TERMS OF CONTRACT

FACULTY OF LAW, UG
OUTLINE
 Ascertainment of terms of contract
a. Distinguish terms from mere representations
b. Tests for distinction b/n terms and mere representations
c. Collateral Contracts
d. Written contracts
e. Signed Contracts
f. Defence of Non est factum
g. Signed contracts and illiteracy
 Classification of the terms of contracts( and respective implications in the
event of breach)
a. Conditions
b. Warranties
c. Innominate terms
 Implied terms and the grounds for their implication into contracts.
 Exclusion or exemption clauses
Introduction
 The terms of a contract defines the content,
scope and extent of the obligations
undertaken by the parties to the contract.
 Generally, a contract may be wholly oral,
wholly in writing or partly oral and partly in
writing. In exceptional circumstances, a
statute may demand that a particular kind of
contract must be in writing to be
enforceable Eg. Conveyancing Act,
1973(NRCD 175)
Distinguish terms of a contract from
mere representations

 Where a statement forms an integral part of a

contract it is said to be a term of the contract such
that when it is breached, the innocent party is
entitled to sue for damages for breach of contract.
Eg leases, sale of goods (purchase of a car) etc
 A mere representation is statement which induces
the other party to enter into the contract, but does
not form part of the contract itself.
 Mere representations are made during negotiations
leading up to the making of a contract but which
does not qualify as contractual terms. (eg “car is
in excellent condition and it is as though new”)
Introduction cont’d
 Upon ascertaining the terms of the
contract, there is the need to consider
their relative importance, and in this
regard, the law classifies the terms of a
contract into
 a. conditions
 b. warranties
 c. innominate terms.
Ascertainment of terms
 Where the contract was made orally, the
terms will be found in the statements
made by the parties during the
negotiations leading to the contract.
 If the statement is a mere
representation, and it turns out to be
false, the party misled by it may have a
cause of action in the tort of deceit, but
cannot sue for breach of contract because
the statement is not a term of the contract.
Test for ascertaining terms of oral
contracts
 The test for ascertaining whether a statement is
a term or mere representation is contractual
intention (objectively deduced from the totality
of the evidence).
 In other words, it depends on whether the parties
intended it to be a contractual term or not.
 Thus, the courts look to see whether,
considering all the circumstances a reasonable
third party would assume that the party making
the statement intended it to be a term of the
contract or not.
Bannerman v. White,
 In the course of negotiating the purchase of hops, the buyer
asked the seller if any sulphur had been used in their
treatment, adding that, if it had, he would not even bother
to ask the price. The seller answered that no sulphur had
been used. The parties continued with the negotiations which
eventually resulted in a contract of sale. It was later
discovered that sulphur had been used in the cultivation of a
portion of the hops and the buyer, when sued for the price,
claimed that he was justified in refusing to observe the
contract. The court had to determine whether the statement or
assertion that sulphur had not been used in the treatment of
the hops was intended to be part of the contract (since the
jury found no fraud on the part of the seller). The jury in this
case found that the buyer had made abundantly clear the
importance he attached to the seller’s answer and the seller
was aware that the intention was that the statement should be
a part of the contract. Therefore, it was held that the
statement by the seller that sulphur had not been used was a
Ascertainment cont’d
 Where the party to whom the statement was
made was given an opportunity to make an
independent investigation or to verify the
statement that would be clear evidence that the
party making the statement was not warranting
its accuracy and this may lead to an inference
that the statement was not intended to be a
term of the contract.
 Ecay v. Godfrey (a seller of a boat stated that
it was sound, but advised the buyer to have it
surveyed. It was held that the statement was not
a term of the contract).
3 broad tests to determine whether a
statement is a term or not

 Relative means of knowledge of the

parties

 Lapse of time between the making of the

statement and the time of contracting

 Reduction of statement into writing.

 Tests not mutually exclusive
Relative Means of Knowledge of Parties

 Where the party who made the statement had

special/superior knowledge, skill or experience
regarding the matter in question, as compared to
the other party, the courts are more willing to infer
an intention that the statement should constitute a
term of the contract.

 In these circumstances, the maker of the

statement, by reason of his superior knowledge
or skill, can reasonably be presumed to have
undertaken contractual responsibility for the
accuracy of the statement.
Relative means cont’d
 However, where both parties have the same
means of knowledge about the matter and
they are aware of this, it is improbable that
a statement made by one of them will
qualify as a term of the contract.
 In such a case, the inference is that one
party would not be relying on the other, but
rather on his own means of knowledge in
entering into the contract.
 Oscar Chess v. Williams
Oscar Chess v. Williams
 The plaintiffs were car dealers. The defendant wished to obtain
from them on hire purchase a new Hillman Minx car and to
offer to them his second hand Morris car in part exchange. The
amount that the defendant would pay depended on the age of
the Morris car. The defendants informed the plaintiffs that the
Morris car was a 1948 model. In stating so, the defendant
relied on the date stated in the car’s registration book. The
plaintiff accepted this as the year of manufacture of the car
and based on this, valued it at £290. The parties then orally
agreed that the plaintiffs would arrange for the hire purchase
of the new Hillman car, and take the Morris, valued at £290.
The agreement was carried out and eight months later, the
plaintiffs found that the date of the Morris was not 1948, but
1939, making the car worth only £175 and not £290 as
assumed. It turned out that the date stated in the registration
book had been altered by a previous holder before it reached
the defendant. The registration book showed that there had
been five changes of ownership of the car between 1948
Oscar chess continued
 The issue was whether the statement made by the defendant
about the year of manufacture of the car constituted a term of the
contract. It was held (on appeal) that the statement did not
amount to a term of the contract.

 In reaching this conclusion, Denning L.J., relying on the means of

knowledge of the parties, stated:
What is the proper inference from the known facts? It
must have been obvious to both that the seller had
himself no personal knowledge of the year when the car
was made. He only became owner after a great number of
changes. He must have been relying on the registration
book. It is unlikely that such a person would warrant the
year of manufacture. The most he would do would be to
state his belief, and then produce the registration book in
verification of it. In these circumstances the intelligent
bystander would, I suggest, say that the seller did not
intend to bind himself so as to warrant that it was a 1948
Contrast
 Contrast Oscar Chess with Dick Bentley Production Ltd
v. Harold Smith Ltd
where the plaintiff, Bentley, asked Smith, a car dealer, to find
him a “well vetted” Bentley car. Smith found a car, which he
told Bentley, had done only 20,000 miles since it was fitted
with a replacement engine and gear box. This statement was
untrue and when the car proved to be unsatisfactory, Bentley
sued for damages. The Court of Appeal held that the
defendants’ statement was a term of the contract and that the
plaintiffs were entitled to damages. The court referred to the
decision in Oscar Chess and stated that in the present case it
was very different. As Lord Denning M.R. put it: “Here we
have a dealer, Smith, who was in a position to know, or
at least to find out, the history of the car. He could get
it by writing to the makers. He did not do so… He ought
to have known better.”
Relative means cont
Even where a party expresses an opinion
on a matter, the fact of his superior
knowledge or special means of knowledge
may result in an inference that he was
warranting that he had reasonable grounds
for the opinion he expressed. In other
words, the courts will construe it as a term
that the opinion was sound and reliable and
was made with reasonable skill and care.
 Esso Petroleum v. Mardon
Esso Petroleum v Mardon
 An experienced representative of Esso Petroleum
company told Mardon, who was thinking of operating a
petrol station, that the company estimated that the
throughput of petrol on the site would reach 200,000
gallons in the third year of operation, and thereby
persuaded Mardon to enter into a tenancy agreement for
the site for three years. After the transaction, Mardon
found that not more than 60,000 to 70,000 gallons could
be realized. Mardon continued to lose money and was
unable to pay for the petrol supplied. Esso then sued to
recover possession of the site and the money due. Mardon
claimed damages in respect of the representation,
alleging, among other things, that the forecast or
representation constituted a term of the contract.
Esso Petroleum
 The court observed:
 [I]t was a forecast made by a party — Esso — who had special
knowledge and skill. It was the yardstick by which they
measured the worth of a filling station. They knew the facts.
They knew the traffic in the town. They knew the throughput of
comparable stations. They had much experience and expertise
at their disposal. They were in a much better position than Mr.
Mardon to make a forecast. It seems to me that if such a person
makes a forecast, intending that the other should act upon it —
and he does act on it, it can well be interpreted as a warranty
that the forecast is sound and reliable in the sense that they
made it with reasonable care and skill. It is just as if Esso said
to Mr. Mardon: “Our forecast of throughput is 200,000 gallons.
You can rely on it as being a sound forecast of what the service
station should do. The rent is calculated on that footing”. If the
forecast turned out to be an unsound forecast, such as no
person of skill or experience should have made, there is a
breach of warranty.
Reliance at time of Contracting

The principle is that generally, if A is reasonably relying on B’s

statement at the time of contracting and B knows or ought to know
that A is relying on the statement, it is likely to be held to be a term
of the contract. Here the courts seek to establish whether the
statement was designed to be a part of the contract and not merely
an incident in the preliminary negotiations.

Thus, the shorter the interval between the statement and the time of
contracting, the more likely it is that A is relying on that statement.

The courts in determining this factor treat the making of the

contract as one protracted process.

 Schawel v. Reade
Reliance at the time of contracting

 In Schawel v. Reade:
The plaintiff wanted a horse (stallion) for stud purposes.
He went to the defendant’s stables to examine a horse,
which had been advertized for sale by the defendant.
While he was inspecting the horse, the defendant
interrupted him, saying “You need not look for anything:
the horse is perfectly sound.” The plaintiff therefore
stopped the examination. A few days later, the price was
agreed. Three weeks later the sale was concluded. The
horse in fact was unfit for stud purposes. The jury found
that the statement constituted a term of the contract.
(both superior knowledge and length of time b/n making of
statement and entry into contract)
Reduction of Terms into Writing

 Where the parties later reduce their oral agreement into writing, the
omission or exclusion of an oral statement from the written
document may lead to the inference that the parties did not intend it
to be a term of the contract.

 Routledge v. McKay:
The plaintiff and defendant were discussing the possible purchase
and sale of the defendant’s motorcycle. Both parties were private
persons. The defendant, taking the information from the registration
book, said on October 23, that the cycle was a 1942 model. On
October 30, a written contract of sale was made, which did not refer
to the date of the model. The actual date was later found to be 1930.
The buyer’s claim for damages failed in the Court of Appeal, partly
on the ground that the said statement was omitted from the written
contract and partly on the basis of the time interval between the
making of the statement and the conclusion of the contract.
Collateral Contracts
 A collateral contract is a
contract, which exists side by
side another contract, the
consideration for which is the
entering into of that other
contract.
Principle explained
 The principle of collateral contracts was explained in
the case of Heilbut, Symons & Co. v. Buckleton
as follows:
 A tells B: “If you will make such and such contract, I
will give you one hundred pounds”. If B provides the
consideration by entering into the specified contract,
there comes into existence a unilateral (or collateral)
contract with A. If that promise is not fulfilled, B can
sue for breach of that collateral contract. This
second contract is in every sense of the word a
complete legal contract. It is collateral to the main
contract, but each has an independent existence.
De Lasse v Guildford
 In De Lassale v. Guildford a tenant had
declined to hand over his counterpart of a lease
until he had the landlord’s oral assurance that
the drains were in good order. The lease did not
contain any clause about the drains, which
turned out not to be in good order. The court
held that in addition to the contractual terms
contained in the lease, there was a collateral
contract under which the landlord promised that
the drains were in good order and the tenant
was entitled to damages for breach of that term
or undertaking.
De Lasse analysed
 In consideration of A signing the lease or
entering into the written contract, B had
promised that the drains were in good order.
Thus two contracts came into existence at the
same time: (i) the bilateral contract contained in
the written lease; and (ii) the collateral contract
(unilateral contract) under which B promised
that the drains were in good order in
consideration of A signing the written lease. The
establishment of the collateral contract helps to
achieve a fair result and implements the true
intentions of the parties.
Collateral contract cont’d

A collateral contract could be

found to exist even if the
collateral term directly
contradicts the express terms of
the main contract.

 City and Westminster Properties

Ltd v. Mudd
City and Westminster Properties Ltd v. Mudd

 The contract was a lease, which contained a covenant not to use the
premises for purposes other than trade. Under an earlier lease, the
defendant had been in the habit, contrary to the lease, of sleeping on
the premises. He insisted he would not sign the new lease unless the
plaintiffs (landlords) agreed to his sleeping there. The landlord, who
was unwilling to include a clause to that effect in the lease itself, orally
assured the tenant that he could sleep there. Later the landlord
brought an action against the tenant for forfeiture of the lease on the
ground that the defendant was sleeping on the premises contrary to
the express terms of the written lease. The action failed. Even though
the collateral term, i.e., the term that the tenant could use the
premises for residential purposes was in outright contradiction of the
express terms of the written contract, the courts found that all the
ingredients for the existence of a collateral contract existed and such a
finding would implement the true intentions of the parties to the
contract. The court stated:
City & Westminster
 The defendant says that it was in reliance on
this promise that he executed the lease and
entered on the onerous obligations contained
in it. He says, moreover, that but for the
promise made he would not have executed
the lease, but would have moved to other
premises available to him at the time. If
these be the facts, there was a clear contract
acted upon by the defendant to his detriment
and from which the plaintiffs cannot now be
allowed to resile.
Collateral contracts cont’d
 The principle of collateral contract may be applied
even where the party receiving the assurance or
collateral promise is not a party to the main contract
entered into. The principle of collateral contract still
applies where A makes a promise to B in
consideration of B arranging for A to enter into a
contract not with B himself, but with C. When B
arranges for C to enter into a contract with A, he (B)
provides the consideration for A’s promise and
thereby concludes a (collateral) unilateral contract
with A. B can therefore sue to enforce A’s collateral
promise even though the main contract is entered
into between A and a third party, C.
See also
 Shanklin Pier Ltd v. Detel Products Ltd:
 Wells (Merstham) Ltd v. Buckland and
And Silica Ltd.
 C.A.S.T. v. Nketia
Written Contracts

 Parole Evidence Rule

Where parties have formally recorded
the whole of their agreement in writing,
the written document, prima facie, is
taken to be the whole contract. The
terms of such a written contract are,
therefore, said to be limited to the
contents of the written document and
nothing more.
Parole Evidence Rule
 As a general rule, where the agreement
is wholly reduced into writing, extrinsic
evidence will not be admitted to add to,
vary or contradict the terms of the
written agreement.
 Motor Parts Trading Co v. Nunoo
Motor Parts Trading Co v. Nunoo

 The appellants, relying on a written agreement

signed by the respondent, instituted proceedings
for arrears of instalments due under the
agreement, damages for breach of contract and an
injunction. The respondent contended that the
written agreement did not contain all the terms
agreed upon between the parties; that there was
an oral collateral agreement not included in the
written agreement because the appellants wanted
to evade payment of income tax on the amount
involved in the transaction; that the appellants did
not honour this collateral agreement and, therefore,
he repudiated the written agreement.
Motor Parts v Nunoo
 It was held, allowing the appeal, that
when a transaction has been reduced
into or recorded in writing by agreement
of the parties, extrinsic evidence is in
general inadmissible to contradict, vary,
add to or subtract from the terms of the
document.

 See also Wilson v Brobbey

Statutory provision

 Section 177of the Evidence Decree (NRCD 323)—Extrinsic

Evidence Affecting the Contents of a Writing.
 (1) Except as otherwise provided by the rules of equity, terms set forth
in a writing intended by the party or parties to the writing as a final
expression of intention or agreement with respect to such terms as are
included in the writing may not be contradicted by evidence of any
prior declaration of intention, of any prior agreement or of a
contemporaneous oral agreement or declaration of intention, but may
be explained or supplemented—
 (a) by evidence of consistent additional terms unless the court finds
the writing to have been intended also as a complete and exclusive
statement of the terms of the intention or agreement, provided that a
will and a registered writing conveying immovable property shall be
deemed to be a complete and exclusive statement of the terms of the
intention or agreement; and
 (b) by a course of dealing or usage of trade or by course of
performance.
Exceptions to the parole evidence rule

The parole evidence rule is, however, subject to a host of

exceptions in which parole evidence may be admissible
1. To establish or prove the existence of a collateral contract. De
Lassalle v. Guildford [1901] 2 K.B. 215 C.A.
2. To establish the existence of a vitiating factor such as mistake,
misrepresentation, duress, undue influence, fraud etc. Curtis
v. Chemical Cleaning and Dyeing Co. [1959] 1 K.B. 805.
3. To establish the plea of non est factum (this is not my deed).
Gallie v. Lee [1971] A.C. 1004. & W 466.
4. To prove the existence of a custom or trade usage, which
should apply to the contract. Hutton v. Warren (1836) 1 M
5. To show that the operation of the entire contract had been
suspended until the occurrence of some event. Pym v.
Campbell (1856) 6 E & B 370.
Exceptions cont
6. Where a word or phrase in a written document is ambiguous
parole evidence is admissible to explain such word or phrase.
Robertson v. Jackson (1845) 5 C.B. 412.
 7. If it can be shown that the written document is incomplete

in that it was not intended to contain all the terms of the

contract, then extrinsic evidence may be admitted to fill the
gaps. Allen v. Pink (1838) 4 M. & w. 140.
8. Where it is shown that a written document which was
intended to record a previous oral agreement does not
accurately reflect the contents of the oral agreement,
extrinsic evidence will be admissible to “rectify” or correct
the written document prior to its enforcement. Joscelyne v.
Nissen [1970] 2 Q.B. 86.
Signed Contracts

 Generally, in the absence of fraud or

misrepresentation where a document
containing contractual terms is signed,
the party signing it is bound by its terms
and it is wholly immaterial whether he
read the document or not.
 L’Estrange v. F .Graucob
 L’Estrange v F. Graucob

 The buyer of an automatic slot machine signed and handed over to the sellers,
an order form, which contained, in ordinary print and writing, the essential
terms of the contract. Certain special terms were also stated in small print,
including the term that “any express or implied condition, statement or
warranty, statutory or otherwise not stated herein is hereby expressly
excluded”. The machine was later delivered by the sellers to the buyer, who
paid to the sellers an instalment of the price. The machine did not work
satisfactorily and the buyer brought an action against the sellers for breach of
an implied warranty that the machine was fit for the purpose for which it was
sold. The sellers argued that the contract expressly provided for the exclusion
of all implied warranties. The buyer replied that at the time that she signed the
order form she had not read it and knew nothing of its contents and the clause
excluding the warranties could not be easily read, owing to the smallness of
the print.
 It was held that the buyer’s action must fail and the sellers were entitled to
judgment. It was stated: “When a document containing contractual terms is
signed, then in the absence of fraud, or, I will add, misrepresentation, the
party signing it is bound and it is wholly immaterial whether he has read the
document or not”
Inusah v. DHL Worldwide Express:

 The defendant operated as carriers. The plaintiff presented a

parcel containing 22 American Express traveller’s cheques
valued at US$6,000 at the office of the defendants to be
delivered to his bankers in London. After the plaintiff had paid
the postage he was issued an air bill which he read and
signed. Subsequently, the plaintiff was informed by his
bankers that they received only three travellers cheques
valued at $1,500 from the defendants. Following the refusal of
the defendants to pay him the difference, the plaintiff brought
an action against them to, inter alia, recover the balance and
damages for breach of the contract to deliver. The court found
that the air bill contained a disclaimer clause limiting the
liability of the defendants in the event of any special,
incidental or consequential damages arising out of the
carriage to $100.
Inusah v DHL cont’d
 It was held, relying on L’Estrange v. Graucob Ltd,
that the general rule was that when a document
containing contractual terms was signed, in the
absence of fraud or misrepresentation, a party of
full age and understanding was bound to the
contract to which he appended his signature. In
such a case it would be immaterial whether he read
the document or not. In the instant case, the
plaintiff was a literate trained professional, a man
of full age and responsibility. Since he read the
disclaimer clause limiting the defendant’s liability
to $100 and then signed the same, he was bound
by those conditions.
Signed contract cont’d
 Where a party who is seeking to rely on
a contractual clause in a written contract
is guilty of misrepresenting its effect to
the other party, he may be precluded
from relying on such clause, even if the
other party has signed the contractual
document.
 Curtis v. Chemical Cleaning And
Dyeing Co
Curtis v. Chemical Cleaning And
Dyeing Co
 The plaintiff took her wedding dress to the
defendants to have it cleaned. She was asked to
sign a form headed “Receipt”. She asked why she
had to sign the form and was told that it was
because the defendant company would not
accept liability for damage to the beads and
sequins on the dress. The receipt in fact
contained the following condition: “This article is
accepted on condition that the company is not
liable for any damage howsoever arising.” When
the dress was returned, there was a stain on it
which could not be explained. The plaintiff sued.
Curtis v. Chemical Cleaning And
Dyeing Co
 It was held that the employees of the defendants had
created a false impression or misrepresented the effect of
the clause in question, and this disentitled the company
from relying on the clause, except with regard to damage
caused to beads and sequins.
Lord Denning stated:
[B]y failing to draw attention to the width of the
exemption clause, the assistant created the false
impression that the exemption only related to the
beads and sequins and that it did not extend to the
material of which the dress was made. It was done
perfectly innocently, but nevertheless a false
impression was created … [I]t was a sufficient
misrepresentation to disentitle the cleaners from
relying on the exemption, except in regard to beads
and sequins.
Doctrine of Non Est
Factum
 The general rule is that a party of full age and
understanding is normally bound by his signature
to a document, whether he read the document or
not. L’Estrange v. F. Graucob [1934] 2 K.B. 394.
 However, in certain circumstances, a party who has
been misled into executing a deed, or signing a
document of a class and character different from
that which he intended to execute or sign can
escape liability on the signed document by
pleading the defence of non est factum in an action
brought against him for the enforcement of the
document. Lewis v. Clay [1897] 67 C.J. Q.B. 224.
Effect of a successful plea of non est
factum

 Renders the contract void and no rights flow

from it.
 This is justified on grounds of fraud and on
the ground that the mind of the signer did not
accompany the signature.
 In other words, he never intended to sign that
particular document and, therefore, in the
contemplation of the law, he never did sign
the document to which his name is appended.
 Lewis v Clay
Lewis v Clay
 The defendant, Clay was induced to sign a
promissory note by the cunning deception of a
friend who caused him to believe that he was
merely witnessing the friend’s signature on
several private and highly confidential
documents. The documents produced to Clay for
his signature were entirely covered with blotting
paper except for four blank spaces that had
been cut out in it. Clay had signed his name in
the blank spaces. The court held that the
defendant could successfully plead non est
factum.
Scope of the defence of non est factum

 Originally limited to blind and illiterate

persons.
 Now applies to all persons, who are
permanently or temporarily unable,
through no fault of their own, to have a
real understanding of the effect of a
document without explanation.
 However, mere negligence in not reading
the document before signing it will cause
an attempt to rely on the plea to fail.
Saunders v. Anglia Building Society
Saunders v. Anglia Building Society
(Gallie v. Lee)
 Mrs. Gallie, a widow of 78 years, had made a will leaving her
house to her nephew, Parkin. Lee, a friend of Parkin, was
heavily in debt, and discussed with Parkin how money might be
raised on the house. In Parkin’s presence, Lee put before Mrs.
Gallie a document, which he told her was a deed of gift of the
house to Parkin. Mrs. Gallie did not read the document,
because she had broken her spectacles. The deed was in fact a
deed of sale of the house to Lee for £3,000, the receipt of
which Mrs. Gallie acknowledged in the deed but did not in fact
receive. Using this document, Lee purported to mortgage the
house to the defendant Building Society and borrowed £2,000.
Lee defaulted in paying the instalments on the mortgage and
the Building Society sought to recover possession of the house.
Mrs. Gallie sued for a declaration that the deed was void,
pleading non est factum, and applied for the recovery of the
title deeds.
Galilie v Lee
 The House of Lords was influenced by the
fact that Mrs. Gallie had not read the
document and was thereby negligent, as
well as the need to do justice to the
Building Society, which was in no way
negligent. Lord Denning observed that “the
man who does not take trouble to read
the document should be liable in each
case to the innocent holder. His
remedy is against the man who
deceived him”.
(Gallie v. Lee)
 Lord Reid’s judgment in the House of Lords decision explains the
reasoning behind the plea and why the plea was not available in these
circumstances. The plea of non est factum obviously applies when the
person sought to be held liable did not in fact sign the document. But at
least since the sixteenth century it has also been held to apply in certain
cases so as to enable a person who in fact signed a document to say that
it is not his deed. Obviously any such extension must be kept within
narrow limits if it is not to shake the confidence of those who habitually
and rightly rely on signatures when there is no obvious reason to doubt
their validity. Originally this extension appears to have been made in
favour of those who were unable to read owing to blindness or illiteracy
and who therefore had to trust someone to tell them what they were
signing. I think it must also apply in favour of those who are permanently
or temporarily unable, through no fault of their own to have without
explanation any real understanding of the purport of a particular
document, whether that be from defective education, illness or
innate incapacity. But that does not excuse them from taking such
precautions as they reasonably can. The matter
Gallie v. Lee
 generally arises where an innocent third party has relied on a
signed document in ignorance of the circumstances in which
it was signed, and where he will suffer loss if the maker of the
document is allowed to have it declared a nullity. So there
must be a heavy burden of proof on the person who seeks to
invoke this remedy. He must prove all the circumstances
necessary to justify its being granted to him, and that
necessarily involves his proving that he took all reasonable
precautions in the circumstances. I do not say that the
remedy can never be available to a man of full capacity. But
that could only be in very exceptional circumstances:
certainly not where his reason for not scrutinising the
document before signing it was that he was too busy or too
lazy. In general, I do not think he can be heard to say that he
signed in reliance on someone he trusted.”
Quao v. Squire

 The plaintiff, an educated man, alleged that he intended to convey a

piece of land to the wife of his eldest son. He signed the title deeds on
the land and gave them to the surveyor. Sometime later, the surveyor,
accompanied by the plaintiff’s younger son, called on him and falsely
represented to him that some mistake had been detected in the
document he signed and that a new one had been prepared. He was
asked to sign the new one, which he did, without reading it. It turned
out that this new document was a conveyance of his plot of land to his
younger son, who in turn conveyed it to the defendant. When the
defendant began to develop the plot, plaintiff brought an action
against him seeking a declaration of title to the land and also applied
for an order of interim injunction against the defendant. Plaintiff
argued that in as much as he signed the document in error it was not
his deed — non est factum. It was held that the onus of proof rested
on the one who pleaded non est factum to establish it. Here the
plaintiff had not discharged the onus of showing that he signed the
document without negligence.
See also
 Wilson v. Brobbey
 Nkrumah v. Serwah & Others
Illiterates and signed
contracts

English position
An illiterate person was bound by
whatever he signed and it did not alter
the legal position
Thompson v. London, Midland and Scottish
Railway.
Thompson v. London, Midland and
Scottish Railway.
 The plaintiff, who could not read, had an excursion ticket
bought for her by her niece. On the face of the ticket were
printed the words: “Excursion. For conditions see back”;
and on the back was a notice that the ticket was issued subject
to the conditions in the defendant company’s time tables and
excursion bills. On the excursion bills excursion tickets were
stated to be issued subject to the conditions shown in the
company’s current time tables. The time tables, which could be
obtained for sixpence each, stated: “Excursion tickets are
issued subject to the general regulations and to the
conditions that the holders shall have no rights of action
against the company in respect of injury (fatal or
otherwise) however caused”. In an action brought for
damages for personal injuries the jury in the trial court found
that the defendant company had not taken reasonable steps to
bring the
Contd
 conditions to the notice of the plaintiff. On appeal, however,
the Court of Appeal held that as a matter of law when the
ticket was accepted the contract was complete, and
therefore there was no evidence on which the jury could
find as they did. The court held that the fact that the
plaintiff could not read did not alter the legal
position; that she was bound by the special contract
made on the excursion ticket on the acceptance of
the ticket; and that the indication of the special
conditions by reference to the time tables was
sufficient notice of their existence and contents. Lord
Hanworth observed, interestingly that: “The plaintiff in this
case cannot read; but, having regard to the authorities, and
the condition of education in this country, I do not think that
avails her in any degree.”
Illiterate Persons and Written
Contracts

 Under Ghanaian law, there is no

presumption that an illiterate person
appreciates or understands the meaning
and effect of a legal instrument, or any
instrument, simply because he signed it
or put his mark on it. Thus no such
presumption can be made with regard to
an unsigned contractual document which
is merely handed over to an illiterate
consumer.
Illiterates
 Ghanaian law places an obligation on the
literate party to the contract to explain
the contents of the contract to the
illiterate party such that if the literate
party does not discharge his good faith
duty, by explaining the contents of the
contract to the illiterate party, the
contract is void. The Ghanaian position
was enunciated in the case of Atta
Kwamin v. Kufour
Atta Kwamin v. Kufour
 The case involved a lease signed between a Gold Coast chief and
an English gold prospector. After the signing of the lease, an
agreement was entered into which contained a clause whereby the
plaintiff’s predecessor in office, another chief, was alleged to have
agreed to give up all his rights and interest in the land, which was
the subject matter of the lease, in consideration of a payment to him
of £300. It was an agent of this predecessor chief who had signed
this agreement, which had been drawn up on their behalf by the
English prospector. All the Africans involved in the transaction
were illiterate. The plaintiff then alleged that the clause was
understood only to be intended to confirm and recognize the lease
granted by the other chief and that in so far as it purported to
surrender the rights of the Enkawie stool, which he represented, it
was invalid and ineffectual. His grounds were, first, that the agent
had no authority to surrender his chief’s rights and, secondly, that
the agent did not understand the memorandum of the agreement.
 The Privy Council held that though the agreement
had been read over to the parties, this was not
enough. It had to be further proved that the
plaintiff’s agent had assented to the legal
document with an intelligent appreciation of
its contents. Speaking of the agent, the court
insisted that “the possibilities of
misunderstanding are so obvious as to render
it imperative on the appellant, who alleges his
intelligent consent to a contract expressed in
a language which he did not understand, to
prove that it was clearly explained to him”.
Atta Kwamin v Kufour
 The Privy Council stated:
When a person of full age signs a contract in his
own language, his own signature raises a
presumption of liability so strong that it
requires very distinct and explicit averments
indeed in order to subvert it. But there is no
presumption that a native of Ashanti, who does
not understand English, and cannot read or
write, has appreciated the meaning and effect
of an English instrument, because he is alleged
to have set his mark to it by way of signature.
That raises a question of fact, to be decided like
other such questions upon evidence.
B.P. (WEST AFRICA) LTD. v.
BOATENG [1963] 1 GLR 232-
240
 To bind an illiterate person to an English
document, it must be established that he
understood and appreciated its full
meaning and import.
Illiterates’ Protection Ordinance (CAP
262)
 Section 4
 Every person writing a letter or other document for or at the request
of an illiterate person, whether gratuitously or for a reward, shall:
 (i) Clearly and correctly read over and explain such letter or
document or cause the same to be read over and explained to the
illiterate person;
 (ii) Cause the illiterate person to write his signature or make his mark
at the foot of the letter or other document or to touch the pen with
which the mark is made at the foot of the letter or other document;
 (iii) Clearly write his full name and address on the letter or other
document as writer thereof: …
 (JURAT)
 Waya v. Byrouthy
 Read Prof. Date-Bah, “Illiterate Parties and Written Contracts” (1971)
R.G.L. 181, 185–186.
Waya v. Byrouthy
 The plaintiff, Waya, an illiterate person, signed with his
thumbprint a purported hire purchase agreement with the
defendant. Under it Waya was to hire purchase the lorry from
Byrouthy, who was given by the agreement, a right of seizure
in the event of Waya’s default on the instalments. Byrouthy
seized the lorry and subsequently sold it. Waya sued
Byrouthy, claiming the return of the lorry or its value with
damages for unlawful seizure and loss of earnings. The initial
seizure was found to be wrongful since there was no
agreement as to the amount and frequency of the
instalments to be paid. The court held further that where
an illiterate person executes a document, any other
party to the document who relies upon it must prove
that it was read over and if necessary interpreted to
the illiterate person.
See also
 U.T.C. Ltd. v. Tetteh & Two Ors
 Boakyem and Others v. Ansah
 See also Zabrama v Segbedzi [1991] 2
GLR 221
Importance of interpretation
clause
 The presence or otherwise of an
interpretation clause on a document was
one of the factors a court should take
into account in determining whether the
document in question was fully
understood by the illiterate.
 However, the presence of an
interpretation clause in a document was
not conclusive of that fact, neither was it
a sine qua non.
 Zabrama v Segbedzi
Zabrama v Segbedzi [1991] 2 GLR 221

 The plaintiff, an illiterate, brought an action against the defendant

to redeem a house he alleged he had pledged to the defendant
nine years earlier for the sum of ¢200. The defendant however
denied that claim. His defence was that the plaintiff sold the
house to him for the stated amount. In support of his case, he
tendered exhibit A, the document they had executed to evidence
the sale. The defendant's evidence was corroborated by the
letter-writer who wrote exhibit A for the parties. He testified that
he interpreted the document in the Twi language to the plaintiff
before the parties executed it. The odikro of the town also
testified that when the parties, in accordance with the practice in
their traditional area, sought his consent to their transaction he
had the document interpreted to them and their witnesses and it
was only after the plaintiff had affirmed the sale to him and his
elders that he gave his consent to the transaction. The trial judge
accordingly dismissed the plaintiff’s action.
Zabrama v Segbedzi
 Aggrieved by that decision, the plaintiff
appealed on the grounds, inter alia, that
"the judge failed to consider the fact that
since exhibit A contained no interpretation
clause showing that the contents were read
over and interpreted to him in a language
he understood and he appreciated what
was read before he made his mark on it, the
document offended the Illiterates'
Protection Ordinance, Cap. 262 (1951 Rev.).
Zabrama v Segbedzi
 Held, dismissing the appeal:
 The principle was that where an illiterate executed a document
which compromised his interest and that document was being cited
against him by a party to it or his privy, there was no presumption
in favour of the proponent of the document, and against the
illiterate person, that the latter appreciated and had an intelligent
knowledge of the contents of the document. The party seeking to
rely on the document must lead evidence in proof that the
document was actually read and interpreted to the illiterate who
understood it before signing same. Being a question of fact, the
presence or otherwise of an interpretation clause on a
document was one of the factors a court should take into
account in determining whether the document in question
was fully understood by the illiterate. The presence of an
interpretation clause in a document was not conclusive of
that fact, neither was it a sine qua non.
Zabrama v Segbedzi
 It was still possible for an illiterate to lead evidence outside the
document to show that despite the said interpretation clause, he was
not made fully aware of the contents of the document to which he
made his mark. If a court, after assessing all the available evidence
was satisfied, upon the preponderance of the evidence, that the
document was read and interpreted to the illiterate person, then the
burden of proof would have been discharged by the person relying on
the document. That was because just as it was bad to hold an
illiterate to a bargain he would otherwise not have entered into if he
fully appreciated it, so also was it equally bad to permit a person to
avoid a bargain properly and voluntarily entered into by him under the
guise of illiteracy. In the instant case, although there was no
interpretation clause on exhibit A, there was sufficient evidence on
record to justify a finding of fact that the document was read over and
dutifully interpreted to the plaintiff before he made his mark. State v.
Boahene [1963] G.L.R. 554 applied. Kwamin v. Kufuor (1914) P.C.
'74-'28, 28 explained.
CLASSIFICATION OF TERMS IN A
CONTRACT

 Although all terms in a contract are

required to be performed, they vary in
their relative levels of importance.
 Terms in a contract may be classified as
 A. Conditions
 B. Warranties
 C. Innominate or intermediate terms
CONDITIONS
 A condition is a term of a contract which is so
fundamental to the very nature of the contract
that its breach entitles the injured party to
rescind the contract and sue for damages.
 Conditions are so essential to the very nature
of the contract that their non-performance
may fairly be considered by the other party as
a substantial failure to perform the contract at
all.
 Wallis, Son & Well v. Pratt and Haynes,
 Poussard v Spiers
Poussard v. Spiers

 There was a contract for the employment of an

actress to play a leading role in an operetta.
She fell ill 5 days before the first performance.
Her illness appeared to be serious and its
duration uncertain. She was unable to take up
her role until a week after the commencement
of the performance. The producers were thus
forced to take on a substitute and terminated
her contract. It was held that the defendants
were justified in terminating her contract, that
is, there was a breach of a condition.
Social Security Bank Ltd v. CBAM
Services Inc[2007–2008] 2 SCGLR 894.
 The Supreme Court observed that an
innocent party is entitled to terminate a
contract if
(a) a breach goes to the root of the
contract and not merely to part of it; or
(b) that which makes further performance
impossible; or
(c) that which affects the very substance of
the contract.
WARRANTIES
Warranties are subsidiary terms of the
contract, the breach of which does not
go to the root of the contract and thus
only entitles the injured party to sue for
damages.
A breach of a warranty does not entitle
the innocent party to repudiate the
contract or treat himself as discharged
from the obligation to perform the
contract.
Bettini v. Gye
 Bettini entered into a contract with Gye, the Director of
the Royal Italian Opera in London, for the exclusive use of
his services as a singer in operas and concerts, both public
and private, for a period of three months. Among the terms
of the contract was an undertaking that he would be in
London at least six days before the commencement of the
engagement, for rehearsals. He arrived only two days
before the engagement commenced and Gye thereupon
refused to go on with the contract. He was sued by Bettini
for breach. The issue was whether the stipulation or term
of the contract “to arrive in London 6 days before” was a
condition of the contract or a warranty. It was held that
having regard to the length of the contract and the nature
of the performances to be given, the rehearsal clause was
not vital to the agreement. It was not a condition, but
merely a warranty, and accordingly its breach did not
entitle Gye to treat the contract as terminated. Gye was
Innominate or intermediate
terms
 Innominate or intermediate terms are terms
which cannot be pre-classified either as
conditions or warranties.
 In determining the consequences of a breach of
such a term, the courts consider not the
importance of the term itself, but rather the
consequences of the breach, after it has
occurred.
 If the events, which occur after the breach are of
a serious nature, the term is treated as a
condition and the innocent party is entitled to
terminate the contract and sue for damages.
Innominate terms
 If the events which occur after the
breach are of a relatively trivial nature
the term is treated as a warranty and the
innocent party is not allowed to
terminate the contract, but can only sue
for damages for the breach.
 Hong Kong Fir Shipping Co. Ltd v.
Kawasaki Kisen Kaisha Ltd.
Hong Kong Fir Shipping Co. Ltd v. Kawasaki Kisen Kaisha
Ltd.

 The case concerned a contract for the charter of a ship, “The Hong
Kong Fir”, for a period of 24 months. The term in the contract which
had been breached was the ship owner’s express promise that “the
ship was seaworthy, she being fitted in every way for ordinary cargo
service”. The vessel was delivered and sailed from Liverpool to
Newport, USA, and loaded a cargo for Osaka. The engine room staff
were inefficient and the engines were very old, with the result that the
ship was held up for repairs for five weeks on her way to Osaka, where
it was found that further repairs, requiring 15 weeks to complete, were
necessary to make her seaworthy. The charterers purported to rescind
the contract. Previous authorities showed that such a term was
deemed to have been breached by the slightest failure to be so fit.
The court of first instance and the Court of Appeal, however, took a
contrary view and held that the clause, in their view, was an
innominate term in the sense that it could be broken by the presence
of trivial defects and rapidly remediable defects such as a missing nail
from one of the timbers, as well as by defects, which must
Hong Kong Fir Shipping Co. Ltd v. Kawasaki Kisen Kaisha Ltd.

inevitably result in the total loss of the vessel. Thus the

unseaworthiness (a breach of the term of seaworthiness) of the ship,
could, depending on the nature of the defect, entitle the charterer to
rescind the contract; or the breach might be of such trivial
consequence that the charterer would have to abide by the contract,
and could only claim damages if he suffered a loss. In other words,
the term could not be pre-classified either as a condition or a
warranty. It was an innominate term, in the sense that certain
breaches of it could entitle the innocent party to terminate the
contract (if they were serious enough); while other breaches would
only entitle the innocent party to claim damages, but not to terminate
the contract (if the breach was trivial). In the Hong Kong Fir case, the
breach of the term that the ship was seaworthy in all resulted in 20
weeks delay. But at the end of it all, the charterers still had 20
months to run. The breach, therefore, did not substantially deprive
the charterer of the whole benefit of the contract and they were,
therefore, held not entitled to terminate the contract altogether.
Innominate terms
 See also Cehave N.V. v. Breme
Handelsgesellschaft MBH (The Hansa
Nord)
IMPLIED TERMS
 The courts are traditionally unwilling to add to
the express terms of a contract because they do
not consider it their role to make a contract for
the parties, but rather to interpret the parties’
contract.
 See Anin JA in ADDISON v. A/S NORWAY
CEMENT EXPORT LTD. [1973] 2 GLR 151-187
where he said “The parties must make their
own contracts; and the courts will not make a
contract for them….”. See also ALLAN SUGAR
PRODUCTS LTD. VRS. GHANA EXPORT CO.
LTD. [1982/83] 2 GLR 922
TYPES OF IMPLICATION OF
TERMS
 However, in certain specific and limited
circumstances the courts may be willing
to imply terms into a contract.
 Generally, terms may be implied into a
contract
 by court itself (judicially implied terms)
 by custom
 by statute
 by course of dealing
JUDICIALLY IMPLIED TERMS
 In certain restricted circumstances, the
courts will imply certain terms into a
contract if it was naturally intended
by the parties to form part of their
contract and necessary to give the
contract business efficacy, that is, in
order to make the contract work.
The Moorcock
 The defendants were the owners of a wharf and jetty on the river
Thames. The plaintiff was the owner of the steamship “The Moorcock”.
It was agreed between them that the ship should be discharged and
loaded at the defendant’s jetty, hire being paid for the use of cranes
and other facilities on the wharf. Both parties knew that the ship would
settle on the riverbed at low water. While the ship was lying there, the
tide ebbed and the ship came to rest on a ridge of hard ground beneath
the mud and sustained damage. The owner of the vessel sued for
damages for breach of an implied term that the owners of the wharf
had taken reasonable steps to ensure that the berth was safe, and that
if they had, they would not have invited ships to lie there. The Court of
Appeal held that the parties must have intended to contract on
the basis that the ground was safe for the vessel at low tide,
and therefore a term was implied into the contract that the
berth was reasonably safe for the purpose of loading and
unloading. The ship owner recovered damages for the breach of the
implied term that the owners of the wharf had taken reasonable care to
ensure that the berth was safe.
Judicially implied terms
cont’d
 The court will not imply a term merely because it
would be reasonable to do so, or because it
would improve the contract, or make its
performance more convenient.
 It must be established in all cases that it is
necessary to imply the term so as to make the
contract workable. The test is, therefore,
always one of necessity and not mere
reasonableness.
 Reigate v. Union Manufacturing Company
(Ramsbottom) Limited and Elton Cop Dyeing
Company, Limited
Reigate v. Union Manufacturing Company
(Ramsbottom) Limited and Elton Cop Dyeing
Company, Limited
 Plaintiff had invested £1,000 in the capital of the defendant
company. The defendant company appointed him their sole
agent for the sale of certain goods for 7 years. The issue
was whether the defendant company could terminate the
agency agreement at any time by ceasing to do business,
in the absence of an express term to that effect or whether
there should be an implied term that the company could
not terminate the agency agreement during that period.
The court held that it could not imply a term that the
company could not terminate the agency at any time by
ceasing to carry on business. In fact it was pointed out that
unlike cases where the parties would have nodded “of
course” to this term; in this case, they would at once have
disagreed as to what the position was.
Reigate cont’d
 The court was also influenced by the fact
that it was clear that the parties had
thought sufficiently about the matter
and had expressed two conditions on
which the contract could have been
terminated: first, upon the death of the
agent and secondly by six months notice
after the expiration of seven years. Thus,
they must have thought about the
matter at hand and deliberately
refrained from making such a stipulation
Reigate cont’d
 Scrutton L.J. stated:
 The first thing is to see what the parties have expressed in
the contract; and then an implied term is not to be added
because the Court thinks it would have been reasonable to
have inserted it in the contract. A term can only be implied
if it is necessary in the business sense to give efficacy to the
contract, that is, if it is such a term that it can confidently be
said that if at the time the contract was being negotiated
some one had said to the parties, “What will happen in
such a case,” they would both have replied, “Of
course, so and so will happen; we did not trouble to
say that; it is too clear”. Unless the court comes to some
such conclusion as that, it ought not to imply a term which
the parties themselves have not expressed.
See also
 In Eyre v. Measday:
 The plaintiff had undergone a sterilization procedure in
1978. The gynaecologist had emphasized that the
procedure was irreversible and the plaintiff and her
husband believed that she was sterile after the
operation. The fact is that there was a slight risk of
pregnancy even after such an operation. Plaintiff
subsequently became pregnant. She sued for
damages. The English Court of Appeal was faced with
the issue of whether or not in a sterilization operation
by the defendant gynaecologist, there should be an
implied term that the gynaecologist was guaranteeing
that after the operation the plaintiff would be sterile.
Eyre v. Measday
 The court held that no such term could
be implied because no such term arose
by necessary implication. In fact, from
the circumstances, the plaintiff was not
entitled to assume that the
gynaecologist was giving such a
guarantee. If the plaintiff wanted such a
guarantee, she should have specifically
asked for it.
 See also Atuwo v. Agip Ghana Ltd:
Terms Implied by Custom
 Usually, a contract is not an isolated act, but
rather an incident in the conduct of business.
Often, the contract is set against the background
of customary practice that is familiar to all those
who engage in the particular trade or business.
 Hence, negotiations leading to the making of a
contract are carried out against the background
of certain commercial or business practices or
usages and it may safely be assumed that such
customs or usages are intended to govern the
parties’ contract
Implied Custom
 In view of this, the courts in some cases may
admit evidence of such customs, usages or
practices and give effect to them in
interpreting the contract even though the
parties have not expressly stated those
terms.
 The assumption is that since the parties
contracted with reference to the known
usages and customs of the trade, business or
profession, they must have intended that
those terms would apply to their contract.
Implied customs
For terms to be implied by custom or
usage, the court must be satisfied that
the custom or usage is notorious or well
known, certain and reasonable, and
must not contradict the intention of the
parties.
 Quartey v. Norgah
 Hutton v. Warren
Hutton v. Warren

 The tenant of a farm, on leaving the

farm after the required notice by the
landlord, was held to be entitled to a
fair allowance for seeds and labour
expended on the land, the benefits of
which the landlord stood to reap. This
term was implied in the contract even
though there was no express term to
that effect.
Hutton v Warren cont’d
Parke B. observed in that case as follows:
It has long been settled, that in commercial
transactions, extrinsic evidence of custom and
usage is admissible to annex incidents to written
contracts, in matters with respect to which they
are silent. The same has also been applied to
contracts in other transactions of life, in which
known usages have been established and
prevailed; and this has been done upon the
principle of presumption that in such transactions,
the parties did not mean to express in writing, the
whole of the contract by which they intended to be
bound, but a contract with reference to those
known usages.
Quartey v.Norgah
 The plaintiff brought the action against the
defendant for thirteen cows, being the
plaintiff’s share of the products of two cows
left with the plaintiff by the defendant. The
plaintiff founded his claim on, inter alia, the
allegation of terms of a custom of cattle
breeders. It was held that the court would
enforce a usage as a custom once it was
proved that it was accepted as a binding rule
regulating the conduct of parties to a
transaction within a particular trade.
Implied custom
 Where a custom or usage which would
otherwise be implied in a contract may
be excluded by the parties, either
expressly or impliedly, where it is
inconsistent with one of the express
terms of the contract.
 Les Affreteurs Réunis Société Anonyme
v. Leopold Walford Ltd
Les Affreteurs Réunis Société Anonyme v. Leopold Walford Ltd

 Walford, as a broker, had negotiated a charter party

between the owners of the SS Flore and the Lubricating
and Fuel Oils Co. Ltd. There was a clause in the charter
party that the owners promised the charterers that they
would pay Walford, on signing the charter, a commission
of 3 per cent on the estimated gross amount of hire. The
owners, defending an action brought by Walford for this
commission, pleaded that there was a custom of the
trade which stipulated that the commission was payable
only when hire had actually been earned. The vessel SS
Flore had been requisitioned by the French government
before the charter party could be operated and no hire
had in fact been earned.
Les Affreteurs Réunis Société Anonyme v. Leopold Walford Ltd

 It was held that the custom that the commission of

brokers was payable in respect of hire duly earned
under the charter party had been excluded or
negatived by the express term in this contract, that
the commission was “payable on signing the
charter, ship lost or not.” It was stated that an
alleged custom can be incorporated into a contract
only if there is nothing in the express or necessarily
implied terms of the contract to prevent such
inclusion, and further that a custom will only be
imported into a contract where it is consistent with
the tenor of the document as a whole.
Terms Implied by Statute

 In some cases there are statutes or legislative enactments, which

mandatorily imply certain terms into certain contracts for policy
reasons.
 Over the years certain contractual terms have been accepted as
implicit or implied in certain kinds of contracts, such that such
terms must of necessity be implied into the contract, unless there
is a contrary express term. In Ghana, legislation governing the
sale of goods, tenancy agreements and hire purchase
agreements, to name a few, (the Sale of Goods Act, 1962 (Act
137), Conveyancing Decree, 1973 (N.R.C.D. 175) and the Hire
Purchase Decree, 1974 (N.R.C.D. 292) imply certain standard
terms into every contract for the sale of goods, tenancy
agreement and hire purchase respectively. Such terms, which are
implied by statute, are equally applicable to the parties’ contract
as the terms they have expressly included in their contract.
Farah v. Robin Hood Flour Mills Ltd and
Another
 On June 4, 1961, 2,000 bags of flour ordered by the
plaintiff, a baker, from the first defendants, a Canadian
company, arrived at Takoradi, C.I.F., on board the S.S.
Kindat. On June 9, the plaintiff paid the cost of £G4,275 0s
5d. to the Bank of West Africa Ltd., and was given the bill
of lading and other documents to enable him to take
delivery of the flour from the harbour. He started to
remove the flour from the harbour to his warehouse in
town. He completed the removal on the June 12, 1961. He
opened ten bags and found that all ten were infested with
weevils. He immediately reported to a Mr. Millington, a
local representative of the defendants. He told Mr.
Millington that he did not like the whole consignment. Mr.
Millingto suggested a survey.
Farah v. Robin Hood Flour Mills Ltd and
Another cont’d
 A survey by Lloyds confirmed the flour was weevil-
infested. All the bags were subsequently collected by the
medical officer of health and destroyed on June 16, 1961,
as unfit for human consumption. The plaintiff sued the
defendants for a refund of the purchase price as money
paid for a consideration that had wholly failed, and other
damages, including the profits he would have made if he
had baked all the 2,000 bags of flour. The court held that
from the nature of the contract and the circumstances of
the parties there was an implied condition that the flour
sold to the plaintiff would be fit for human consumption.
As the flour was eventually destroyed as unfit for human
consumption, the defendants were liable of a breach of
this implied condition.
STANDARD FORM CONTRACTS AND
EXEMPTION CLAUSES

 A standard form contract is a contract, the

terms of which are often set out in printed
form in a written document and used as a
standard contractual document with little or
no variation in all contracts of a particular
kind. Egs. Air tickets, parking tickets, laundry
receipts/tickets, bus tickets, insurance
policies, bank offer letters etc.
 In most cases the contract applies in the
same form to every purchaser, customer or
client without any modification.
Standard form (exclusion
clauses)
 A familiar feature of standard form
contracts are contractual terms which
purport to limit or exclude the liabilities
of one party which may arise under the
contract-Exclusion or limitation or
exemption clauses.
Difficulties
 In most cases, the consumer neither has
the time nor energy to scrutinize the
document, and even if he were to do so,
it would not help him much since the
conditions are often not negotiable(take
it or leave it).
 The consumer cannot discuss or vary the
terms in any way. It is only when a
dispute arises that he realises how
limited his rights are under the contract.
Judicial reaction
 The common law courts have generally
expressed some form disapproval or
hostility towards such exclusion clauses.
They sought to redress the imbalance in
power relations by developing
restrictive rules for the interpretation of
exclusion clauses and imposing stringent
requirements of notice as conditions for
the validity of such clauses.
Effectiveness of exclusion
cls.
 For an exclusion clause to be effective, it must be
shown that it was properly incorporated into the
contract as a term of it.
 Incorporation in this context means that the party
seeking to rely on the clause must show that he
took reasonable steps to draw the other party’s
attention to the printed conditions.
 Hence, whether an exclusion clause forms part of
the contract invariably depends on whether or not
a particular term has been sufficiently brought to
the customer’s attention, to make it a term of the
contract. Parker v. South Eastern Railway
Parker v. South Eastern Railway

 The plaintiff deposited a bag in the cloak room at the

railway station. He was given a ticket with a number,
date and the words “See back” on the front of it. On
the back of the ticket were several printed clauses.
Amongst the clauses was the following: “The Company
will not be responsible for any package exceeding the
value of £10”. The plaintiff did not read the ticket. His
bag, worth £24.10 was lost. Plaintiff sued, and the
defendants relied on the exclusion clause.
 On appeal by the defendants, the Court of Appeal
stated the real question was whether the defendants
had done what was reasonably sufficient to give the
plaintiff notice of the condition.
Sufficient notice a question
of fact
 Whether or not sufficient notice has
been given of the exclusion clause is a
question of fact based on the evidentiary
circumstances. The courts consider all
the circumstances and the situation of
the parties.
 Several broad principles have been
developed to deal with the enforcement
of exclusion clauses contained in
standard form contracts
Broad principles garnered from case law

 Where the conditions or exclusion clause was

printed on the back of a ticket or document,
without any reference to it on the face of the
document, such as “See back for conditions”,
the courts are likely to hold that reasonable
notice was not given. Also where the condition
printed on the ticket is obliterated by a stamp;
faded or otherwise illegible, the courts are
likely to hold that reasonable notice was not
given.
 Richardson, Spence & Co v. Rowntree
Richardson, Spence & Co v. Rowntree:

 The plaintiff contracted with the defendants to be

carried as a passenger on their steamer from
Philadelphia to Liverpool. She paid her passage
money and received a ticket, which contained a
number of printed terms including one limiting the
liability of the defendants to $100. The ticket was
handed to her folded up, and the conditions were
obliterated in part by a stamp in red ink. She
sustained injuries during the voyage and sued the
defendants. The jury found that although she knew
that there was writing on the ticket, she did not know
the writing contained conditions. The jury found that
she did not have reasonable sufficient notice.
Broad principles cont’d(2)
 Where the particular clause relied on by the party
seeking exemption is exceptionally far reaching
or unusual in that class of contract, he must show
that he took special measures to bring it to the
notice of the other party. In other words, the
more far-reaching the clause, the greater
must be the clarity of the notice given to
satisfy the requirements of reasonableness.
 Thornton v. Shoe Lane Parking Ltd [1971] 2
Q.B.163; Interfoto Picture Library Ltd v. Stiletto
 Visual Programme [1988] 1 All E.R. 348.
Thornton v. Shoe Lane Parking Ltd

 The plaintiff drove into the entrance of the defendant’s car park,
where a notice was posted, stating: “All cars parked at owner’s risk”. A
light changed from red to green as he drove in. He took a ticket from a
machine and drove into the garage. He looked at the ticket to see the
time printed on it and saw other printed words, which he did not read.
When plaintiff collected the car, there was an accident in which he
suffered personal injuries partly through the negligence of the
defendants. He sued. Defendants relied on the ticket, which stated
that it was issued “subject to the conditions of issue as displayed on
the premises”. The conditions displayed inside the garage stated that:
“The customer is deemed to be fully insured… the Company
will not be liable for any loss, misdelivery or damage to the
vehicle or injury to the customer.” The court of first instance held
that the defendants were liable and they appealed. The court was of
the opinion that the clause was so wide and destructive of
rights that the court should not hold any man bound by it,
unless it was drawn to his attention in the most explicit way.
Thornton cont’d
 “In order to give sufficient
notice, it would need to be
printed in red ink with a rend
hand pointing to it –
something equally startling”.

Lord Denning
Broad principle (3)
 For the exclusion clause to be effective, the party
relying on it must show, not only that he gave
the other party reasonable notice of it, but also
that notice of the clause was given before or at
the time the contract was entered into and not
after.
 If the notice of the clause is given after the
contract has been concluded, it will be held to be
ineffective. The principle is based on the fact
that once the contract has been made, none of
the parties can alter its terms without the
consent of the other.
Olley v. Marlborough Court Ltd

A husband and wife arrived at a hotel as guests and paid for a week’s
stay in advance. They went up to the bedroom allocated to them and
on one of the walls was a notice stating that the “proprietors will not
hold themselves responsible for articles lost or stolen unless handed
over to the managers for safe custody”. The wife then closed the self
locking door of the bedroom, went downstairs and hung the key on
the board in the reception office. In her absence the key was
wrongfully taken by a third party who opened the bedroom door and
stole her furs. It was held that the notice in the hotel room,
which purported to exempt the proprietors of the hotel from
liability for the loss of any articles left in the rooms, was not
incorporated in the contract between the proprietors of the
hotel and the plaintiffs, because notice of it was given after
the contract had been concluded. According to the court, the
contract was made in the hall of the hotel, before the plaintiff
entered her bedroom and before she had an opportunity to
see the notice.
Broad principles(4)
 For the exclusion clause to be enforceable, the
document containing the clause must be one, which
can properly be described as a contractual
document, that is, it must be one, which a
reasonable person would expect to contain the
conditions or terms of the contract.
 Thus if the document in question is the sort of ticket
which a reasonable man would suppose to be
merely a voucher or receipt, given as evidence of
payment, the mere delivery of such a document
would not amount to the giving of reasonable notice.
 Chapelton v. Barry U.D.C.
Chapelton v. Barry U.D.C.

 The plaintiff, who wished to hire a deck chair on a beach

went to a pile of deck chairs belonging to the defendant
council. Near to the chairs was displayed a notice stating:
“Barry Urban District Council. … Hire of chairs 2d per
session of 3 hours”. The notice went on to state that the
public was requested to obtain tickets for their chairs from
the chair attendants and that those tickets should be
retained for inspection. There was nothing on the
notice relieving the defendant council from liability
for any accident or damage arising out of the hire of
the chair. The plaintiff obtained two chairs from the
attendant for which he paid 4 d and received two tickets.
The plaintiff glanced at the tickets and slipped them into
his pocket and had no idea that they contained any
conditions. On the other side of the ticket were the words:
“Available for three hours.
Chapelton V Barry cont’d
 Time expires where indicated by cut-off and should be retained and
shown on request. The council will not be liable for any accident or
damage arising from the hire of the chair”. The plaintiff put the chair
up in the ordinary way on a flat part of the beach, and then sat down
on a chair which gave way, the canvas having come away from the
top of the chair. In an action against the defendants the county court
judge found that the accident was due to the negligence of the
defendants, but that the defendants were exempted from liability as
the plaintiff had sufficient notice of the special contract printed on
the ticket. It was held on appeal, that the ticket was a mere
voucher or receipt for the money paid for the hire of the
chair, and that the conditions upon which the local authority
offered to hire out the chairs were those contained in the
notice put up near the pile of chairs, and that as that notice
contained no limitation of liability for any accident or
damage arising from the hire of the chairs, the local
authority were liable to the plaintiff.
Contra Proferentem Rule

 In cases involving exclusion clauses, it is the party seeking to

impose the exemption who proffers the written instrument.
Thus if there is any ambiguity in the words used, it is resolved
against the party seeking to rely on the clause — the
proferens. The words contra proferentem come from the Latin
maxim verba chartarum fortius accipiuntur contra
proferentem, which means the words of written documents are
construed more forcibly or strictly against the party putting
forward the document (the proferens). Generally, it is the
responsibility of the party relying on the clause to show that
the words used are sufficiently explicit to exclude his liability
for the event which has occurred. If the words are in any
way ambiguous, they will be construed in favour of the
other party and not the party who seeks to rely on it.
 Wallis, Son and Wells v. Pratt and Haynes
Wallis, Son and Wells v. Pratt and Haynes

 The defendants sold to the plaintiffs by sample a quantity of seed

described as “common English sainfoin”. Seed that was equal to
sample was delivered, and a part of it was resold by the plaintiffs as
“common English sainfoin”. When it came up, it was found not to be
“common English sainfoin”, but “giant sainfoin”, a seed which is
indistinguishable but of inferior quality. The plaintiffs settled a
claim brought against them by the sub-purchaser and sued to recover
the amount they had paid. The defendant relied on a term in the written
contract which stated: “Sellers give no warranty, express or implied, as
to growth, description, or any other matters …”. The trial court gave
judgment for the plaintiffs, but was reversed by the Court of Appeal. The
decision of the Court of Appeal was reversed by the House of Lords on
the grounds given by Fletcher Moulton L. J. The court held that the
sellers had broken an implied condition in the Sale of Goods Act to the
effect that the goods delivered should correspond exactly with the
description. Since they were in breach of a condition, and not a
warranty, an exemption clause designed to protect them from a breach
of warranty could not avail them.
Exclusion of Liability for Negligence

 Where a contracting party seeks to exclude liability for

his own negligence, the courts apply a very strict
approach in the interpretation of the clause. This is
because the courts consider it most unlikely that one
party would agree to allow the other contracting party
to exclude liability for his own negligence. Thus the
courts require that very clear words must be used if a
party’s liability for negligence is to be excluded. The
general rule, therefore, is that an exclusion clause will
not be construed as excluding a party’s liability for his
negligence unless the clause expressly, or by necessary
implication, covers such liability. The applicable rules
were stated in Lord Morton’s judgment in Canada
Steamship Lines v. The King
Canada Steamship Lines v. The King

1. If the clause contains language, which expressly exempts

the party relying on the clause from the consequences of
negligence, then effect ought to be given to it. For example,
if the word “negligence” or its synonym is used in the clause.
2. If not, then the courts ought to consider whether the
words are wide enough in their ordinary meaning, to cover
negligence on the part of the party seeking to rely on it. In
this regard, clauses excluding liability for “any act or
omission”; or “any damage whatsoever, or howsoever
arising”, would be sufficient.
3. The court, assuming the second test is satisfied, must
consider whether or not the clause may cover some kind of
liability other than negligence, such as strict liability. This is
a matter of construction of the contract.
Exclusion of the liability of third parties

 Can an exclusion clause operate to protect a

third party?
 i.e a person who is not a party to the contract
containing the clause
 Where an excluding or limiting clause seeks to
exclude liability of third parties,e.g where a
party seeks to exclude liability for the
negligence of his servants or agents
 Relevant in contracts of carriage where the
carrier may have effectively exclude his
liability under the contract
Exclusion of the liability of third parties

 And an injured party seeks to obtain redress by suing

the servant or agent of the carrier, whose negligence
has caused him damage
 Adler v. Dickson
 Held: While the clauses protected the company from
liability, they could not avail anyone else
N.B The decision was based on the fact that the ticket
did not on its true construction purport to exempt the
master/boatswain
 The court was divided on this issue of what the
position would have been if the ticket had stated that
the master and boatswain were exempt from liability.
 Scruttons Ltd. V. Midland Silicones
DOCTRINE OF FUNDAMENTAL BREACH OF
CONTRACT

 With the help of a skilfull drafter, most

interpretation clauses could be overcome.
 There was therefore a need to come up with
substantive rules to control the use of
exclusion clauses, principal among them was
the doctrine of fundamental breach of
contract.
 The doctrine of fundamental breach of was
the most powerful judicial tool used to
control exemption clauses until the decision
in Photo Production v. Securicour
DOCTRINE OF FUNDAMENTAL BREACH OF
CONTRACT

 The doctrine was basedon the concept

that a party to a contract is only entitled
to rely on an exclusion clause when he is
carrying out his contract not when he is
deviating from it or when he is guilty of a
fundamental breach of the contract
 i.e where he commits a breach that goes
to the root of the contract. Chanter v.
Hopkins (peas and beans)
DOCTRINE OF FUNDAMENTAL BREACH OF
CONTRACT

 On this basis a substantive rule of law emerged

which stipulated that certain kinds of breaches
and types of contractural terms were so
fundamental that no exemption clause,
however widely drawn, could exclude liability .
 Under this doctrine, a person who had
committed a breach of a fundamental term of a
contract, or who had committed a fundamental
breach of the contract should not be entitled to
rely on any exclusion clause in the contract to
exclude his liability for such breach.
What is a fundamental term of a
contract

 A fundamental term of a contract is one

which underlies the whole contract such
that where it is not complied with, the
performance becomes totally different
from that which the contract
contemplated. Chanter v. Hopkins
 In this sense it has been said that a
fundamental term is one which is more
fundamental to the contract than a
condition.
What is a fundamental term of a
contract

 In simple terms, if a party delivers something

that is totally different from what he was
contracted to deliver, it is not simply a
breach of a condition of the contract, but it
amounts to a total non-performance and he
is deemed to be guilty of a fundamental
breach of the contract.
 According to the doctrine of fundamental
breach, he cannot rely on any exclusion
clause to exclude his liability for such a
fundamental breach of contract.
What is a fundamental term of a
contract

 Nichol v. Godts
 Karsales(Harrow) Ltd v. Wallis
 Sze Hai Tong Ltd v. Rambler Cycle
Ltd
 Alexander v. Railway Executive
Modifications to the doctrine of
Fundamental Breach

 Where the breach was categorised as

fundamental or going to the root of the
contract, such breach totally disentitled
the party in breach from relying on an
exemption clause no matter how widely
drawn.
Modifications to the doctrine of
Fundamental Breach

 Problems arose with the implementation of the

doctrine as it was.
I. The concept of “fundamental term” or
fundamental breach” was not altogether easy to
define’
II. When is a term said to be fundamental ?
III. A fundamental term has been defined as
something more than a condition of a contract or
something which underlies the whole contract
such that if not complied with, the performance
becomes something totally different from that
which the parties contemplate.
Modifications to the doctrine of
Fundamental Breach

 The problems with it is that it is quite

indistinguishable from the classic
definition of a condition.
 The fluidity of the concept also made it
difficult to construct a rational theory
from the point of view of the practitioner.
 It therefore became impossible to predict
the courts decision and give reliable
advice on the enforceability or otherwise
of such claims.
Modifications to the doctrine of
Fundamental Breach

 Case that led to the modification of the

application of the doctrine was
Photo Production v Securicour
Transport
Modifications to the doctrine of
Fundamental Breach

 Thus the application of the doctrine of

fundamental breach has now given way to a
test of reasonableness.
In applying the test the courts consider a
number of relevant factors
whether the contract is a commercial one
entered into between parties of equal
bargaining power or a consumer contract
entered into between an individual and a
company, where there is a wide disparity in
the bargaining power of the individuals
Modifications to the doctrine of
Fundamental Breach

1. Whether there was an opportunity for

the other party to insure
2. The level of remuneration received for
service
3. Any attempt at allocation of risk
between the parties
4. The efficiency of the arrangements
Modifications to the doctrine of
Fundamental Breach

 George Mitchell (Chesterhall) Ltd v.

Finney Lock Seeds ltd
Modifications to the doctrine of
Fundamental Breach

 Factors
 The clause was not negotiated between
persons of equal bargaining power. It was
inserted by the seed merchants in their
invoices without negotiation with farmers
 The buyers had no opportunity at all of
knowing or discovering that the seed was not
cabbage seed, whereas the sellers could and
should have known that it was the wrong seed
altogether. They should have tested it before
putting it on the market.
Modifications to the doctrine of
Fundamental Breach

 The buyers were not covered by

insurance against this risk , nor could
they insure. But as to the seed
merchants it was possible for them to
insure against this risk.
 Also such a mistake as this could not
have happened without serious
negligence on the part of the seed
merchants themselves or their suppliers,
so serious that it would not be fair to
allow them to escape responsibility for it
Modifications to the doctrine of
Fundamental Breach

 In all the circumstances it was held that

it would not be fair or reasonable to
allow the seed merchants to rely on the
clause to limit their liability.
 The UK statutes do not apply in Ghana
and there is an urgent need for
legislative intervention to regulate the
enforcement of exclusion clauses in
consumer contracts in Ghana.