Law of Contract: Express and Implied Terms

Express Terms

• Express terms refer to the provisions that have been specifically mentioned and agreed upon by both parties during the formation of the contract.
• These may be written they can be oral.
• They are considered to be of primary importance in understanding obligations under the contract.
• There are two main categories: conditions and warranties.
• Conditions are integral to the contract. If they are breached, the wronged party can terminate the contract and seek damages.
• Warranties are less significant contractual terms. Although a breach will warrant damages, it doesn't give the wronged party the right to terminate the contract.
• An innominate term is a term that could be a condition or warranty depending on the nature of the breach.

Implied Terms

• Implied terms aren't expressly stated by the parties but are nevertheless considered an integral part of the contract.
• These are generally regarded by law or by the courts as essential for achieving the contract's intended purpose.
• Implied terms can come from four key sources: statute, courts, custom and previous dealings.
• Statute: These are terms implied by Acts of Parliament such as the Sale of Goods Act 1979.
• Courts: These terms are sometimes imposed by courts in the interest of fairness, to reflect the intention of the parties, or to maintain market efficiency.
• Custom: If it's common practice in a particular trade or location to include certain terms, they may be implied into the contract.
• Previous dealings: If parties have contracted before, past terms and conditions could form implied terms in their current contract, especially if a consistent pattern of dealing exists.

Exclusion Clauses

• Exclusion clauses or limitation clauses are terms in a contract which attempt to exclude or limit a party's liability for breach of contract or negligence.
• For these clauses to be valid, they must be clearly written and reasonable.
• The Unfair Contract Terms Act 1977 provides controls on the application of exclusion clauses, particularly in consumer contracts. For example, it's not possible to exclude liability for death or personal injury resulting from negligence.

Parol Evidence Rule

• The parol evidence rule prevents parties from introducing evidence of prior agreements or terms allegedly agreed after the contract was formed, when those terms contradict what's in the written contract.
• The rationale is that a final written contract should reflect the complete and final agreement between parties.
• However, there are exceptions such as when it's necessary to clarify ambiguity, establish a collateral contract, or in cases of fraud or mistake.