The Contents of a Contract

8/17/2019 The Contents of a Contract

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INTRODUCTION Terms in a contract set out duties of each

party under the agreement.

The terms will be of two kind

Express terms: These are laid down by theparties themselves

Implied terms: These are read into the

contract by the court on the basis of the

nature of the agreement and the partiesapparent intentions or on the basis of law

on certain types of contract


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DISTINCTION BETWEEN TERMSAND MERE REPRESENTATION

Is a statement part of a contract! Statements made

during negotiations leading to a contract may be

either:

Terms: Statements which form the express terms of

the contract . "s such they constitute promises as

to the present truth of the statement or as to

future action. If such a promise is broken #for

example because the statement is untrue$ this will

be a breach of contract% or&ere representation' Statement that do not form

part of the contract but which helped to induce the

contract. If these are untrue they are

misrepresentation


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(hether a statement has become a term of the

contract depends on the intention of the parties.

In trying to ascertain such intention the court

may take into account the following:

)$Importance of statement' If the statement is

so important that a party would not otherwise

have entered into the contract. The statement

is likely to be viewed as a term

#*annerman v (hite #)+,) - the buyer stated

if sulphur has been used. I do not want to

know the price/ Held: it was a term of the

contract that sulphur was not used.


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0$ Timing of statement - 1enerally the more

time between statement and conclusion of

contract the less likely is he statement to

be held a term of the contract#2outledge v &c3ay$

4$ The manner of the statement' It is unlikely

to be a term if it discourages verification.If there was anything wrong with the

horse I would tell you #Schawel v 2eade

#)5)4$ It is more likely to be a term


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6$ Special knowledge and skill of parties - If

statement made by party with special

knowledge and expertise on matter the

court is more likely to deem the statementa term than if statement was made by

someone without such expertise.

In 7scar 8hess 9td. williams #)56;$ it was

held that a statement by a member of thepublic #a non expert$ to a garage #an expert$

with regards to the age of the car was a mere

representation not a term


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IMPLIED TERMS

Sometimes a term which has not been

mentioned by either party will nonetheless be


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TERMS IMPLIED BY THE COURTS

As a matter of fact: Something that=s soobviously included that it did not need to be

mentioned in the contract. If I agree to pay

you >6? for a lawnmower it probably wouldnot occur to us to write down that we mean

fifty pounds sterling as opposed to any other

sort of pound. That=s obvious to both of us.

#*eware of this point - it has to have been

obvious to both parties - it=s not enough to

show that one party thought it was included

or that the contract would have been more

reasonable with the added term.$


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TERMS IMPLIED BY THE COURTS

As a matter of law: This is about generalconsiderations of public policy - the courts are

laying down as a matter of law how the

parties to certain types of contract ought tobehave. @or example in one case the courts

held that landlords of blocks of flats ought to

keep the communal areas #lifts stairs etc$ in a

reasonable state of repair - so that term was

implied into the rental contract.


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TERMS IMPLIED BY COURTS

Ao note that any of these terms implied by the

courts can be excluded with an express term.

If a bakers contract has a clear term in it that

says one doBen means twelve for the purposesof this contract/ then the courts can=t say

that a doBen has to eCual thirteenD


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TERMS IMPLIED BY CUSTOMS

" contract may be deemed to incorporate any

relevant custom of the market trade or locality

in which the contract is made in #Hutton v

(arren #)+4,$ where a tenant establish a right

to fair allowance for improvement to the land

through a local custom.

Some terms are generally known to be included

in contracts in a particular trade or locality.

"mongst bakers one doBen/ means thirteen -

they don=t have to include terms in every

contract specifying that.


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TERMS IMPLIED BY STATUTE The most well known example of terms

implied by statute is the


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TERMS IMPLIED BY STATUTE Section ): the goods must be of satisfactory

Cuality/ - that is they should meet the

standard that a reasonable person would

regard as satisfactory/. "lso if the buyer

says they=re buying the goods for a particular

purpose there=s an implied term that the

goods are fit for that purpose.

Section )6: if you=re selling the goods by

sample - you show the customer one bag of

flour and they order 6? bags - then the bulk

order has to be of the same Cuality as the

sample.


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EPRESS TERMS

Express terms are terms that have been

specifically mentioned and agreed by both

parties at the time the contract is made. They

can either be oral or in writing


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THE PAROLE E!IDENCE RULE

There is a general rule the


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CLASSIFICATION OF TERMS

Fot all the terms of the contract are of eCual

importance and the law has sought to classify

them according to their importance. The

normal classification is into conditionswarranties and innominate terms. These are

types of express terms


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WARRANTY

(arranties are minor terms of a contract which

are not central to the existence of the

contract. If a warranty is breached the

innocent party may claim damages but can not

end the contract:


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INNOMINATE"INTERMIDIATE

8lassification as a condition or a warranty

depends on the intention of the parties but in

many cases their intention is not expressed

and the clause will not obviously be acondition or a warranty. Such terms are called

innominate of intermediate terms. The remain

unclassified until the seriousness of a breach

can be Gudged.

See Hong 3ong @ir Shipping 8o. v 3awasaki

3isen 3aisha #)5,0$


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HON# $ON# FIR

" ship was chartered to the defendants for a 0

year period. The agreement included a term that

the ship would be seaworthy throughout the

period of hire. The problems developed with the

engine of the ship and the engine crew wereincompetent. 8onseCuently the ship was out of

service for a 6 week period and then a further )6

week period. The defendants treated this as a

breach of condition and ended the contract. Theclaimants brought an action for wrongful

repudiation arguing the term relating to

seaworthiness was not a condition of the contract.


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HON# $ON# FIR CONT%

The defendants were liable for wrongful

repudiation. The court introduced the innominate

term approach. 2ather than seeking to classify the

term itself as a condition or warranty the court

should look to the effect of the breach and ask ifthe breach has substantially deprived the innocent

party of the whole benefit of the contract. 7nly

where this is answered affirmatively is it to be a

breach of condition. 0? weeks out of a 0 yearcontract period did not substantially deprive the

defendants of whole benefit and therefore they

were not entitled to repudiate the contract.


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SCHULER ! WIC$MAN TOOLS&'()*+ AC ,-. HOUSE OF LORDS

Schuler were manufacturers of certain tools and (ickman

were a sales company granted the sole right to sell certain

tools manufactured by Schuler. " term of the contract

between the parties was described in the contract as being a

condition and provided that (ickman would send a sales

person to each named company once a week to solicit sales.

This imposed an obligation to make )?? visits in total.

(ickman failed to make some of the visits and Schuler

terminated the contract for breach of condition. Held:

Aespite the fact the contract had expressly stated the term

was a condition the House of 9ords held that it was only a

warranty.


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LOMBARD NORTH CENTRAL !BUTTERWORTH &'(/)+ 0B .,) The defendant leased a computer from the claimant. The

claimant was to pay >6+ by 0? instalments every 4 months. "

term of the lease agreement provided that punctual payment

was reCuired and breach of this term would entitle the lessor

to terminate the agreement. The defendant got into arrears

with the instalments and the claimant took possession of thecomputer and sold it on for >);6. The claimant sued the

defendant claiming arrears and all future payments amounting

to >,+,5 in total.

Held: The term relating to prompt payment was a condition.The parties by their agreement had demonstrated that prompt

payment was an essential term and the conseCuence of breach

was clearly set out. Ficholls 9 stated that even one late

payment would entitle the lessor to terminate irrespective of

the effect of the breach.


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THE MIHALIS AN#ELOS &'()1+ -WLR 21'The owners of the ship The &ihalis "ngelos chartered the ship

to the defendant to use for the carriage of some cargo. " clause

in the agreement stated the ship was expected ready to load on

)st uly. In fact the owners had no grounds for believing the ship

would be ready to load on that date as it was in Hong 3ong at the

time and would not be ready until at least the )th of uly and infact it was not ready at that date. The defendant cancelled the

contract on );th of uly. The cargo that they expected to be

carrying had not arrived due to the bombing of a railway in

ietnam. The ship owners brought an action against the

defendants for anticipatory breach. The defendants argued that

the claimant was in breach of condition of the contract by not be

ready to load on the specified date.

Held: The expected ready to load clause was a condition despite

the fact it had


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POUSSARD ! SPIERS 3'/)24 '0BD *'1

&adame oussard entered a contract to perform

as an opera singer for three months. She became

ill five days before the opening night and was not

able to perform the first four nights. Spiers then

replaced her with another opera singer.

Held: &adame oussard was in breach of

condition and Spiers were entitled to end the

contract. She missed the opening night which was

the most important performance as all the critics

and publicity would be based on this night.


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E!ALUATION

0??5

a$ i$ Aistinguish between an express term and

a mere representation # marks$

ii$ Fame two express terms and giveexamples of their operation with reference to

case law # marks$

b$ Explain with reference to at least T(7

decided cases the factors which are relevantin a determination of whether an assessment

made during negotiation becomes a term of

the contract #)6 marks$

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The Contents of a Contract