02.Contents_of_a_contract.pdf

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Terms that parties
specifically agree to
May be written or oral
E.g. consideration,
agreed price
‘freedom of contract’ - parties
are allowed to choose the terms
of their contractual relations
Terms of
contract
Conditions,
Warranties and
Innominate terms
Expressed and implied terms will be categorised as conditions
and warranties depending on the importance of the term
It is not always easy to determine if a terms is a condition or warranty, so
the courts have introduced an ‘innominate’ terms as an alternative
The most important terms – fundamental, e.g. selling price of a house or
number of bedrooms, where a breach would have major consequences
Expressed
terms
State what each party is obliged
to do under the contract, each
party must comply with terms or
may be sued for breach
Conditions
Not actually agreed between the parties
but part of the contract nonetheless
As important as the expressed terms
Usually in case of conflict between
express term and implied term,
express term overrides implied term
Included in contract by
virtue of legislation
E.g. minimum rights in relation to
pay, holidays, dismissals,
protective leave, notice etc.
Sometimes it is possible to contract
out of terms implied by legislation, but
often it is specifically prohibited
May determine that a term was intended to be included in the
contract based on the facts, even if it was not specifically
expressed
The business efficacy test
– which ascertains
whether implying a term is necessary in order to
make the contract work
The officious bystander test
– seeks to
determine what a reasonable person would
assume was a part of the contract
The Moorcock (1889)
If a party breaches a condition of the contract, the injured party has a right
to ‘terminate without notice’ and sue for breach of contract
Some terms may be considered conditions even if the
consequences of a breach are not serious
Arcos v Ronaasen (1933)
Poussard v Spiers and Pond (1876)
Less vital/ancillary terms of a contract
Implied
terms
Contents of
a contract
Terms implied by the Constitution
(This arises when a contract seeks to
encroach upon any individual rights
protected by the Constitution
Glover v BLN (1973)
)
Custom that exists and is regarded as
being associated with such contracts
Additional terms that do not form the basis of the
contract and are not usually the terms that persuade
the party to enter the contract
Terms implied
by legislation
Warranties
A breach of warranty does not entitle to repudiate the
contract because it does not usually have the serious
consequences
Bettini v Gye (1876)
Developed by the courts for cases where it not always possible
to determine whether a term is a condition or a warranty
Not classified until it has been breached, may be treated as
either depending on the consequences of the breach
If an innominate term has been breached, the injured party can
claim damages and depending on the nature and consequences
of the breach may have the right to repudiate the contract
If the breach deprives the injured party of ‘substantially the whole
benefit’ of the contract, the courts will treat the term like a condition.
Terms implied
by custom
Custom must be notorious (widely
known) and viewed as obligatory
Hutton v Warren (1836)
O’Conaill v Gaelic Echo (1958)
Terms implied
by
the courts
May imply a law into the contract if
they consider that the law implies
such a term into the contract, tests:
Innominate terms
(
intermediate terms
)
If the court determines that the injured party did not
‘lose substantially the whole benefit of the contract’
the courts will treat the term like a warranty.
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962)

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