Contents of a Contract
What is a term?
Mere ‘puff’ is not a term (advertising boasts)
‘Representations’ are not necessarily terms, but may still be possible to sue for mis-rep
Contractual terms are only express or implied
Express Terms can be written, oral or a mix of both
Terms can be subdivided into conditions, warranties, or innominate terms
Express Terms (ET)
Express Terms (ET) - of a contract are terms specifically agreed by the parties. They may be
in writing or oral. Generally, parties are free to agree to any terms they choose, although
there are some restrictions
In order to be terms, statements (whether oral or in writing) must be incorporated into
the contract
Implied Terms (IT)
Implied Terms (IT) - are not expressly created by the parties but are implied (read) into the
contract. Certain implied terms have been given statutory force and will operate regardless
of the intention of the parties, unless there is a valid exemption clause to exclude them
Court can imply terms into contracts:
by custom or trade usage
by a previous course of dealings between the parties
for business efficacy
because of the type of contract
Terms Implied by custom or trade usage
Terms may be implied by fact where there is a sufficiently regular and consistent course of
dealing between the parties
Hutton v Warren (1836) – if there is a disagreement about the provisions of the
contract, court may imply a term based on local custom or trade usage
o If the contract has an express provision which contradicts with the custom,
custom will not be implied
Spurling J Ltd v Bradshaw [1956] – a delivery receipt containing exemption clause was
usually provided after delivery, on all the previous occasions. Given their previous
consistent course of dealings the court held that the although the exemption clause was
included in a post-contractual document (receipt), it was a term of the contract
o This principle is not confined to exemption clauses. It can be used to imply other
terms where the parties have had previous consistent dealings
Official Bystander/ Business Efficacy Test
There are two tests that have been devised by the courts to imply terms into a contract
based on the presumed intentions of the parties:
Business efficacy test
Official Bystander test
,The Moorcock (1889) established the ‘business efficacy’. Idea behind this test is that the
court should consider whether a term is necessary to make the contract work commercially
It is not enough that the term would be a reasonable one to imply in the sense that it
would improve the contract
Shirlaw v Southern Foundries Ltd [1939] suggested that a term could only be implied if
the point was so obvious that it went without saying that that was what the parties
intended (officious bystander test)
Terms Implied because of the type of contract
Where a contract is of a kind which frequently occurs, the court may identify provisions
which are typical of that kind of contract and say that these provisions will be implied terms
unless the parties make contrary provision
Liverpool CC v Irwin [1977] – test of necessity should be implied bearing in mind the nature
of this particular contract, because otherwise the contract would not work
Terms Implied by Statute
Terms may also be implied in law by statute:
Sale of Goods Act (SGA) 1979
Supply of Goods and Services Act (SGSA) 1982
Consumer Rights Act (CRA) 2015
Implied terms in contracts for goods under SGA1979:
S.8 SGA1979 – where the price is not fixed in the contract or ascertainable in one of the
other ways stated in S.8(1) then the buyer must pay a reasonable price
S.12 SGA1979 – implied term that the trader holds the title to the goods and can sell them
S.13 - Sale of Goods by Description
S.13 SGA1979 – implied condition that the goods will correspond with the description
In order for S.13 to apply the buyer must rely on the description, and whether it was
reasonable to do so Harlingdon & Leinster v Christopher Hull [1991]
S.13 may still apply even where the goods have been inspected by C prior to the
purchase, provided that C reasonably relied on the description Beale v Taylor [1967]
Liability is strict (buyer does not have to prove that the seller is at fault)
S.14 - Satisfactory Quality and Reasonable Fitness for Purpose
S.14(2) – implied term that goods are of satisfactory quality, which includes being generally
fit for purpose
S.14(3) – implied term that goods are reasonably fit for purpose which the buyer expressly
or by implication makes known to the seller. Seller must be in course of business for this to
apply
If X intends to use the goods just for their normal purpose, X does not have to tell the
seller what this is, it is made known by implication
If X has a special or unusual purpose in mind, than the seller must be made aware of it in
order to gain benefit of S.14(3)
It must be reasonable for the buyer to rely on the seller’s skill and judgement
Liability is strict (buyer does not have to prove that the seller was at fault)
, Remedies for breach of terms implied by S.13 + 14 SGA1979
If one of the terms implied by S.13/14 is broken then normally the buyer can terminate
the contract and reject the goods even if the breach is minor
The buyer is not obliged to perform any further obligations under the contract and can
recover money paid, but must give back the goods to the seller
He can also sue for damages if there is any further loss
Alternatively, the buyer may affirm the contract, keep the goods and just sue for
damages for any loss suffered
The right to terminate the contract and reject the goods will be lost in the following
circumstances:
Right to reject the goods is lost where the buyer has accepted the goods S.11(4); S.35
SGA1979
o S.11(4) provides that the buyer cannot reject the goods if he has accepted them
o S.35 sets out situations when the buyer will be deemed to have accepted the
goods
Most common situation where the buyer is deemed to have accepted the
goods is where he retains the goods beyond a reasonable time without
intimating rejection
Reasonable time is a question of fact in each case (time starts to run from
the date of delivery)
In deciding this, the court must consider whether the buyer has had a
reasonable opportunity in commercial terms to examine the goods to see
whether they are in conformity with the contract
Nature of the goods and their complexity will be relevant
Buyer is allowed a reasonable time to try out the goods in general terms
Right to reject the goods for breach of S.13/14 will be lost if the breach is so slight that it
would be unreasonable for the buyer to reject them S.15A SGA1979
o If X buys something for his business and the goods are usable but very slightly
defective
o X will not be able to reject the goods for breach of S.14(2)/14(3)
o Remedy will be restricted to damages
o It is up to the seller to show that the breach is so slight that rejection of the
goods would be unreasonable
Implied terms in contracts for services under SGSA1982
If the contract is just for the supply of a service, only S.13, 14 and 15 need to be
considered.
Where the contract is to supply both goods and services, consider S.13, 14 and 15 for
the service and also S.3, 4 for the goods
Service Contract occurs where a supplies is simply contracting to provide a service
Commercial cleaning contracts/ commercial courier contracts
S.3 SGSA1982 implies a term that the goods will correspond with the description
S.4(2) SGSA1982 - goods will be of satisfactory quality
S.4(5) SGSA1982 – goods are reasonably fit for any particular purpose which the transferee
makes known
What is a term?
Mere ‘puff’ is not a term (advertising boasts)
‘Representations’ are not necessarily terms, but may still be possible to sue for mis-rep
Contractual terms are only express or implied
Express Terms can be written, oral or a mix of both
Terms can be subdivided into conditions, warranties, or innominate terms
Express Terms (ET)
Express Terms (ET) - of a contract are terms specifically agreed by the parties. They may be
in writing or oral. Generally, parties are free to agree to any terms they choose, although
there are some restrictions
In order to be terms, statements (whether oral or in writing) must be incorporated into
the contract
Implied Terms (IT)
Implied Terms (IT) - are not expressly created by the parties but are implied (read) into the
contract. Certain implied terms have been given statutory force and will operate regardless
of the intention of the parties, unless there is a valid exemption clause to exclude them
Court can imply terms into contracts:
by custom or trade usage
by a previous course of dealings between the parties
for business efficacy
because of the type of contract
Terms Implied by custom or trade usage
Terms may be implied by fact where there is a sufficiently regular and consistent course of
dealing between the parties
Hutton v Warren (1836) – if there is a disagreement about the provisions of the
contract, court may imply a term based on local custom or trade usage
o If the contract has an express provision which contradicts with the custom,
custom will not be implied
Spurling J Ltd v Bradshaw [1956] – a delivery receipt containing exemption clause was
usually provided after delivery, on all the previous occasions. Given their previous
consistent course of dealings the court held that the although the exemption clause was
included in a post-contractual document (receipt), it was a term of the contract
o This principle is not confined to exemption clauses. It can be used to imply other
terms where the parties have had previous consistent dealings
Official Bystander/ Business Efficacy Test
There are two tests that have been devised by the courts to imply terms into a contract
based on the presumed intentions of the parties:
Business efficacy test
Official Bystander test
,The Moorcock (1889) established the ‘business efficacy’. Idea behind this test is that the
court should consider whether a term is necessary to make the contract work commercially
It is not enough that the term would be a reasonable one to imply in the sense that it
would improve the contract
Shirlaw v Southern Foundries Ltd [1939] suggested that a term could only be implied if
the point was so obvious that it went without saying that that was what the parties
intended (officious bystander test)
Terms Implied because of the type of contract
Where a contract is of a kind which frequently occurs, the court may identify provisions
which are typical of that kind of contract and say that these provisions will be implied terms
unless the parties make contrary provision
Liverpool CC v Irwin [1977] – test of necessity should be implied bearing in mind the nature
of this particular contract, because otherwise the contract would not work
Terms Implied by Statute
Terms may also be implied in law by statute:
Sale of Goods Act (SGA) 1979
Supply of Goods and Services Act (SGSA) 1982
Consumer Rights Act (CRA) 2015
Implied terms in contracts for goods under SGA1979:
S.8 SGA1979 – where the price is not fixed in the contract or ascertainable in one of the
other ways stated in S.8(1) then the buyer must pay a reasonable price
S.12 SGA1979 – implied term that the trader holds the title to the goods and can sell them
S.13 - Sale of Goods by Description
S.13 SGA1979 – implied condition that the goods will correspond with the description
In order for S.13 to apply the buyer must rely on the description, and whether it was
reasonable to do so Harlingdon & Leinster v Christopher Hull [1991]
S.13 may still apply even where the goods have been inspected by C prior to the
purchase, provided that C reasonably relied on the description Beale v Taylor [1967]
Liability is strict (buyer does not have to prove that the seller is at fault)
S.14 - Satisfactory Quality and Reasonable Fitness for Purpose
S.14(2) – implied term that goods are of satisfactory quality, which includes being generally
fit for purpose
S.14(3) – implied term that goods are reasonably fit for purpose which the buyer expressly
or by implication makes known to the seller. Seller must be in course of business for this to
apply
If X intends to use the goods just for their normal purpose, X does not have to tell the
seller what this is, it is made known by implication
If X has a special or unusual purpose in mind, than the seller must be made aware of it in
order to gain benefit of S.14(3)
It must be reasonable for the buyer to rely on the seller’s skill and judgement
Liability is strict (buyer does not have to prove that the seller was at fault)
, Remedies for breach of terms implied by S.13 + 14 SGA1979
If one of the terms implied by S.13/14 is broken then normally the buyer can terminate
the contract and reject the goods even if the breach is minor
The buyer is not obliged to perform any further obligations under the contract and can
recover money paid, but must give back the goods to the seller
He can also sue for damages if there is any further loss
Alternatively, the buyer may affirm the contract, keep the goods and just sue for
damages for any loss suffered
The right to terminate the contract and reject the goods will be lost in the following
circumstances:
Right to reject the goods is lost where the buyer has accepted the goods S.11(4); S.35
SGA1979
o S.11(4) provides that the buyer cannot reject the goods if he has accepted them
o S.35 sets out situations when the buyer will be deemed to have accepted the
goods
Most common situation where the buyer is deemed to have accepted the
goods is where he retains the goods beyond a reasonable time without
intimating rejection
Reasonable time is a question of fact in each case (time starts to run from
the date of delivery)
In deciding this, the court must consider whether the buyer has had a
reasonable opportunity in commercial terms to examine the goods to see
whether they are in conformity with the contract
Nature of the goods and their complexity will be relevant
Buyer is allowed a reasonable time to try out the goods in general terms
Right to reject the goods for breach of S.13/14 will be lost if the breach is so slight that it
would be unreasonable for the buyer to reject them S.15A SGA1979
o If X buys something for his business and the goods are usable but very slightly
defective
o X will not be able to reject the goods for breach of S.14(2)/14(3)
o Remedy will be restricted to damages
o It is up to the seller to show that the breach is so slight that rejection of the
goods would be unreasonable
Implied terms in contracts for services under SGSA1982
If the contract is just for the supply of a service, only S.13, 14 and 15 need to be
considered.
Where the contract is to supply both goods and services, consider S.13, 14 and 15 for
the service and also S.3, 4 for the goods
Service Contract occurs where a supplies is simply contracting to provide a service
Commercial cleaning contracts/ commercial courier contracts
S.3 SGSA1982 implies a term that the goods will correspond with the description
S.4(2) SGSA1982 - goods will be of satisfactory quality
S.4(5) SGSA1982 – goods are reasonably fit for any particular purpose which the transferee
makes known
