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chapter 7

4 Pages

Administration - UNBF
Course Code
Robert Derra

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Chapter 7: the terms of a contract
I. The content of a contract
Terms: contractual terms can be expressed or implied.
oExpress terms: a provision of a contract that states a promise explicitly
(Ex: price, quantity, warranties…)
oJudicial interpretation of express terms:
Vague or ambiguous language: any vague or ambiguous wording
or language from the drafter will be construed against that party in
favor of the other party.
In case the language is too ambiguous to understand, the
contract will not be enforceable.
Rules of construction: guiding principles for interpreting
or “constructing” the terms of a contract.
oThese principles often conflict. (Ex: plain-
meaning rule vs. parties intention) Its impossible
to predict the judges decision.
Implied term: a provision that is not expressly included in
a contract but that is necessary to give effect to the parties
intention (a judges will put these terms in if hes satisfied
that not all of the terms the parties intend to include are
actually included in the contract)
oBusiness efficacy: a judge is entitled to imply terms
necessary to make the contract workable.
oCustoms in the trade of the transaction: relying
on trade custom to imply a term is rarely successful
since it must be proved that the custom is so
notorious that the contract must be assumed to
imply it.
oPrevious dealings between the parties: if parties
have contracted in the past, it may be possible to
imply that their current contract contains the same
oStatutory requirements: certain terms are a
mandatory part of every contract for the sale of
goods unless specifically excluded by the parties
(sales of goods act)
In general, it’s not easy to imply a term except in
routine transactions or unless the sale of goods
act applies, or both parties are clear in their
intentions to put the terms in.
oContractual quantum meruit: awarding one party
a reasonable sum for the goods or services provided
under a contract.

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Chapter 7: the terms of a contract I. The content of a contract  Terms: contractual terms can be expressed or implied. o Express terms: a provision of a contract that states a promise explicitly  (Ex: price, quantity, warranties…) o Judicial interpretation of express terms:   Vague or ambiguous language: any vague or ambiguous wording  or language from the drafter will be construed against that party in  favor of the other party. • In case the language is too ambiguous to understand, the  contract will not be enforceable. • Rules of construction: guiding principles for interpreting  or “constructing” the terms of a contract.  o These principles often conflict. (Ex: plain­ meaning rule vs. parties’ intention) It’s impossible  to predict the judges’ decision. • Implied term: a provision that is not expressly included in  a contract but that is necessary to give effect to the parties’  intention (a judges will put these terms in if he’s satisfied  that not all of the terms the parties intend to include are  actually included in the contract) o Business efficacy: a judge is entitled to imply terms  necessary to make the contract workable. o Customs in the trade of the transaction: relying  on trade custom to imply a term is rarely successful  since it must be proved that the custom is so  notorious that the contract must be assumed to  imply it. o Previous dealings between the parties: if parties  have contracted in the past, it may be possible to  imply that their current contract contains the same  terms. o Statutory requirements: certain terms are a  mandatory part of every contract for the sale of  goods unless specifically excluded by the parties  (sales of goods act)  ▯In general, it’s not easy to imply a term  except in  routine transactions or unless the sale of goods  act applies, or both parties are clear in their  intentions to put the terms in. o Contractual quantum meruit: awarding one party  a reasonable sum for the goods or services provided  under a contract.  The Parol evidence rule: a rule that limits the outside evidence a party can  introduce concerning the contents of the contract. o This rule forbids any evidence outside of a contract when the contract is  clearly written  ▯parties should be careful with any oral contracts, as they  may not be enforced by the court. o Reinforced by the entire contract clause o However, there are still cases where outside evidence is important:  There was a fraud in the formation of the contract.  When the contract was actually intended to be partly oral and  partly written.  If the promise is contained in a collateral agreement, which itself  happens to be oral • Collateral agreement: an independent side contract which  has terms that conflict with the main contract.  When the language is too ambiguous. II. Using contractual terms to manage risk.  Change circumstances: parties should put contractual terms that protect them in  unexpected events. (Ex: instead of having a fixed price, negotiate a price to be  based on current economic stand)  Conditional agreement: are essential when one party wants to incur contractual  obligations but only under certain circumstances (Ex: an offeree agrees to buy the  house only if he can get a mortgage from the bank) o Given there is a contract between parties, the law provides two  mechanism/terms to bind a party from breaching the contract during the  time set aside for the condition’s fulfillment:  Condition subsequent: an event or circumstance that, when it  occurs, brings and existing contract to an end. (Ex: an employee’s  salary is guaranteed if he does a good job. If he does not, he is  immediately fired)  Condition precedent: an event or circumstance that, until it  occurs, suspends the parties’ obligations to perform their  contractual obligations (Ex: the mortgage example. The house  owner must wait during a certain period of time f
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