Contractual Terms

Question 1

Classification of Terms

What are the three main type of term?

Answer 1

1. Conditions Breach of which entitles end the contract and sue for damages or affirm the contract and sue for damages. Treated as a more serious breach.
2. Warranties Breach of which entitles the injured to sue for damages only. Less serious breach.
3. Innominate Term A term that isn’t ‘labelled’ as a condition or a warranty.

Question 2

Classification of Terms - Innominate Terms

What is an innominate term?

Answer 2

If a term can’t be classified as a condition or warranty, it is classed as an innominate term

Question 3

Classification of Terms - Innominate Terms

Hong Kong Fir Shipping Company v Kawasaki [1962]

Answer 3

• Seaworthiness term in a shipping contract. Technical problems delayed the sailing by 5 months’
• K sought to avoid the contract by claiming the sea-w clause was breached and it was a condition.
• CA held the nature of a term could be determined by reference to the effects of its breach.
• Sea-w could be breached by hole in ship bottom (serious) or merely absence of life jacket (minor)
• The hole would be a breach of condition whereas the life jacket would be a breach of warranty
• Held in this case, the breach could be remedied by damages and thus it was a warranty.
• TEST: Whether the event deprives the party substantially of the whole benefit of the contract.

Question 4

Classification of Terms - Innominate Terms

West Park Investments Ltd v Leisureplex [2012]

Answer 4

• L leased a premises from W. Access to parking was essential to L and in the original lease W guaranteed a min of 177 spaces. Then W proposed to build underground one for more spaces.
• So in 08 they entered a variation of lease where L agreed to less spaces (142) in return for €550k.
• Also agreed L wouldn’t pay rent Sept 07-Aug 10 as compensation for construction inconvenience
• Recession hit, car park never built. Aug 10 came: L refused to pay rent arguing W was in breach as (1) hoarding intruded on the spaces (2) it’s unsightly (3) car park not built in reasonable time.
• Applying Hong Kong Fir, held the diminution in car park spaces could not justify the total non-payment of rent: they still receive a substantial benefit from the contract so must pay (warranty).

Question 5

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff

Where a contract is oral or a combination of written and oral, statements can be confused between these, what are they and their legal effect?

Answer 5

(a) Warranties: Contractual term and is actionable by breach of contract action.
(b) Mere Representations: Not a contractual term but actionable: action for misrepresentation.
(c) Sales Puff: Not a contractual term nor legally actionable.

Question 6

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff

Oscar Chess v Williams [1957]

Answer 6

Objective test: Whether the term was intended to be a warranty or not: ‘if
an intelligent bystander would reasonably infer a warranty was intended, this will suffice’.

Question 7

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff

What are McDermott’s 5 criteria for determining whether something is a warranty or rep?

Answer 7

(1) Timing of the statement: closer to the completion of the contract, the more likely a warranty
(2) In writing: If later reduced to writing and statement omitted, more likely a representation
(3) Special Skill: If person making statement has a special skill, more likely warranty
(4) Importance of Statement: More important it is to completion of the contract, more likely a warranty
(5) If there’s an indication from the maker that the statement can be relied on and need not be verified, then it’s an indication the statement is a warranty

Question 8

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff - Timing

Schawel v Reade [1913]

Answer 8

• 4 weeks before conclusion the seller represented the horse was perfectly sound for stud purposes.
• Held to be a warranty and this formed part of the contract. R had a special skill re horses.

Question 8

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff - Timing

Schawel v Reade [1913]

Answer 8

• 4 weeks before conclusion the seller represented the horse was perfectly sound for stud purposes.
• Held to be a warranty and this formed part of the contract. R had a special skill re horses.

Question 9

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff - Timing

Schawel v Reade [1913]

Answer 9

• 4 weeks before conclusion the seller represented the horse was perfectly sound for stud purposes.
• Held to be a warranty and this formed part of the contract. R had a special skill re horses.

Question 10

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff - Timing

Routledge v McKay [1954]

Answer 10

• 4 weeks before conclusion resulting in court holding the statement concerning the age of a motorbike did not constitute a warranty. M relied on the bike’s registration – no reason to doubt it

Question 11

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff - Special Skill

Oscar Chess v Williams [1957]

Answer 11

• W agreed to sell his Morris car to O (car dealer). Both believed it was a 1948 model (as in registration book), but turned out to be a 1939 model. O sued for damages for breach of warranty.
• Held the test was whether the term was intended to be a warranty: would the intelligent bystander reasonably infer a warranty was intended?
• Held the inference from the facts was he didn’t intend a warranty: he became an owner after a number of owners. Simply relied on the reg book. Unlikely he’d warrant the year of manufacture

Question 12

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff - Special Skill

Dick Bentley v Harold Smith Motors [1957]

Answer 12

• Oscar Chess distinguished: Dealer sold a car to a private person and the CA held a statement as to the mileage by the dealer constituted a warranty binding on him.
• Dealer was in a better position than the other party to verify the truth of the statement.

Question 13

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff - Importance

Carey v Irish Independent Newspapers [2003]

Answer 13

• C (journalist) told during negotiations for new job that she could work from home.
• Court held this was a warranty as without it, an agreement wouldn’t have been reached.

Question 14

Express Terms - 1. Warranties vs Mere Representations vs Sales Puff - Importance

What case stands for the proposition that If there’s an indication from the maker that the statement can be relied on and need not be verified, then it’s an indication the statement is a warranty?

Answer 14

Schawel v Reade [1913]

Question 15

Express Terms - The Parol Evidence Rule

Bank of Australasia v Palmer [1897]

Answer 15

• “Parol testimony cannot be given to contradict, vary, add or subtract from the terms of a written contract or terms in which parties have deliberately agreed to record any part of their contract”.

Question 16

Express Terms - The Parol Evidence Rule - Exceptions

What are the 6 exceptions?

Answer 16

(1) The written document does not reflect the entire contractual agreement
(2) To explain the circumstances surrounding the agreement
(3) To explain the subject matter
(4) To correct a mistake
(5) To prove the consideration
(6) To prove that the alleged contract was not a contract at all

Question 17

Express Terms - The Parol Evidence Rule - Exceptions

Clayton Love v B&I Transport [1970] Ireland

Answer 17

Parties intended the contract consist of written doc read in light of other oral statements/docs

• Written contract that B would transport frozen scampi from Dublin to Liverpool.
• P clarified, via telephone, that it had to be transported at frozen temp. Not done, scampi ruined.
• SC allowed oral evidence of phone call that supplemented the instructions in the written contract

Question 18

Express Terms - The Parol Evidence Rule - Exceptions

Revenue Commissioners v Moroney [1972]:

Answer 18

Allowed oral evidence to show a written doc which appeared to be a contract for the sale of land was in fact a transfer of a gift.

Question 19

Express Terms - The Parol Evidence Rule - Exceptions

Chambers v Kelly [1873]:

Answer 19

Oral evidence allowed to show the words “all other trees” contained in a
written contract for the sale of land referred only to larch trees.

Question 20

Express Terms - The Parol Evidence Rule - Exceptions

Macklin & McDonald v Greacan & Co [1983]

Answer 20

• If the equitable remedy of rectification of a doc is sought on grounds of mistake, PE is allowed

Question 21

Express Terms - The Parol Evidence Rule - Exceptions

Revenue Commissioners v Moroney [1972

Answer 21

(5) To prove the consideration
Revenue Commissioners v Moroney [1972]: If the contract omits the consideration to be paid parol
evidence may be adduced to prove the price

Question 22

Express Terms - The Parol Evidence Rule - Exceptions

Pym v Campbell [1856]

Answer 22

• PE showed the writing was signed on terms that it was void until a condition was fulfilled.
• Held PE can be admissible to show a contract was not a contract at all.

Question 23

Implied Terms

Generally in what two scenarios can the Court imply a term?

Answer 23

If a term’s not expressed in the contract, it may be implied as (1) a matter of fact or (2) a matter of law

Question 24

# Implied Terms Tradax Ireland v Irish Grain Board [1984

Answer 24

- Held the courts cannot imply terms into the contract merely if it would be reasonable or fair. - Held courts have no role in acting as contract makers or to direct what ought to have been done.

Question 25

# Implied Terms - As a Matter of Fact What three tests are used in factual circumstances?

Answer 25

(a) Officious Bystander Test (b) Business Efficacy Test (c) The Custom and Practice Test

Question 26

# Implied Terms - As a Matter of Fact - Officious Bystander Shirlaw v Southern Foundries [1939]

Answer 26

- Held it must be something so obvious that it goes without saying. If an officious bystander were to suggest the provision, both parties would reply with a common ‘oh, of course!’.

Question 27

# Implied Terms - As a Matter of Fact - Officious Bystander Tradax Ireland v Irish Grain Board [1984]

Answer 27

- T agreed to buy barley from I. Price was to be met with a letter of credit. They left important details out. After some shipments, I repudiated contract claiming an implied term the Ps were required to furnish a letter of credit. Refused to imply such a term: no evidence of joint intention

Question 28

# Implied Terms - As a Matter of Fact - Officious Bystander Carna Foods Ltd v Eagle Star Insurance [1997]

Answer 28

- Irish SC stated that ‘one can imply a term into a contract only when the implied term gives effect to the true intentions of all the parties to the contract who may be affected by such implied term’.

Question 29

# Implied Terms - As a Matter of Fact - Officious Bystander Horan v O’Reilly and Others [2008]

Answer 29

- Dispute re lottery syndicate. Syndicate def included 4 people. H alleged he was the 5th member. - Members agreed they’d pay €1.50 for 2 draws weekly & Mr. O’B would collect it and buy tickets - Winnings were to be shared equally. In past, O’B allowed H fall into arrears of payment. - Winning ticket was purchased with €6, not €7.50 as H hadn’t contributed that week. - Did they vary the original agreement w intent H would stay in syndicate even though in arrears? - Held although the informal arrangement was capable of having legal effect, there was no term that O’B could vary the terms of the contract to cover H’s arrears. Not ‘so obvious’ to OB.

Question 30

# Implied Terms - As a Matter of Fact - Officious Bystander Flynn v Breccia [2017]

Answer 30

- Complex commercial dispute, F sought to imply a term. Held compelling case not enough for OB test - Held the Officious Bystander test requires the court to be satisfied of two things: (i) That reasonable people in the position of the parties would all have agreed to the term (ii) That they would without doubt have accepted the term proposed by the officious bystander.

Question 31

# Implied Terms - As a Matter of Fact - Business Efficacy The Moorcock [1889] TEST

Answer 31

In commercial contracts, it is presumed that they intended their agreement be workable and effective: - P and D agreed the P’s ship (The Moorcock) could dock at the D’s wharf. - But the ship was damaged due to a shallow, uneven ridge of seabed beside the wharf. - Held Test: The law implies a term with the object of giving the transaction such efficacy as both parties must have intended it should have. - Held to give business eff to the transaction, a term must be implied the jetty was safe to dock at.

Question 32

# Implied Terms - As a Matter of Fact - Business Efficacy Sweeney v Duggan [1997]

Answer 32

The courts will not imply a term simply because it’s reasonable or would make better sense: - Employee of quarrying co injured at work. Quarry became bankrupt so couldn’t satisfy damages. - S sued MD and sole shareholder instead: claimed he owed him a duty of care to ensure co got employment liability insurance or warn employees they didn’t have it. - Claimed it was an implied term from the dangerous nature of the business. - HC refused to imply this term: the contract worked effectively without it.

Question 33

# Implied Terms - As a Matter of Fact - Business Efficacy Dakota Packaging v Wyeth Medica Ireland [2005]

Answer 33

- HC implied a term into a supply contract requiring W to give D 12 months’ notice of intention to stop using them for packaging. Also held W was obliged to take a proportion of orders from D. - SC overturned: Arrangement was a contract of supply for individual orders, thus there was no basis for the sake of business efficacy to imply a 12-month notice period and order requirement. - SC held courts will not lightly infer terms particularly on the basis that it’d be reasonable to do so especially in circs where the term wasn’t defined w sufficient precision: how many orders?

Question 34

# Implied Terms - As a Matter of Fact - The Custom and Practice Test O’Reilly v Irish Press [1937]

Answer 34

Where contracts are made in a particular industry, terms may be implied to give effect to the custom and practice of that industry - Must be shown it is so notorious, well known and acquiesced that in the absence of agreement in writing, it is to be taken as one of the terms of the contract.

Question 35

# Implied Terms - As a Matter of Fact - The Custom and Practice Test O’Connail v Gaelic Echo [1958]

Answer 35

- A term was implied into a journalist’s employment contract that he’d receive holiday pay on the basis of evidence that holiday pay for journalist’s was customary in Dublin.

Question 36

# Implied Terms - As a Matter of Law - Constitution Meskell v CIE [1973]

Answer 36

The constitution takes precedence over all other sources of Irish law. Implied where necessary - SC held C was prohibited from exercising their contractual rights in a way that undermined M’s constitutional right to freedom of association (M refused to join the trade union and was sacked).

Question 37

# Implied Terms - As a Matter of Law - Common Law What are the two conditions for implication at CL?

Answer 37

Two conditions: (1) Contract must be of a defined type (2) implication of the term must be necessary

Question 38

# Implied Terms - As a Matter of Law - Common Law Carna Foods Ltd v Eagle Star Insurance [1997]:

Answer 38

SC gave non-exhaustive list of ‘defined type’ contracts: sale of goods, hire purchase, landlord and tenant, sale of lands, etc.

Question 39

# Implied Terms - As a Matter of Law - Common Law Liverpool City Co v Irwin [1977]

Answer 39

- Ds were tenants in Ps apartments and lived on 9th floor. Common staircase and lavatory overflowed regularly. Lifts always broken down and rubbish shoots were blocked. - Ds refused to pay their rent and P sued for eviction. - Ds argued implied term in the tenancy agreement that it’s not possible to live in the apt w/o a staircase or lift, therefore there’s an implied term they’d all be working. - Court looked at unequal bargaining power: conditions were on a standard form of the council. All obligations were put on the Ds. Held necessary to imply to make a one-sided contract bilateral.

Question 40

# Implied Terms - As a Matter of Law - Statute What are some examples of statutes that imply terms?

Answer 40

SGSS 1980, Employment Eq Act 1998, Terms of Empl (Info) Act 1994,

Question 41

# The Construction of Contractual Terms General rule?

Answer 41

The courts use an objective test to ascertain the parties’ intentions.

Question 42

# The Construction of Contractual Terms - Plain Meaning Rule Marathon Petroleum v Bord Gais [1986]

Answer 42

If a term is clear, the courts can’t go beyond the literal meaning of the words to interpret the contract. If the words are clear, then one can’t have recourse to the extrinsic evidence to interpret the contract.

Question 43

# The Construction of Contractual Terms - The Factual Matrix Rule LAC Minerals v Chevron [1993]

Answer 43

Words are interpreted in a way that’s not divorced from the surrounding circumstances of the contract - will look at the "factual matrix".

Question 44

# The Construction of Contractual Terms - The Factual Matrix Rule Emo Oil Ltd v Sun Alliance and London Insurance Company [2009]

Answer 44

- Irish SC approved principles of interpretation in Investors Compensation Scheme v WBBS: (1) Interpretation is ascertaining the meaning the doc would convey to a reasonable person. (2) Background was described as the ‘matric of fact’, but this is an understated description. (3) The law excludes previous negotiations of parties and declarations of subj intent from evidence (4) Meaning of doc to reasonable man not the same as meaning of words (dictionaries & grammar). Meaning of doc is what the parties using those words against the background reasonably meant (5) Words to be given “natural and ordinary meaning” as we don’t easily accept linguistic mistakes, but this doesn’t stop the court concluding from the background that there was a linguistic mistake

Question 45

# The Construction of Contractual Terms - The Factual Matrix Rule Arnold v Britton [2015]

Answer 45

- UKSC held the focus should be on the terms rather than any immediate resort to commercial common sense and surrounding circs (this undervalues the importance of the language) - Emphasised grammar and syntax: worse the drafting, more the courts can depart from meaning - Judges should not search for drafting infelicities to justify a departure form the natural meaning of the words and cautioned against applying commercial common sense in hindsight.

Question 46

# The Construction of Contractual Terms - The Factual Matrix Rule Law Society of Ireland v Motor Insurers’ Bureau of Ireland [2017] Important SC

Answer 46

- Held in interpreting one clause in a contract, the court should consider the agreement as a whole.