Week 6 Everything Flashcards
(33 cards)
The terms of the contract
The terms of the contract are the specific details of the agreement, including each party’s rights and obligations. Broadly speaking, there are two types of contractual terms: express terms and implied terms: terms may be implied either by the courts and/or any relevant statutory terms.
EXPRESS TERMS: Representations and promisesAt common law
The terms of a contract – what the contract contains - the rights and obligations agreed upon within it – are usually arrived at as a result of negotiations during which much may be said by both parties. The crucial issue here, is then, to determine how much of what was said was intended to be a term of the contract? This gives rise to the need to distinguish between statements which are considered to be part of the contents of a contract [terms] and those statements which were not [representations].
REPRESENTATIONS
If the statement is not part of the content of a contract [a term], it is referred to as a ‘mere representation’. A mere representation is a statement which has no contractual impact. It stands outside the contract. That does not mean that that statement cannot form the basis for a remedy under another heading just because it is not a term. It can.
That does not mean that that statement cannot form the basis for a remedy under another heading just because it is not a term. It can.
That remedy will lie in ‘Misrepresentation’, which is a statement of fact which is not true, which stands outside the contract and which induces someone to enter into a contract.
The misrepresentation may be:
Innocent
Negligent
Fraudulent
Misrepresentation
The remedies available are
Innocent misrepresentation: Rescission only
Negligent misrepresentation: Rescission and damages in the tort of Negligent Misrepresentation
Fraudulent misrepresentation: Rescission plus damages in the tort of Deceit
PAROL EVIDENCE RULE
As an alternative to possibly constituting a misrepresentation, the statement made can constitute one of the exceptions to the parol evidence rule. This possibility requires the discussion of both the rule and one of the exceptions to it – that the contract was partly written and partly oral. The parol evidence rule provides that if the contract is fully and completely in writing, no oral evidence will be allowed to change the provisions of the written contract
If a court determines that the contract is partly written and partly oral, then
that oral statement is considered to be a term of the contract. The next question to be determined is how important was the oral promise which is now a term? Was it a condition or a warranty? The difference between the two types of terms will determine the contractual damages and thus, remedy.
COLLATERAL CONTRACTS
The final possibility of what the oral statement may be is that of a collateral contract. A collateral contract is a contract the consideration (payment) for which is the entry into of another contract.
There are three prerequisites to the application of a collateral contract argument:
There must be no inconsistency with the main contract
The statement made must be promissory in nature
There must be consideration given for the collateral promise made
Apart from these alternative arguments at common law, there may also be grounds for breaching certain statutory provisions of the ACL.
If the other party was tricked or deceived into entering into a contract they can commence a legal action using the statutory provisions in the ACL that prohibit misleading or deceptive conduct, false representations and other unfair practices
EXPRESS TERMS: Signed documents
There are two ways by which a term becomes an express term of the contract:
by inclusion in a signed written contract.
by being brought to the attention of the other party by reasonable notice.
Signed documents
If a term is in a written contract that has been signed by the parties, it is a binding and enforceable term of the contract, even if one of the parties has not actually read and understood the written contract unless there is fraud or misrepresentation.
Situations where a signed contract may be unenforceable include:
cooling off periods
non est factum
cooling off periods
It is not uncommon to find a ‘cooling off’ provision in certain contracts today. Where these provisions are contained in a contract, they provide a period for a signatory to the contract in which a party may change his/her mind and not proceed with the contract.
Non est factum
A latin phrase which literally means ‘it is not my deed.’ This phrase applies to situations where a party is mistaken as to the nature of the document signed.
UNSIGNED DOCUMENTS
If a statement is not contained in a written and signed contract (unsigned document) it will only be an express term of the contract if the other party had reasonable notice of the statement. Unsigned documents are usually referred to as the ‘ticket’ cases – cases where a customer is given a ticket when goods are left in another’s care such as dry cleaners, car parks and boot markers.
Tickets
Tickets are generally viewed as ‘vouchers’, ‘dockets’ or ‘receipts’ – a means of identifying the goods left in another’s care and paying for the services rendered in relation to those goods. As a general rule therefore, tickets are not viewed as contractual documents. So any provision (such as an exclusion clause on a ticket) is not viewed as having any contractual significance
If however actual notice or reasonable notice is given of the existence of the exclusion clause, prior to the completion of the contract, then the exclusion clause will form part of the contract.
Actual notice exists where a party is advised of the existence of the exclusion clause and given a choice as to whether or not that party wishes to proceed with the transaction
Reasonable notice
Reasonable notice occurs when everything that is reasonably required of a party to bring the existence of the exclusion clause to the attention of another party prior to the completion of a contract, has been done. In that case, the exclusion clause will also be considered to be part of the contractual terms
Reasonable notice occurs when everything that is reasonably required of a party to bring the existence of the exclusion clause to the attention of another party prior to the completion of a contract, has been done. In that case, the exclusion clause will also be considered to be part of the contractual terms
This necessarily means that
This necessarily means that an exclusion clause brought to the attention of another after the contract has already been formed will not be a term of the contract because reasonable notice was not given prior to the contract’s completion.
CONTRA PROFERENTUM RULE
If the exclusion is considered to be part of the contract for either reason, then the wording of that exclusion will be considered by a court in order to determine if the exclusion clause is appropriately worded to cover exclusion from the liability by the defendant for which the plaintiff is suing. If there is ambiguity in the wording, the court will apply the contra proferentem rule and read the exclusion clause down and against the party seeking its application
FUNDAMENTAL BREACH
When a party acts outside the contract in this way, usually, they will have committed a ‘fundamental breach’ of contract.To commit a fundamental breach is to do something which is as bad as not performing the contract at all. The court takes the view that if a fundamental breach has been committed by one of the parties, the law will presume (in case of ambiguity in the wording of the exclusion clause), that the exclusion clause was not meant to cover exclusion from that liability. This means the defendant will not be able to rely on the ambiguous exclusion clause when sued by a plaintiff.
The court’s view is a presumption only and applies to ambiguously worded exclusion clauses.
That means that if the exclusion clause is carefully and precisely worded so that it leaves no room for doubt that it intends to cover exclusion from liability for a fundamental breach, then the court will give that exclusion clause effect.
