Lecture Notes: Terms of Contracts

Introduction

• Continuation of the discussion on terms of contracts.
• Recap of previous discussions:
  • Importance of classifying statements in the pre-contractual negotiation state.
  • Difference between representations and terms of a contract.
  • Misrepresentation vs breach of contract.

Classification of Statements by Courts

• Four guides for classification:
  1. Timing of the statement.
  2. Importance of the statement.
  3. Whether the statement was written into the contract.
  4. Expertise of the statement maker.

Implied Terms

• Terms not necessarily negotiated by parties but included by courts.
• Differences between implied and express terms.

How Implied Terms Arise

1. Implied by Statute

   • Certain contracts have statutory implied terms (e.g., Sale of Goods Act).
   • Statutory provisions can override the contractual agreement unless excluded.
   • Example: Implied terms regarding the quality of goods.

2. Implied by Custom

   • Local trade usages or practices can imply terms.
   • Example: Hutton v. Warren case – custom in farming agreements.
   • Usage must be well-established and recognized by parties.
   • Example in local context: Poku v. Bernasco case.

3. Implied by Courts

   • Courts imply terms to reflect unexpressed intentions of parties.
   • Two main methods:
     • Business Efficacy Test: Ensures the contract can achieve its purpose.
       • Example: The Moorcock case – safety obligations for ship docking.
     • Officious Bystander Test: Implies terms that parties would agree to if pointed out by a bystander.
       • Example: Spring v. National Amalgamated Stevedores.

Terms Implied by Law

• Implied not only for specific contracts but for all of a particular kind.
• Often a matter of public policy.
• Example: Employment contracts and the duty to obey reasonable instructions.

Cases

• Liverpool City Council v. Irwin
  • Obligations of a landlord implied for maintenance and safety.
• Leicester v. Romford Ice & Cold Storage
  • Public policy terms in employment contracts.

Conclusion

• Importance of understanding different types of implied terms.
• Responsibility of students to read full case judgments for deeper understanding.
• Encouragement to prioritize studying over social media to become a competent law student.