Contractual Terms

The main body of a contract is its terms. The terms must be incorporated into the contract whether that is by them being written terms, implied into the contract by trade custom or whether one party makes a representation to the other party where it is clear that the other party treats the representation to be of great importance. There are also other ways that terms can be incorporated into a contract.

Terms can be divided into conditions, warranties and intermediate terms.

Conditions

Conditions are terms which are of such importance that if one party breaches that term (known as a repudiatory breach) the other party has the right to rescind the contract (accept repudiation). In other words the party not in breach could elect to treat the contract at an end and would no longer have to perform its obligations. At the same time that party could seek damages from the party in breach. Care must be taken to communicate acceptance of the repudiatory breach in case it is otherwise deemed that the party has waived its right to rescind.

The party not in breach does not have to rescind the contract but can elect to affirm the contract. By doing so it waives its right to accept repudiation and cannot at a later date treat the contract as at an end due to the other party's repudiatory breach.

Where the party not in breach chooses to affirm the contract, it is still entitled to damages for breach.

Warranties

Warranties are those terms which are not serious enough for breach to be a repudiatory breach. The party not in breach can only recover damages.

Intermediate Terms

Intermediate (or innominate) terms are neither conditions nor warranties. Whether a breach of an intermediate term is a repudiatory breach is a question of fact. If the breach is serious enough then it will be a repudiatory breach, otherwise it will not be.

Exclusion Clauses

One particularly important type of term is the exclusion clause. These are clauses that purport to exclude liability for breach. There are statutory rules as to the extent of such clauses and these are to be found in the Unfair Contract Terms Act 1977 (UCTA). There are also rules in the common law, such as the rule that exclusion clauses will be construed against the party seeking to rely on them (contra proferentem rule).

Exclusion clauses should be contrasted with limitation clauses which seek to limit liability. The Courts have tended to be less harsh with such clauses.

The Unfair Terms in Consumer Contracts Regulations 1999 apply, with certain exceptions, to unfair terms in contracts concluded between a consumer and a seller or supplier. The Regulations provide that an unfair term is one which has not been individually negotiated and which, contrary to the requirement of good faith, causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer.

Policing the Contract

There are various factors that need to be considered in deciding whether a contract is void and therefore unenforceable or voidable which allows a party to treat the contract as void. It should be considered whether there has been a misrepresentation of facts made by any of the contracting parties. It should also be considered whether any of the contracting parties entered into the contract under a mistaken belief as to the subject matter of the contract.

·         Was the contract tainted by illegality?

·         Was there a question as to the capacity of any contracting party to enter into a contract?

·         Did any of the contracting parties enter into the contract as a result of undue influence?

There is no general duty on a contracting party to disclose all material facts to the other party. The doctrines of misrepresentation and undue influence, in the context of fraud rather than contract, are considered in the chapter on the law relating to fraud.

Remedies for Breach of Contract

There are two principal remedies for breach of contract. They are:

·         damages;

·         injunctions for specific performance.

Damages are awarded on the basis that they should put the party not in breach in the position that it would have been in had the contract been properly performed.

The level of damages is limited to natural consequences of the breach and consequences that are in the contemplation of the parties. These are both questions of fact.

Specific performance is a remedy available in many actions for the sale of land. This is because by its very nature a parcel of land is unique. However it must always be remembered when seeking an equitable remedy that the equitable maxims apply.

Gaming Contracts and Bills of Exchange

Gaming contracts are unenforceable at law as a matter of public policy. However it is still possible for a casino to enforce payment by a gambler defaulting on payment of its gambling debts. The gambler pays for chips in order to gamble. Usually this will be by cash or cheque.

If the gambler defaults on a cheque then the casino has a remedy as there is in general no defence to a bill of exchange not being honoured, regardless of whether the defaulting party has a counterclaim with which to set off the debt.