Ascertaining Terms

Terms of the Contract I

The terms and conditions of a contract must have been agreed, either verbally or by implication at the time the contract was made. A court may not look at what occurred later. Logically, the contract must have been agreed expressly or impliedly at the outset.

Later acts, words or circumstances may tend to prove what was said or implied but are not otherwise relevant.  If any terms or key matters have not been agreed, then there may be no contract at all. There may, therefore, be no legal consequences for either party so that the status quo remains.

If money or benefits have passed, but there is no contract, restitution principles may be used by a court to impose a just result. If there is no contract, but parties have acted to their detriment in reliance on what another party has said or done, the courts may in some cases impose a just and equitable solution where it is appropriate to do so.


Terms of the Contract II

The terms of a contract will vary considerably in their nature and detail. In some cases, a contract may have a few terms only. It may be wholly unspoken. For example, the purchase of goods in a shop may involve the contemporaneous delivery and purchase of goods for the marked price, supplemented by terms implied by the Sale of Goods Act.

In contrast, a contract for the sale and installation of a complex piece of plant and equipment may involve the negotiation of a detailed bespoke written agreement.

Another type of contract may involve the supply of a product such as computer software on the supplier’s standard contract. Here the only limitation on what the supplier might stipulate are the rules in the consumer protection and unfair contract terms legislation.

The terms and conditions of a contract are usually critical and determinative, in the event of a dispute.  There may be a different result in the dispute, depending on the terms of the contract. For example, the dispute may concern whether a particular promise was made and if so, its consequences.


Terms of the Contract III

In many cases, the parties will not have spelled out detailed terms and conditions. Even where there is a written document it may not cover all the relevant matters and circumstances. For example, a buyer and seller may agree that a particular item is to be bought and sold but may dispute whether a particular promise was made about them, for example, that they would conform with a particular standard or requirement.

The Sale of Goods Act implies many of the basic terms for a contract for the sale and purchase of goods. Most terms can be varied by agreement to the contrary. The Act and other consumer protection legislation imply certain basic terms and conditions into consumer sale contracts, which cannot be varied by agreement.


Representations

Separate from the terms of a contract, the law recognises so-called “representations” as having significant legal effects A representation is a statement of fact or intention made by one party to an agreement on which the other party relies, in entering the contract.

For example, the sold goods may be said to have a particular quality. If the buyer relies on this statement of fact, that statement may be a representation or it may be part of the contract. In common with contract terms, representations are legally significant in that there are legal consequences if they turn out to be incorrect or false.


Agreement in Writing

There is a presumption that if an agreement is recorded in writing, that the writing contains the full terms of the agreement. Generally, it will not be possible to give verbal evidence to contradict, change, add to or subtracted from the terms of written terms of the agreement.

There are numerous exceptions to this rule   It is possible to give verbal evidence to disprove the contract to explain it, to prove a mistake or where it is clear that the written document is not the entire contract. See the article on the verbal (parol) evidence rule.


Implied Terms I

The law will imply into a contract, terms which are necessarily in order to make it effective. It will “read in” the parties’ presumed intentions in relation to a particular matter, which they have not expressly contemplated. See the article on implied terms

The law will not only remake the contract. The implication of terms does not go so far as to allow the court to imply into existence an agreement that does not exist.  There must be an actual agreement and the implied that terms must be required by necessary implication in order to make the agreement workable.

In some  cases, some of the terms of an agreement may be implied by a course of past dealings between the parties   If the parties have acted on a particular basis in previous transactions, they will be readily presumed to act on similar terms in the following transactions.


Implied Terms II

In some cases, the particular customs of a business can be implied.  However, a custom cannot override the term of the particular agreement.

There are terms which are implied by law for example, in the building of a house, there is an implied term that the house will be built in a good and workmanlike manner. This obligation is commonly implied into contracts for repair etc

In the case of the sale of goods, there are certain statutorily implied terms, which are of great importance. They include the implied term that the goods are ‘merchantable quality’ and are fit for purpose and the seller is entitled to sell them.


Pre-Contract Discussions I

If there is no written agreement the courts may find a contract from verbal discussions and conduct.  Not every statement made prior to the contract will be part of the contract. Many statements are preliminary and promotional in nature.

Statements made and discussions had prior to the conclusion of the contract may have legal significance, whether or not they form part of the contract. Where a party relies on a false or misleading statement in entering the contract, it may constitute an “actionable” misrepresentation, even if it is not a term of the contract. The legal effect of a misrepresentation will depend on whether it is deliberate, negligent or innocent.

Many pre-contract discussions may simply be hyperbole, “sales” talk or puff. Provided that they do not constitute representations of fact upon which the other party relies, they are unlikely to have legal effect or be incorporated in the contract.

Where a statement is a term of the contract, liability on it is usually unconditional.  Where a statement is in unconditional terms, the party who makes it takes the risk that the particular matter is true, irrespective of his state of knowledge. The recipient’s state of knowledge is irrelevant and it is not necessary to show actual reliance on his part when the statement is a term.


Pre-Contract Discussions II

It is a matter of interpretation as to whether the pre-contract discussions form part of the contract in the sense of constituting a term or warranty. The onus is on the person who asserts that a statement is incorporated as a term of the contract, to so prove.

Most discussions and statements made prior to entry into the contract will not form part of the contract. The presumption is that if there is a clear offer and acceptance of terms, the earlier pre-contract discussions are not incorporated.

A number of factors are considered by the courts in determining whether pre-contract statements become part of the contract or are so-called mere representations. The closer in time to the conclusion of the contract, the more likely the representation is to constitute part of the offer (and may thereby become a term).


Statement by Skilled Person / Specialist

Where the party making a statement has some special skill or knowledge in the area concerned such as by a trader in a consumer sale, the expression is more likely to form part of the contract. The more important the statement, the more critical it is to entering the contract, the more likely it is to be a term.

Similarly, an express manifestation of intention on the part of the recipient of the warranty to rely on it will tend to point towards it being included in the contract as a term.

Ultimately, the matter depends on the intention and conduct of the parties, as inferred and interpreted by the court.

A number of leading cases have involved the sale of motor vehicles. Key statements made by the motor garage/dealer as to mileage and other critical matters have been held to be likely to form part of the contract. Where a seller induces a buyer in relation to a particular matter and dissuades him from making his own examination, then the term will be more readily held to be a term of the contract.


Term or Representation

If the person making the statement has some special skill in relation to the matter is more likely to be treated as a term. If the statement is more important, it is more likely to be a term (warranty) The importance of the statement also points towards it being part of the contractual term.

Where the contract is in writing a statement omitted from the written document is more likely to be a representation, rather than a term.

Where a term of the contract is breached (e.g. what is warranted is false) it may entitle the innocent party to damages for breach of contract, or in some cases, to terminate the contract. A representation, although not part of the contract can have legal consequences. A deliberately false representation is a civil wrong (tort) which entitles the person who has suffered a loss to claim for damages caused in consequence.

An innocent misrepresentation may under certain circumstances, entitle the party addressed to withdraw from the contract. In limited cases, a negligent misstatement may constitute a civil wrong. An innocent misrepresentation has lesser consequences and may entitle innocent party to rescind the contract


Different Types of Term

There are legally significant distinctions between different types of contract term. Some terms are so important that their breach is fatal to the contractual relationship. Breach of a fundamental term, “going to the root” of the contract, is sufficient to allow the innocent party to terminate the contract. Other breaches are less serious and give a right to damages/compensation only.

A distinction between “conditions” and “warranties” is adopted by the Sale of Goods Act, which codified the law on the sale of goods. The classification determines the effect of a breach of the relevant term in the context of termination of the agreement. Breach of a “condition” under the Act allows the innocent party to terminate the contract and sue for damages. A warranty under the Act is a term which is part of the contract, breach of which gives the innocent party an entitlement to damages only.

In the context of contracts generally, the labelling of terms as warranties, conditions etc. is not conclusive. Much will depend on circumstances. In some cases, what is labelled a warranty will be a condition in the sense that breach will entitle the innocent party to terminate.


Entire Agreement Clause

Written contracts may provide a clause to the effect that they comprise the entire agreement. This is sometimes referred to as an entire contract or integration clause. The purpose is generally to prevent pre-contract representations and discussions forming part of the contract

The clause may provide further that one or both parties have not relied on the representations made or proposed to be made, on behalf of the other. It may be provided that one party, for example, a purchaser acknowledges that the written document is an entire agreement and that he has not been entered the contract on foot of any representation.

The courts may find that there is a collateral contract varying the principal contract, which effectively overwrites the entire agreement  clause.  Other courts take the view that the entire contract clause precludes collateral contracts which are contradictory to the principal agreement.


Consumer Contracts

As with other exclusion or limiting clauses, the courts will interpret them against the interests of the party that puts them forward. They must clearly apply and be incorporated in order to be given effect. The courts will attempt to circumvent such clauses, if possible. If, however, the clause is clearly incorporated and covers the particular circumstances, then in the absence of unfair contract considerations, it will be enforceable.

The courts take a different approach in commercial cases than in consumer cases. In commercial cases, the clause may be more readily enforced. Where  the contract involves a consumer, the courts are not favourably disposed to allowing the clause to be effective to negate statements clearly made to consumers, regarding particular aspects of the subject matter, in particular, warranties regarding the subject matter on which the other party clearly relied.

A whole agreement clause may be unfair in a consumer contract., under the unfair contract terms regulations.

The court may be prepared to rectify a contract containing such a clause in an appropriate case.


References and Sources

Irish Textbooks and Casebooks

Clark, R. Contract Law in Ireland 8th Ed. (2016) Ch 5,6

Friel, R. The Law of Contract 2nd Ed, (2000)

McDermott, P.  Contract Law (2001) 2nd Ed (2017) Ch 6,7,8

Enright, M. Principles of Irish Contract Law (2007)

Clark and Clarke Contract Cases and Materials 4th Ed (2008)

English Textbooks and Casebooks

Poole, J. Casebook on contract law. (2014) 12th edition

Stone and Devenney, The Modern Law of Contract 10th Ed (2015)

McKendrick, Contract Law 10th Ed (2013)

Chen-Wishart, Contract Law 5th Ed (2015)

Anson, Reynell, Beatson, J., Burrows, Cartwright, Anson’s law of contract. 29th Ed (2010)

Atiyah and Smith, Atiyah’s introduction to the law of contract. 6th Ed.

Chen-Wishart, M. (2015) Contract law. 5th Ed.

Cheshire, Fifoot and Furmstons, Furmstons and Fifoot Cheshire, Fifoot and Furmston’s law of contract. OUP.

Duxbury, Robert (2011) Contract law. 2nd Ed.

Halson, Roger (2012) Contract law. 2nd Ed.

Koffman & Macdonald’s Law of Contract. 8th Ed. (2014)

O’Sullivan, Hilliard, The law of contract. 6th Ed. (2014)

Peel, and Treitel, The law of contract. 13th Ed. (2011).

Poole, J.Casebook on contract law. 12th Ed. (2014).

Poole, J.  Textbook on contract law. 12th Ed. (2014)

Richards, P Law of contract. 10th Ed. (2011)

Stone, R.  The Modern law of Contract. 10th Ed. (2013)

Treitel, G. H.  An outline of the law of contract. 6th Ed (2014).

Turner, C Unlocking contract law. 4th Ed. (2014).

Upex, R. V., Bennett, G Chuah, J, Davies, F. R. Davies on contract. 10th Ed. (2008).

UK Casebooks

Stone,Devenney, Text, Cases and Materials on Contract Law 3rd Ed (2014)

McKendrick, Contract Law Text, Cases and Materials 6th Ed (2014)

Stone, R, Devenney, J Cunnington, R Text, cases and materials on contract law. 3rd Ed (2014)

Burrows, A. S.  A Casebook on Contract. 4th Ed.

Beale, H. G., Bishop, W. D. and Furmston, M. P. Contract: cases and materials. 5th ed. (2008)

Blackstone’s Statutes on Contract, Tort & Restitution 2017 (Blackstone’s Statute Series)

UK Practitioners Texts

Chitty on Contracts 32nd Edition, 2 Volumes & Supplement (2016)

The above are not necessarily the latest edition.