Express Terms in a Contract

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Table of Contents

Statement of the legal issue
The rule of law
Application of the rule of law
Short answer question
Conclusion
References

Statement of the legal issue

Peter has a change of mind and decides to buy the bike from Sally. However, to Peter’s dismay, the bike does not perform to his expectation. Six weeks after purchase was made, the bike’s gears fail completely rendering the bike unusable. Peter also discovers that the condition of the bike does not conform to the description detailed in the in the advertisement and contact agreement.

The rule of law

The issue is determining which terms are expressly agreed and the status of those terms. According to Burnett and Bath (2009, 45) any terms specifically agreed upon before or at the time in which a contract is formed are referred to as express terms. Express terms can be agreed orally or in written form (contract document). In the Australian case of Codelfa Construction Pty Ltd v. State Rail Authority of New South Wales (1982) 149 CLR 337, the State Rail Authority sued Coldelfa for failure to adhere to a three shift work day. In its ruling, the court declared that the term was not obvious and that it was technically indefinable. Thus, as explained by Duncan (2005, 65), the meaning of an express term has to be obvious to both parties. In Routledge v McKay [1954] 1 All ER 855, Mckay contested the incorporation of a previously mentioned term (that the motor cycle was a 1942 model), into the written contract. However, it was determined that the motorcycle was not manufactured in 1942. In its ruling, the court determined that the term was only used for business purposes. A “puff”, as a statement used for business purposes is commonly referred to, does not attract any legal consequences even if it is proven not to truthfully express the actual status of the item on sale (Stone 2009, 40).

Assertions made by Stone (2009, 40) and in Routledge v McKay [1954] 1 All ER 855 indicate that there are terms that have more legal consequences than others. Conditional terms form the basis of the contract and as search if violated, a contract is repudiated (CCH Australia Limited 2012, 405). On the other hand, a warranty does not affect the core of the contract. Violating warranties does not affect that performance of a contract (Turley 2001, 135). As such, to determine whether a term is a condition or a warranty, objective assessment seems necessary.

Determining which terms are expressly agreed requires objective assessment of those terms. A term is expressly used if it is agreed on or before the formation of the contract. There are a few terms that were expressly motioned in the contract. For instance the terms ‘dashing green color’, ‘comfortable seat’, ‘short supply’, ‘new tires’, ‘refurbishment of the gears’ and that the seller is “not liable for defect, malfunction or fault” are stated in the contract. Additionally, any guarantees ‘given only last for 30days after purchase was made’ is also expressly mentioned. The use of the term ‘new’ in this case is not obvious whether it means retreads or brand new tires. Thus the term may not have been expressly agreed. Additionally, Sally used the terms ‘dashing green color’, ‘comfortable seat’, ‘short supply’ for the sake of advertising. In this case, the terms can be referred to as ‘puffs’ and therefore not expressly agreed. However, ‘refurbishment of the gears’ is contestable, since it was a clarification on the actual condition of the bike. The clause at the bottom of the documents states that the seller is not liable for defects, malfunctions. However, the defects emanate from the fact that the gears had not been refurbished. To a reasonable person, Sally violated the contract to the extent that ‘refurbishment of the gears’ is concerned. Thus, since this condition existed before the contract formed, the 30 days guarantee cannot be used to refute Peter’s claims.

Application of the rule of law

To a reasonable person, the terms ‘dashing green color’, ‘comfortable seat’, ‘short supply’, ‘new tires’, does not necessarily affect the core functionality of the contract as they are not intended to be legally binding. As such they can be treated as warranties. However, ‘refurbishment of the gears’ is a term that convinced Peter to enter into a contract with Sally. As such, this is a condition whose violation amounts to breach of contract.

Based on the facts herein, it is evident that Peter’s options are limited. Nevertheless, he can seek legal redress as far as refurbishing of gears is concerned.

Short answer question

According to Winckel (1999, 56) Acts of Parliament are the main source of law. There are however, other issues that are not expressly covered in the Acts of Parliament. In this regard, judges have to rely on other sources of law in interpreting laws covering these issues. For instance, facts in a case can resemble facts from a previous case in which judgment has already been made. Thus, judges usually use previous judgments in interpreting the law. Additionally, there are issues brought before the court that heavily rely on international agreements and treaties. Thus, international conventions such as the ‘International Covenant on Civil and Political Rights’ acts as sources of law in relations to human rights.

Conclusion

However, in using these sources of the law, judges rely on both intrinsic and extrinsic evidence. Intrinsic evidence involves information contained outside the main statutory text. These include long and short titles, preambles as well as information contained in footnotes. Extrinsic evidence includes reports from commissions of inquiry, findings from select committees as well as reports from commissions on law reform (Spigelman 2001, 34).

References

Cases

Codelfa Construction Pty Ltd v. State Rail Authority of New South Wales (1982) 149 CLR 337

Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA (No 4) [2009] FCA 522

Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 97325; 15- 305

Routledge v McKay [1954] 1 All ER 855

Other Sources

Burnett, Richard and Victor Bath. 2009. Law of International Business in Australasia. Perth: Federation Press

CCH Australia Limited. 2011. Australian Corporations & Securities Legislation. Perth: Taylor and Francis

Duncan, William. 2005. Joint Ventures Law in Australia. Melbourne: PF Pages

Helewitz, Daniel. 2010. Basic Contract Law for Paralegals. Aspen: Aspen publishers

Monahan, Geoff. 2001. Essential Contract Law. Perth: Francis and Taylor

O’Shea, Kathryn and Kylie Skeahan. n.d. “Acceptance of Offers by E-Mail: How Far Should the Postal Acceptance Rule Extend?” Australia Journal of law. 23(5)

Spigelman, Chris. 2001. The Poet’s Rich Resource: Issues in Statutory Interpretation Sydney: Parliament House Press

Stone, Richard. 2009. The Modern Law of Contract. London: Taylor and Francis

Thorpe, Chris, Patrick Thorpe and John Bailey. 1999. Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises. Melbourne: Kogan Page

Turley, Ian. 2001. Principles of Commercial Law. Sydney: Taylor and Francis

Winckel, Anne. 1999. “The Contextual Role of a Preamble in Statutory Interpretation”. Melbourne University Law Review 184(2).

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