Terms of a Contract

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1.Express and Implied Terms
The content of a contract are made up of terms (or ‘clauses’ as they are called in the case of written contracts) which may be express or implied. The express terms are the terms which the parties actually stipulated for themselves when making the contract, whether orally or in writing. In addition to the express terms, the courts sometimes, for a variety of reasons, imply certain terms into the contract. Implied terms are terms that are not expressly stated in the contract but are deemed to be included in the contract. The most obvious reason is that the implied terms are required by a statute. Examples of statutes requiring certain terms to be implied into particular types of contracts are the Sale of Goods Act 1957, the Hire-Purchase Act 1967 and the National Land Code. Another reason is that sometimes the court finds it necessary to import a particular trade custom or usage into a contract, if it is satisfied that both parties were aware of it and must have intended that trade custom or usage to apply in their contract. This is less likely to happen nowadays, because most customs have been absorbed into statute (e.g. the Sale of Goods Act). A more likely reason is that the court finds it necessary to imply a term into a contract simply to make it workable, or, in legal language. ‘to give business efficacy’ to it. This will only involve those terms that the parties must have taken for granted.

The Moorcock [1889]
The owners of a wharf agreed that a ship should be moored alongside to unload its cargo. It was well known that at low water the ship would ground on the mud at the bottom. At ebb tide, the ship settled on a ridge concealed beneath the mud and suffered damage. The court held that there was an implied term that the ground alongside the wharf was safe at low tide since both parties knew that the ship must rest on it.

Terms may also be implied from previous dealings between the parties concerned.

Hillas & Co Ltd v Arcos Ltd [1932]
The claimants agreed to purchase from the defendants ’22,000 standards of softwood goods of fair specification over the season 1930’. The agreement contained an option to buy a further 100,000 standards in 1931, without terms as to the kind or size of timber being specified. The 1930 transaction took place, but the sellers refused to supply any wood in 1931, saying that the agreement was too vague. The court held that the missing terms of the agreement could be imported/implied by reference to the transactions in 1930.

2.Conditions and Warranties
Not all terms of a contract are of equal importance. Failure to perform some may have a more serious effect on the contract than failure to perform others. A condition is a term of the contract which is so important that it goes to the root of the contract, and if breached, the injured party may repudiate (get out of) the entire contract or continue with the contract and sue for damages (compensations). A warranty, on the other hand, is a lesser term, which upon breach entitles the injured party merely to damages, but not repudiation of the contract. Sometimes, a statute states whether or not a term shall be a condition (e.g. the implied conditions and warranties of the Sales of Goods Act). The mere labeling of a term as a condition or warranty is not conclusive. Normally, it is left to the court to classify the term which has been breached, usually on the basis of the commercial importance of the term. Note that the word ‘warranty’ is sometimes used in a different way, e.g. by a manufacturer of goods who gives a warranty against faulty workmanship offering to replace part free. The term warranty is used by the manufacturer as equivalent to guarantee.

Poussard v Spiers and Ponds (1876)
Madame Poussard had entered into an agreement to play a part in an opera, the first performance to take place on 28 November 1874. On 23 November, Madame Poussard was taken ill and was unable to appear until 4...
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