Content of Contract

Terms of Contract :

Terms of the contract are those promises that will become binding on the parties. A term of the contract does not have to be set down in a written agreement, it may have been agreed orally, it may contained in another document or it may be implied either by the court or by statute. The terms of a contract can be divided into express terms and implied terms.

Express terms

Express terms are ones that the parties have set out in their agreement. The parties may record their agreement, and hence the terms of their contract, in more than one document. Those terms may be incorporated by references into the contract. Once the express terms have been identified, there is the question of interpretation. The document setting out the parties’ agreement must be interpreted objectively. It is not a question of what one party actually intended or what the other party actually understood to have been intended but of what a reasonable person in the position of the parties would have understood the words to mean. The ‘parol evidence’ rule provides that evidence cannot be admitted to add to, vary or contradict a written document. Therefore, where a contract has been put in writing, there is a presumption that the writing was intended to include all the terms of the contract. The parol evidence rile prevents a party from relying on extrinsic evidence only about the content of a contract, and not about its validity.

Implied terms

A contract may contain terms which are not expressly stated but which are implied, either because the parties intended this, or by operation of law, or by custom or usage.The courts have adopted two tests governing whether a term may be implied The first is the “officious bystander” test, if it can be established that both parties regarded the term as obvious and would have accepted it, had it been put to them at the time of contracting, that should suffice to support the implication of the term in fact.

Terms implied in law are terms imported by operation of law, whether the parties intended to include them or not. For example, in a contract for the sale of goods, it is an implied term that the goods will be of a certain quality and, if sold for a particular purpose, will be fit for that purpose. For certain contracts the law seeks to impose a standardized set of terms as a form of regulation. Many terms which are implied in law have been put into statutory form. For instance, a number of important terms are implied into contracts for the sale of goods by ss 12 to 15 of the Sale of Goods Act 1979.

Terms implied by custom or usage is the evidence of custom is admissible to add to, bu not to contradict, a written contract. Terms may also be implied by trade usage or locality.