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A contractual term is " provision forming part of a contract"Martin, E [ed & Law, J [ed], ''Oxford Dictionary of Law'', ed6 (2006, London:OUP). Each term gives rise to a Contract ual obligation, Breach of which will can give rise to Litigation . Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the Contract . CLASSIFICATION OF TERM
It is an objective matter of fact whether a term goes to the root of a Contract . By way of illustration, an actress' obligation to perform the opening night of a Theatrical production is a condition,''Poussard v Spiers and Pond'' (1876) 1 QBD 410 whereas a singers obligation to perform during the first three days of rehearsal is a warranty''Bettini v Gye'' (1876) 1 QBD 183. Statute may also declare a term or nature of term to be a condition or warranty; for example the Sale Of Goods Act 1979 s15AAs added by the Sale of Goods Act 1994 s4(1). provides that terms as to title, description, quality and sample (as described in the Act ) are conditions save in certain defined circumstances.
STATUS AS A TERM Status as a term is important as a party can only take Legal Action for the non fulfillment of a term as opposed to representations or mere puffs. Legally speaking only statements that amount to a term create contractual obligations. Statements can be split into the following types:
There are various factor that a Court may take into account in determining the nature of a statement. These include:
The Parol Evidence Rule limits what things can be taken into account when trying to interpret a Contract . This rule has practically ceased operation under UK Law IMPLIED TERMS A Term may either be expressed or implied. An Express term is stated by the parties during negotiation or written in a contractual document. Implied terms are not stated but nevertheless form a provision of the Contract . Terms implied in fact The Privy Council established a five stage test in ''BP Refinery Western Port v. Shire of Hastings''(1977) 180 CLR 266: # Reasonableness and equitableness: The implied term must be reasonable and equitable. # Business efficacy: The implied term must be necessary for the business efficacy of the contract. For instance, if the term simply causes the Contract to operate better, that does not fit this criterion. This is the principle laid out in ''The Moorcock''(1889)14 P.D. 64. The presiding Judge created a quaint concept of an ''officious bystander''; if the ''officious bystander'' were to propose a term and both the parties would be likely to reply "oh, of course", the term is implied. # Obviousness: The term is so obvious that it goes without saying. Furthermore, there must be one and only one thing that would be implied by the parties. For example, in ''Codelfa Construction Pty Ltd v. State Rail Authority of New South Wales'',(1982) 149 CLR 337 a term regarding the inability of construction company to work three shifts a day could not be implied because it was unclear what form it would have taken. In English Law , This principle was established in the case of ''Spring v. NASDS'' {Link without Title} 1 W.L.R. 585, in the context of a Trade Union membership contract. # Clear expression: The term must be capable of clear expression. No specific technical knowledge should be required. # Consistency: The implied term may not contradict an express term. In Australia , the High Court has ruled that the test in BP Refinery applies only to Formal Contract s, while the test in ''Byrne and Frew v. Australian Airlines Ltd''(1995) 185 CLR 410 shall apply to Informal Contract s:
Terms implied in law These are terms that have been implied into standardised relationships. Common Law.
These terms will be implied into all Contract s of the same nature as a matter of Law . Statutory. The rules by which many Contract s are governed are provided in specialized Statute s that deal with particular subjects. Most Countries , for example, have statutes which deal directly with sale of goods, lease transactions, and trade practices. For example, most American State s have adopted Article 2 of the Uniform Commercial Code, which regulates contracts for the sale of goods. The most important Legislation implying terms under United Kingdom Law are the Sale Of Goods Act 1979 , the Consumer Protection (Distance Selling) Regulations 2000 and the Supply Of Goods And Services Act 1982 which imply terms into all Contract s whereby Goods are sold or services provided. Terms implied by custom or trade One is generally bound by the custom of the industry that one is in. To imply a term due to custom or trade, one must prove the existence of the custom, which must be notorious, certain, legal and reasonable''Con-stan Industries of Australia Pty Ltd v. Norwich Winterthur Insurance (Australia) Ltd'' (1986) 160 CLR 226''Frigaliment Importing Co., Ltd., v. B.N.S. International Sales Corp.'', 190 F. Supp. 116 (S.D.N.Y. 1960) (plaintiff failed to prove what he meant by "chicken") and U.C.C. ยง 1-205. Course of dealing If two parties have regularly conduct business on certain terms, the terms may be assumed to be same for each Contract made, if not expressly agreed to the contrary. The parties must have dealt on numerous occasions and been aware of the term purported to be implied. In ''Hollier v Rambler Motors Ltd.'' QB 71 four occasions over five years was held to be sufficient. In ''British Crane Hire Corp. Ltd. v Ipswitch Plant Hire Ltd.''[1975 QB 303 written terms were held to have been implied into an oral in which there was no mention of written terms. Good faith See Also: Good faith It is common for lengthy negotiations to be written into a heads of agreement document that includes a clause to the effect that the rest of the agreement is to be negotiated. Although these cases may appear to fall into the category of agreement to agree, Australian Court s will imply an obligation to negotiate in Good Faith provided that certain conditions are satisfied''Coal Cliff Collieries Pty Ltd v. Sijehama Pty Ltd'' (1991) 24 NSWLR 1
The test of whether one has acted in good faith is a subjective one; the cases suggest honesty, and possibly also reasonably. There is no such implied term under in a series of case during the 70s and 80s but they are no longer considered 'good law'. European legislation imposes this duty, but only in certain circumstances. The Unfair Terms In Consumer Contracts Regulations 1999 SI 1999/2083 reg 8 will render ineffective any 'unfair' contractual term if made between a seller or supplier and a consumer.For definitions, see reg 3(1). Regulation 5 of the Statutory Instrument further elaborates upon the concept of 'unfair', which is rather novel to English law. 'Unfair' is a term that was not individually negotiated (i.e. Standard Form ) that "causes a significant imbalance in the parties' rights and obligations arising under the Contract to the detriment of the consumer" Unfair Terms In Consumer Contracts Regulations 1999 reg 5(1). This is not possible if the term is not contrary to 'good faith'; such as in ''Director General of Fair Trading v First National Bank'' {Link without Title} 3 WLR 1297, wherein the lack of a seemingly unfair Interest term would leave the bank open to a very poor deal whereby no Interest could be charged. "SUBJECT TO" CONTRACTS If a Contract specifies "subject to contract", it may fall into one of three categories:''Masters v. Cameron'' (1954) 91 CLR 353 # The parties are immediately bound to the bargain, but they intend to restate the deal in a formalised contract that will not have a different effect; or # The parties have completely agreed to the terms, but have made the execution of some terms in the contract conditional on the creation of a formalised contract; or # It is merely an agreement to agree, and the deal will not be concluded until the formalised Contract has been drawn up. If a Contract specifies "subject to finance", it imposes obligations on the purchaser:''Meehan v. Jones'' (1982) 149 CLR 571
This may also refer to contingent conditions, which come under two categories: condition precedent and condition subsequent. Conditions precedent are conditions that have to be complied with before performance of a Contract With conditions subsequent, parties have to perform until the condition is not met. Failure of a condition repudiates the Contract this is not to necessarily discharge it. Repudiation will alway gives rise to an Action for damages. REFERENCES |
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