What is the Difference between a Term and a Representation?
Terms:
- Statements of Fact the Parties intend to be Binding.
- Breach of a Term is Breach of Contract.
Representations:
- Statements of Fact or Law, made to Induce Agreement, that the Parties do not intend to be Binding.
- Breach of a Representation is Misrepresentation.
If a Representation is Codified into the Contract, it also becomes a Term.
How does the Court Distinguish between Terms and Representations?
By asking what a reasonable person would believe the Parties intended given:
- The timing of the Statement.
- The importance of the Statement.
- Whether the Statement was Codified.
- Whether the Speaker had special skill or knowledge.
- Whether the Speaker assumes responsibility for the Statement’s truth.
A Statement is more likely to be a Term if these conditions are present.
‘Timing’ refers to the Statement’s proximity to Contract — the greater, the likelier it is a Term.
How can an Express Term be Incorporated into a Contract?
- Notice.
- Conduct.
- Codification into the signed, written Contract.
Other means are also viable, e.g. oral agreement or written correspondence, provided the Parties display an intention to be bound.
The same factors distinguishing Terms from Representations are relevant for assessing Incorporation.
How can an Express Term be Incorporated by Notice?
A Party takes reasonable steps to bring the Term to its Counterparty’s attention. For example:
- A Party makes clear reference to the contents of a separate document.
Beware that the more onerous the Term, the clearer and stronger the Notice must be.
How can an Express Term be Incorporated by Course of Conduct?
The Parties have consistently included it in previous Transactions, forming a regular history of dealing.
How can an Express Term be Incorporated by Codification?
By merely including it in the Contract, since Signatories are bound by the entirety of a Contract, unless:
- It was not intended to have legal effect; or
- The meaning of a given Term was misrepresented.
How can an Implied Term be Incorporated into a Contract?
- Implication by Law.
- Implication by Fact.
That said, beware the existence of a general Presumption against Implied Terms.
A valid Exemption Clause can prevent Implication altogether.
How can a Term be Implied by Law?
- By Statute.
- By Common Law.
When is a Term Implied by Statute?
When a given Contract falls within a given Statute’s purview.
When is a Term Implied by Common Law?
When a given Contract falls within the Common Law’s purview.
How can a Term be Implied by Fact?
- Obviousness.
- Business Efficacy.
- Course of Dealing.
- Professional Custom.
All of these Tests are applied Objectively.
When is a Term Implied by Obviousness?
When it is so obvious that both Parties would have agreed to it, had it been suggested at Formation.
When is a Term Implied by Business Efficacy?
When it is absolutely necessary to make the Contract functional given its intended purpose(s).
When is a Term Implied by Course of Dealing?
When the Parties have regularly dealt on a consistent set of Terms.
When is a Term Implied by Professional Custom?
When a Trade or Profession’s well-established customs include the Term in dealings.
What is the Scope of the Sale of Goods Act (“SOGA”) 1979?
Any Contract for the Sale of Goods.
This does not apply to Consumer Contracts as defined by CRA 2015.
Which Terms are Implied by the Sale of Goods Act 1979?
§12 — Title (Condition):
- The Seller must have the right to sell the Goods.
§13 — Correspondence with Description (Condition):
- The Goods must correspond with the Seller’s description.
§14(2) — Satisfactory Quality (Condition):
- Goods sold in the course of business must be of satisfactory quality (i.e. reasonable considering the price, description, etc.).
- Actual or Constructive Notice of Defects notwithstanding.
§14(3) — Fitness for Purpose (Condition):
- The Goods must be fit for the Buyer’s purposes if it made them known to the Seller, expressly or impliedly; unless
- The Buyer did not rely on the Seller’s judgement, or it would have been unreasonable for it do so.
§15 — Correspondence with Sample (Condition):
- The Sample and Goods must correspond in quality.
- The Goods must be free of any Defects that a reasonable inspection of the Sample would not reveal.
These Terms are also Implied into any:
- Contract for the Hire of Goods; or
- Contract for the Transfer of Property in Goods.
As defined in SGSA 1982.
What is the Consequence of Breaching an Implied Term under the Sale of Goods Act 1979?
The Buyer is entitled:
- To Terminate or Affirm the Contract; and
- To claim Damages.
However, if the Breach is so slight that rejection is unreasonable:
- The Condition is reduced to a Warranty; and
- The Buyer is only entitled to claim Damages.
What is the Difference between a Condition and a Warranty?
- Conditions go to the Root of the Contract, as per the Parties’ Intentions at Formation; whereas
- Warranties do not.
What is the Scope of the Supply of Goods and Services Act (“SGSA”) 1982?
Any Contract for the Supply of Services, including alongside the Sale of Goods.
This does not apply to Consumer Contracts as defined by CRA 2015.
Which Terms are Implied by the Supply of Goods and Services Act 1982?
§13 — Care and Skill (Innominate):
- In the course of business, the Supplier must execute the Service with reasonable care and skill.
§14 — Time of Performance (Innominate):
- If a deadline is unspecified, the Supplier must complete the Service within a reasonable time.
§15 — Consideration (Innominate):
- If a price is unspecified, the Supplier must charge a reasonable price.
An Innominate Term is one that cannot be clearly classified as a Condition or Warranty; and whose Remedy depends on the nature and impact of the Breach.
What is an Innominate Term?
- A Term that cannot be clearly classified as a Condition or Warranty; and
- Whose Remedy depends on the nature and impact of the Breach.
When will an Innominate Term be deemed a Condition?
If it deprives the Victim of, substantially, their whole benefit under the Contract.
Regarding Time as a Term, if it is Of The Essence, it is a Condition, and if it is not, a Party can serve Notice making it so.
What is the Consequence of Breaching an Implied Term under the Supply of Goods and Services Act 1982?
If the Breach is serious, Buyer is entitled:
- To Terminate or Affirm the Contract; and
- To claim Damages.
If the Breach is slight, Buyer is only entitled:
- To claim Damages.
