd WASCA 18 [4- 100] http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/wa/WASCA/2013/18.html?context=1;query=la%20rosa%20;mask_path= La Rosa had accident whilst carrying cargo Regular cartage contracts over many years La Rosa had always issued invoices with terms and exclusion https://www.abc.net.au/news/2017-10-14/five-things-you-didnt-know-about-the-wa-supreme-court-building/9048958 on the back Parties had always negotiated cartage verbally The relevant test was whether the party seeking to rely on a term had done what was reasonably sufficient to give the other party notice of the term Held no: no contractual document showing a clause, invoices were post-contract and usually believed to be soliciting payment rather than imposing terms, the taking of the invoice did not necessarily mean acceptance of any terms on it, Nudrill was factually not aware of the clause (having not read the back of the invoices) 01 02 03 04 5. EXCLUSION CLAUSES 4-090 to 4-110, 4270 to 4-460 TIMING Must be BEFORE the contract is made Thornton v Shoe Lane (see before) Olley v Marlborough Court Hotel 1 KB 532 (not in text) INTERPRETATION Courts will strictly interpret clauses (and apply reasonableness tests) https://en.wikipedia.org/wiki/Tom_Denning,_Baron_Denning Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 [4-460] George Mitchell (Chesterhall) Ltd v Finney Lock Seed Ltd 2 AC 803 (not in text) See Quote from Denning LJ in his last ever judgement at QB 284, 297 https://en.wikipedia.org/wiki/George_Mitchell_(Chesterhall)_Ltd_v_Finney_Lock_Seeds_Ltd 01 02 03 04  6. CONCLUSIONS & FURTHER READING The terms of a contract can arise from many sources. They can be expressed or implied. Courts are reluctant to imply terms (except by law). There are tests to determine whether or not verbal statements are binding. There are tests to determine whether terms can be implied by fact. The Parol Evidence rule attempts to protect the sanctity of written contracts. Once we have identified the terms, they often need to be classified into conditions or warranties as these give rise to different remedies. Exclusion clauses attempt to remove or limit liability. There are rules about using these. Further Reading None  THANKYOU You have now completed this lecture