Self-test questions: Identifying and Interpreting Contractual Terms (Terms and Representations, and Express and Implied Terms)

. Davina runs a hotel. Davina wants to limit the hotel's potential liability in relation to loss and damage to property suffered by its guests. Although most of the hotel's bookings are made online, and those making a booking are required to agree to the hotel's terms before confirming their booking, Davina is concerned with how to incorporate the hotel's terms into contracts made with guests that turn up without a prior booking. Which one of the following methods is the most likely to mean that any such terms limiting the hotel's potential liability will have been successfully incorporated into such contracts?

The hotel posts a one-page notice under the bedroom door of all guests, once they have checked in, during the first day of their stay at the hotel, which sets out the relevant terms clearly.

Each bedroom has a notice, fixed to the wall in a prominent position, which contains the words 'Important customer notice' at the top, with the relevant terms set out clearly.

The inside of the hotel lift has a notice, positioned above the buttons used to operate the lift, which contains the words 'Important customer notice' at the top, with the relevant terms set out clearly.

The hotel reception area, where all guests are required to go on arrival, contains a notice in a prominent position, which contains the words 'Important customer notice' at the top, with the relevant terms set out clearly.

The hotel car park contains a notice with the words 'Important customer notice' at the top, with the relevant terms set out clearly.

. Erica purchased the Daily Buzz newspaper. Free inside the newspaper was a scratch card, which is published and administered by the newspaper. Erica claims to have won £10,000 via the scratch card. The Daily Buzz claims Erica is not entitled to the money, because she has not met the qualifying terms on the back of the scratch card. On the front of the scratch card were the words 'subject to the terms on the back'. Which one of the following most accurately explains whether the terms were successfully incorporated and binding?

The terms are unlikely to be incorporated because the scratch card has obviously not been signed by the parties.

The terms are incorporated by reference, because the front of the scratch card refers to the terms contained on the back.

The scratch card was contained in a newspaper and as such is most likely to be no more than an invitation to treat, so the Daily Buzz is not bound to pay any money to winners.

As the terms are contained on the back of the scratch card, they will be deemed to be 'onerous or unusual' and so a higher standard of incorporation applies.

The terms on the back of the scratch card will only be incorporated if they are in the same sized writing as reference on the front of the scratch card to what is contained on the back.

. Gabrielle and Tobias are negotiating a contract for the sale of goods. They have made various statements to each other about different aspects of the contract and its potential terms. Where a statement made by one party before the conclusion of the contract is found to be untrue, the innocent party's remedies may vary according to whether the statement is characterised as a term or a representation. If the statement is characterised as a term, which one of the following assertions relating to the innocent party's remedies is true?

The innocent party may terminate the contract.

The innocent party is not entitled to claim damages unless it proves the misstating party's deliberate fault.

The innocent party is generally entitled to damages for expectation losses.

The innocent party may recover all those losses that are directly caused by the misstating party.

The innocent party can elect between terminating the contract and claiming damages as of right.

. Benedict Ltd and Primero Ltd have a written contract containing an entire agreement clause. Which one of the following statements relating to the effect of such a clause is true?

The clause prevents the parol evidence rule from operating.

The clause excludes all extrinsic evidence, including oral evidence of a collateral contract, from the admissible evidence of the contract terms.

The clause does not prevent the court from substituting terms in a collateral contract for inconsistent written terms.

The clause will automatically prevent any claim being brought for misrepresentation.

The clause will automatically have the effect of excluding all statutory implied terms and there is no need to mention such exclusion in the clause itself.

. Jimmy Jeanz is a well-known brand of jeans. Jimmy Jeanz has a contract to supply a retailer, House of Jeans, with stock of its jeans. In a sale of goods contract, the jeans must be of satisfactory quality (s. 14(2) of the Sale of Goods Act 1979). Which one of the following statements is a correct application of this provision?

House of Jeans can return any jeans and claim a full refund if it struggles to sell the Jimmy Jeanz jeans in its shops due to low demand.

House of Jeans can return a faulty pair of jeans even if the defect has been brought to its attention at the time of the sale and a lower sale price has been agreed.

If the colour of the jeans fades after only one washing, the seller has the right either to give a full refund or to issue a credit note.

If all the zippers in a batch of 100 jeans are broken, House of Jeans is entitled to return all these jeans and claim a full refund.

Section 14(2) of the Sale of Goods Act 1979 applies only if the parties have incorporated it expressly into their contract.

. World of Sports Ltd is a retailer in the sport and leisure industry. World of Sports has a contract with No Limits Ltd by which World of Sports has rights to sell No Limits' goods. World of Sports is alleging that the contract contains an implied term governing whether World of Sports' competitors can also sell No Limits' products. Which one of the following approaches is inconsistent with the approach to the implication of terms in fact following Marks & Spencer plc v BNP Paribas Securities Services Trust Co. (Jersey) Ltd [2015] UKSC 72, [2016] AC 742?

A term can be implied if the parties would have definitely agreed upon it had they been asked about it by an officious bystander at the time of contracting.

It will often be appropriate for a court to first construe the express words of a contract before considering whether a term should be implied.

A term will be implied into a commercial contract whenever the court considers it fair to do so.

An appropriate question to ask is whether the implication of a term would give 'business efficacy' to the contract.

It is relevant to consider the length and detail of the contract, the nature of the parties, and whether the contract was negotiated and drafted by lawyers.

. Mia, the owner of a large chain of 'off-licence' shops, wishes to purchase 100,000 bottles of Liebzig white wine from Coral Ltd, a wine wholesaler. Mia states a particular wish to purchase wine of a 2007 vintage because this appears to offer the best mix of quality and value. In Coral's opinion, the wine is of the correct vintage but, as there are no labels on the bottles, Coral advises Mia to verify this fact independently. Mia purchases the wine, but subsequently discovers that the wine was produced in 2009, an inferior vintage. Mia and Coral cannot agree whether the vintage of the wine was a term of the contract. Which one of the following statements probably summarises the legal position between the parties?

The vintage is a term of the contract because Mia has clearly attached special importance to that issue.

Because Coral tells Mia to verify the vintage independently, it is clear that there is no intention that the vintage would be a term of the contract.

The vintage is a term of the contract because this is a condition precedent for the contract to come into existence.

The vintage is not a term of the contract because Mia and Coral are equally experienced and knowledgeable on such issues.

A court is likely to imply a term that it was a 2007 vintage based on the nature of the parties and their relationship.

. Percy and Lisa are in dispute as to the correct meaning of a particular term in their commercial contract. Which one of the following statements relating to the rules of interpretation set out by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 898 is not true?

Interpretation of contracts should be made in accordance with principles of commercial common sense.

Interpretation of contracts should take account of both the factual background and the state of the law that would reasonably have been available to the parties at the time of the contract's formation.

As a general rule, a court may have recourse to pre-contractual negotiations to explain the meaning that the parties must be taken to have intended for their contractual document.

The literal meanings of separate words may sometimes yield to the commercial meaning of the document reasonably understood as a whole.

The law generally excludes from the admissible background parties' declarations of subjective intent.

. Six months ago, Aztec and Lewison's entered into a written contract. The parties are in dispute as to which of them has the responsibility for fulfilling certain obligations under the contract. Aztec's lawyers have advised that the contract has been written in such a way that a court is likely to conclude that Aztec is responsible for fulfilling the obligations in question. Aztec maintains that this was not what the parties intended when they were negotiating the contract, and so the written contract has been recorded incorrectly. Aztec has been advised that it might need to bring a claim for rectification. Which one of the following is not true in respect of the approach to rectification, following FSHC Group Holdings Ltd v GLAS Trust Corp Ltd [2019] EWCA Civ 1361, [2020] 2 WLR 429?

Rectification is an equitable remedy.

In a claim for rectification for common mistake, it may be necessary to distinguish between the situation where the claim concerns a concluded contract which the parties had then recorded incorrectly and the situation where the claim concerns parties' negotiations which have subsequently been recorded incorrectly at the point the parties formed their concluded contract in writing.

To succeed in a claim for rectification in this context, it will be necessary to show there was an outward expression of accord demonstrating the parties' intentions.

In FSHC, the Court of Appeal departed in part from the approach to rectification taken by Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 3 WLR 267.

The parties' subjective intentions are never relevant in a claim for rectification for common mistake.

. In relation to terms implied by law, which one of the following is true?

A term will only be implied in law into a relational contract.

A term will only be implied in law if it satisfies the 'officious bystander' or 'business efficacy' tests endorsed in Marks & Spencer plc v BNP Paribas Securities Services Trust Co. (Jersey) Ltd [2015] UKSC 72, [2016] AC 742.

A term will only be implied in law if a statutory provision, in force at the time the contract was made, states that such a term is implied within contracts of that type, and the parties have not excluded it by an express term.

Terms implied in law do not depend on any particular intention of the parties; rather, terms implied in law are concerned with the duties arising out of certain types of contracts, guided by policy considerations.

A term will only be implied in law in contracts of utmost good faith.

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