lecture 4.1 contractual terms

8/12/2019 Lecture 4.1 Contractual Terms

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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

lecture 4.1 contractual terms

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