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Contractual term

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A contractual term is a specific provision that forms part of a contract. These terms are the essence of an agreement because they state exactly what the contract will do. For example, terms might include the price of a good or the time it must be delivered. Each term creates a legal obligation for the people involved. If someone breaks a term, it is called a breach. This can lead to litigation, which is a legal process to settle the disagreement.

Not all terms are the same importance. Some are called conditions, which are major rules that go to the very root of the deal. If a condition is broken, the innocent party can end the contract. Other terms are called warranties, which are less vital. If a warranty is broken, the contract stays active, but the person might have to pay damages. There is also a category called innominate terms. These were created by Lord Diplock in the case of Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd. Whether breaking an innominate term ends a contract depends on if it removes the legal benefit for the other person.

Terms can be express or implied. An express term is stated clearly during a talk or written in a document. Implied terms are not written down, but they are still part of the deal. Some are implied in fact to make a business work properly. In the case of The Moorcock from 1889, a judge used the idea of an "officious bystander." He suggested that if a bystander proposed a term and both sides said "of course," it should be implied. Other terms are implied in law for certain relationships. For instance, a landlord must keep common areas in repair for a tenant.

Sometimes people make statements that are not actually terms. A "puff" is just sales talk, like what you hear in TV commercials. No reasonable person would take a puff seriously as a legal promise. A representation is a statement of fact that is not a guaranteed term. Courts look at several things to decide if a statement is a term. They check the timing of the statement and the content. They also look at the knowledge and expertise of the person speaking. In Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd, a dealer's statement was a term because he should have known the car's history.

Special laws also create terms for certain activities. These are called statutory terms. In the United Kingdom, the Sale of Goods Act 1979 helps set these rules. In the United States, most states use the Uniform Commercial Code to regulate the sale of goods. People can also be bound by the customs of their specific industry. To use a custom as a term, it must be certain and reasonable. In England and Wales, a 2010 ruling said that saying "terms and conditions available on request" can also create a binding obligation. This helps ensure that people know what they are agreeing to in a deal.

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