Terms of Contract

1. Terms of Contract Express Terms of Contract Chapter 4.1 Exclusion Clauses Chapter 4.2 Implied Terms of Contract Chapter 4.4

2. Problems of Uncertainty and Incompleteness • An agreement which is uncertain or incomplete cannot be legally enforced. • This is because, in both situations, the intention of the parties cannot be ascertained objectively.

3. Terms of Contract- the need for certainty • All terms and conditions must be agreed before the contract is made • All the terms and conditions of the offer must be brought to the attention of the offeree before or at the time of acceptance. • Note that sometimes the terms and conditions of an agreement might be: • contained in several documents • or they might be partly oral and partly in writing

4. Construction of Express Terms What does a term of a written contract mean? • Lord Hoffman’s approach : • Commonsense - not a strictly literal interpretation. • Extrinsic evidence - can be used for context but only if existing words are not clear

5. Exclusion Clauses • a term inserted into a contract whereby one party purports to limit or negate their responsibility under the contract by • excluding themselves from liability for some eventuality; or • limiting their liability for some eventuality.

6. Types of notice • Actual notice – existence and contents of clause brought to the attention of the other party. • Constructive notice – the other party has not become aware of the clause although reasonable steps taken to bring it to their notice. E.g. notices on entranceways. • Previous course of dealing – notice may be inferred from a previous course of dealing between parties. • NB. The more unreasonable the exclusion clause- the greater the notice that must be given!

7. Notice requirements “The exclusion clause is so wide and so destructive of rights that the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way…In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it - or something equally startling” Thornton v Shoelane Parking [1971] 2 QB 163 per Lord Denning at p 170 (Parking ticket contained an extremely onerous exclusion of liability clause)

8. Common law and exclusion clauses – questions for the Courts • Is the clause part of the contract? • Was sufficient notice given? • How should it be interpreted. • if ambiguous the contra proferentem* rule applies. Ie. where a term is ambiguous, the preferred meaning should be the one that works against the interests of the party who provided the wording

9. Question Emma pays Jim for work on her car’s brakes but they fail the next time she drives. She complains to Jim. Jim points to the exclusion clause on the wall of his workshop: “All care taken- no responsibility” .

10. Which is correct? A Emma has no rights because Jim has excluded responsibility. B Jim has no rights because his notice is not part of the contract. C Jim’s clause will be interpreted against him because it is ambiguous and he is the person seeking to rely on it.

11. Implied terms

12. What is Needed to Convince a Court to Enforce a Term or to provide a Remedy for breach of a term? • Generally the courts need to be satisfied the term was intended to be contractually binding.

13. Terms of the Contract • Terms of the contract may be express. • OR they may be implied • Context may indicate other terms implied • Mutual intentions of parties

14. Types of Implied Terms • Terms implied by Trade Usage or Custom • Terms implied by Law • Terms implied by the Courts into particular contracts where the parties obviously intended the term to be binding

15. Implied Terms: Terms Implied by Trade Usage or Custom • Requirements for establishing custom: (i) “notoriety” (ii) certainty (iii) reasonable (iv) clear and convincing evidence (v) not inconsistent with express terms Principles established in Woods v NJEllingham & Co Ltd [1971] 1 NZLR 218 as summarised in Everist v McEvedy [1996]3 NZLR 348, 360

16. Question for Discussion • Is it an implied term by trade usage or custom that “coffee to go” is always sold in a cup with a lid?

17. Terms implied by Law • By statuteEgs135-140 Contract and Commercial Law Act 2017 • By common law terms consistently implied into all contracts of a particular type because of the nature of the contract rather than the supposed intentions of the parties e.g. implied duties in employment contracts. • Note: the list of terms is not closed.

18. Term implied by Law • Where the term sought to be implied has not previously been recognized the test is one of necessity in the context of the particular category of contract • Per Lord Wilberforce in Liverpool City Council v Irwin [1977]AC 239 at 254 • The term must also be reasonable.

19. Implied Terms- Question for Discussion • In the Merchant of Venice Portia saves Antonio’s life by arguing that, while Shylock may be entitled to his pound of flesh, the contract does not entitle him to any blood. He can only remove the flesh if no blood is spilled. • Could Shylock argue that there is an implied term to the contract that he can spill Antonio’s blood?

20. Terms Implied by the Courts into individual particular contracts • Terms implied to give business efficacy BP Refinery (Westenport) Pty Ltd v Shire of Hastings (1977)16 ALR 363, 52 ALJR 20 (PC)

21. Five Point Test- to be implied a term • must be reasonable and equitable • must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it • “The Moorcock” (1889) • must be so obvious that “it goes without saying” • must be capable of clear expression • must not contradict any express term of the contract

22. Terms implied to give business efficacy • “This could hardly be a clearer case for giving a commercial contract business efficacy” Compcorp Ltd v Force Entertainment Ltd (2003)7 NZBLC 103,996 (CA)

23. Discussion of the 5 point test • per English Court of Appeal • “the test is almost misleading in its simplicity. • McNeill v Gould McNeill v Gould (2002) • “intention of the parties is still the yardstick” • Attorney General of Belize v Belize Telecom [2009] • “there is only one question: is that what the instrument read as a whole against the relevant background, would reasonably be understood to mean?” • Hickman v Turn and Wave Ltd [2011] • “while the BP Refinery list should not necessarily be regarded as cumulative, each element is a useful indicator relevant to the ultimate question of what the reasonable person would have understood the contract to mean.”

24. Implied Terms: What about an implied duty of good faith? “No topic in the law of contract has generated more articles than the issue of good faith” • EW Thomas “Good Faith in Contract: a Non Sceptical Commentary” (2005) NZBLQ 391 at 392.