Types of Contract Terms

Q.1. What is a term and what are the different kinds of terms in a contract? What is their importance and impact if these terms are broken?

TERM: –

A contractual term can be defined as ‘Any provision forming part of a contract’. Each term gives rise to a contractual obligation and breach of which can give rise to litigation. All terms are not stated expressly but some terms carry less legal gravity as because they are peripheral to the objectives of a contract.

KINDS OF TERMS: –

There are two basic types of Terms which are defined as under.

1. Implied Terms.
2. Express Terms.

Implied Terms: – Implied terms are the terms in which it has not been mentioned by either party that will nonethless be included in the contract, often because the contract does not make any commercial sense without that term. There are two main types of Implied term.

1. Terms Implied by Statue.
2. Terms Implied by Courts.

Express Terms: – Express terms can be defined as the terms that have been specifically mentioned and agreed upon by both parties at the time of making that contract and they can be either in oral or in written.

IMPORTANCE AND IMPACT OF BROKEN CONTRACT TERMS

The importance of a term can be clearly understood by explaining the contract. So, If an agreement is eventually put into writing form, then the statement is more likely to be a term of the contract. The general rule is that the party is bound by all the terms set out in a contractual document once they have signed it. This applies whether they have read the terms and understood them or not.

Contract Terms may be Conditions or Warranties :-

As contracts contain different types of terms, some are oral and some are written and some are more important than others. The more important terms are called conditions and the less imprtant terms are called warranties.

Conditions are considered so important that without conditions one party or the other party or both of the parties would not enter into a contract. Similarly, to make a condition falsely or to breach a condition, it is viewed so seriously that the wrong party will be entitled to treat the contract as void or voidable. Where if the term is a warranty then the wronged party will only be able to seek monetary damages for any loss suffered by the party and the contract itself will remain binding on both parties.

Similarly breach of contract is the failure by one party to a contract to uphold their part of deal. A breach of contract will make the whole contract void and can lead to damages being awarded against the party which is in brech. As each term gives rise to a contractual obligation similalry by breach of which it can give rise to litigation. All the terms are not stated expressly but some of the terms carry less legal gravity, because they are peripheral to the objectives of the contract.

Q.2. “Implied terms may override express terms in certain circumstances such as where they are implied by statue”. Apply and analyze this law in the case of consumers.

As we know that the rights and duties of both employers and employees are to be found in the contract of employment which are called terms of the contract. Some of these terms are express terms which means that they are expressly or specifically stated, either orally, say at the initial interview, or in writing form. Express terms include such things like pay, hours and holidays. For this the law states that certain express terms must be put in writing and handed over to the employee in the form of a written statement of particulars within two months of starting the work.

There are other contractual terms called implied terms and they are not expressly or explicitly stated because, in the main, they are fairly obvious to both parties to the contract of employment. Occasionally the courts will imply a term in a contract of employment where an important term has been left out. Similalry Implied terms include statutory rights, such as the right to equal pay and duties such as a duty of care.

Implied terms refers to the practice of setting down the default rules for contracts. When the terms that the contracting parties expressly choose run out or setting down mandatory rules which usually operate to override the terms that the parties may have themselves chosen. The purpose of implied terms is to often supplement a contractual agreement in order to make the deal effective for the business purposes and to achieve fairness between the parties or to relieve hardship.

Terms may be implied into contract through the statutes or by the courts. When terms are implied by statute the Parliament may make certain terms well compulsory. The examples are numerous. For instance, that under the Unfair Contract Terms Act 1977, provisions of the Sale of Goods Act 1979, such as that goods for sale must be of satisfactory quality, become compulsory in contracts with consumers, or can only be excluded when reasonable in contracts among businesses. similalry when terms are implied by the courts, the general rule for this is that they can be excluded by express provision in an agreement. For this the courts have developed an apparent distinction between terms implied ‘in fact’ and those which are implied ‘in law’. Terms that are implied ‘in fact’ are said to arise when they are strictly necessary to give effect to the reasonable expectations of the parties. While the terms implied ‘in law’ are confined to particular categories of a contract or particularly employment contracts or contracts between landlords and tenants, as necessary for incidents of the relationship. For example, in every employment contract there is an implied term of mutual trust and confidence which supports the notion that workplace relations depend on partnership.

It can also be explained that courts imply terms as a general rule. So, when the express terms of a contract leaves a gap to be filled being given their basic attachment to the contractual freedom then the courts are reluctant to override the express terms for contracting parties. Also the Legislation can be a source of implied terms which may be overridden by the agreement of the parties. Similarly for contracts in general the individual terms are implied to reflect the reasonable expectations of the parties and like the process of interpretation and implication of a term of commercial contract must have to follow from its commercial settings.