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Terms of a contract introduction
Contract Law (LAWS10021)
University of Manchester
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Terms of a contract - Introduction
Starter: Term which attempts to exclude or restrict the liability – (difficult to uphold). When is something a term or a mere representation.
Condition and warranty and an innominate term.
Legal issues:
No written document at all – oral agreements The agreement the court believes the parties actually reached. What doe terms actually mean? How do courts interpret contractual terms. Not all terms will be expressly agreed by the parties. Terms may be implied into contracts.
What is a contractual term?
- ‘Any provision forming part of the contract’, which objectively has been agreed
between the parties. – needs to be clear whether it is a statement or a
- Each term gives rise to a contractual obligation. –
- Not all terms are stated expressly – terms can be ‘express’ or implied’ -
Commercial reality: parties – lack of clarity – disputes over misunderstandings. Thus, when a dispute arises, argument should be that something is an incorporated term in a contract, then the argument is stronger. If it is condition, then you would have power to terminate.
Relevance:
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APPLICATION:
- not all terms are of equal importance – where a condition is broken, the parties may
be entitled to terminate the contract.
- If it is a warranty, a breach only entails the innocent party to claim damages.
- Innominate – no prescribed remedy, depends on the situation.
Not all terms are “equal” - some terms are crucial; others carry less legal weight as they are peripheral to the objectives of the contract.
If a “term”, properly defined is breached (broken) then the other party will have a remedy in law, but those remedies will differ depending on the proper classification of the term.
Terms of a contract - Introduction
CONTRACTUAL TERMS:
Express terms: - can be either of the 3 mentioned above,
- Has been expressed orally or in writing.
Issue: - when agreements reached orally, but not written down. The courts would try and establish; what became a term of the contract from what was said. From things said, what became the terms of the contract. How would a reasonable person interpret the agreement? Thus, the cooling off periods allows a consumer to cancel an agreement without incurring any penalty. (consumer credit act 1974 – it’s 14 days)
How does the law respond? 1) Intention Measured objectively. The fact that one party did not intend to be bound by a term does not matter if their acts and words indicate otherwise.
Difficulties: Courts have to choose between two alternate accounts.
Resolution: How does the party decide which version to trust or which party to reward?
TERMS V REPRESENTATIONS:
Terms are part of the contract that describe the parties’ obligations under the contract.
Representation are statement of facts which are made to persuade, - connected to the contract but isn’t a term of it. – question of the statement maker’s intent.
However, because representations are not terms of the contract, a breach of a representation does not give you the ability to bring an action for breach of contract. Rather, it gives you an entirely separate action for misrepresentation.
- Terms must be incorporated into the contract.
Conditions are the fundamental terms of a contract. Breach of a condition gives the innocent party the right to treat the contract as at an end and terminate it as well as claim damages.
Conditions
Warranties are less important terms. Breach of warranty does not give rise to a right to terminate, but it does give rise to a right to damages.
Warranties
Innominate terms fall in between conditions and warranties. The legal effect of the breach of an innominate term depends on the seriousness of the breach and/or the practical seriousness of the breach.
Innominate Terms
Terms of a contract - Introduction
INDICATORS OF INTENTION: - TIMING
The lapse of time between the making of the statement and the entering into the contract may be relevant – the longer the time, the less likely it is to be a term:
Routledge v McKay [1954] 1 WLR 615
R was in the process of purchasing a motorbike from M. M stated that it was a 1941 model, based on information in the car’s registration book BUT the book was incorrect – the contract, which was concluded one week later, made no mention of the age of the motorbike. R claimed damages for breach of a term.
Statement made around 23rd of April, contract concluded on 30th of April. The contract made no statement about age of the motorbike. The claimant found out it was a much older model and it was actually modified and was re-registered by a previous owner.
Court held:
- Has to decide objectively what is the
status of any statement made about the age of the motorbike? Is it a term or representation?
Decided that it was a representation and not a contractual term so no breach of contract.
The timing of when the statement was made and when it was concluded. There was a week difference, which meant that the contracting party could have taken the time and made checks if the age of the bike was such a big concern. The delay from the negotiation and conclusion gave time for checks.
N. – if the negotiation and conclusion was on the same day, then the conclusion would have been different and the representation may have been classed as a term.
Terms of a contract - Introduction
IMPORTANCE OF TERM:
How important is what has been said or written when trying to differentiate between reps and term. Bannerman v White (1861) 10 CBNS 844 This case concerned a contract for the sale of hops (plant which beer is made from). The buyer made it clear that he would “not even ask the price if any sulphur had been used”. Samples were provided and inspected, and sellers confirmed that sulphur had not been used. BUT 5 of the 300 acres on which the hops had been grown had been treated with sulphur.
In a dispute about this matter -
HELD:
It was regarded as a contractual term because it was so important that it went to the essence of the term. They took measures to make sure that sulphur was not included, which meant that it had to be a term of the contract. They had expressly stated it shouldn’t be included.
Couchman v Hill [1947] KB 554
This case concerned an auction catalogue which described a heifer (young female cow) as ‘unserved’ – Could not have been pregnant. The claimant asked the auctioneer to again confirm this which he did – 8 weeks after the sale, the heifer died due to the fact that it was carrying a calf at too young an age.
The issue was whether the statement as to the heifer being ‘unserved’ was a term of the contract – on the basis the claimant would not have bought the heifer if he had known the truth. Issue is the loss and damage. The issue in contractual term is whether unserved was a term or a representation.
HELD:
‘unserved’ was a condition of the contract. It goes to the essence of the contract. The information about the health and state of the cow is of essence because of the implication was that he wanted an unserved. They didn’t want one at risk of what happened in the case.
THERE WAS TIMING BUT THE PERSON DID
CHECK AND CONFIRM WHAT THEY CONSIDERED
THE ESSENCE OF THE CONTRACT.
Terms of a contract - Introduction
he found out the actual mileage so the importance attached test can be applied. The dealer was negligent in not checking the mileage.
Terms of a contract introduction
Module: Contract Law (LAWS10021)
University: University of Manchester
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