Contract seminar 6
1) Official bystanders test- Shirlaw v Southern Foundries [1939]- The test works on the principle
that if something is so obvious it goes without saying it will be implied into a contract. In
other words if an officious bystander were to suggest a term he would be met with an “Oh,
of course!”
Terms implied by law- the term is necessary-Liverpool city council V Irwin [1976]- a block of
flats was continually being vandalised, so that the lifts didn’t work and the communal areas
were in a very poor state of repair. The tenancy agreement did not cover who was
responsible for their maintenance and the tenants sued trying to imply a term that it was the
council’s responsibility. The HL decided it was the Councils responsibility, but then decided
that the tenants had failed to establish that such an implied term had been breached.
2) The innominate term classification allows the law to be flexible in its approach to the legal
consequences of breach. The flexibility prevents a minor breach from being used as a
condition and therefore exiting contracts. The flexibility of the innominate term classification
allowed the court to look at the seriousness for the breach to determine the availability of a
right to terminate.
3) Incorporation- is the clause part of the contract?
Construction- is the clause appropriately worded to cover what has occurred?
Legislation- basically, is the clause affected by the unfair contract terms act 1977 or the
legislative regime dealing with unfair terms in consumer contracts?
4) The contra proferentem rule applies so that any ambiguity in the clause is resolved against
the person seeking to rely upon it. Exemption clauses are strictly construed. The words used
must clearly cover what has occurred if the clause is to be effective.
1) Official bystanders test- Shirlaw v Southern Foundries [1939]- The test works on the principle
that if something is so obvious it goes without saying it will be implied into a contract. In
other words if an officious bystander were to suggest a term he would be met with an “Oh,
of course!”
Terms implied by law- the term is necessary-Liverpool city council V Irwin [1976]- a block of
flats was continually being vandalised, so that the lifts didn’t work and the communal areas
were in a very poor state of repair. The tenancy agreement did not cover who was
responsible for their maintenance and the tenants sued trying to imply a term that it was the
council’s responsibility. The HL decided it was the Councils responsibility, but then decided
that the tenants had failed to establish that such an implied term had been breached.
2) The innominate term classification allows the law to be flexible in its approach to the legal
consequences of breach. The flexibility prevents a minor breach from being used as a
condition and therefore exiting contracts. The flexibility of the innominate term classification
allowed the court to look at the seriousness for the breach to determine the availability of a
right to terminate.
3) Incorporation- is the clause part of the contract?
Construction- is the clause appropriately worded to cover what has occurred?
Legislation- basically, is the clause affected by the unfair contract terms act 1977 or the
legislative regime dealing with unfair terms in consumer contracts?
4) The contra proferentem rule applies so that any ambiguity in the clause is resolved against
the person seeking to rely upon it. Exemption clauses are strictly construed. The words used
must clearly cover what has occurred if the clause is to be effective.
