Lecture 5 Express Terms Implied Terms. Introduction to Terms.

Lecture 5

Express Terms

Implied Terms

Introduction to Terms

TERMS

EXPRESS IMPLIED

ORAL IN WRITING FACT LAW STATUTE TRADE USAGE

INCORPORATION

SIGNED UNSIGNED COURSE OF DEALING REFERENCE

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. Time of statement

2. Content of statement

3. Existence of written memorandum

4. 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 IMPLIED

ORAL IN WRITING FACT LAW STATUTE TRADE USAGE

INCORPORATION

SIGNED UNSIGNED COURSE OF DEALING REFERENCE

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.

RecapTERMS

EXPRESS IMPLIED

ORAL IN WRITING FACT LAW STATUTE TRADE USAGE

INCORPORATION

SIGNED UNSIGNED COURSE OF DEALING REFERENCE

Implied Terms

IMPLIED IN

FACT LAW TRADE USAGE

COMMON LAW 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. Notorious

2. Certain

3. Legal

4. Reasonable