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8/17/2019 The Contents of a Contract
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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$