THE CONTENTS OF

A CONTRACT
Hampton School

INTRODUCTION
Terms in a contract set out duties of each
party under the agreement.
The terms will be of two kind
Express terms: These are laid down by the
parties themselves
Implied terms: These are read into the
contract by the court on the basis of the
nature of the agreement and the parties
apparent intentions, or on the basis of law
on certain types of contract

DISTINCTION BETWEEN TERMS

AND MERE REPRESENTATION
Is a statement part of a contract? Statements made
during negotiations leading to a contract may be
either:
Terms: Statements which form the express terms of
the contract . As such they constitute promises as
to the present truth of the statement, or as to
future action. If such a promise is broken (for
example, because the statement is untrue) this will
be a breach of contract; or
Mere representation- Statement that do not form
part of the contract, but which helped to induce the
contract. If these are untrue they are
misrepresentation

Whether a statement has become a term of the

contract depends on the intention of the parties.
In trying to ascertain such intention the court
may take into account the following:
1)Importance of statement- If the statement is
so important that a party would not otherwise
have entered into the contract. The statement
is likely to be viewed as a term
(Bannerman v White (1861 the buyer stated
if sulphur has been used. I do not want to
know the price Held: it was a term of the
contract that sulphur was not used.

Timing of statement Generally, the more

time between statement and conclusion of
contract the less likely is he statement to
be held a term of the contract
(Routledge v McKay)
2)

3)

The manner of the statement- It is unlikely

to be a term if it discourages verification.
If there was anything wrong with the
horse , I would tell you (Schawel v Reade
(1913), It is more likely to be a term

Special knowledge and skill of parties If

statement made by party with special
knowledge and expertise on matter, the
court is more likely to deem the statement
a term than if statement was made by
someone without such expertise.
In Oscar Chess Ltd. V williams (1957) it was
held that a statement by a member of the
public (a non expert) to a garage (an expert)
with regards to the age of the car was a mere
representation not a term
5)

IMPLIED TERMS
Sometimes a term which has not been
mentioned by either party will nonetheless be
included in the contract, often because the
contract doesnt make commercial sense
without that term. Terms like this are called
implied terms, and there are two main types:

Terms implied by the courts

Terms implied by statute
Terms implied by customs

TERMS IMPLIED BY THE COURTS

As a matter of fact: Something thats so
obviously included that it did not need to be
mentioned in the contract. If I agree to pay
you 50 for a lawnmower, it probably would
not occur to us to write down that we mean
fifty pounds sterling, as opposed to any other
sort of pound. Thats obvious to both of us.
(Beware of this point it has to have been
obvious to both parties its not enough to
show that one party thought it was included,
or that the contract would have been more
reasonable with the added term.)

TERMS IMPLIED BY THE COURTS

As a matter of law: This is about general
considerations of public policy the courts are
laying down, as a matter of law, how the
parties to certain types of contract ought to
behave. For example, in one case, the courts
held that landlords of blocks of flats ought to
keep the communal areas (lifts, stairs etc) in a
reasonable state of repair so that term was
implied into the rental contract.

TERMS IMPLIED BY COURTS

Do note that any of these terms implied by the
courts can be excluded with an express term.
If a bakers contract has a clear term in it that
says one dozen means twelve for the purposes
of this contract, then the courts cant say
that a dozen has to equal thirteen!

TERMS IMPLIED BY CUSTOMS

A contract may be deemed to incorporate any
relevant custom of the market, trade or locality
in which the contract is made in (Hutton v
Warren (1836) where a tenant establish a right
to fair allowance for improvement to the land
through a local custom.
Some terms are generally known to be included
in contracts in a particular trade or locality.
Amongst bakers, one dozen means thirteen
they dont have to include terms in every
contract specifying that.

TERMS IMPLIED BY STATUTE

The most well known example of terms

implied by statute is the Sale of Goods Act

The key provisions are:

Section 12: the person selling the goods has
to have the legal right to sell them.
Section 13: if youre selling goods by
description, e.g. from a catalogue or
newspaper advert, then the actual goods
have to correspond to that description

TERMS IMPLIED BY STATUTE

Section 14: the goods must be of satisfactory

quality that is, they should meet the
standard that a reasonable person would
regard as satisfactory. Also, if the buyer
says theyre buying the goods for a particular
purpose, theres an implied term that the
goods are fit for that purpose.
Section 15: if youre selling the goods by
sample you show the customer one bag of
flour and they order 50 bags then the bulk
order has to be of the same quality as the
sample.

EXPRESS TERMS
Express terms are terms that have been
specifically mentioned and agreed by both
parties at the time the contract is made. They
can either be oral or in writing

THE PAROLE EVIDENCE RULE

There is a general rule, the parol evidence
rule that where a contract is embodied in a
written document the extrinsic (parol)
evidence is not admissible to add to , vary,
subtract from or contradict the terms of the
written document. Extrinsic evidence is not
confined to oral statement but can extend to
written matters such as draft contract and
correspondence. Exceptions to this rule
involve custom, operation of the contract,
validity, evidence as to supplimentary terms,
Rectification and collateral contract

CLASSIFICATION OF TERMS
Not all the terms of the contract are of equal
importance and the law has sought to classify
them according to their importance. The
normal classification is into conditions,
warranties and innominate terms. These are
types of express terms

CONDITION
A condition is a major term of the contract
which goes to the root of the contract. If a
condition is breached the innocent party is
entitled to repudiate (end) the contract and
claim damages:

WARRANTY
Warranties are minor terms of a contract which
are not central to the existence of the
contract. If a warranty is breached the
innocent party may claim damages but can not
end the contract:

INNOMINATE/INTERMIDIATE
Classification as a condition or a warranty
depends on the intention of the parties, but in
many cases their intention is not expressed
and the clause will not obviously be a
condition or a warranty. Such terms are called
innominate of intermediate terms. The remain
unclassified until the seriousness of a breach
can be judged.
See Hong Kong Fir Shipping Co. v Kawasaki
Kisen Kaisha (1962)

HONG KONG FIR

A ship was chartered to the defendants for a 2
year period. The agreement included a term that
the ship would be seaworthy throughout the
period of hire. The problems developed with the
engine of the ship and the engine crew were
incompetent. Consequently the ship was out of
service for a 5 week period and then a further 15
week period. The defendants treated this as a
breach of condition and ended the contract. The
claimants brought an action for wrongful
repudiation arguing the term relating to
seaworthiness was not a condition of the contract.

HONG KONG FIR CONT

The defendants were liable for wrongful
repudiation. The court introduced the innominate
term approach. Rather than seeking to classify the
term itself as a condition or warranty, the court
should look to the effect of the breach and ask if
the breach has substantially deprived the innocent
party of the whole benefit of the contract. Only
where this is answered affirmatively is it to be a
breach of condition. 20 weeks out of a 2 year
contract period did not substantially deprive the
defendants of whole benefit and therefore they
were not entitled to repudiate the contract.

SCHULER V WICKMAN TOOLS

[1974] AC 235 HOUSE OF LORDS
Schuler were manufacturers of certain tools and Wickman
were a sales company granted the sole right to sell certain
tools manufactured by Schuler. A term of the contract
between the parties was described in the contract as being a
condition and provided that Wickman would send a sales
person to each named company once a week to solicit sales.
This imposed an obligation to make 1,400 visits in total.
Wickman failed to make some of the visits and Schuler
terminated the contract for breach of condition. Held:
Despite the fact the contract had expressly stated the term
was a condition, the House of Lords held that it was only a
warranty.

LOMBARD NORTH CENTRAL V

BUTTERWORTH [1987] QB 527

The defendant leased a computer from the claimant. The

claimant was to pay 584 by 20 instalments every 3 months. A
term of the lease agreement provided that punctual payment
was required and breach of this term would entitle the lessor
to terminate the agreement. The defendant got into arrears
with the instalments and the claimant took possession of the
computer and sold it on for 175. The claimant sued the
defendant claiming arrears and all future payments amounting
to 6,869 in total.

Held: The term relating to prompt payment was a condition.

The parties by their agreement had demonstrated that prompt
payment was an essential term and the consequence of breach
was clearly set out. Nicholls LJ stated that even one late
payment would entitle the lessor to terminate irrespective of
the effect of the breach.

THE MIHALIS ANGELOS [1970] 3

WLR 601
The owners of the ship, The Mihalis Angelos, chartered the ship
to the defendant to use for the carriage of some cargo. A clause
in the agreement stated the ship was expected ready to load on
1st July. In fact the owners had no grounds for believing the ship
would be ready to load on that date as it was in Hong Kong at the
time and would not be ready until at least the 14th of July and in
fact it was not ready at that date. The defendant cancelled the
contract on 17th of July. The cargo that they expected to be
carrying had not arrived due to the bombing of a railway in
Vietnam. The ship owners brought an action against the
defendants for anticipatory breach. The defendants argued that
the claimant was in breach of condition of the contract by not be
ready to load on the specified date.
Held: The expected ready to load clause was a condition despite
the fact it had

POUSSARD V SPIERS (1876) 1

QBD 410
Madame Poussard entered a contract to perform
as an opera singer for three months. She became
ill five days before the opening night and was not
able to perform the first four nights. Spiers then
replaced her with another opera singer.
Held: Madame Poussard was in breach of
condition and Spiers were entitled to end the
contract. She missed the opening night which was
the most important performance as all the critics
and publicity would be based on this night.

EVALUATION
2009
a) i) Distinguish between an express term and
a mere representation (4 marks)
ii) Name two express terms and give
examples of their operation with reference to
case law (4 marks)
b) Explain with reference to at least TWO
decided cases, the factors which are relevant
in a determination of whether an assessment
made during negotiation becomes a term of
the contract (15 marks)