3. Terms and Content of a Contract Flashcards
Everything in the contract will have been discussed beforehand. True or False?
FALSE! - some terms are implied either by statute or by case law.
Not all the terms of the contract will be of equal importance. True or False?
TRUE! - different legal consequences will result from a breach of different contractual terms, depending on their importance.
What are ‘mere puffs’?
Extravagant claims about the product. They have no legal effect as no one believes them.
What are ‘representations’?
pre-contractual statements intended to induce/persuade the other party to enter into a contract - BUT NOT PART OF THE CONTRACT.
What is a TERM?
Statements incorporate into the contract
If a term is broken there will be a breach of contract.
How is something a representation or a term?
- if it is a really important part of the contract - will likley be a term, whether stated in the contract or not.
- If one party asks the other to check out a particular statement for himself, it is UNLIKELY to be a term.
- Whether one party has a specialist skill and the other doesnt . see Dick Bentley Ltd -v- Harold Smith (Motors) Ltd (1965).
- If a statement is made long before the contract was concluded - could be evidence that the parties did not intend for it to be a term. See Routledge -v- McKay (1954)
What happened in the case
Dick Bentley Ltd -v- Harold Smith (Motors) Ltd 1965?
- Dick Bentley knew the defendent - a car trader specialising in the prestige car market for some time.
- asked to look out for a well vetted bentley car.
- defendent found a car and reccomended it to the claimant - told him it had had a replacement engine and gearbox - only done 20k miles.
- Mr Bentley purchased the car - but developed faults.
- Discovered the car had done nearly 100k miles.
The question was…
- had the statement amounted to a term in which damges would be payable for breach of contract. Or…
- was the statement a misrepresentation - in which no damages would be payable since it was an innocent misrepresentation.
Verdict… The statement WAS a term. Mr Smith as a car dealer had greater expertise and the claimant relied upon that expertise.
Name the THREE types of term…
- A CONDITOIN
- A WARRANTY
- An INNOMNATE TERM
What is a ‘CONDITION’?
Fundamental to the performance of the contract
If a condition is broken the injured party can either…
a) Treat the contract as at an end and have no further part in it.
b) Carry on with it.
NB: he can also sue for damages for breach of contract.
What is a ‘WARRANTY’?
not fundamental - but can cause some loss if breached.
Breach of warranty does NOT entitle the injured party to cancel the contract - can only claim damages.
He must carry on with the contract.
Eg. Defective Ashtray and new car.
What is an ‘INNOMINATE TERM’?
Somewhere between a condition and a warranty when it is impossible to say whether it is one or the other.
Court will ask the whether the innocent party has been deprived of substantially what he should have recieved under the contract.
- if he has - will be a CONDITION
- has not - will be a WARRANTY
Court adopts a ‘wait and see’ approach.
What is meant by an ‘Express Term’?
What the parties have expressively agreed.
fairly clear and my be written or oral.
What is meant by an ‘Implied Term’?
Implied into the contract without them being specifically being mentioned or agreed by the parties.
Automatically become part of the contract - just as valid as express terms.
How may terms be implied?
- STATUTE - Eg. under the Sale of Goods Act 1979. Goods must be of satisfactory quality and fit for their purpose - this term is implied in all consumer contracts, for example.
- THE COURT - Courts will presume the parties intended to include a term not expressively stated - because this is what the parties must have intended. There are two ways the court can test this…
a) Business Efficacy - the term is essential to make the contract work.
b) The Officious Bystander - if someone has suggested to the parties that a particular clause should be included.
* BY CUSTOM - A local/trade custom will be implied if necessary - has to be clear and very definite.
NB: Local/Trade custom cannot override the express terms of a contract.
What is the Parol Evidence Rule?
‘If all the terms of the contract are in writing, there is a strong presumption that no evidence supporting a different oral agreement will be permitted to vary those terms’
NB: The written contract will normally be the entirely of the contract.
