Commercial Law - Terms (slides)

Terms
In this part of the lecture we determine the promises exchanged in a contract
What did parties agree upon?

Pre Contractual Statements
Statements made before the contract is made fall under 3 categories
Puffs – inconsequential statements
Representations – action for misrepresentations
Terms

Terms of Contract
Tells us what parties agreed on
Determines the obligations of parties to the contract
Sets the perimeters for the deal

How are terms agreed upon?
Expressly by parties
Implied by law
Implied by legislation

Express Terms
Are terms considered expressly by parties
Present in the minds at the time of the contract

Express Terms
Orally – many contract are made orally
In writing – letters, faxes, sms, proper contracts
Conduct – a nod, a shrug etc.
Combination of all of the above

Written Agreements
The Parol Evidence Rule
Section 93 Evidence Act
Tells us that where parties agree to put their agreement in writing, oral evidence cannot be admitted to vary it.

Implied Terms – Common Law
Terms can be implied by common law
The common law uses a test known as the “business efficacy” test;
The Moorcock (1889)
Shirlaw v Southern Founderies (1926)
“SOMETHING SO OBVIOUS IT GOES WITHOUT SAYING”

Implied Terms (cont)
Examples:-
Air Conditioner works;
Rental car is insured
Lawyer is licensed
Doctor is qualified
Drugs approved by authority is safe?

Implied Terms - Legislation
Used by lawmakers to regulate certain aspect of commercial transactions
The Sale of Good Act
Hire Purchase Act

Sale of Goods Act
Contracts for sale as oppose to Contracts for Services or Barter trade (S2(1))
Imposes duties on seller of goods to:-
Deliver goods
Pass good title (s12)
Deliver goods of right quantity


Sale of Goods Act (cont)
Deliver goods that matches description (S13)
Deliver goods that is satisfactory in quality (s14)
Deliver goods that is fit for intended purpose (s14)
Deliver goods that corresponds with sample (s15)
Property, Risk & Possession

Quality on Terms
Conditions – very important terms, breach of which entitles non breaching party to rescind the contract
Warranties – less important terms, breach of which entitles the non breaching party only to damages
In-nominate terms – are terms which could be both conditions and warranties depending on the breach (Hong Kong Fir case)

Quality on Terms (examples)
Car is sold without a tyre replacement equipment
Car keeps breaking down
Air Conditioning is not cold enough
Food is too salty
Pizza delivered late

Exemption Clauses
Are terms that are intended to exclude or limit the liability of the breaching party
They are valid provided the following conditions are satisfied:-
The terms must be agreed upon either in a contractual document; (Chapelton v Barry UDC (1940))
Reasonable notice must be given;(Olley v Marlborough Court (1949))

Exemption Clauses (cont)
UCTA (1977) – limits the scope of exclusion clauses
Makes a distinction between consumers and non consumers (s12 UCTA)
Prohibits sellers from excluding their implied obligations under the SOGA to consumers (s6(2))
Restricts the sellers from excluding their implied obligations under the SOGA to non consumers (s6(3)) by the requirement of reasonable

Conclusion
Pre Contractual Statements – Puffs, Representations or Terms
Terms – Express or Implied
Terms fall under 3 quality – Warranty, Conditions or In nominate Terms
Exclusion Clauses