Chapter 10 Guidance on answering the questions in the book

Identifying and interpreting contractual terms

1. To what extent has the law responded to the problems raised by standard form contracts?

See 10.1 The problem of standard form contracts, and, really, aspects of chapter 10 Identifying and interpreting contractual terms and chapter 11 Direct control over terms.

This is a very broad question inviting you to consider the problems raised by standard form contracting and assess how well the law deals with them.  The sub-questions you should consider are:

  • What are the problems posed by standard form contracts (pay attention to the quotation)?  Are there any advantages to standard form contracts?
  • What techniques are available to the courts to control any problems?  Be exhaustive in discussing as many as you can of the common law and statutory controls, eg incorporation, interpretation, statutory invalidity.  Note that some implied terms are not excludable by agreement.
  • Can anything be said about the way that courts apply the rules? Are these techniques directed at procedural unfairness or substantive unfairness? 
  • How effective are these techniques?  Is there, or should there be, greater transparency in what courts are doing? 
  • Do you have any suggestions for reforming the law in this area?
  • Why and how does the law make a distinction between consumer and commercial transactions?  Critically assess the law, including UCTA and CRA.

2. 'The law on implied terms is very difficult to state; the test for implication is unclear and the categories shade into each other.' Discuss.

See 10.6 Implied terms

This question invites you to state and assess the law on implied terms.  The sub-questions you should consider are:

  • What are the recognised categories of implied term?
  • What is the test for implication in each category?
  • Identify and explain the points of uncertainty (eg distinction between reasonableness and necessity) and potential overlap (eg terms implied in law by the courts and those implied in fact)? 
  • How does Lord Hoffmann’s emphasis on the purpose of the contract in AG of Belize v Belize Telecom affect the implication of terms?
  • What are the policy considerations in play?  What are the pros and cons of implying terms?  Eg to what extent is uncertainty inevitable and justifiable to alleviate the potential harshness of (usually) non-negotiated contracts?
  • To what extent is it possible and desirable to reform the law?  How?

3. Adam’s advertisement for his airport car hire service states that 'You’ll be off in minutes'. Consider the following situations:

(a) Bella is late for a business meeting and she quickly signs Adam’s standard form without reading it after Carol (A's employee) tells Bella 'It's all standard stuff.' The car breaks down almost immediately. Bella incurs £150 cost to get to her meeting. Adam claims that Bella owes him £250 for the hire period and £200 for his costs in towing the car back to Adam’s premises, as stipulated in the contract. Advise Bella.

See 10.3.3 The incorporation of terms.

Is Bella liable to pay the £250 and £200 Adam is demanding?

  • Does the signature rule apply?
  • Has there been a misrepresentation as to the contents of the signed document by Carol?  What is the significance if there is?
  • Is there any other way out for Bella? Note Spencer's suggestion of properly applying the objective approach to contract formation and the Canadian approach.
  • The answer may also depend on the issue of termination, discussed in chapter 14.  Can Bella not pay the hire fee by terminating the contract for breach of a serious term?  Has Adam breached a term (express, implied or collateral)?  If so, is it a condition (or an innominate term the breach of which deprives Bella of substantially the whole benefit she was intended to receive)?

Can Bella sue Adam for her pecuniary loss of £150?

(b) As Don enters the car, Adam rushes up and hands him the standard form contract but he forgets to ask Don to sign. The breaks in the car fail causing Don to crash; Don's valuable painting is damaged but Adam states that he has excluded all liability in the contract. Advise Don.

Is the unsigned document binding on Don? Has Don had timely and adequate notice? Does the fact that the document was intended to be signed make any difference?

Has there been a breach by Adam?  If the document is part of the contract, is the term excluding liability for personal injury enforceable?  What about the exclusion of liability for property damage?

(c) Erik is a regular business customer. On this occasion, he is not asked to sign Adam’s' newly revised standard form contract. He returns the car five minutes late. He is told that, as per the contract, he is now liable to a £300 surcharge for late return. Advise Erik.

Is Erik bound to pay the surcharge?  Can Adam argue that there has been incorporation by previous dealing?  Even if he can, might the term be regarded as a penalty?

4. 'Rule one is that the task of the judge when interpreting a written contract is to find the intention of the parties.' Discuss the principles which guide the judge in interpreting contract terms, including exemptions of liability.

See 10.4 Interpretation of terms.

This question invites you to state and assess the rules on the interpretation of written contracts. 

  • You should set out the principles discussed in Investors Compensation Scheme v. West Bromwich Building Society as well as other rules (eg on the interpretation of exemption clauses).  What changes, if any, do recent Supreme Court decisions in Rainy Sky, Arnold v Britton and Wood v Capita make? Do they undermine this statement?
  • To what extent do courts seek to discover and give effect to the parties' intentions?  Is it always possible to do that? 
  • What does it mean that courts look for parties’ objective intention?
  • To what extent do the principles of interpretation express other policies?  
  • To what extent are the latter justifiable? 
  • Is the current law satisfactory?  Do you have any suggestions for reform?

5. What evidence is, and what evidence should be, admissible when courts interpret contractual documents?

See 10.4.4. Inadmissibility of pre-contractual negotiations and subsequent conduct.

This question invites you to discuss the evidence that should be taken into account by the courts in interpreting contractual documents.

  • What are the aims of contract interpretation?  You must refer to Investors Compensation Scheme v. West Bromwich Building Society (eg the 'meaning of persons' and not merely of 'words') and also recent Supreme Court cases (see question 4 above)..
  • What evidence is definitely 'in'?  Assess these categories in the view of the aims of interpretation.
  • What evidence is controversial (eg absolutely anything relevant to reasonable person's interpretation)?  Assess these in the view of the aims of interpretation.
  • What evidence is definitely 'out' (eg parole evidence rule, previous negotiations, subsequent conduct)? What is the propriety of exclusionary rules? Assess these in the view of the aims of interpretation.  Note the latest pronouncements on this in  Rainy Sky, Arnold v Britton and Wood v Capita.