Classification + Interpretation of Terms

Question 1

What is a condition in contract law?

Answer 1

A condition is a fundamental term of the contract or an event upon which the performance of the contract depends. Breach of a condition allows termination and damages

Question 2

What are the two types of conditions (and examples)?

Answer 2

1. Condition Precedent: Must be fulfilled before a contract becomes binding.
   Example: A house purchase conditional on securing a mortgage.
2. Condition Subsequent: When it occurs, it ends the contract.
   Example: Employment termination upon losing a professional license.

Question 3

What is a warranty in contract law?

Answer 3

A warranty is a secondary term in a contract, less significant than a condition. Breach allows a claim for damages but not termination

Question 4

How does the breach of a condition differ from the breach of a warranty?

Answer 4

• Condition: Breach allows termination and damages
• Warranty: Breach allows only damages, and the contract remains in force

Question 5

What are innominate terms?

Answer 5

Terms that cannot be easily classified as conditions or warranties. Remedies depend on the breach’s consequences. If the breach deprives the party of substantially the whole benefit, termination is allowed

Question 6

What are three ways to identify a condition in a contract?

Answer 6

1) Statute: Terms defined as conditions (e.g., Sale of Goods Act 1979)

2) Court Ruling: Courts decide the term’s importance (Couchman v Hill [1947])

3) Contract Stipulation: Explicit agreement by parties (Lombard North Central plc v Butterworth [1987]

Question 7

What is the primary objective of interpreting contracts?

Answer 7

To ascertain and give effect to the parties’ intentions while ensuring fairness, certainty, and administrability

Question 8

What is the “objective and contextual approach” to contract interpretation?

Answer 8

Interpretation is based on how a reasonable person would understand the contract, considering all relevant circumstances

Question 9

What is the exclusionary rule in contract interpretation?

Answer 9

The exclusionary rule limits the use of pre-contractual negotiations, except in cases where ambiguity or mutual understanding needs clarification (Chartbrook Ltd v Persimmon Homes Ltd [2009])

Question 10

When can a contract be rectified?

Answer 10

Rectification is allowed when a written contract does not reflect the parties’ mutual intention, with clear evidence of the shared understanding

Question 11

What is the “matrix of fact”?

Answer 11

The term refers to the factual context known to both parties when the contract was formed

Question 12

What 2 situations are excluded from the “matrix of fact”?

Answer 12

• Pre-contractual negotiations (Rank Enterprises v Gerard [2000] 1 All ER (Comm) 449)
• Subjective intentions