Deck 10: Identifying and Interpriting Contracual Term

Question 1

Standard form contracts may not be used by commercial parties dealing with consumers.

Answer 1

False

Question 2

Which of the following statements is true?

A) Contractual terms are only binding if both parties sign a document which contains those terms.
B) Contractual terms are only binding if they are embodied in a document, whether written or typed, and both parties receive a copy.
C) Express terms may only be agreed to in writing. Implied terms may only be agreed to orally.
D) Parties may be bound to terms they have agreed to orally without ever putting them in writing.

Answer 2

D

Question 3

Where a contract is written, parties can never adduce extrinsic evidence to add to, vary, or contradict the terms contained in that document.

Answer 3

False

Question 4

Which of the following statements is true?

A) If a party wishes to rely on a collateral term, he must show that the statement made by the other party was 'a' reason for him to enter into the contract.
B) Collateral terms may only be agreed to in writing.
C) Collateral terms can override inconsistent terms in a contractual document.
D) All of the options given are correct.

Question 5

Highland Supermarkets has come up with a promotional idea to have all its employees dress in kilts in the month of May. It arranges for the hire of 500 kilts from Clover Costumes Co for £7,000. Upon delivery, Highland is required to sign an invoice on the back of which are printed Clover's terms and conditions of hire, which Highland doesn't bother to read. Clause 58 of the contract stipulates that the garments must be returned within one week after the end of the month and that any delay will result in a holding fee of £2 per day per garment being charged. Highland's promotional idea is a complete failure and they decide to abandon it. The kilts are collected in the middle of May but are not sent back until the end of the second week of June, four days too late. Clover requests Highland pay the holding fee of £4,000, but Highland alleges the term has not been validly incorporated into the contract. Is Highland right?

A) Yes, the term was not drawn to Highland's attention.
B) Yes, the term is unfair.
C) Yes, notice of the term was not given before or at the time of contract formation, but only at the time of delivery.
D) No, the term has been validly incorporated by signature.

Question 6

Metalworks Ltd wishes to purchase a machine from Koggs Co and is sent an order form, on the back of which are printed Koggs' 'terms and conditions of sale'. According to clause 127: 'all costs made in the course of repairs will be at the buyer's expense'. Metalworks enquires whether this also means the shipment costs if the machine needs to be sent to Koggs' factory for repairs. Metalworks is told that, in such an event, Koggs would cover the costs and Metalworks signs the order form. Four months later, the machine breaks down and Koggs is called to repair it. The repairman suggests to ship the machine back to Koggs' factory. Koggs returns the fixed machine to Metalworks along with an invoice which also includes the shipment costs. Metalworks protests and argues that these costs should be at Koggs' expense, whereupon Koggs reminds it of clause 127 of the contract which refers to 'all costs', making no distinction between the costs of shipment and other costs related to the repair of the machine. Does Metalworks have to pay for the shipment costs?

A) Yes, a contracting party is bound by his signature.
B) No, the term is an unreasonable one and is not binding upon Metalworks.
C) No, a contractual term cannot be incorporated if it has been misrepresented, even if the other party has signed the document.
D) Yes, a contract can only contain written terms.

Question 7

Colin is visiting London for the weekend and concludes a number of contracts. In which of the following cases has the term been successfully incorporated?

A) In the morning, Colin drives his car into a car park. He parks on the premises and steps out of his car to pay a parking attendant, who posts a receipt on the lower side of his windscreen. On the front in big letters is the date, on the back, which can only be read from the inside of the car, is the following clause: 'The management is not liable for any theft or loss of property on the premises.'
B) At midday, Colin goes to St James's Park and hires a boat for use on the lake. Colin is given a ticket upon the back of which is written: 'The management is not liable for loss of property or personal injury.' The relevant clause is obscured by a date stamp.
C) In the afternoon, Colin is queuing for a sightseeing bus tour. On a sign at the bus stop the following notice is posted in big letters: 'The management is not liable for death or personal injury.' When the bus arrives, Colin buys a ticket and hops on.
D) At the end of the day, Colin decides to go swimming. He pays an entrance fee at the door, goes to the changing rooms and, once at the pool, sees the following notice: 'The management is not liable for any theft or personal injury, howsoever caused.'

Question 8

In the past month, Anglo Lumber Co has concluded a number of contracts. In which of the following cases have its standard terms been incorporated?

A) Anglo is contacted by Baker Builders. An employee of Anglo faxes an order form on the front of which is written: 'For terms and conditions of sale see back.' The employee forgets to fax the back of the document. Baker accepts the offer on the form.
B) Anglo Lumber sends an English language order form containing its conditions of sale to a Chinese construction firm. Although the management does not speak a word of English, they sign the order form. The order form contains numerous terms and conditions of sale.
C) In a telephone conversation, Paperwrite agrees to buy a shipment of lumber from Anglo for £550 per ton. At the time of delivery, Paperwrite is presented with an invoice which has Anglo's conditions of sale printed on the back. Before Paperwrite has paid the contract price, the market value of paper rises dramatically. Anglo's conditions contain a price variation clause for such an event.
D) None of the options given is correct.

Question 9

The courts imply terms from the factual context in order to give effect to what courts perceive as the unexpressed intention of the parties. The idea is that, whether through forgetfulness, lack of time, or bad drafting, the parties failed to include a term which they would have done if they had thought about it. Which test do the courts apply when implying terms in fact?

A) A term will be implied in fact where the courts deem it necessary to give business efficacy to the contract
B) A term will be implied in fact where the court deems it reasonably necessary, having regard to the context and the price.
C) A term will be implied in fact where the courts deem it reasonable in order to achieve a fair and practical allocation of risks between the parties.

Question 10

Barney is a trainee chef. His contract requires him to be available 'from 5pm to 10pm and any other hours that may be required'. After working two 90 hour weeks in a row, he refuses to stay late on Monday and instead returns home to sleep. When his employer argues that he is in breach of contract, Barney argues that there is an implied term in law limiting working hours on health and safety grounds. Is Barney right?

Question 11

Jenny signs an employment contract with Bigwigs circus to work as an elephant trainer. A few weeks later, Bigwigs circus is embroiled in an animal abuse scandal for gross mistreatment of its performing animals. The circus is shut down and Jenny cannot find work anywhere else in the circus world. Jenny can sue Bigwigs for her loss of employment prospects.

Question 12

Which is the most accurate description of the courts' general approach to interpreting contracts in English law?

A) The courts adopt a literalist approach and look at the dictionary meaning of the words used by the parties.
B) The courts look at the meaning which the document would have, taking into account the parties' subjective intentions at the time of contracting.
C) The courts look at the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties at the time of contracting.

Question 13

In Investors Compensation Scheme Ltd v. West Bromwich Building Society (1998), Lord Hoffmann defined interpretation as the 'ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract'. In other words, agreements cannot be interpreted in isolation from the factual matrix in which they were set. Which of the following is part of the factual matrix?

A) The pre-contractual negotiations of the parties.
B) The parties' declarations of subjective intent.
C) The parties conduct subsequent to contract.
D) None of the options given is correct.

Question 14

Which of the following statements is true?

A) A court may interpret a contract in contradiction of the words used by the parties.
B) In interpreting a contract, a court will have regard to the principles of good faith and fair dealing between the parties.
C) Where a third party is dependant on the outcome of a contract between two parties, the wording of their contract will always trump the meaning adduced from the factual matrix.
D) All of the options given are correct.

Question 15

Which of the following statements about the interpretation of exemption clauses is false?

A) An exemption clause can be interpreted in different ways, depending on which party seeks to enforce it.
B) An exemption clause may not be used to escape liability arising from a fundamental breach, that is, a breach which negates the benefit the innocent party expected to obtain from the contract.
C) Clauses which completely exclude the liability of one of the contract parties are construed more strictly than clauses that merely limit his liability.
D) None of the options given is correct.

Question 16

According to the Canada Steamship rules (Canada Steamship Lines Ltd v. The King (1952)), a clause which purports to exempt one party for liability in negligence will be construed to cover negligence liability if it expressly exempts such liability. Exempting liability for 'loss whatsoever or howsoever occasioned' is not sufficiently express. Such a clause will only be construed to cover negligence liability where the words used are wide enough in their ordinary meaning to cover negligence liability, and:

A) fhe exemption can cover other types of liability.
B) the exemption cannot cover other types of liability.
C) the exemption is a reasonable one.

Question 17

In Investors Compensation Scheme v West Bromwich, Lord Hoffmann says that 'if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had'. This means that, where an agreement does not accord with 'business common sense', the courts may depart from the language of the contract.

Question 18

Recent Supreme Court decisions have restated the law relating to interpretation of contracts (Rainy Sky (2011); Arnold v Britton (2015) and Wood v Capita (2017)). Which of the following statements are true?

A) The court's task is to ascertain the parties' intentions, even if these are inconsistent with the language used to express their agreement.
B) The court can have regard to pre-contractual negotiations and post-contractual conduct to ascertain the meaning of the agreement.
C) The court should focus on the language with which the parties' expressed their agreement and its objective meaning.