Lecture Notes: Contract Law - Implied and Exempting Terms

Introduction

• Special greeting for Muslim brothers and sisters: "Eid Mubarak."
• Combined class for regular and part-time students.
• Today's focus: Discussion on terms of contracts and implied terms.

Recap of Previous Discussion

• Implied Terms:
  • Terms not expressly stated but included by statute, custom, or court.
  • Examples: Sale of goods, employment contracts, land transfer contracts.
  • Implied by custom if well-established and consistent.

Terms Implied by Courts

• Courts imply terms to ensure contract efficiency and business sense.
• Example: The "Moorcock" case - implied term for safety in docking.
• Reasonable bystander test: Terms implied based on objective observations during contract formation.

Categorization of Terms

• Terms classified based on importance: Conditions, warranties, and innominate terms.
• Conditions:
  • Major importance, breach can terminate contract.
  • Innocent party may treat contract as discharged and seek damages.
• Warranties:
  • Lesser importance, breach allows for damages but contract continues.
• Innominate Terms:
  • Cannot be classified until a breach occurs.
  • Impact of breach determines if treated as a condition or warranty.

Important Cases

• Poussard v. Spiers: Condition breach allows contract termination.
• Bettini v. Gye: Warranty breach, contract continues.
• Hong Kong Fir Case: Introduced innominate terms; wait-and-see approach.
• Schuler v. Wickman Machine Tools: Conditions must reflect true intent.

Exclusion Clauses

• Definition: Clauses limiting liability in contracts.
• Types:
  • Exclusion Clause: No liability at all.
  • Limitation Clause: Liability up to a certain point.
• Issues: Considered potentially unfair, especially in standard form contracts.

Tests for Validity

• Incorporation: Clause must be part of the contract.
  • By Signature: Signing signifies acceptance unless fraud/misrepresentation.
  • By Notice: Reasonable and sufficient notice must be given before contract formation.
  • By Course of Dealing: Established consistent practice between parties.

Case Studies

• Chapelton v. Barry UDC: Notice on ticket not part of contract made after the fact.
• Parker v. South Eastern Railway: Sufficient notice needed for conditions on ticket.
• Interfoto Picture Library v. Stiletto Visual Programmes: Unusual clauses require more notice.

Conclusion

• Upcoming discussions will address interpretation and construction of terms in contracts.
• Questions on today's topics are welcomed.