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TERMS OF THE CONTRACT

Express: Terms where both parties explicitly agree on Implied: When the law steps in and fill in the blanks Condition: Upon a breach of contract, the innocent party can terminate and sue for breach. Warranty: The innocent party has to continue to perform the contract and reco er compensation for the loss by way of damamges Inominate terms: !onse"uences similar to either a condition or warranty depending on the degree of seriousness upon a breach of contract.

A. Parol E iden!e R"le #ss$% and $& EA'


(e)inition: When the parties ha e reduced their contract to writing, either party may not attempt to show by extrinsic e idence that the terms in the written contract must be changed, added to or contradicted. #one of these parties can displace the contents of the written contract by showing that the document is incorrect because there are other oral terms that change or ary the terms found in the contractual document. Exceptions Where extrinsic e idence shows that the contract was the result of mistake, a lack of consideration, or of misrepresentation. $.g. mistake in Joscelyne v Nissen %&'()* Where extrinsic e idence shows a mistake in the written contract and the party pro es that the contract should ha e read instead of its disputed term. Where extrinsic e idence shows that the written contract has not yet come into existence or that it is no longer in operation. %+aybe due to the occurrence or non, occurrence of a certain e ent by a certain date, which has been accepted erbally* Pym Camp*ell #+,-.' -bligation to buy shares in an in ention was conditional upon a . rd party appro ing the in ention, of which the appro al had not been recei ed. Where extrinsic e idence demonstrates that a particular custom of trade must be implied to, and therefore become a part of, the written agreement. Smit/ Wilson #+,%0' $ idence of local custom show that &))) rabbits really meant &/)) rabbits was allowed !ustomer transaction between a consumer and a supplier: A!!ordin1 to se!. +2 o) Cons"mer Prote!tion A!t3 parol or extrinsic e idence establishing the existence of an express warranty is admissible in any action relating to a consumer transaction

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between a consumer and a supplier e en though it adds to, aries or contradicts a written contract. %This act shall not be applicable to establish the existence of any express warranty in respect of goods or ser ices intended for business use* Collateral !ontra!ts , -ne party, in consideration of the other party making a separate and distinct contract, makes a contract with the other party by gi ing that other party a collateral warranty %security* , 1efore collateral contract can be said to exist, it must be shown that one party made a representation intending to persuade the other to conclude , That person concluded the contract as a result , 2epresentation is a warranty collateral to the main contract and exist side by side with the main contract , 3ny collateral contract must not be inconsistent with those contained in the main agreement S/an4lin Pier 5( (etel Prod"!ts 5( #+$-+' Fa!ts: 4efendants made some misrepresentation on the paint they manufactured. 3s a result, plaintiff found out when it asked its contractor to use the paint on its pier. Held: 5laintiff had a collateral contract with the defendant and could reco er damages caused by the unsuitable paint. Tendency to relax Parol E iden!e R"le. 6 E ans 7 Sons #Portsmo"t/' 5td Andrea Mer8ario 5td #+$2.'

Fa!ts: -ral assurance that defendant would transport plaintiff6s goods below deck, but no such written condition. 7oods transported on deck and lost at sea. Held: !3 ma8ority held that the contract was partly oral and partly 9ritten, while 9ord 4enning +2 held that the oral agreement was !ollateral.

:. Express Terms
3re terms which are explicitly stated in the contract. #ormally both parties dispute at the implicit terms. 3n express statement could be: P")): exaggerated statements with no legal effects Representation: o :tatements made before the time the contract is formed o #o legal effect in relation to the contract itself ; they do not bind the maker, such that breach would enable the maker to be sued for damages. o They are statements that induce the recipient to enter into the contract

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o The recipient of such statement may ha e remedies under misrepresentation, and could ask for the contract to be unwound, and 0 or, in certain circumstances, ask for damages for the misrepresentation. Term: binding statements. o Why distinguish between representation and term< 3ffects a ailable cause of action o When term has not been complied with, the court will ask the defendant to compensate you. =.e >uture earnings o When it is not a term, the court may 8ust bring you backward to where you were by rescinding the contract Contra Pro)erent"m r"le ?ou drafted the document so court rules that if term could be good for you or bad for you, the court automatically enforces the meaning of the term that is bad for you. :. Terms s Mere Representations The person who relied on the misrepresentation and was induced into the contract can sue for breach of contract. :e eral objective tests to consider %intention of the parties and "uestion of fact* #o one single test is decisi e, thus totality of e idence must be considered. 1. Re;"est to <eri)y %5hang @.&.* =f during negotiation prior to contract, one party tells the other something then re"uest the other party to erify the statement, court will probably hold that the party made a representation E!ay =od)rey #+$&2'

Fa!ts: :eller told buyer that boat did not ha e flaws and in ite the buyer to inspect it. 1uyer did not inspect the boat and after the sales, the buyer found flaws. Ae thus sued for breach of contract. Held: :eller6s statement was a representation and not a term. S!/a9el Reade #+$+%' :eller of horse did not in ite buyer to erify conditions of horse and claim that the horse was perfectly sound which turned out untrue. 1uyer successfully sued for breach of contract. 2. Importan!e o) statement %5hang @.&B* =f the statement was so important that one will not enter into contract but for such statement ha ing been made, court likely to hold that statement was intended to be a term :annerman W/ite

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Fa!ts: 1uyer made it clear that if sulphur was used, he would not buy the plants. :eller assured him that no sulphur was used. :ulphur was used. 1uyer sued the seller for a breach of contract. Held: 3ssurance about plants being free of sulfur was a term of contract and not a representation 3. Timin1 o) statement %5hang @.&@* =f the inter al between the making of the statement and the conclusion of the contract is short, the statement is more likely to be a term. Ro"tled1e M!>ay #+$-&' Fa!ts: 2 enter into negotiations to purchase +Cs motorcycle. -n /.rd -ct, + told 2 that the motorcycle was a &'B/ model. -n .) -ct, 2 entered into the contract but disco ered that the motorcycle is actually a &'.) model. Ae thus sue claiming a breach of contract Held: !lear and significant & week inter al between the making of the statement and the making of the contract. This indicates that the statement is not a term of the contract. 2 cannot claim for a breach. 4. T/e in!l"sion o) t/e Oral Statement in a later )ormal !ontra!t in Writin1 =f the statement was excluded, this suggests that it is a representation. Aowe er this is dependent on the situation =f there is oral assurance, contract may be taken to be part oral and part written like in J Evans & Sons (Portsmouth) Ltd v Andrea Merzario Ltd ( !"#) 5. W/et/er t/e ma4er o) t/e Statement /ad Spe!ial >no9led1e or S4ill to eri)y its a!!"ra!y as !ompared to t/e ot/er party =f this is the case, then the statement is more li4ely to be considered a term. The knowledge of the person recei ing the statement is about the same or superior to the party making the statement, it would more likely be a representation, not a term. 3 comparison of the applications in the following / cases is illustrati e: Os!ar C/ess 5td Williams #+$-2'

Fa!ts: 4efendant willing to trade in /nd hand car to buy 5laintiff dealer6s new car. o 5rice depended on /nd hand car6s age. o 9og book stated &'BD, and 5laintiff accepted this with the 4efendant6s assurance. o 3ctual age was &'.'. 5laintiffs sued for age0price difference. Held: !3 held that the statement of age was not a contractual term and looking at the . rd test, the 5laintiff had special knowledge to disco er the actual age, not the 4efendant. o The claim was thus dismissed. (i!4 :entley Prod"!tions Harold Smit/ Motors #+$.-' Fa!ts: 5laintiffs looking for well kept 1entley. o 4efendants said that they had such a car with only /),))) miles on it after a new gear box and engine. o 5laintiff bought car and found out that mileage was false. Held: !3 ruled that mileage was part of the contractual terms. o :eller dealt in cars and should ha e sufficient knowledge
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0. Classi)i!ation o) Terms %to be dealt in greater details in discharge* $ntention o% the &arties' assess the objective lan(ua(e o% the contract Conditions: +a8or Terms, breach of which entitles innocent party to discharge or affirm contract and claim damages whiche er course is chosen. Warranties: +inor Terms, breach of which gi es rise to only a claim for damages. Innominate Terms: Unnamed terms, remedy for breach of which depends upon nat"re3 !onse;"en!es and e))e!t o) *rea!/. =f breach of innominate term goes to the root of the contract such that the innocent party is depri ed of substantially the whole benefit, innocent party may discharge Test: (id t/e *rea!/ depri e t/e inno!ent party o) s"*stantially t/e 9/ole *ene)it "nder t/e !ontra!t? Po"ssard Spiers #+,2.' Fa!t: 5laintiff was contracted to sing in an opera. :he fell ill and was unable to sing on opening night. 4efendants engaged a substitute Held: 5laintiff6s failure to appear on opening night was a breach of a condition entitling the defendant to repudiate the contract and treat it as discharge

:ettini =ye #+,2.' Fa!t: 1 an opera singer contracted with 7 for a performance in 9ondon. !ontract included a term for her to attend a rehearsal E days before the day of the concert. :he fell ill / days before the concert but was in time for opening night. 7 refused to continue with the contract and 1 sued for breach Held: -bligation to participate in rehearsals not a condition but a warranty. +ain purpose of the contract was for the singer to engage in the actual performance.

Root o) t/e !ontra!t:

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!ondition: 3bsense of which would ha e persuaded the innocent party to not enter into the contract. Warranty: #on,performance will not impair the substance of the bargain. Hon1 >on1 Fir S/ippin1 Co 5td >a9asa4i >is/en >ais/a 5td @+$.0A 0 B: 0. Co"rt o) Appeal Fa!ts: >acts: 5laintiff owner chartered ship to 4efendants for /B months. -n deli ery, engine room staff too few and too incompetent to operate machinery. +ultiple delays, :hip only ready (mths later Held: Though the ship was inoperable for ( months out of /B months, this did not depri e the innocent party of substantially the whole benefit. Aence, the innocent party was not allowed to repudiate the contract, and was only awarded damages.

Innominate term: =mpossible to en isage both serious and tri al breaches of the term, nature and conse"uences of the breach &* 3ccording to conditional,waranty approach, determine whether the language of the term re"uires it to be classified a condition /* Whether the breach has depri ed the innocent party substainally0entirely the benefit of the contract. When the term is not a condition, it will not be held automatically as a warranty. %. Implied Terms i' Terms Implied in Fa!t Terms are only implied where they are o* io"s or ne!essary to 1i e e))e!t to pres"med intention of both parties to contract. &. Term must be reasonable and e"uitable /. Term must be necessary to gi e business efficacy to the contract. Thus no term will be implied if the contract is effecti e without it .. Term implied must be ob ious, it goes without saying. B. =t must be capable of clear expression @. it must not contradict any expressed term of the contract 0 Tests /a e *een )orm"lated :

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a' T/e :"siness E))i!a!y Test Term may be implied where it is ne!essary to 1i e *"siness e))i!a!y to the contract. !ontract will not be able to work in the absence of such terms *' T/e Moor!o!4 #+,,$' +& P( .& Fa!ts : !ourt held 4efendants in breach of implied term that ships should be safe when loading0unloading. This was necessary to gi e *"siness e))i!a!y to the contract, %ie. 4efendants should ha e taken reasonable care to ensure safety of ship*. CO))i!io"s :ystander Test Term may be implied if it is so o* io"s that both parties m"st /a e intended it to be part of the contract. =magine the / parties before time of formation of contract and whether it was within the contemplation of the parties that term is within the contract ii' H"1/es =reen9i!/ 5ondon :oro"1/ Co"n!il #+$$%' % W5R ,0+ N: : =mplication will not be allowed if it is in!onsistent with the Express Terms of the contract. +ost academics argue that the 1usiness $fficacy Test would be more appropriate as it relates to the conduct of business. Aowe er, cf. Treital who insists that both tests must be applied simultaneously in e ery case. Terms Implied in 5a9 #(e)a"lt terms' =mplication is not a "uestion of intention of parties, but is based on 9ider poli!y !onsiderations. &* Whether contract is of a defined type. /* Whether implication is necessary and not 8ust reasonable #Test o) ne!essityDreasona*leness' >acilitate global commerce and the smooth functioning of arbitral agreement. F5i erpool City Co"n!il Ir9in #+$22' AC 0%$ #Ho"se o) 5ords' Held : A9 held that it was necessary to imply some terms on maintenance for poli!y reasons. Aowe er, the landlords need not take absolute care to maintain premises and since they had taken reasonable care, they were not in breach of the implied terms. National :an4 o) =ree!e Pinios S/ippin1 Co #+$,$' + All ER 0+% Fa!ts : 5laintiff bank ad anced money to 4efendant ship owners. 5laintiff appointed .rd party management agents to super ise and manage the ship. :hip under,insured by the .rd party, and 5laintiffs sued for amount ad anced to 4efendants. 4efendants claimed that 5laintiffs were under an implied duty of care to ensure that . rd party does not under,insure them. Held : !ourt held that this was not a contract of a de)ined type and it was carefully drawn up meaning that there should be less ambiguity and need for implication of terms. 1esides this, it is not necessary to imply this term because if this were so, then the other duties of the . rd
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party management agents would also ha e to be ensured by the 5laintiffs and this is not only "nne!essary, but also "nreasona*le. Ela9adi :an4 o) Credit and Commer!e International SA #+$,$' + All ER 0&0 Fa!ts : 3ction for refund of stolen tra ellers che"uest. Held : !ourt cited and applied 8udgment of 9loyd 9G in National :an4 o) =ree!e Pinios S/ippin1 Co #+$,$' and held that the issue and purchase of tra ellers che"ues is self, e idently a contract of a de)ined type. !ourt then implied a duty and the 5laintiff6s claim succeeded. F:et/le/em Sin1apore Pte 5td 5ee Ho!4 Sen1 #+$$-' + S5R + #CA3 Sin1apore' Fa!ts : Employment !ontra!t ; =ssue was whether a term pro iding certain retrenchment benefits should be implied, or less benefits should be applicable. Held : =t was not necessary to imply the term based on :"siness E))i!a!y %=mplication in >act*, but in the course of the 8udgment, they used the case of 5i erpool City Co"n!il #+$22' which was based on a term implied in law.

iii' Terms Implied *y Stat"te o :tatute may imply terms in a particular type of contract o 3n example is the :ale of 7oods 3ct %:-73, !ap .'.* o 3llows buyer and seller to routinely engage in sales without wasting time hammering out details o :ection &/%&*: implies a condition that the seller has a right to sell the goods o :ection &/%/*: implies a warranty that goods are free from charges or encumbrances in fa our of .rd parties o :ection &.%&*: implies a condition that goods sold by description will correspond with their description o :ection &@%/*: that goods sold by sample will correspond with their sample o :ection &B%/*: implies a warranty that where a seller sells goods in the course of his business, implied warranty that goods supplied are of satisfactory "uality. i ' Terms Implied *y C"stom o 5articular trade practice, feature of the market and customs of the locality may be rele ant to the operation of the contract o Where a party engages in contracting within a particular trade, like the coffee trade, that party will be bound by the usage in that trade if usage is 9ellE4no9n3 !ertain3 reasona*le and le1al o 3 custom must be a usage that is s"))i!iently "ni)orm and a!!epted *y t/e rele ant !omm"nity.

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H"tton Warren #+,%.' Fa!ts: 5laintiff farmer ga e the landlord notice of his intention to "uit farming the land o 9ease re"uired plaintiff to continue to plant during notice period o Ae will not be in contractual relationship during har est time o Ae seek to claim fair allowance Held: This was a type of contract where the parties did no express in writing the whole of the contract by which they intended to be bound but to contract with reference to known usages o =f there is a particular generally accepted custom and that anyone in"uiring would ha e been told about the custom, then this custom would bind e en if both were ignorant of it

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