Contract Terms

i. Exam Technique

a) Identify all ______

b) Identify what ____ of terms (e.g. express + warranty)

c) Identify the ______

d) Identify available _____

.

1. Types of Terms

1a. Condition

A condition is a vital, fundamental term of the contract.

A term is a condition if statute or the parties' explicitly define it as such, OR if it's vital to the contract's purpose and fulfilment

Breaching a condition is a ________ breach. The claimant can:

Just because a term is labelled a "condition" in a contract does not automatically give it the status of a condition in law

The courts usually regard time as an innominate term. However, they will regard it as a condition if:

.

1b. Warranties

A warranty is a less important, minor term of the contract.

The claimant can:

.

1c. Innominate Terms

An innominate term is a term in a contract that is neither clearly a condition nor a warranty at the creation of the contract and whose remedy for breaching it depends on the seriousness of the breach and its effect on the contract as a whole.

.

2. Express Terms

Express terms are terms ____ agreed upon by the parties. Express terms can take two forms:

.

1a. Distinguishing a Representation from a Term

Representations are statements made during precontract negotiations to _____ someone into entering a contract that do not form part of the contract and so thus do not impose legal obligations. Express terms are statements both parties intend to form part of the contract

The courts take a ____ approach. The question is: Would a reasonable person, in the position of the parties, have understood the statement to be a binding term of the contract — or merely a representation?

a) Time - A statement made closer to the time of entering into the contract is more likely to be considered an express term. If there is a substantial time gap between the statement and the final contract, the courts are less likely to treat the statement as an express term.

b) Importance - When a statement is of significant importance to one party, and the other party knows this, it is more likely to be considered a term of the contract.

c) Oral Statements Followed by Written Contract - When a contract is in writing, it is presumed that all agreed terms are included in the document. Therefore, pre-contractual oral negotiations are typically not considered terms unless explicitly stated in the written agreement.

d) Special Skills of the Statement Maker - If the person making the statement possesses special knowledge or expertise, and the other party relies on this, the courts are more likely to treat the statement as an express term.

.

2. Implied Terms

Implied terms are terms not explicitly discussed or agreed upon by the parties during negotiations. These terms are automatically inserted into the contract by law, either by courts or ______.

1. Custom - Courts may imply terms if it is common practice in a particular trade or industry for contracts to include these.

2. Business Efficacy - Courts will imply terms when doing so is necessary to make the contract work properly. The question the courts ask is, "Would the contract still function if this term wasn't implied?" If the answer is no, the court will imply the term to ensure the contract makes sense and achieves its purpose.

3. Officious Bystander - The officious bystander test states that a term can be implied if an outsider had asked the parties during the contract negotiations whether a particular term should be included and both parties would have immediately said, "Of course!"

4. Reflection of prior dealings - If the parties have engaged in multiple contracts in the past, and those contracts have consistently included certain terms, courts may imply those terms into the current contract.

Express terms override implied terms by courts.