BTEC NATIONALUNIT 21- ASPECTS OF CONTRACT &

BUSINESS LAW

“Meaning and effects of ‘Terms’ in a standard form contract.”

By Jane Akinyebo

Contractual TermsA contract is equally agreed promises made

between 2 or more parties with the intention of creating a legally binding agreement.

Statements made by the parties under negotiation that are not meant to form part of the contract are called representations, whilst

the things that the parties are bound to perform under the contract are called the terms of the

contract.

Types of Term

There are two types of term which can be found in a contract:

•The express term•The implied term

Express Terms

Express terms are statements made by the parties either by word of mouth or in writing and the parties intend that these terms will create the vital part of the contract. Express

terms can be either conditions, warranties or innominate Terms .

Conditions

A condition is a fundamental part of the agreement and is something which forms

the root of the contract.

A breach of condition will entitle the injured party to repudiate (treat the

contract as if it is over and invalid) and claim damages.

Warranties

A warranty is a less important term that does not go to the root of the contract. A breach of a warranty will only give the injured party the right to claim in damages; the contract itself

cannot be rejected.

Warranties

It is common in business contracts to not only have express terms relating to conditions and warranties, but also to have express key terms

included in the contract such as:

•Exclusion clauses•Clauses relating to damages

•Price variation clauses

Innominate Terms

Contractual term that may turn out to be either a condition (is integral to the contract) or a

warranty (is incidental to the contract) depending on its effect on the injured or

innocent party.

Implied Terms

Implied terms are not actually stated in a contract but are introduced into the contract by statute,

custom and common law.

The Difference Between Express and Implied Terms

Express terms will be those terms in the contract that

the parties have negotiated and expressly agreed. Parties can strike these terms out and re-negotiate until

all terms have been agreed. The parties have total control over the type of express terms their contract

contains.

The Difference Between Express and Implied Terms

On the other hand, implied terms are those that the law insists are included in the contract. Here the parties have no say in the matter and if they wish to do business with each other must follow

these implied terms precisely.

To protect parties, terms are implied into a contract by virtue of legislation. A main example of this is the Sale of

Goods Act 1979 - which is implied by statute into contracts for the sale of goods. According to this Act:

•Every seller has the right to sell goods•Where there is a sale of goods by description there is an implied condition that the goods will correspond with that

description•Goods sold are of a satisfactory condition and that they are

fit for the particular purpose stated

Terms Implied by Statute

Terms implied by StatuteThe Supply of Goods and Services Act 1982 deals with

implied terms that apply to contracts where one person agrees to bail goods to another person by way of hire.

•S7: defines that there is an implied condition that the bailor has the right to transfer the goods

•S8: provides that when there is a contract for the hire of goods by description, there is an implied condition that the

goods will match that description•S9: states that where goods are hired in the course of a business, there is an implied condition that the goods are of a satisfactory quality and reasonably fit for the purpose

hired

Terms Implied by Custom

An agreement may be subject to customary terms not actually specified by

the parties. These could be historical; therefore, a person making a contract

should try to find if any such terms are in existence. It should be noted, however,

that such a custom will be overruled by any express clause to the contrary.

Terms Implied by the Common Law

The courts will be prepared to imply a term into the contract in order to validate the obvious intentions of the parties. This may be a point that has been overlooked or may not have been clearly stated by the parties. In such circumstances, the court will imply such a term in the interests of 'business fairness' so that the contract makes commercial common sense.

Terms that can have impact on my contract

• Time for performance and rejection of goods• Price Variation• Payment terms• Quality and quantity of goods delivered• Reservation of title• Exclusion clauses

Time for Performance & Rejection of Goods

This is an chosen amount of time that allows the buyer to return items after received, this is typically

14 – 31 days. In my contract this is underlined as number 9 and labelled as “Your right of

cancellation”. This is a fair term as it does not limit the liability or disadvantage the consumer. The consumer protection regulations (2000) would

affect this as it states the amount of days allowed for rejection of goods. Louis Vuitton have chosen 7

days.

Price VariationThis is allows a business or a company to sell

goods or services at different prices. An example of this would be petrol, as the price changes

daily. In my contract this is underlined as number 5 as “Price” in the paragraph it also includes

payment terms. Within this contract this is a fair term as the company have set a standard rate for 12 months that will not be changed. This is fair as

it does not disadvantage the customer.

Payment TermsThis is a clause that shows how the customer

will pay the company that it has brought goods or a service from. This would typically be via a

monthly charge via the credit card. In my contract this is this is underlined as number 6 in the quick summary page. This is a fair term as it

does not disadvantage the customer. The consumer protection regulations (2000) would

affect this as it states what information is.

Reservation of TitleThis is a clause under a contract for the supply of

goods. It states that ownership of the product will remain (be reserved) with the supplier until

goods have been fully paid for, only if this is agreed by all parties and stated in the contract

at the time of supply.

Exclusion ClausesLouis Vuitton have added an exclusion clause

in their contract in an effort to limit its liability to a fixed sum. The use of exclusion clauses is

governed by the Unfair Contract Terms Act 1977 [amended by the Supply of Goods and

Services Act 1982].