A contract is a set of rules. These rules tell people what to do. Some rules are written down. Other rules are just understood. They help people play fair. Do you follow rules too?
A contract has special rules. These rules are called terms. They say what a person must do. Some terms are written down clearly. Other terms are just understood by everyone.
Terms can be very important. One rule might be about the price. Another rule might be about when to deliver a gift.
If someone breaks a rule, it is a problem. This can lead to a big disagreement. A person might have to pay money to fix it.
Rules also help people work together. They make sure everyone plays fair. This keeps things clear for everyone involved.
A contract is a set of rules. These rules are called terms. Terms tell people what they must do. Some terms are written down. These are called express terms. Other terms are not written down. These are called implied terms. They are just understood to be part of the deal.
Not all terms are the same. Some are very important. These are called conditions. If a person breaks a condition, the deal can end. Other terms are less important. These are called warranties. If someone breaks a warranty, the deal stays. But the person might have to pay money to fix the mistake.
Sometimes, people make statements that are not terms. A "puff" is just sales talk. No one takes a puff seriously. A "representation" is a statement of fact. It is not a guaranteed rule. Courts look at many things to decide. They look at when the statement was made. They also look at what the person knew. This helps keep things fair for everyone.
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.
A contractual term is any provision that forms part of a contract. These terms are the essence of an agreement because they define exactly what the contract will do. For example, terms might include the price of a good or its description. Each term creates a legal obligation for the parties involved. If a party fails to meet an obligation, it is called a breach. A breach may lead to litigation, which is a legal process to settle the disagreement.
Not all terms carry the same legal weight. They are often classified into three distinct types based on their importance. The first type is a condition. A condition is a major provision that goes to the very root of a contract. If a condition is breached, the innocent party is entitled to terminate the contract. The second type is a warranty. A warranty is less imperative than a condition. If a warranty is breached, the contract continues to exist, but the innocent party may receive damages. The third type is an innominate term. This concept was created by Lord Diplock in the case of Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd. For these terms, the result of a breach depends on whether the legal benefit of the contract was removed from the innocent party.
Terms can be categorized by how they are created. An express term is one that is stated by the parties during negotiations or written in a document. In contrast, implied terms are not explicitly stated but are still considered part of the agreement. Some terms are implied in fact to ensure business efficacy. This means the term is necessary for the contract to work properly. In the 1889 case of The Moorcock, a judge used the idea of an "officious bystander." He suggested that if a bystander proposed a term and both parties replied "of course," that term should be implied.
Other implied terms are established through different legal channels. Terms implied in law are automatically included in certain standardized relationships. For example, the case of Liverpool City Council v Irwin established that landlords must keep common areas in a reasonable state of repair. Similarly, Wong Mee Wan v Kwan Kin Travel Services Ltd established that tour operators must perform services with reasonable care. There are also statutory terms created by specific laws. In the United Kingdom, the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982 imply terms into many contracts. In the United States, most states have adopted Article 2 of the Uniform Commercial Code to regulate the sale of goods.
It is important to distinguish between contractual terms and other types of statements. A "puff," or puffery, is mere sales talk often seen in television commercials. Because no reasonable person would take a puff seriously, it does not create a legal obligation. A representation is a statement of fact that is not a guaranteed term. While a representation does not create a contractual obligation, it may lead to a claim for misrepresentation. To decide if a statement is a term, courts look at several factors. They consider the timing of the statement and its content. They also examine the knowledge and expertise of the person making the statement.
Expertise plays a major role in how courts interpret statements. In the case of Oscar Chess Ltd v Williams, a person sold a car as a 1948 model based on a document. It was actually a 1939 model. The court held this was not a term because a reasonable dealer would not expect an inexperienced person to guarantee the truth. However, in Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd, a dealer stated a car had done 20,000 miles since an engine refit. The true figure was 100,000 miles. The court ruled this was a term because the dealer was in a position to know the car's history.
Finally, contracts can be influenced by industry customs and specific wording. A person is generally bound by the customs of their industry. To imply a term based on custom, one must prove the custom is notorious, certain, legal, and reasonable. In 2010, an English appeal court also clarified the use of specific phrases. The court ruled that "terms and conditions available on request" can create a binding obligation. This was decided in the case of Rooney v CSE Bournemouth Ltd. This ensures that a reasonable person understands when they are entering into a binding agreement.
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