The terms of a contract: express and implied terms (including statutory implied terms), the classification of terms (conditions, warranties and innominate terms), and exclusion clauses and their statutory controls.

What this dot point is asking

Eduqas contract requires you to know the terms of a contract: express and implied terms (including statutory implied terms), the classification of terms (conditions, warranties and innominate terms), and exclusion clauses and their statutory controls. The skill is to classify a term and apply the right remedy, and to assess an exclusion clause on a scenario (AO2), and to evaluate the controls (AO3).

The answer

Express and implied terms

Statutory implied terms

Important terms are implied by statute to protect quality. In a consumer contract the Consumer Rights Act 2015 implies that goods are of satisfactory quality (s9), fit for purpose (s10) and as described (s11), and that a service is performed with reasonable care and skill (s49). In business-to-business sales the Sale of Goods Act 1979 implies similar terms.

Classifying terms

Exclusion clauses and their controls

An exclusion (exemption) clause seeks to exclude or limit liability. The courts apply a three-stage test. First, the clause must be incorporated: by signature (binding even if unread, L'Estrange v Graucob), by reasonable notice given at or before contracting (a notice in a hotel room after booking is too late, Olley v Marlborough Court; an onerous clause needs extra prominence, Thornton v Shoe Lane Parking), or by a course of dealing. Second, on its true construction the clause must cover the breach, ambiguity being construed against the party relying on it (contra proferentem). Third, it must survive the statutory controls: under the Unfair Contract Terms Act 1977 a clause excluding liability for death or personal injury caused by negligence is void, and others are valid only if reasonable; under the Consumer Rights Act 2015 consumer terms must be fair and transparent, and the statutory rights cannot be excluded.

Examples in context

A strong answer classifies the term and runs the three-stage exclusion-clause test in order.

Try this

Q1. Explain the difference between a condition, a warranty and an innominate term. [10 marks]

• What the marker wants. Precise AO1: a condition is a major term allowing termination and damages (Poussard); a warranty is a minor term allowing damages only (Bettini); an innominate term's remedy depends on the seriousness of the actual breach (Hong Kong Fir).

Q2. A dry cleaner's ticket, handed over after the customer leaves the clothes, contains a clause excluding all liability for damage. The clothes are ruined. Advise on whether the cleaner can rely on the clause. [20 marks]

• Cue. An AO2 application: the clause must be incorporated by reasonable notice given at or before contracting; a clause on a ticket handed over after the contract is made may be too late (Olley; Thornton), and the Consumer Rights Act 2015 controls fairness, so the cleaner is unlikely to be able to rely on it.