Uos Pmgt5895 Contracts Management - Lecture 06

Front 1

What are terms of a contract?

Back 1

The terms of a contract relate to its contents. Terms contain obligations of each party to the contract. The terms are all the promises made in the contract. They address the technical issues, schedule issues, quality issues, payment issues, warranty issues and so on. There can be express or implied, Conditions, Warranties, or lesser terms.

Front 2

What is a warranty in a contract?

Back 2

A term of a contract of a lesser importance than a condition. A warranty may be implied by Statute or expressly agreed to by both parties. Generally, in a contract for the purchase of a new motor vehicle, a condition would be broken if a second-hand car was delivered. If a new car was delivered, but its colour was not as ordered, then a warranty only would have been broken. The breach of a warranty allows the innocent party to sue for damages only, but not to rescind the contract.

Front 3

What is a condition of a contract?

Back 3

A condition is a major or vital term of a contract, the breach of which would entitle the innocent party to sue for damages and/or set the contract aside (repudiate the contract). Whether a term within a contract is to be a condition or a mere warranty would be open to discussion by parties to the contract.

Front 4

Can a contract be voided by the breach of a contract warranty?

Back 4

No, but the term can be enforced, or damages awarded in the courts.

Front 5

Can a contract be voided by the breach of a contract condition?

Back 5

Yes

Front 6

What is an express term in a contract?

Back 6

Terms that are explicitly included in the contract.

Front 7

What is an express term in a contract?

Back 7

Terms that will be read into the contract and which were never the subject of express agreement. They can be drawn from statute, courts (precedence), or by custom or trade usage.

Front 8

What five conditions are required for a court to imply a term in to a contract?

Back 8

1. the terms must be reasonable and equitable;
2. it must be necessary to give business efficacy to the contract (i.e. the contract would be ineffective without it);
3. it must be so obvious that it goes without saying;
4. it must be capable of being clearly expressed; and
5. it must not contradict any express term of the contract.

Front 9

For custom or trade usage, what conditions need to be met for the courts to imply a term in to a contract?

Back 9

a) The existence of the custom or usage is certain, reasonable and notorious.
b) A term will not be implied into a contract on the basis of custom where it is contrary to the express terms of the agreement
c) The custom or usage alleged must not offend any statutory principle.

Front 10

Are statements made in pre-contractual negotiations terms of the contract?

Back 10

Yes, they are considered express terms of the contract.

Front 11

Are statements made in pre-contractual negotiations warranties, conditions, or lesser terms?

Back 11

If they promissory in nature then they are terms. It depends on the importance of the statement as to which they are.

Front 12

What factors are taken in to account to determine whether a pre-contractual statement is a term or merely a representation?

Back 12

- The importance of the statement;
- The time that has passed since making the statement and of making the agreement;
- Whether the party making the statement was in relation to the other party, in a better position to ascertain the truth of the statement;
- Whether the statement was subsequently omitted when the agreement was embodied in a more formal written document-if so, the more likely it is that the statement is a representation only.

Front 13

If it is unclear if a pre-contractual statement is a term or a representation, how does the court decide?

Back 13

The court will try to ascertain the objective intention of the parties, and ask whether a reasonable person would interpret the statement as being promissory in nature.

However, where there are reasonable grounds to believe that the promisor believed that his statement was true, then this amounts to innocent representation and is not considered a term.

Front 14

Can a statement at any time be made a term of the contract?

Back 14

Yes, but the closer the statement was made to the creation of the contract, the more likely that it is a term.

Front 15

What does the term “entire agreement” mean when used in a term of a contract?

Back 15

Such a clause has the effect of making the document an exhaustive statement of the express terms which the parties are subject to under their agreement. It effectively excludes all statements not detailed in the written contract.

Front 16

What are collateral contracts?

Back 16

Even if a statement is promissory in nature it may not form part of the contract, but is none the less it may form a collateral contract. It is a mini-contract of sorts as it was made and so it could be argued that it should be considered part of the contract. This type of contract is separate to the main contract.

Front 17

What is a bipartite collateral contract?

Back 17

Where the parties make a separate contract to enter into the main contract;

Front 18

What is a tripartite collateral contract?

Back 18

Where a third party who is not involved in the contract makes the statement which promises a contract (e.g. A enters into contract with C, after statement made by B).

Front 19

As a collateral contract is not part of the main contract, can one contract be enforceable but not the other?

Back 19

Where the main contract is unenforceable, the collateral contract may still be enforceable, as it is separate to the main contract;

Front 20

What is the parole evidence rule?

Back 20

It prevents a party to a written contract from presenting extrinsic evidence that contradicts or adds to the written terms of the contract that appears to be whole. Basically, you cannot use oral testimony to contradict the terms of a signed contract.

Front 21

Can collateral contracts be used to contradict a contract?

Back 21

No, but they are contracts in their own right, so they do not need to be in writing and can avoid the parole evidence rule.

Front 22

What is privity of contract?

Back 22

Only those parties to the contract have rights or obligations under that contract. Others cannot be sued over the contract, and cannot enforce the contract.