Finding intention

 Heilbut,Symons & Co v Buckleton (1913)

Finding the intention of parties (Contractual Cartography Test), guidelines as per of Lord Moulton in
Heilbut,Symons & Co Buckleton (1913):

1. The importance of the statement, greater importance (or of critical importance), greater
likelihood that it was intended to be a term
2. Where one part is clearly relying another, it is likely a term.
 Seller may have great expertise in particular area (Esso petroleum Co Ltd v Mardon)
 Seller may have knowledge of matter that purchaser will unlikely have (E.g how a car
has been driven)
3. Relative knowledge of the parties
 if maker of statement has more knowledge than the other, it is likely that it is a term
 if there is equal knowledge or other party greater knowledge, it is likely to be a
representation

Special Knowledge

 Oscar Chess Ltd v Williams (1957)

o Car was described as 1948 Morris 10 when it was in fact an earlier model.
o Defendant obtained information in good faith of car log book which was subsequently
discovered to be forged
o Courts held that defendant’s statement as to as to the age of the car was not a term but
a representation.
o Innocent misrepresentation because defendant had no specialist skills and was reliant
on the registration documents in making the statement.
 Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965)
o Car sold to claimants had traveled 100k miles instead of state 20k miles
o Defendant’s statement was held to be a term of the contract because he was in a better
position than the claimant to know whether the statement was true.
 Esso petroleum Co Ltd v Mardon (1976)
o Esso built a petrol station and presented to Marden, the intended franchise.
o Throughput of 200k gallons per year was not met because Local Authorities did not all
pumps to have access from main road.
o Esso sued unsuccessfully for repossession
o Esso had extensive expertise in the area and likely throughput was only mere opinion.
o Marden relied on estimate and thus a negligent misrepresentation was made.
o Lord Denning: if a person with expertise in the area induced another person into
contract by making a representation, he is “under a duty of reasonable care to see that
the representation is correct.” Misleading/unsound advice/erroneous opinion that
induces other side into contract will make him liable.
Verification

 Schawel v Reade (1913)

o “You need not look for anything; the horse is perfectly sound. If there was anything the
matter with this horse, I should tell you.”
o Claimant in reliance of this bought the horse without examining it
o Horse was completely unfit for intended purpose
o Defendant’s statement was held to be a term

Importance

 Couchman v Hill (1947)

o Claimant asked defendant if heifer was in calf and stated that he was not interested in
purchasing it if it was.
o Several weeks later, heifer suffered a miscarriage and died
o Held to be a term of the contract because of importance attached to it by claimant.

Implied Terms

 Crossley v Faithful & Gould Holdings Ltd (2004)

o Mr Crossley was a director of Faithful & Gould Ltd. He suffered a nervous breakdown.
Under the firm’s disability insurance scheme, so long as he was an employee he was
entitled to benefits while totally unable to work. He tendered his resignation in terms
suggested by Faithful Ltd. Unfortunately that terminated his right to benefits. The
scheme insurer stopped payments after one year. Was there an ‘implied term of any
contract of employment that the employer will take reasonable care for the economic
well being of his employee?’
o Dyson LJ, for terms implied in law one should not ‘focus on the elusive concept of
necessity’ which is ‘somewhat protean’ but should ‘recognise that, to some extent at
least, the existence and scope of standardised implied terms raise questions of
reasonableness, fairness and the balancing of competing policy considerations.’ But it
was inappropriate to imply such a broad term, and ‘such an implied term would impose
an unfair and unreasonable burden on employers.’ Their interests conflict with
employees so it is unreasonable for employers ‘to have regard to the employee’s
financial circumstances when he takes lawful business decisions which may affect the
employee’s economic welfare.’ The employer does not need to ‘act as his employee’s
financial adviser.’ So there were ‘no obvious policy reasons to impose on an employer
the general duty to protect his employee’s economic well-being.’
o HOL formulated a narrowly drawn implied term.
o This less stringent test (as compared to officious bystander) used reflects the court’s
perception of the nature of the relationship between employer and employee by
accessing whether the implied term is suitable or reasonable to be incorporated into all
contracts.
The nature of relationship

 Malik v BCCI (1997)

o Mr Malik and Mr Mahmud both worked for the Bank of Credit and Commerce
International. BCCI went insolvent due to massive fraud, connection with terrorists,
money-laundering, extortion and a raft of other criminal activity on a global scale. Malik
and Mahmud had both lost their jobs and they sought employment elsewhere. They
could not find jobs. They sued the company for their loss of job prospects, alleging that
their failure to secure new jobs was due to the reputatational damage they had suffered
from working with BCCI. Nobody, they said, wanted to hire people from a massive fraud
operation like that at the company. This raised the question of what duty the company
had owed to its employees that had been broken. Although there was no express term
in their contracts, Malik and Mahmud argued there was an implied term in their
employment contract that nothing would be done calculated to undermine mutual trust
and confidence.
o The House of Lords unanimously held that the term of mutual trust and confidence
would be implied into the contract as a necessary incident of the employment relation.
This was a term implied by law.
 Liverpool City Council v Irwin (1976)
o Liverpool city council owned a block of flats in which the defendant was a tenant. The
common parts of the flats, the lifts, stair cases, rubbish chutes etc, had fallen into
disrepair. A rent strike was implemented by many of the tenants including the
defendant. The council sought to evict the defendant for non payment of rent and she
counter claimed for breach of an obligation to repair. However, the tenancy agreement
did not mention any obligation to repair. In fact the tenancy agreement only imposed
obligations on the tenant with no mention of the obligations of the landlord. The
defendant asked the court to imply a term that the council had an obligation to repair
the common parts of the block of flats.
o The courts did imply a term. The implied term arose as a legal incident in contracts of a
defined type between landlord and tenant that the landlord was to take reasonable care
to maintain the common parts. However, there was no breach of this duty.
o HOL insisted that the term must be a necessary one before it could be implied.
o Necessity test allows courts to base its reasoning on the intention of the parties.
 Equitable Life Assurance Society v Hyman

o Equitable Life (est 1762) issued ‘with profit’ life assurance policies, which are a way of
saving for retirement. If policy holders took benefits as a taxable annuity, then they got
tax exemptions on the premiums (i.e. bonuses). They could choose to have their annuity
at a "guaranteed annual rate" ("GAR") or a "current annuity rate" ("CAR"). From 1993,
the current annuity fell below the guaranteed one. Article 65 of the Society’s articles
said the directors could in their discretion vary the premiums, which you would get on
top.
 o The directors of Equitable Life decided they would change the level of bonuses, to
equalise the return between a guaranteed or a current annuity rate. This meant
guaranteed annuity rate holders got less than they believed had been stated, and they
complained, Mr Hyman being a representative policy holder.
o Lord Steyn held there was an implied term that the directors could not use their
discretion in apportioning profits to exclude those with guaranteed annual rate policies.
This implication was strictly necessary... essential to give effect to the reasonable
expectations of the parties... The legal test for the implication of such a term is a
standard of strict necessity.

The relationship between the parties, ‘officious bystander’

 The Moorcock (1889)

o Claimants were contracted to dock a ship and unload cargo at specified location
o Both parties knew at time of contract that this could involve ship at jetty at low tide.
o Ship was too big, got grounded and broke up.
o Claimants sued successfully because defendant gave an implied undertaking that the
shop would not be damaged. Without this purpose of contract will be defeated.
o ‘necessary to give the transaction such business efficacy as the parties must have
intended’
 Shirlaw v Southern Foundries (1926) Ltd (1939)
o The claimant had been employed as a managing director of Southern Foundries the
office of employment was to last for 10 years. Federated Foundries then purchased a
controlling share in the company and altered the company's Articles of Association
giving them the power to remove directors. They then dismissed the claimant as a
director who brought an action for wrongful dismissal. There was no breach of contract
for his dismissal based on the employment contract as they had not dismissed him from
being a managing director but only as a director. However, if he was not a director he
was not able to be a managing director. The claimant asked the court to imply a term
that the defendant would not act in a way making it incapable for him to perform his
contract.
o The Court of Appeal applied the officious bystander test and did imply the term.

s.14(3) – Reasonable fitness

 Slater v Finning (1996)

o The appellants engaged the respondents to repair the vessel’s engine when the main
bearing failed. Respondents installed a new type of camshaft which the manufacturers
claimed would be less subject to wear and compatible with other fishing
vessels.However the new camshaft failed at sea .The two further camshafts installed
also failed. The appellants then sold the problematic engine to another who used it
without encountering any problems.The replacement engine did not cause any
 trouble.The appellants brought an action claiming damages for breach of the implied
condition as to reasonable fitness for purpose under S 14(3) of SOGA 1979.House of
Lords.No breach of the implied condition for fitness of purpose where the failure of the
goods to meet the intended purpose arose out of a idiosyncrasy or abnormality which
was not made known to the seller. The fact that the buyer was himself ignorant of the
idiosyncrasy is irrelevant

Concept of ‘satisfactory quality’

 Wilson v Best Travel (1993)

o The plaintiff booked a holiday in Greece through the defendants.While on holiday, the
plaintiff fell through a glass patio door in the hotel where he was staying and sustained
personal injuries.He sued the defendant either on the basis of an implied term that the
defendant had failed to exercise his duty to provide contractual services with
reasonable skill and care under S 13 of the Sale and Supply of Goods Act 1982.
o Held: Since the glass used in the patio doors met with Greek safety standards, the
defendants had acted with reasonable care and skill for the purposes of the standard set
in S 13 Sale and Supply of Goods Act 1982.

Rescinding for Breach

 Bowes v Shand (1877)

o Shipment was held to be part of the description
 Re Moore and Landauer (1921)
o Contract for sale and purchase of consignment stipulated 30 tins but this was not met
o Purchaser refused to accept them
o Court held that it was in breach of s13, implied terms that must correspond with their
description even though quality was correct and buyer was unaffected by the breach as
he intended to sell them.

Common law

 Behn v Burness (1868)

o The charterparty of a ship described the vessel as being “in the port of Amsterdam”. In
fact it arrived in Amsterdam 4 days after the date of the charter.
o Held to be a condition and contract could be repudiated.
 Bettinin v Gye (1876)
o A singer was contracted to appear in different theatres for a season of concerts.
o Contract included term that he must attend rehearsals for six days before actual
performances began
o Absent for 3 days and was replaced.
o He sued and producer’s claim that this was a condition had failed because it was only
ancillary to the main purpose of the contract which was appearing in the actual
 performance. Producers could only sue for damages and thus, repudiation of contract
was done unlawfully.
 Poussard v Spiers (1876)
o An actress was contracted to be lead singer.
o Fell sick and could not attend earlier performance
o Subsequently give the role of an understudy
o She sued unsuccessfully
o Held the she had breached her contract by being late for the first night. Role of lead
singer was crucial and this was a condition that allowed producers to repudiate contract

Modern Approach (Court will examine the consequences of the breach):

 Hong Kong Firs

o Lord Diplock: “There are many contractual undertakings which cannot be categorized as
being conditions or warranties…of such undertakings, allthat cen be predicted is that
some breaches will and other will not give rise to an event which will deprive the party
not in default to substantially the whole benefit which was intended that he should
obtain”

Where sale of goods did not faill within statutory ‘conditions’

 Cehave v Bremer HG (The Hansa Nord)

o Buyer of citrus fruit purported to reject cargo on the grounds that the shipment was not
made in ‘good condition’
o Sellers refused to refund the price already paid and sold cargo to a third party who
subsequently sold original buyers the cargo at a lower price.
o COA held that term broken was innominate and that breach was not sufficiently serious
enough to give rise to terminate because fruits could be used for original purpose.
o Buyers could only claim in damages to reflect loss in value of cargo cause by its defective
state.
 The Mihalis Angelos (1970)
o Stipulation of a voyage charterplay relating to the time at which the vessel is expected
read to load is generally treated as a condition.
 Bunge v Tradex (1981)
o Buyers agreed to purchase 15 000 tons of Soya bean meal from the sellers.
o Contract required three shipments of 5000 tons each from a port be nominated by the
sellers.
o The parties agreed that one shipment would be made in June 1975 and the buyers
would provide a vessel in a nominated port. Clause 7 of the standard form contract
stated that the buyers were to “ give at least 15 consecutive days’ notice” of their
probable readiness to load the vessel.In order for the goods to be shipped in June, this
notice had to be given by 13 June. The notice was not given until 17 June and the sellers
 claimed that the late notice was a breach of contract amounting to a repudiation of the
contract.
o They claimed damages from the buyers on the basis that by that time the market price
of a Soya bean meal had fallen by over $ 60 a ton.The buyers contended that the term
as to notice was an innominate term and the effect of the breach was not sufficiently
serious for the sellers to treat the contract as repudiated.The Court of Appeal held that
it was not an innominate term.The House of Lords held that it was a condition since it
was a stipulation as to time in a mercantile contract.
 The Naxos (1990)
o HOL held that obligation for seller to have cargo for delivery at any time was a condition
even though COA and judge at first instance were in opinion that it was not.
o There is uncertainty in relation to whether a term broken is actually a condition
 Barber v NWS Bank (1996)
o Barber agreed with a dealer to buy a car on credit. Dealer sold car to creditor who then
sold it to Barber as usual with these transactions. Creditor sold Baber under express
condition that car remained with creditor until full payment. It was discovered that the
car was subject to prior financial agreement and creditor had no title. Baber recinded
the agreement and claimed full refund
o Held: term in the contract that property remained with creditor until full payment was
an express condition that creditor had title. Having used the car for 18 mths did not
undermind Barber’s case as Hire Purchase Act 1964 made it clear that trade purchaser
was not exonerated from criminal or civil liability.

Contrast

 Torvald Klaveness v Arni Maritime Corp (The Gregos) 1994

o HOL held that the obligation to re-deliver a time-chartered shop on the due date was
not a condition

Knock-on effect, s13(1) SOGA

 Reardon Smith v Hansen-Tangen

o Contract for tanker to be described as Osaka 354
o Work was subcontracted and tanker was named different
o Need for tanker lessened and buyers tried to avoid contract by claiming breach that
tanker should correspond with full description in documentation
o Held that breach was entirely technical and no bearing on the outcome could justify
repudiation

Reluctance to permit rescission on technicality

 Schuler AG v Wickman Machine Tools Ltd (1974)

 o Contract stated that it would be a condition that Wickman shall send
representatives to visit manufacturers at least once every week for the purpose
of soliciting orders.
o On the facts, a failure to make one visit would entitle Schuler to terminate
contract.
o Wickman failed to make some visits, courts thought that this was inevitable
o HOL Lord Reid held that the word ‘condition’ was an indication that parties
intended the term to be a condition in the technical sense but it was no means
‘conclusive’ evidence. The more unreasonable the consequences of treating a
term as a condition, the more unlikely that parties intended it to be that way
o Lord Wilberforce dissented, said that majority assumed the bother parties
adopted an ‘easy-going tolerance’ instead of ‘aggressive insistent punctuality
and efficacy’
o Note: Contract was poorly drafted and this allowed HOL to exploit lack of clarity

Traditional approach (examining the intention of the parties or the conduct of the parties to decide how
parties treated a term):

 Lombard North Central plc v Butterworth (1987)

o clause 2 of agreement said that essence of contract hirer should pay each installment
promptly
o COA held that breach of this was fir repudiation of contract
 Union Eagle v Golden Achievement (1997) – Privy Council
o 10 minute delay was too much as time was of the essence.
o Time of performance had passed so had the right to performance