Chapter 7 – The Terms of a Contract
The Content of a Contract
Contractual term can be expressed or implied
A provision of a contract that states a promise explicitly
Ex. Price, quantity, and warranties
Court assigns reasonable meaning to vague or ambiguous terms
If a contract is made by one of the parties, any ambiguity in the language will be construed
against that party in favor of the other.
Drafter should bear the risk of unclear language
If language is so ambiguous that the contract cannot be understood, the contract will fail for
uncertainty, none of the promises it contains will be enforceable
Rules of construction: Guiding principles for interpreting or “constructing” the terms of a
o Implied Terms
A provision that is not expressly included in a contract but that is necessary to give effect to the
When an event arises that is not addressed in the contract through express terms, courts may be
asked to imply a term in order to give effect to the parties’ intention.
Judge will do so if he is satisfied that not all of the terms that the parties intended to include in
the contract were in fact included.
A judge is entitled to imply terms necessary to make the contract workable
Previous Dealings between Parties
If parties have contracted in the past, it may be possible to imply that their current contract
contains the same terms.
Ex. If a party delivers too many goods to another, the receiving end may accept the quantity of
goods stated in the contract and reject the rest
Entire Contract clause: A term in contract in which the parties agree that their contract is
complete as written
Implies the parole evidence rule (below) Contractual Quantum Merit: Awarding one party a reasonable sum for the goods or services
provided under a contract
The Parol Evidence Rule
A rule that limits the evidence a party can introduce concerning the contents of the contract
Rule forbids outside evidence as to the terms of a contract when the language of the written
contract is clear and the document is intended to be the sole source of contractual
Contracts can take three possible forms:
Entirely Oral (i.e., conversation)
Entirely Written (i.e., written contract)
Both oral and written.
Situations where evidence outside the contract is important and considered:
If there is an alleged problem going to the formation of the contract - because one party alleges