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Law of Contract (2) - Terms & Conditions (Exemption Clause (Eg. EC…
Law of Contract (2) - Terms & Conditions
Terms
- statements which form part of the agreement which set out the duties and rights of each party. These can be oral or written.
Become part of the
contract.
Representations
- statements which are usually made before the agreement is entered into and which
do not form
part of the final contract.
Express terms
- acually communicated to each other by the parties. eg price, date of delivery, sealing of crate with special tape
Implied terms
- parties have not communicated to one another but which the law inserts into the contract as a term. eg, must have adequate packing material, kept refrigerated during delivery.
Sources of Implied Terms:
a) the courts
b) Statutes
(eg section 14(2) of the Sale of Goods Act 1979 states that where there is a sale of goods in the course of business, there is an implied condition that the goods would be of satisfactor quality)
c) customs and practices
of a particular trade which have become so well-known in that trade that it does not need to be expressed.
Conditions
- important term of a contract, one which goes to the root of the contract. It is so crucial to the contract that if it is breached, the innocent party can treat the contract as being discharged, and can refuse to perform his part of the contract or claim for damages.
Puffs
- Sales talks.
Do not
become part of the contract
Warranties
- not so important to the contract. If it is breached, the contract is still intact, which means that the innocent party cannot refuse to perform his part of the contract. His remedy is to sue the other party for damages.
some terms are more important than others
consequences of breach of term:
if important - contract discharged
Not so important - contract continues + damages awarded
Innominate Terms - Depending on how it is actually breached, the consequences can be trivial or serious, therefore it is difficult to tell whether it is a condition or warranty. These term falls into a grey area.
If very serious, contract can be treated as discharged.
If not so serious, only damages can be claimed.
Representations
are not part of the contract.
If a representation turns out to be false, the contract is not 'breached'.
But it may be called a misrepresentation and the innocent party may be able to sue for that.
Void/Voidable Contracts
Valid contracts
4 elements
no other issues with parties
**But some contracts:
**- 4 elements
but problematic issues with parties/terms etc
eg. illegality/duress/mistakes/misrepresentation
These factors may make the contract void/voidable
Contracts which are void
- treated as void from the start (void ab initio). Such contracts cannot be enforced by either party.
Voidable contracts
- valid contracts, but one of the parties may have entered into the contract without full knowledge or consent to the contract's terms. For voidable contracts, innocent party may elect to treat the contract as valid or void.
Effect of void contracts:
invalid contracts
no legal contract effect, not enforceble
Effect of voidable contracts:
Injured party has choice to terminate or affirm
Valid until injured party terminates it
if terminated, will be void ab inito
parties put back into positions before the contract
Illegality
Contract involves illegal activity/ purpose
Courts will not uphold!
If illegality? Contract void
eg. Ron pays Don $500 to give false evidence in court
Duress
One party puts pressure on the other party
eg. threats or acts of violence, blackmail
Contract voidable
Alex threatens to kill Vin kids if Vin does not sign an agreement to buy over Alex business.
Mistake
One or both parties are mistaken about certain facts
if mistake? Contract void/ voidable
eg. RK enters a contract with PC to write a novel thinking she is PC, the author but she is just an accountant.
Misrepresentation
False statements made prior to contract
Induces one party to enter contract
If misrepresentation? Contract void/ voidable
eg. Alia wants to sell her car which has broken time many times but she tells RK that is has never broken before.
Purpose is to protect injured (innocent) party by:
putting them back into original position
giving them a choice to continue with (affirm) contracts
Note: when we discuss ‘breach of contract’, we are talking
about valid contracts, not void/ voidable contracts
Exemption Clause
type of contractual term which is inserted into contracts for the purpose of excluding or limiting the liability of one of the parties to the contract.
Typical clauses contain conditions, warranties, innominate terms
Contract may also include ‘exemption clauses’
“Clause” – a paragraph, section in a legal document
Exemption Clause
Clauses in a contract which protect one party
In event of breach, seek to:
exclude liability; or
limit/ reduce liability
Typically contains words like:
The company is not responsible
for any loss or damage….’
‘Visitors use at their own risk…
Eg.
EC limiting liability
:
“The liability of the laboratory in the event of loss
or damage to any film sent to us for processing is
limited to the cost of replacement film.”
a.k.a ‘limitation clause’
does not seek to exclude all liability, only to
limit liability to certain value
Can a party rely on an exemption clause?
Yes, if:
(1) The clause is incorporated into the contract
(2) The clause is not void i.e. it complies with the
Unfair Contract Terms Act (‘UCTA’)
(3) The clause, when properly interpreted, clearly
covers the damage
(1) The clause must be incorporated into the contract:
-EC must be part of the contract;
Other party alerted to it before contract is made e.g. by a
Notice
If EC is inside contract signed by injured party?
injured party is bound by EC
-But if EC is brought to injured party’s attention after
contract concluded?
-not bound
(2) EC must comply with UCTA:
Section 2(1) – excluding liability for death or
personal injury due to negligence
Clause is void
Section 2(2) – excluding liability for other loss or
damage due to negligence
Clause is valid only if it is reasonable