Summary - Express and Implied Terms (Contract Law)
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Course
Contract Law (LL104)
Institution
London School Of Economics (LSE)
Book
Contract Law
This set of notes helped me prepare for my Contract Law exam and achieved a 2.1 in my exam, graduating with a first class honours overall. This document sets out the key principles and cases to cite in your exams.
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Express and implied term
Parol Evidence rule: The rule that once parties have enshrined their contract in a written
document, evidence outside of the document cannot be submitted to undermine the
document.
o Promotes certainty
o Lord Hobhouse in Shogun Finances Ltd v Hudson [2003] described it as
‘fundamental’ and ‘certainty of contract depended on it’.
Exceptions to the rule, evidence can be permitted when:
a. the document was not intended to be the whole contract. Allen v Pink (1838)
i. Though there is a presumption a document which looks like a contract will
be counted as one, the presumption is rebuttable.
b. a custom must be implied into the contract. Hutton v Warren (1836)
c. misrepresentation, fraud, mistake or non est factum is claimed. Campbell Discount
Co v Gall [1961]
d. When terms need to be implied into the contract. Gillespie Bros & Co v Cheney,
Eggar & Co [1896]
e. To show a contract needs to be rectified.
f. To show a contract has ceased to operate or has not come into operation. Pym v
Campell (1856)
g. To prove the existence of a collateral contract (which can directly contradict the
contract as was the case in City and Westminister Properties Ltd v Mudd [1959]
Lease was signed based on oral assurance by lessors that premise could be used for
personal residence though the lease said use of premises must be business purposes
only. Lessors tried to forfeit lease because of personal residence but oral prior
evidence was permitted to prove collateral agreement (a separate agreement which
is contrary to the written lease agreement).
Parole evidence rule is largely undermined by the many exceptions but not removed
altogether. Law reform acknowledged its limited use but suggested it remain in place
Limited significance in practise.
Signature:
Sanctity of signatures prior to UCTA 1977 and CRA 2015:
o L’estrange v F Graucob Ltd [1934]: Signature on a contract as binding and of utmost
importance. Defendant sold claimant slot machines which did not work, the claim
was lost on the basis exclusion clause excluded liability and was incorporated into
the contract by claimant’s signature even though she did not read it and was in
‘regrettably’ small print.
o But signature must be on document that is meant to have contractual effect.
Grogan v Robin [1996]: Document signed must be one that has contractual
effect. The nature and purpose of the document must reflect it to be a
document intended to have contractual effect. Timesheet in this case was
held not to be of contractual effect and so signature was not binding.
Post UCTA 1977 and CRA 2015 there are checks against exclusion clauses even if signed and
also, terms that bind consumers when they have not been acquainted with them that are
unfair (Paragraph 10 of Schedule 2)
Non est factum: ‘This is not my deed’
Engages two different policies, injustice to hold a party to a contract they did not properly
consent to and holding a person accountable for a document they signed esp. when an
innocent third party relied on the agreement.
, Defence against a binding contract on the basis that the person did not enter into it with a
consenting mind.
Available to those who through no fault of their own don’t have a real understanding of
the document usually due to:
o Blind
o Illiterate
o Innate capacity
Not available if person was too lazy or too busy to read the document.
The type of mistake that warrants this defence is when the difference in what the
document is believed to be and what the document actually is radical or fundamental.
o Saunders v Anglia Building Society [1971]: Aunt left house to her nephew. He
wanted to raise money for security of the home through a friend and made a deed
in his name. Aunt did not read the document as her glasses were broken but signed
when told it was a deed of gift to nephew. Friend did not pay back the nephew, aunt
or Building Soc. Building soc. sued to recover property. The building soc (innocent
party) interests were protected and the signer was held to have enabled the fraud.
o Aunt believed the document was to benefit her nephew by raising funds which it
was but how it achieved this was different so there was not a radical difference in
what she believed the document to be and what the document was.
Defence is not available if the person relying on it is careless.
o United Dominions Trust Ltd v Western [1976]: Defendant wanted a loan from
claimant for a car. Left the details of the car to be filled out by the garage owner
who overstated the price of the car and was paid extra. Onus was on defendant to
show he had been careful and it was held that he had not been.
Non est factum defence is narrow so as to enforce reliability on signatures and avoid
detrimental effect to parties. If this defence fails, parties may obtain a remedy in
fraud/undue influence.
Incorporation of written terms:
Written terms can be incorporated into a contract in three ways:
o Giving notice at or before the time of concluding the contract. Terms after the contract are
not included.
Notices, with an exclusion clause, on the door of a hotel room are after a contract
has been concluded. Olly v Marlborough Court Ltd [1949]
o Terms must be contained in a document intended to have contractual effect. Receipts or
time sheets for example are not documents typically intended to have contractual effects.
A ticket for the hire of a deckchair with an exclusion clause on it was held to be a
mere receipt, not intended for contractual effect. Chapleton v Barry [1940]
o Reasonable steps must be taken to bring it to the attention of the other party. (Not
whether the other party has actually read it)
Before there was a more liberal approach where in a case it was held an exclusion
clause in a railway timetable was incorporated and reasonable attention was drawn
to it even though the claimant was illiterate. Parker v South Eastern Railway (1877)
Now there is less likely chance of a term being incorporated:
If the clause was not on the front of the ticket. Henderson v Stevenson
(1875)
Or if reference to the clause is obliterated. Sugar v London [1942]
Red hand rule: The more onerous the term the greater degree of notice required as
set out by Lord Denning in J Spurling Ltd v Bradshaw [1956]. But this is now
redundant following the UCTA 1977.
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