Contract terms

AuthorJulian Bailey
Freedom of contract 127
Identication of contract terms 128
Contract documents 129
(i) Introduction 129
(ii) Form of agreement/articles of agreement 130
(iii) General conditions 131
(iv) Standard forms 131
(v) Special conditions and amendments to general terms 147
(vi) Specications 148
(vii) Schedule of rates and prices 149
(viii) Drawings 150
(ix) Method statement 150
(x) Contract programme 151
(xi) Bill of quantities 151
(xii) Tender documents 154
(xiii) Other documents and terms 154
(xiv) Documents incorporated by reference 156
Classication of terms 157
(i) Introduction 157
(ii) Essential term 158
(iii) Innominate term 159
(iv) Warranty 160
(v) Dependent obligation 161
(vi) Independent obligation 162
Condition precedent 162
Condition subsequent 163
Express terms 165
(i) Generally 165
(ii) Recitals 165
(iii) Denitions and interpretation 165
(iv) “Entire agreement” clause 167
(v) Quality of workmanship 169
(vi) Quality of materials 171
(vii) Fitness for purpose 172
(viii) “Equivalent project relief ” clauses 174
(ix) Proscribed materials 174
(x) Application of human resources 174
(xi) Risk 175
(xii) Force majeure 178
(xiii) Governing law and jurisdiction 181
(xiv) Service of notices 183
(xv) Condentiality 185
(xvi) Best endeavours and reasonable endeavours 185
Implied terms 187
(i) When will a term be implied? 187
(ii) Quality of goods supplied 192
(iii) Fitness for purpose 193
(iv) Sale of goods legislation 199
(v) Quality of work 205
(vi) Duty to exercise reasonable skill and care 207
(vii) Duty to cooperate/duty not to hinder performance 208
(viii) Duty to act in good faith 213
(ix) Duty to act reasonably in exercising rights 216
(x) Duty to act honestly 217
(xi) “Buildability” 217
(xii) Duty to provide accurate design information 219
(xiii) Compliance with laws and regulations 220
Contractual interpretation 220
(i) Generally 220
(ii) Striving to nd meaning 222
(iii) Business common sense 224
(iv) Context 225
(v) Peculiar or technical meanings 225
(vi) e contra proferentem rule 226
(vii) e ejusdem generis rule 228
(viii) Preservation of common law rights 229
(ix) Deletions 229
(x) Earlier and later versions of standard forms 230
(xi) Knowledge of judicial interpretation 230
(xii) General provisions and specic provisions 230
(xiii) Headings 231
(xiv) Punctuation 231
(xv) Homogeneity 231
(xvi) Hierarchy of documents 232
(xvii) Use of dictionaries and guidance or practice notes 233
(xviii) Language 234
(xix) Redundant language 234
(xx) Errors 235
(xxi) Changes to statutes 235
(xxii) English consumer law 235
Extrinsic evidence 236
(i) e general position 236
(ii) Admissible evidence 239
(iii) No ambiguity 243
Other issues concerning contract terms 243
(i) Uncertainty 243
(ii) Rectication 244
(iii) Variation of terms 247
(iv) Particularly onerous or unusual terms 248
(v) Declaration of correct interpretation 250
Freedom of contract
3.01 Underlying the law of contract is the notion that legal persons, possessed of their
faculties, ought generally to be free to enter into contracts of whatever terms they decide
appropriate, and that the courts must uphold their agreement, even if they think the
terms to be imprudent or unfair. Various statements can be found, particularly in nine-
teenth century cases, espousing this right. Two examples will suce: “Every man is the
master of the contract he may choose to make”;1 and “Between men of full age and
competent understanding ought there to be any limit to the freedom of contract but that
imposed by positive law or dictated by considerations of morality or public policy?”.2
Over time there has, however, been a retreat from the “high Victorian age in which
freedom of contract was regarded with a special awe”,3 potentially so as to subvert the
terms agreed by contracting parties to the paramount will of the legislature.4 Never-
theless, the notion that able persons should be able to enter into contracts on terms of
their choosing remains strong in the common law. e natural consequence of persons
being free to contract on their own terms is that they will be bound by those terms,
even if they turn out to be unfavourable to a contracting party, and bring disaster on it.
Contracting parties are free to make unreasonable agreements.5 By way of illustration, in
Bottoms v York Corporation,6 Lord Esher MR said of a contractor who had entered into
a particularly disadvantageous contract:
1 Clarke v Watson (1865) 18 CB (NS) 278 at 284, per Erle CJ [141 ER 450 at 452]. is approach has been
reected in modern cases. See, eg, Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 at 619, per Lloyd LJ;
Tekmat Pty Ltd v Dosto Pty Ltd (1990) 102 FLR 240 at 241, per Miles CJ [Sup Ct ACT]; AC Controls Ltd v BBC
(2002) 89 Con LR 52 at 73–74 [64], per HHJ ornton QC.
2 Tailby v Ocial Receiver (1888) 13 App Cas 523 at 545, per Lord Macnaghten. See also Printing and Numerical
Registering Co v Sampson (1875) LR 19 Eq 462 at 465, per Sir George Jessel MR; Tullis v Jacson [1892] 3 Ch 441
at 445, per Chitty J.
3 London Regional Transport v Mayor Of London [2001] EWCA Civ 1491 at [46], per Robert Walker LJ. Some
contracts – such as contracts of employment – are not considered to be entered into by persons who are free and
equal actors: Johnson v Unisys Ltd [2003] 1 AC 518 at 549 [77], per Lord Millett. See also Braganza v BP Shipping
Ltd [2015] UKSC 17 at [54], per Lord Hodge; Cavendish Square Holdings BV v Makdessi [2015] UKSC 67 at [13],
per Lord Neuberger PSC and Lord Sumption JSC.
4 See also Andrews v ANZ Banking Group Ltd (2012) 247 CLR 205 at [5].
5 Transocean Drilling UK Ltd v Providence Resources plc [2016] EWCA Civ 372 at [30], per Moore-Bick LJ.
6 (1892) Hudson’s BC (4th edition, volume 2) 208.

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