The Terms of a Contract
- A provision of a contract that states a promise explicitly.
Examples include price, quantities and warranties. Only terms,
not assumptions, have legal weight.
- Problems of interpretation: vague or ambiguous language. Court
assigns as reasonable a meaning as possible. Example: “what is
best quality” -> Court reasonably decides, such as ‘highest
Rules of Construction:
- Guiding principles for interpreting the terms of a contract. Can
often be conflicting; on one hand court is supposed to uphold
reasonable meaning of terms, yet, courts are to give effect to the
parties’ intentions. If there was a natural disaster per say, a party
would want the court to use plain-meaning rule standing alone.
- A provision that is not expressly included in a contract but that is
necessary to give effect to the parties’ intention.
- Occurs when an event arises that is not addressed in the
contract through express terms. Judge will imply a term in order
to give effect to the party’s intention.
Courts will imply terms based on a number of grounds:
1) Business efficacy: judge is entitled to imply terms to make the
2) Customs in the trade of the transaction: rarely successful, since
it must be proved that the custom is so notorious that the
contract in question must be presumed to contain such an
3) Previous dealings between the parties: if parties have contracted
in past, it may be possible to imply that their current contract
contains the same terms.
4) Statutory requirements: important source of terms implied by
statute is found in provincial sale-of-goods legislation, which is
largely uniform across the country. This legislation provides that
certain terms are a mandatory part of every contract for the sale
o goods unless specifically excluded by the parties
Ontario Sale of Goods Act: 29. (2): Where the seller delivers to the
buyer a quantity of goods larger than the seller contracted to sell, the
buyer may accept the goods included in the contract and reject the
rest, or may reject the whole, and if the buyer accepts the whole of the
goods so delivered, the buyer shall pay for them at the contract rate. Entire contract clause
- A term in a contract in which the parties agree that their contract
is complete as written. It is the clearest way for parties to signal
Contractual quantum meruit
- Awarding one party a reasonable sum for the goods or services
provided under contract.
The Parole Evidence Rule
- A rule that limits the evidence a party can introduce concerning
the contents of the contract.
- 3 possible forms contracts can take: 1) Entirely oral 2) Entirely
written 3) Both
- Written contracts are the best at proving existence. However,
written contracts may trigger the parol evidence rule when a
court is asked to determine what a contract means and includes.
This forbids outside evidence as to the terms of a contract. Entire
contract clauses are used to ensure application of the parol
evidence rule to the contract in question.
- Emphasizes the sanctity of the written agreement and means
that the parties should ensure provision of all terms important to
- If the contract is intended to be partly oral and partly written,
this rule has no application.
Using contractual terms to manage risk – planning function of law
permits a businessperson to use contractual terms as a buffer against
future, uncertain events as well as a way of limiting liability.