#16128 - Contents Of Contracts Interpretation Consumer Rights Implied Terms - Contract Law

Introduction: Chen-Wishart 5

A – What are Terms? 6

1/ Express terms 6

a/ The parole evidence rule 6

b/ Collateral terms and collateral contracts 7

c/ Incorporation of terms 7

2/ Implied Terms 7

a/ Terms implied in Fact 8

b/ Terms implied in law 8

B – What do the terms mean? (Interpretation) 9

C – Interpretation of exclusion clauses 10

1/ Fundamental Breach 10

2/ Contra proferentem 11

|NOTE Peel, “Whither Contra Proferentem?” in Contract Terms (eds Burrows and Peel, 2007) 53 11

3/ Limitation-exclusion distinction 11

4/ Exemptions of negligence liability 11

5/ Exemptions for indirect and consequential loss 12

I - Interpretation 12

|*Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912-913 (Lord Hoffmann) 12

|*Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 13

|*Arnold v Britton [2015] UKSC 36, [2015] 2 WLR 1593 esp [14]-[23] 14

*Wood v Capita Insurance Services Ltd [2017] UKSC 24 14

|Lord Nicholls, “My Kingdom for a Horse: The Meaning of Words” (2005) 121 LQR 577 14

|Leggatt, “Making sense of contracts: the rational choice theory”(2015) LQR 454 15

|McLaughlin, “A better way of making sense of contracts?” (2016) LQR 577. 16

|Lord Sumption, “A Question of Taste: The Supreme Court and the Interpretation of Contracts” 16

II - Implied Terms 17

|Collins, “Implied Terms: The Foundation in Good Faith and Fair Dealing” (2014) 67 Current Legal Problems 297 17

A/ Terms implied by Statute in Sale of Goods Contracts 17

1/ Non-Consumer Contracts 17

|*Sale of Goods Act 1979, ss 12-15A; 17

2/ Consumer Contracts 18

|*Consumer Rights Act 2015 ss 1 – 3, 5, 9 – 16, 18 (goods contracts); ss 49, *50, 51 – 57 (services contracts) s. 59. 18

B/Terms Implied by Custom 18

|Hutton v Warren (1836) 18

C/ Terms implied by the court 18

1/ Terms implied in Fact 18

|*The Moorcock (1889) 14 PD 64 18

|*Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10 [16]-[27] 19

|*Marks and Spencer v BNP Parisbas [2015] UKSC 72, [2015] 3 WLR 1843 20

2/ Terms implied in Law 20

|*Liverpool CC v Irwin [1977] AC 239 20

|Scally v Southern Health & Social Services Bd [1991] 4 All ER 563 21

|Peden, Policy Concerns Behind Implication of Terms in Law (2001) 117 LQR 459 21

3/ Implied Duty of Good Faith? 22

a/ Foundation Case: Yam Seng v International Trade Corp 22

|Yam Seng Pte Ltd v International Trade Corp Ltd[2013] EWHC 111 (QB) NB [123]-[153] on implied term of good faith, [186]-[192] on reliance damages 22

|NOTE Whittaker (2013) 24

b/ What is the scope of Yam Seng? 24

|Collins, 2014 24

|Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (t/a Medirest) [2013] EWCA Civ 200 [77]-[92] 25

|Hamsard v Boots (2013, Norris J) 25

|Cohen, "Pre-Contractual Duties: Two Freedoms and the Contract to Negotiate" in Good Faith and Fault in Contract Law, ed. Beatson & Friedman, p.25 25

III - Exemption Clauses 29

|Atiyah, Introduction to Contract Law pp. 149-154 (2006) 29

A – Incorporation 30

|Cartwright, Unequal Bargaining, pp. 37-51 30

1/ Signature 30

|*L’ Estrange v Graucob [1934] 2 KB 394 30

|*Curtis v Chemical Cleaning Co [1951] 1 KB 805 31

|Spencer, “Signature, Consent, and the Rule in L’Estrange v Graucob” (1973) 32

|Tilden v Clendinning (1978, CoA of Ontario) 32

|Atiyah (1986) 32

2/ Notice 32

a/ Notice must be given at or before time of contracting. 32

|*Olley v Marlborough Court Ltd [1949] 1 KB 532 32

|*Thornton v Shoe Lane Parking [1971] 2 QB 163 32

b/ The terms must be contained or referred to in a document intended to have contractual effect 33

|*Chapelton v Barry UDC [1940] 1 KB 532 33

c/ Reasonable steps to bring the terms to the attnetion of the other party 33

|Parker v South East Railway Co (1877) 2 CPD 416 33

|*Interfoto Picture Library v Stiletto Visual Programmes [1988] 1 All ER 348 33

3/ Course of dealing 35

|*McCutcheon v MacBrayne [1964] 1 All ER 430 35

|Hollier v Rambler Motors [1972] 2 QB 71 36

|British Crane Hire v Ipswich Plant Hire [1975] QB 303 36

B – Construction 36

|Hollier v Rambler Motors 36

|*Photo Productions v Securicor [1980] 1 All ER 556 37

|*Ailsa Craig Fishing v Malvern Fishing [1983] 1 WLR 964 37

|*George Mitchell v Finney Lock Seeds [1983] 2 All ER 737 37

Transocean Drilling UK Ltd v Providence Resources Plc [2016] EWCA Civ 372 38

IV - Legislative control of exemption clauses and unfair terms 38

A - Non-consumer contracts 39

1/ UCTA 39

|*Unfair Contract Terms Act 1977 ss 1 – 3, 6 - 7, 11 and 13; Schs 1&2 (as amended by the Consumer Rights Act 2015) 39

2/ Illustrative Cases 43

|Phillips Products v Hyland [1987] 2 All ER 620 43

|NOTE Adams and Brownsword, “The Unfair Contract Terms Act: A Decade of Discretion” (1988) 104 LQR 94 44

|Thompson v Lohan (Plant Hire) Ltd [1987] 2 All ER 631 46

3/ The nature of exclusion clauses 47

|*Smith v Eric Bush [1989] 2 All ER 514 47

|Stewart Gill v Horatio Myer [1992] 2 QB 600 47

|*St Albans DC v International Computers [1996] 4 All ER 481 48

|Watford Electronics Ltd v Sanderson CFL Ltd [2001] All ER (Comm) 696 48

|Beale, “Exclusion and Limitation Clauses in Business Contracts: Transparancy” in Contract Terms (eds Burrows and Peel, 2007) 191 49

B - Consumer contracts 50

*Directive on Unfair Terms in Consumer Contracts (93/13/EEC of 5 April 1993, OJ L95/29) 50

|*Consumer Rights Act 2015 ss 31, 57, 61 – 71, 73, 75 – 76; Sched.2 50

|Bright, “Unfairness and the Consumer Contract Regulations” in Contract Terms (eds Burrows and Peel, 2007) 173 56

|Bright,“Winning the Battle Against Unfair Terms” (2000) 20 LS 331 57

|*The Office of Fair Trading v Abbey National Plc and 7 Others [2009] UKSC 6, [2009] 3 WLR 1215 58

|NOTE Chen-Wishart (2010) 126 LQR 157 58

*Aziz v Caixa d’Estalvis de Catalunya, Tarragona i Manresa of 14 March 2013 (C-415/11) 59

*Kásler v OTP Jelzálogbank Zrt of 30 April 2014 (C-26/13) 59

*ParkingEye Ltd v Beavis [2015] UKSC 67, [2015] 3 WLR 1373 59

V - Commentary 59

Micklitz and Reich, “The Court and Sleeping Beauty: the Revival of the Unfair Contract Terms Directive (UCTD)” (2014) 51 CMLR 771. 59

Anson’s Law of Contract (27th ed.) pp.182-199 (see table at p. 184) 59

Policy factors:

• Promoting freedom of contract

• Curbing excesses of unfairness and exploitation resulting from significant inequality in bargaining power

The vitiating factors can go some way, but they are usually ineffective against standard term contracts, so that the modern increase in such contracts puts pressure on traditional contract law, premised on the model of individual negotiation.

The danger here is:

• The customer has no time to read them, and if he did he would probably not understand them, and even if he understood them and objected, he would be told to take it or leave it. If he then went to another supplier the result would be the same. Freedom of contract must surely imply some choice or room for bargaining (Suisse Atlantique v NV Rotterdamsche Kolen Centrale (1967) per Lord Reid)

Courts limit the effect of unfair terms by:

• Implied term in favour of adhering party

• Holding that insufficient notice has been given of onerous or unusual standard terms in unsigned documents

• Interpreting an unfair term in a way less advantageous to the adhering party

• Holding the unfair term unenforceable

Must distinguish (i) terms from (ii) representations and (iii) “mere puffs”.

1/ Express terms

a/ The parole evidence rule

Parties are generally barred from adducing extrinsic evidence to add to/vary/contradict a document that purports to record the parties’ agreement (Jacobs v Batavia).

Exceptions:

• Claim that contract is vitiated

• Claim that the contract includes additional terms than those in the document (express or implied)

• Claim to rectification

Thus it is better to understand the rule as an easily rebuttable presumption that the document contains the entire contract. It is problematic because:

• The reasoning to support it is circular: the document is presumed to contain the whole contract, unless the parties did not so intend (such intention requiring extrinsic evidence to show) (Allen v Pink)

• Its application is questionable – in Shogun Finance v Hudson HL held that the parole evidence rule bars extrinsic evidence in claim of mistaken identity (though in this case is the rule relevant where it is not what is the contract but whether there is a contract at all that is in question?)

b/ Collateral terms and collateral contracts

• For D’s assurance to amount to a collateral term C must show that it was the decisive influence on the transaction, the very thing that induces the contract (Mendelssohn v Normand, Phillimore LJ) ( it was merely a cause, which is the test for misrepresentation)

• It used to be thought that collateral terms could only add to but not vary the written contract, so courts sidestepped the problem by finding a collateral contract (a second unilateral contract containing the promise, in consideration of the promisee entering the main contract)

They both perform the same function:

1. Confer remedial advantages for breach of the collateral term/contract (better than misrepresentation because C might want their expectation interest)

2. Override privity (ex. Shanklin v Detel)

3. Override inconsistent terms in the main contract by circumventing the parole evidence rule

Entire agreement clauses (clauses that say the written document contains the entire contract and no other collateral terms may be added) are enforceable (Inntrepreneur v East Crown).

c/ Incorporation of terms

i/ Signature:

• Signature is binding except:

  • Non est factum

  • Misrepresentation

  • Other vitiating factor...