#2152 - Identifying Contractual Terms - Contract Law

What are terms?

Question to ask = does the assurance given amount to an undertaking inside the contract? A = Yes if assurance is contained in....

• Express Terms

  • These are terms explicitly agreed by the parties

  • Which can be either written or oral

    • You’re more likely to be able to enforce written contracts though

  • Parole Evidence Rule

    • General rule = documents which purport to record a parties’ agreement are sacred and no evidence can be brought to disprove or vary it.

      • However, are a number of exceptions.....

        • Where undue influence/duress/mistake/non es factum

        • Contract includes terms additional to those contained in document

          • Whether express (collateral) or implied

        • Words of document do not accurately record parties’ agreement (owing to mistake/fraud)

    • Chen Wishart: so the rule is basically an easily rebuttable presumption....

• Collateral Terms and/or Collateral Contracts

  • In principle, a term or even a contract can be found which is collateral to the main terms

    • Which add to

    • Vary

    • Contradict

      • The terms of the contractual document

  • Things which can be collateral terms:

    • D’s verbal/written assurance

      • Must have induced C to consent to contractual document

        • Not enough that this was a cause of C entering the contract

          • C needs to show that but for that term, C would not have contracted at all.

    • Signed Documents

    • Notices

    • References

  • Functions of collateral terms/contracts:

    • Circumvent parole evidence rule

    • Confer remedial advantages of an action for breach over misrepresentation

      • Means C can get his expectation rather than his reliance if he prefers in damages

    • Override the Privity Rule

      • Shanklin Pier Ltd v Detel Products Ltd [1951]:

        • D told S that its paint was suitable for painting S’ pier and would last X years. S instructed contractor to but D’s paint – turned out to be less durable.

          • S still managed to sue D on collateral contract despite not buying the paint

            • Because D’s promise in relation to the paint was supported by S’ consideration of directing its contractor to but it.

    • Overriding unreasonable exemption clauses

      • J Evans & Sons (Portsmouth) Ltd v Andrea Merzario Ltd [1976]

        • Shipping contract agreed after shipper orally assured owner of goods that goods would be shipped under deck – actually shipped above deck and lost.

          • Held that oral agreement was collateral to clause in contractual document, which gave shipper discretion to place goods and limited liability except for negligence, and collateral term would be enforced instead.

  • Collateral contracts are only valid when there is no entire agreement clause in the contractual document

    • This would exclude liability for misrepresentation or breach of collateral agreements.

      • Meaning any negotiations or assurances that would otherwise act as a collateral warranty

        • Will not actually be enforceable.

    • UTCCR Sch 2 [1 n]:

      • These clauses are termed indicatively unfair under this regulation

        • And will therefore be void in strictly consumer contracts

          • And as such, Collateral can be incorporated per normal rules.

How do you incorporate terms into a contract?

Signed documents

• English Law gives a lot of credence to signatures –

  • General rule = person is bound by the contents of a contractual document he has signed

    • whether or not he has/capable of reading or understanding it

  • L’Estrange v F Grauncob Ltd [1934]:

    • C bought cigarette vending machine, signing document she didn’t read which excluded all implied terms. Machine turned out to be defective, C attempted to imply in term of adequate quality.

      • Scrutton LJ:

        • Case is distinct from ticket cases

          • Where you have to prove that C either was aware or ought to have been aware of its terms and conditions.

        • But this has no application where the sales document is signed.

          • In the absence of fraud or misrepresentation

            • Then the signature is binding and incorporates the terms, whether you read them or not.

• Chen Wishart: is does at least promote contractual and administrative certainty

  • Exceptions to the rule that signatures are binding:

    • Non est Factum

      • Where through no fault of signer (e.g. signer is mentally deficient/illiterate so unable to read what is actually written)

        • Contract turns out to be fundamentally different from his assumption.

    • Misrepresentation

      • Whether fraudulent or not

        • Misrepresentations can negate enforceability of particular terms where it induces representee’s signature

    • Other vitiating factors

      • Mistake, undue influence, unconscionability, incapacity etc.

    • Signed document non-contractual

      • If document is only administrative – it merely allows the parties to implement their prior agreement

        • Then it will not be binding.

Unsigned Documents

• In course of negotiations, document may be delivered by one party to another

  • Or displayed as a notice

    • Or incorporated by reference

• In order to enforce these terms, proffering party must show he has given adequate notice of them:

• How to give Adequate Notice of Additional Terms

  • Notice given at or before contract formation

    • Olley v Marlborough Court Ltd [1949]: O paid for bed and board a week in advance for hotel. O had some valuable belongings stolen from her room. M argued notice excluding liability for theft was behind door in each bedroom.

      • Denning LJ: Need to bring exemption to C’s attention:

      • Whatever form this takes, whether a prominent public notice or signed document

        • This has to occur at or before contract formation

      • C had no chance to see notice in room b/c paid and booked at reception.

        • Thus, exemption clause came after contract completion and has no effect.

    • Thornton v Shoe Lane Parking [1971]: C injured in car park – got ticket automatically, ticket had term saying “all conditions of sign at entrance apply”, sign at entrance excludes many things inc. injury however caused.

      • Lord Denning MR (min)

        • Case different from other ticket cases b/c has automatic ticket machine.

        • Offer is made when machine is set up ready for receiving money and dispensing tickets

          • Acceptance made when C puts in his money.

          • Unlike with a human, C cannot protest to machine about subsequent terms – he’s already lost his money.

            • Thus C not bound by terms on ticket

              • because the terms on the ticket only appear after contract formation.

      • Magnew LJ (maj): reserve judgement on when contract formed – justified same result through construction.

  • Which is contained in a document intended to have contractual effect

    • Chapelton v Barry UDC [1940]: voucher given after hiring deckchairs with terms excluding liability for personal injury.

      • Slesser LJ:

        • Voucher is only intended to be a receipt to show payment, unlike railway tickets which spell out terms company agree to carry you

          • Here it is merely an evidentiary voucher.

            • And as such it is not a contractual document

        • Therefore, UDC had missed the boat in incorporating the terms

          • Because the contract had already been concluded before the voucher was given.

    • Common practise (e.g. for organisations to have such exclusions)

      • = adequate notice.

  • And it is reasonable in the circumstances for the notice to be incorporated

    • Where terms themselves are not onerous or unusual:

      • Parker v SE Railway Co (1877):

        • Malshew LJ: Three questions to answer about reasonableness before notice is incorporated into contractual terms

          • Did D know about or ought to have seen the writing?

            • If yes, did D know the writing contained terms?

            • If not, was reasonable notice so that ordinary people would have their attention drawn to the fact the writing contained terms?

              • Only if yes to 2 or 3 are terms incorporated.

    • Where terms ARE onerous or unusual, extra effort needed before they can be incorporated:

      • Interfoto v Stiletto...