Last Updated 05 Aug 2021

Business: terms of contract

Category Contract, Justice
Essay type Research
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Express terms are those obligations and liabilities which the parties themselves create to form the basis of their relationship (Goldwater, V 2007). That is to say. These are the terms the parties actually agreed and included in the contract. Express terms may be in writing or agreed upon verbally. It is highly recommended to reduce a significant contract to writing so that all parties are clear about their rights and obligations. Where the contract is made orally, express terms are which actually used by the parties when entering into a contract.

Furthermore, there are two ways that a term becomes an express term of the entrant:

In a signed written contract According to Lagrange v Curaçao [1934] 2 KGB 394, If a term in a written contract that has been signed by X, it is enforceable and legally binding, even if X has not read or understands the written contract. However, there are four circumstances when a signed contract may not unenforceable:

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  • 'signed via lack of contractual capacity, a lack of consent or a lack of legality. For example, Y agreed to purchase a car from X, but in fact, X intended to sell the car newly-painted whereas Y thought the car was new. The contract was void due to a lack of consent.
  • 'Cooling off periods', this means that a contract may Include an express or Implied terms which allow one of the parties to change their mind In a short time.
  • 'Non est. factotum', regarding Petering v Culled [1975] HOC 24, If X has a reasonable cause for not reading the document and the mistake Is about the essential nature of It, then the contract Is unenforceable.
  • 'Being tricked Into signing a contract', according to Lee Mans Grand PRI Circuits Pity Ltd v Ladles [1998] 4 IVR 661, If X signed a document and led to believe that It was not a contractual term In nature.

Then X was not bound y the contract. The other way that it can be an express term is to have reasonable notice for both parties. However, the statement which is made after the contract had already been formed will not be a contractual term. According to Causer v Browne [1952] VALE 1, Browne (a dry cleaner) damaged Causer's dress and refused to compensate Causer due to the statement on the docket which Causer had not seen. Since Causer had not been given any reasonable notice about that statement, it was not an express term.

Implied terms of the contract Implied terms are those which are not expressly stated by the parties, but are imposed either by a court or by operation of statute law (Goldwater, V 2007). This means that, the terms are put into the contract not because they both agree to these, but for common law and legislation. Based on Camels v Sutton [1941] All ERR 14, if the terms included in the contract are not clearly enough, the agreement will be unenforceable. On the other hand, courts are willing to enforce rather than void contracts.

James (2010) stated that there are five situations that terms can be an implied term: Reasonable and fair Necessary to make the contract viable So obvious that it goes without saying Able to be clearly expressed Consistent with the express terms Furthermore, statements will be implied terms which the parties are deemed to be aware due to prior dealings. On the basis of Bellman New Ferry Co Ltd v Robertson (1906) 4 CLC 379, Robertson, who missed the ferry, decided to exit without paying, but attendant refused to let him leave because of the statement on the sign.

The statement was an implied term as Robertson had prior experience taking ferry. There are two kinds of terms implied by the court which are 'co-operation' and 'good that'.

  • 'co-operation' is a promise that both parties will cooperate in the performance of the agreement. Based on Peers v Coolants Investments Pity Ltd (1982) 149 CLC, Peers signed the agreement with CLC for selling property which did not have a limitation on time. After months CLC terminated the agreement. CLC was entitled to terminate the contract as Peers fail to provide reasonable time.
  • 'Good faith' is a promise that both parties will exercise their contractual rights honestly and reasonably.

In Burger King Corp. V Hungry Jacks Pity Ltd (2001), BC was not acting in DOD faith when it did not grant approval to HAJJ for the new restaurants. Statutory terms The sale of goods legislation implies statutory terms which protect the buyer into the contract. I. E. The right to sell goods to the buyer; the goods will correspond to the description; the goods will have merchantable quality; the goods will be suitable for their purpose; the bulk of the goods will comply with the sample.

A seller will have breached the statutory term regarding fitness if: the seller normally sells goods of that description; the buyer has either expressly or by implication told the seller the purpose of buying the goods; the buyer has relied on the seller's skill and Judgment; the goods are not fit for the dated purpose; According to Grant v Australian Knitting Mills Ltd [1936] AC 85, since the buying purpose is obvious, buyer relied on the seller's expertise, and the seller normally deal with these goods. The implied terms of fitness had been breached.

The sale of goods legislation also implies into statutory terms on: pass ownership, payment, delivery, and acceptance. Part B Parties In this case, there are two parties involved, Johnny (buyer who order the fruit) and George (supplier of the fruit). Issues The main issue: Can Johnny legally enforce George's verbal promise about the fruit? The sub issue: Is the statement on whether the fruit is organic between Johnny and George a contractual term or non-contractual promise? Rules Express Terms: both parties actually agreed and included in the contract. Implied implied into the contract due to the operation of legislation. A statutory term requiring goods to be fit for the purpose of the buyer. A non-contractual promise is a promise made during negotiations that is not intended to be a term. The parole evidence rule applies if the written contract appears to be a complete record of the agreement. If the Court decided that the verbal agreement or promise was intended to be a term of the contract , the Court can decide that the complete contract consists of the written agreement plus the verbal representation and the parole evidence rule will not apply Games, N 2010). A collateral contract is a secondary contract, the consideration for which is the entry into the main contract Games, N 2010). The parties may be entitled to damages for breach of collateral contract . Analysis Johnny and George only negotiated about the organic fruit and George make sure hat the fruit will be organic, there is no evidence that both of the parties have included this statement into the contract. So the statement is not an express term. Furthermore, both of the parties have fully discussed and agreed about the organic fruit, therefore, the statement is not an implied term.

In addition, a seller will have breached the statutory term regarding fitness if four requirements are satisfied, Johnny has told George the purpose of buying(for customers), he has relied on George's expertise, the goods are not fit for the purpose stated before. Nevertheless, there is no evidence that George normally sells goods of that description. Therefore, it is not a breach of the statutory term regarding fitness. Above all, the statement is not a contractual term, it is a promise made during negotiations( a non-contractual promise).

To sum up, the oral statement is legally binding between Johnny and George. Therefore, Johnny was entitled to get compensation from George. However, Johnny can also claim that George made a misrepresentation to induce him to enter into the contract. But he needs evidence to prove that.


  1. James, N 2010, Business law, John Wiley & Sons Australia, Australia.
  2. Goldwater, V 2007, Mastering business law, Lexis's Butterscotch, Australia. Author: Wing Gao

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