Contents of a contract

Resources → Subject Notes → Law → Lesson Plan

Law of Contract – 3.2 Contents of a Contract (Cambridge IGCSE/A‑Level)

3.2.1 Express Terms

Express terms are the promises that the parties have actually said or written into the agreement. They form the “bargain” of the contract.

Representation vs Term

  • Representation: a statement of fact intended to induce the other party to contract. If false it gives rise only to a claim for mis‑representation (e.g. Smith v. Hughes).
  • Term: a promise that becomes part of the contract. Breach gives rise to contractual remedies.
  • Courts decide whether a statement is a term by looking at:
    1. The importance of the statement to the parties;
    2. Whether the parties intended it to be contractual;
    3. The timing of the statement (see Oscar Chess Ltd v. Williams).

Incorporation of Express Terms

Method of Incorporation Requirement Key Authority
By signature The term is incorporated once the party signs the document, even if they have not read it. L’Estrange v. Graucob
By notice (before or at the time of contracting) The term must be brought to the other party’s attention before the contract is concluded. Spurling Ltd v. Bradshaw
By course of dealing or trade usage Term is incorporated when it is a well‑known, regular practice in the relevant trade. Hollins v. Vickers

Parol Evidence Rule

  • If a contract is reduced to writing, prior or contemporaneous oral statements cannot be used to vary, add to or contradict the written terms (Joscelyne v. Nissen).
  • Exceptions:
    1. Evidence of a term omitted by mistake;
    2. Evidence of a collateral contract;
    3. Evidence of a term implied by law, custom or trade usage.

3.2.2 Implied Terms

Implied terms are not expressly agreed but become part of the contract by operation of law, custom, or the parties’ conduct.

Sources of Implied Terms

Source Typical Content (Illustrative) Key Authority / Statute
Statute – Consumer Rights Act 2015 (CRA 2015)
  • Goods: satisfactory quality, fit for any disclosed purpose, as described.
  • Services: performed with reasonable care and skill; within a reasonable time.
 CRA 2015 ss 9‑11 (goods); ss 49, 52 (services)
Common Law Terms necessary to give the contract business efficacy; duties of mutual trust in employment. The Moorcock; Shirlaw v. Southern Foundries
Custom & Trade Usage Terms regularly observed in a particular trade (e.g. “delivery within 30 days” in textiles). Hollins v. Vickers
Reasonable Expectations Terms a reasonable person would expect in the circumstances (e.g. safety of a product). British Westinghouse v. Underground

Remedies for Breach of Implied Terms (CRA 2015)

  • Goods: right to reject (within 30 days), repair, replacement, price reduction, or damages (ss 20‑24).
  • Services: repeat performance, price reduction, damages, or termination where the breach is serious (ss 55‑56).

3.2.3 Classification of Terms – Conditions, Warranties & Innominate (Intermediate) Terms

The way a term is classified determines the remedies available when it is breached.

Classification Nature of the Term Effect of Breach Illustrative Cases
Condition Fundamental term going to the root of the contract. Right to terminate the contract and claim damages. Schuler v. Wickman (condition precedent); Poussard v. Spiers and Pond (condition subsequent).
Warranty Minor term; breach does not affect the overall performance. Only damages are recoverable; contract remains in force. Bettini v. Gye.
Innominate (Intermediate) Term Classification depends on the seriousness of the breach.
  • If breach deprives the innocent party of substantially the whole benefit → right to terminate.
  • Otherwise only damages are available.
 Hong Kong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha Ltd (doctrine established).

3.2.4 Exemption (Exclusion & Limitation) Clauses

Exemption clauses attempt to limit or exclude liability. Their enforceability is controlled by common‑law rules and by statute.

Common‑Law Controls

  • Incorporation: The clause must be part of the contract (see L’Estrange v. Graucob for signature, Spurling v. Bradshaw for notice).
  • Contra‑proferentem: Any ambiguity is interpreted against the party that drafted the clause (e.g. Canada Steamship Lines Ltd v. The King).

Statutory Controls – UCTA 1977 (Business‑to‑Business)

Section Requirement / Effect
s 1(3) Exclusion of liability for negligence is valid only if “reasonable”.
s 2 Exclusion of liability for breach of contract is subject to the reasonableness test.
s 3 Exclusion of liability for death or personal injury caused by negligence is void.
s 11 Reasonableness is assessed on the parties’ bargaining positions and the availability of alternatives.

Statutory Controls – Consumer Rights Act 2015 (Consumer Contracts)

Section Key Provision
s 2 Terms must be transparent and expressed in plain, intelligible language.
s 31 Unfair terms that create a significant imbalance to the consumer’s detriment are unenforceable.
s 57 Exclusion of liability for death or personal injury caused by negligence is void.
s 62 Terms that limit the consumer’s statutory rights (e.g., right to reject faulty goods) are ineffective.
s 65 Terms that impose a disproportionate burden on the consumer (e.g., excessive fees for exercising a right) are unfair.
s 68 Courts may assess the fairness of a term at any time, not only at the point of contract formation.

Applying the Reasonableness Test (Checklist)

  1. Was the clause brought to the consumer’s (or weaker party’s) attention before or at the time of contracting?
  2. Is the wording clear, unambiguous and expressed in plain language?
  3. Does the clause create a significant imbalance to the party’s rights?
  4. Is there a genuine disparity in bargaining power?
  5. Would a court consider the clause “reasonable” in the surrounding circumstances?

3.2.5 Summary Checklist – Contents of a Contract

  1. Identify all express terms and decide whether any statements are merely representations.
  2. Check that each express term has been properly incorporated (signature, notice, or trade usage) and that the parol evidence rule does not bar reliance on it.
  3. List implied terms that apply:
    • Statutory (CRA 2015 – goods s 9‑11; services s 49‑52)
    • Common‑law (business efficacy, mutual trust, etc.)
    • Custom, trade usage, and reasonable expectations.
  4. Classify each term as a condition, warranty, or innominate term and note the appropriate remedy for breach.
  5. Identify any exemption or limitation clauses and assess:
    • Incorporation and clarity (contra‑proferentem).
    • Compliance with UCTA 1977 for B2B contracts.
    • Compliance with CRA 2015 for consumer contracts.
  6. Reflect on the overarching policy aims – freedom of contract, justice, morality, and effectiveness – when evaluating the fairness of the contract’s content.
Suggested diagram: Flowchart of “Contents of a Contract” – starting with Express Terms (representation vs term, incorporation, parol evidence), branching to Implied Terms (statutory, common law, custom, expectations), then to Classification of Terms (condition, warranty, innominate), and finally to Exemption Clause Controls (common‑law rules → UCTA 1977 → CRA 2015).

Create an account or Login to take a Quiz

43 views
0 improvement suggestions

Log in to suggest improvements to this note.