Business Law Ch. 7 Notes.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B
Philip King

Business Law Ch. 7 Notes Chapter 7 The Content of a Contract  Contractual terms can be express or implied  Express term: o A provision of a contract that states a promise explicitly o One party’s promise to another o E.g. price, quantity, warranties o Should be very careful not to make assumptions about any aspect of the transaction since only terms have legal weight – not assumptions o Judicial interpretation of express terms – vague or ambiguous language  Even when a term is express, there may be problems interpreting what it means because the language is vague or ambiguous  The court assigns as reasonable a meaning as possible to vague or ambiguous terms  One of the parties could construct the contract in their favour with ambiguous language  E.g. “best quality” – what exactly is best quality?  There is a point at which language is so ambiguous that the contract cannot be understood  In these cases, the contract will fail for uncertainty, and none of the promises it contains will be enforceable  Rules of construction: guiding principles for interpreting or “constructing” the terms of a contract  The court simply asks how a reasonable person would regard the term in question  When parties fail to address an important aspect of their contractual relationship, the law may help to “fill in the blanks” through implied terms  Implied Term o A provision that is not expressly included in a contract butt hat is necessary to give effect to the parties’ intention o Courts will imply terms based on a number of grounds:  Business Efficacy  A judge is entitled to imply terms necessary to make the contract workable  Customs in the Trade of the Transaction  Relying on trade customs to imply a term is rarely successful, since it must be proved that the custom is so notorious that the contract in question must be presume to contain such an implied term  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  Statutory Requirements  Found in provincial sale of goods legislation  Provides that certain terms are a mandatory part of every contract for the sale of goods unless specifically excluded by the parties o Terms are not easily implied except in routine transactions or unless the Sale of Goods Act applies o Courts ordinarily will not imply terms when the parties have agreed that their contract is complete as written o Entire contract clause: a term in a contract in which the parties agree that their contract is complete as written  Clearest way to signal intention of a complete contract  Contractual Quantum Meruit: awarding one party a reasonable sum for the goods or services provided under a contract  Parole Evidence Rule o Contracts can take three possible forms:  Entirely oral  Entirely written  Both oral and written o Parole evidence rule: a rule that limits the evidence a party can introduce concerning the contents of a contract  Important consequence of having a written contract  Parole means oral or spoken; but
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