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LAW OF CONTRACT. LAW 103. THE CONTENT OF THE CONTRACT.

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Introduction

LAW OF CONTRACT. LAW 103. THE CONTENT OF THE CONTRACT. 1. CONTRACTUAL TERMS. The terms of a contract identify the rights and obligations of each party under that contract. A contract is merely a collection of terms - duties and rights and penalties, some of which may be in writing and some of which may be oral. Terms create contractual obligations for breach of which an action lies. Terms may be either express or implied. Express terms. Express terms are those which are specifically agreed by the parties. Implied terms. Implied terms are those which form part of the contract but they have not been specifically agreed between the parties during the negotiations for that contract. Terms may be implied into the contract in a number of ways;- Terms implied through custom and practice. Perhaps a most obvious example here would be the fact that contracts in the baking industry that make reference to the term 'dozen' may actually mean thirteen rather than twelve as that is a custom within that industry. "It has long been settled that, in commercial transactions, extrinsic evidence of custom and usage is admissible to annex incidents to written contract, in matters with respect to which they are silent... and this has been done upon the principle of presumption that, in such transactions, the parties did not mean to express in writing the whole of the contract by which they intended to be bound, but a contract with reference to those known usages." (Baron Parke - Hutton v Warren (1836) 1 M&W 466) British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd (1975) 1 ALL ER 1059. Both parties were engaged in the business of hiring out heavy earth moving equipment. A contract was agreed by telephone for the hire of a crane. A written document was sent afterwards the terms of which were similar to those used by all firms in the plant-hiring business including the hirer themselves. ...read more.

Middle

(Such a contract is known as a charterparty.) It stated that the ship was "now in the port of Amsterdam." In fact the ship arrived in Amsterdam four days after the date of the contract. Williams J stated: "The court must be influenced not only by the language of the contract but also by the circumstances and for the purposes for which it was entered into. ... For most charters the time of the ship's arrival to load is an essential fact, for the interest of the charterer. In the ordinary course of charters it would be so: the evidence of the defendant shows it to be actually so in this case. If the statement of the place of the ship is a substantive part of the contract, it seems to us that we ought to hold it to be a condition." Can the parties stipulate that a term is a condition or a warranty? In Schuler v Wickman Machine Tool Sales Ltd [1973] 2 All ER 39, HL the contract appointed Wickman sole distributor of Schuler's panel presses in the UK for four-and -a half years. Clause 7 stated "It shall be a condition of this agreement that Wickman shall send [one of two named] representatives to visit [six named large motor manufacturers] at least once every week for the purpose of soliciting orders." Clause 11 stated that either party might determine the contract if "the other shall have committed a material breach of its obligations and shall have failed to remedy the same within 60 days of being required to do so." Question 2. How do you think this contract was construed? Do you think the parties intend that a breach of clause 7 would enable Schuler to repudiate the contract? Answer 2. The HL held that clause 7 must be read subject to clause 11. "It appears to me that clause 11 is intended to apply to all material breaches of the contract which are capable of being remedied. ...read more.

Conclusion

in the particular case, when the evidence had been heard, to decide that in the particular circumstances the breach was or was not such as to go to the root of the contract. Where justice does not require greater flexibility, there is everything to be said for, and nothing against, a degree of rigidity in legal principle." Question 6. Can you summarise the law? Answer 6. In The Hansa Nord Ormrod LJ offered this summery: "When a breach of contract has taken place the question arises: is the party who is not in breach entitled to treat the contract as repudiated? The answer depends upon the answers to a series of questions. The first question is: does the contract expressly provide that in the event of the breach of the term in question the other party is entitled to terminate the contract. If the answer is no the next question is: does the contract when correctly construed so provide? The relevant term for example may be described as a condition. The question then arises whether this word is used as a code word for the phrase "shall be entitled to repudiate the contract" or in some other sense as in Wickman v Schuler. The next question is whether the breach of the relevant term creates a right to repudiate. This may arise either from statute or as the result of judicial decision on particular contractual terms e.g. the "expected ready to load stipulation" in The Mihailis Angelos where the courts have decided that breach will ipso facto give rise to a right on the other party to repudiate. In these two classes of cases the consequences of the breach are irrelevant or, more accurately, are assumed to go to the root of the contract. There remains the non-specific class where the events produced by the breach are such that it is reasonable to describe the breach as going to the root of the contract and so justifying the repudiation." ?? ?? ?? ?? 1 ...read more.

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