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PROGRAMME
Edexcel BTEC Higher National Diploma in Business (Management)
MODULE
Aspects of Contract and Negligence for Business (ACNB)
Lecture 4 / Wk 4
TOPIC : Contractual Terms
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Introduction
Review of previous lesson
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Contractual Terms
.
Meaning
Terms of the contract define the obligations and promises which the parties
exchanged when they made the contract.
Thus Contractual terms are statements that form part of the contract
Implication of contractual terms to parties
Parties to a contractual term will normally be bound to perform any promise that they have agreed to
Failure by any party to perform any of the promise will lead to an action for a breach of contract.
the precise nature of the remedy will depend upon the nature of the promised broken
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Condition term
.
A condition is an important term that forms the root of thecontract
Effects of reach of a condition
1) Breach of a condition can result in damages o r disch arge or bo th.
2) Breach of a condition entitles the innocent party (i.e. injured party) the rightto either terminate the contract andrefuse to perform their part of i t orsue for damages
Case law : Poussard v Spiers & Pond (1876)
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Mme Poussard v Spiers & Pond (1876)
Facts: The plaintiff had contracted with the defendants to sing in an opera
they were producing. Owing to some illness she was unable to appear on
the opening night, or the next few days. When Mme Poussard recovered,
the defendants refused her services as they had hired a replacement forthe whole run of the opera.
Task: Identify the type of contractual term (s) breached and advice the
parties in terms of the legal effects of this breach.
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Held:
It was held that her failure to appear on the opening night had been a
breach of a condition, and the defendants were at liberty to treat the
contract as discharge.
This was a breach of a condition, which entitled the injured party to treat the
contract as ended
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Warranties
A warranty is a subsidiary obligation which is not vital to the overall
agreement, and in relation to which failure to perform does not totally
destroy the whole purpose of the contract.
A warranty is less important term of the contract, it does go into the root
of the contract but subsidiary to the main purpose of the agreement
ffects of breach of a warranty
1) Breach of a warranty does not result or give the right to terminate the agreement
2) The injured party has completed their own part of the agreement,and can only sue
for damages only
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Held:
On this occasion , it was held that there was only a breach of a warranty.
The injured party (defendants) could not treat the contract as ended. They
were entitled to damages only.
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Determining Whether a Term is a Condition or a Warranty
Classification of whether a contractual term is a cond i t ion or a warranty
depends on the following issues.
1) Statute
Statute often implies
terms specifically as
condition or warranty.
Such identification must
be followed by courts.
2) Case law
Case law may also
identify particular
clauses as conditions
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The Hansa Nord(1976)
Facts: Some of the ships cargo arrived in poor state. The buyer
rejected the whole cargo.
Held: the remedy was damages. The breach was insufficient to justify
treating the whole contracted as ended
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Activity 1Quick Quiz
1. Which of the following is correct
A. A condition is a term which the parties intended to be of fundamental
importance
B. Warranty is term which the parties did not intended to be of fundamental
importance
C. If a condition is breach then the contract must be terminated
D. If a warranty is breach, then the innocent party terminate the contract
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3. An obligation, which though it must be performed, is not so vital
that failure to perform it goes to the substance of the contract is a
A. Warranty
B. Condition
C. Innominate term
D. Representation
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Answers to Activity 1: Quick quiz answers
1 A:Conditions are the most important terms. Failure of conditions so
serious that the other party is not limited to seeking damages, he may
also treat the contract as discharged by breach. However it is incorrect to
state that the contract must be terminated. The correct statement in the
question provides a useful summary of the difference between conditions
and warranties.
2C: When a warranty is breached, the injured party can only claim
damages
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3A:A warranty is a term which is incidental to the main purpose of thecontract. Failure to observe it does not cause the whole contract to
collapse
4 A:A remedy for breach of a warranty is damages. The remedies for
breach of condition are repudiation and damages
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Activity 2 Feedback
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Summary of Lesson
This lesson has covered the following :
Analysed contractual terms with reference to their meaning and effects
Undertaken a number of objective class exercises to test students
understanding of the contract terms
Undertaken group activities that applied the law on terms in different
contracts
Evaluated the effect of different terms in given contracts
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