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Building Engineering & Construction Management

Written Terms
Written terms can be incorporated into a contract in three
ways: by signature, by reasonable notice and by a previous
course of dealing.

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Implied terms
As well as the express terms laid down by the parties, further
terms may in some circumstances be read into contracts by
the courts.

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Terms implied in fact


These are terms which are not laid down in the contract, but
which it is assumed both parties would have intended to
include if they had thought about it – they may be left out by
mistake, or because one or both parties thought them so
obvious that they did not need to be spelt out.

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Terms implied in law


These are terms which the law dictates must be present in
certain types of contract – in some cases, regardless of
whether or not the parties want them.

Example: A landlord who lets property containing several


homes in one building is under an implied obligation in law to
provide proper access to the individual dwellings.

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Terms implied by custom


Terms can be implied into a contract if there is evidence that
under local custom they would normally be there.

Example: In Smith v Wilson (1832) evidence was admitted to


the effect that, under local custom, 1,000 rabbits meant 1,200
rabbits – a sort of ‘bakers’ dozen’.

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Terms implied by trade usage


Where a term would routinely be part of a contract made by
parties involved in a particular trade or business, such a term
may be implied by the courts.

In British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd
(1975) the owner of a crane hired it to a contractor, who was
engaged in the same sort of business. It held that the hirer was
bound by the owner’s usual terms, even though these were not
actually stated at the time the contract was made.
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Terms implied by trade usage


The owner’s terms were based on a model supplied by a trade
association, and were common in the trade, and could
therefore be implied into the contract in much the same way as
terms implied by custom.

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Contractual terms

Contractual
Terms

In nominate
Conditions Warranties
Terms

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Condition
A term which is clearly an important one, in the sense that
a breach of it would have very significant consequences for
the innocent party, will usually be regarded by the courts as a
condition.
Where a condition is breached, the innocent party is
entitled to regard the contract as repudiated,
and so need not render any further performance, and can
also sue for damages

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Warranties
The word warranty usually describes a contractual term
which can be broken without highly important consequences

If a warranty is breached the innocent party can sue for


damages, but is not entitled to terminate the contract.

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Innominate terms
Also known as ‘intermediate terms’, these are terms which
can be broken with either important or trivial consequences,
depending on the nature of the breach. If the effects of the
breach are serious, the term will act as a condition; if they
are minor, it acts as a warranty.

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Exemption clauses
In some cases, one party to a contract may seek to avoid
incurring liability for certain breaches of the contract, or may
specify that their liability for such a breach will be limited,
usually to a certain amount in damages.
Therefore, Exemption clauses are terms that may be included
in contracts for the purpose of:
Limiting the extent of liability for damages(Limitation Clause)
 Exclude the liability for damages (Exclusion Clause)

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