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Complete Notes on Contract Terms for Ulaw PgDL
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Complete Notes for Contract Terms for Ulaw PgDL
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Contract TermsMarch 19, 2023
1 Express and Implied Terms of a Contract
• The express terms of the contract are terms specifically agreed by the
parties, these terms may be either written or oral.
• In general, parties are free to agree to any terms they choose. This is the
freedom of contract.
• Implied terms are not expressly created by the parties but are implied into
the contract.
• Terms can be implied by either statute or the courts.
2 Court Implied Terms: Local Custom and Trade
Usage
• Parties may not expressly agree all the terms of their contract because they
form the contract against a background of common assumptions based on
what usually happens in that locality or in that line of business.
• Thus, if there is a disagreement about the provisions of the contract, a
court may imply a term based on local custom or trade usage (see Hutton
v Warren (1836) 1 M W 466 ).
• However, if there is a provision in the contract which contradicted a local
custom or trade usage, then the courts will not imply terms.
• In sum, then, a court will imply terms on these bases only if the contract
does not contradict these bases.
3 Court Implied Terms: A Previous Court of
Dealings Between Parties
• Regular trading between two parties over a period of time on the basis of
consistent terms of trade is sufficient for the same terms to be treated as
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, incorporated in a new contract between those parties (see Spurling J Ltd
v Bradshaw [1956] 1 WLR 461, CA).
4 Court Implied Terms: The Presumed Inten-
tions of the Parties
• 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.
• The first test for determining whether a court will imply terms into a
contract is the Moorcock test - or the ‘business efficacy’ test - which was
expounded in The Moorcock (1889) 14 PD 64.
• Under this first test, courts will not imply terms merely because they are
reasonable or desirable; rather, courts will imply terms only if they are
‘...necessary and obvious... to give business efficacy.’
• Another test for determining whether a court will imply terms into a
contract is the officious bystander test which was developed in Southern
Foundries (1926) Ltd v Shirlaw [1940] AC 701.
• Under this second test, suppose that a nosey, officious bystander were to
walk past two contracting parties and ask them whether they would want
to put some express term into the agreement.
• If the contracting parties would instantly retort that such a term is ‘of
course’ already mutually part of the agreement then that term is apt for
implication.
5 Court Implied Terms: The Type of Contract
• Where a contract is of a kind which frequently occurs, such as employment
contracts and tenancy agreements, 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 (see Liverpool
City Council v Irwin and Another [1977] AC 239, HL).
6 Terms Implied by Statute
• The Sale of Goods Act (SGA) 1979 implies terms into contracts for the
sale of goods; however, it does not imply terms into all contracts for the
sale of goods.
• Since the Consumer Rights Act (CRA) 2015 came into force, the SGA
1979 no longer applies to contracts for the sale of goods made between a
trader and a consumer.
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, • The SGA 1979, then, only applies to contracts for the sale of goods
which are made business-to-business, consumer-to-consumer or consumer-
to-business.
• The SGA 1979 does not concern private sellers.
7 Terms Implied by the SGA 1979: S 14
• Under s 14(2), so long as the seller sells in the course of business to com-
mercial buyer, there is an implied condition that the goods are of satis-
factory quality.
• Under s 14(3), so long as the seller sells in the course of business to com-
mercial buyer, and the buyer expressly or impliedly makes known any
particular purpose for which the goods are being bought, then there is an
implied condition that the goods are reasonably fit for that purpose.
• The liability for breach of s 14(2) and 14(3) is strict; the buyer does not
have to prove that the seller is at fault.
• To get the benefit of s 14(3), you do not have to tell the seller what
purpose you are using the goods for if you intend to use them for their
normal purpose. It is made known by implication.
• If you have a special or unusual purpose in mind, then to get the benefit
of s 14(3) you should tell the seller what this is.
• Note that there is an exception to s 14(3), which is where the buyer does
not rely, or that it was unreasonable for them to rely, on the skill or
judgment of the seller.
8 Terms Implied by the SGA 1979: S 13
• Under s 13 of the SGA 1979, where there is a contract for a sale of goods by
description, there is an implied condition that the goods will correspond
with the description given.
• This term will be implied whether the seller is a business or a private
individual, unlike the terms implied by s 14(2) and 14(3) where the seller
must sell in the course of a business.
• In order for a contract for the sale of goods to be a sale by description, the
buyer must rely on that description (Harlingdon & Leinster Enterprises
Ltd v Christopher Hull Fine Art Ltd [1991] 1 QB 564).
• So, to identify a sale by description, you should ask whether the buyer
relied on the seller’s description and whether this was reasonable.
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