A contract, legally speaking, comprises a set of promises and obligations which the law enforces
. The obligations agreed upon by the contracting parties, are known as the terms of the contract. A contract, as we normally say, is the will of the contracting parties. If a dispute arises the terms of the contract will become the object of intense scrutiny as each one will seek to justify his position. The first task for any court, if any, is to establish exactly what was really agreed upon by the parties. This, on the face of it, may appear to be a relatively simple matter where the details of the agreement have been enshrined in a written contract, but even then certain problems can arise.
The parties may have failed to express the intentions clearly or unambiguously, the written contract document may contradict what was said or agreed upon during the course of oral negotiations between the concerned parties. Where the contract is made wholly by word of mouth or gesture it becomes, sometimes, even more difficult.
The terms of a contract, in general terms, are essentially a matter of express agreement between the parties. It should be noted, however, that additional terms can be implied into an agreement, even against the wishes of the parties, and there are certain terms which have been clearly and completely ineffective by operation of the law. This happens in contracts avoiding taxation or other rules.
How the contents of a contract are determined, during negotiations, and what is the relative importance that may be attached to the duties and obligations undertaken by the parties …etc. This process, in fact, is very important to exclude or limit the legal liability of each one of the contracting parties.
The express terms of an agreement reached between the contracting parties, in certain instances happening every day, may be so vague and indefinite that in real terms we could say there is no legal contract in existence at all.
The presence of a vague term will not prove fatal in every case, and the terms of each contract should be interpreted on the merits of each case. Various devices and means could exist for ascertaining the general meaning of the terms of the contract, such as:
The contract itself may provide the machinery whereby any disputes, between the contracting parties, about the operation of the agreement can be resolved. A court can ascertain the terms of a contract by reference to a prevailing trade custom or a course of previous transactions and dealings between the parties. A meaningless or redundant term which is subsidiary to the main agreement can, in certain instances, be ignored and the rest of the contract enforced.
The first step in determining the terms of a contract is to establish clearly what the parties said or wrote. That is not to say that all statements made during the course of negotiations will automatically be incorporated in the contract document. The statement made by one of the parties may be, if we could say, a trader’s puff, or a representation or a term. The statement could vary from one case to another and if it turns out to be wrong, the plaintiff’s remedy will depend on how the statement is classified.
For clarification purposes we could say that the differences between the above mentioned cases are as follows:
Trader’s puff, for example, if a hotel location or vacation beach is described by a travelling agent as ‘totally immaculate’ and of ‘incredible value’ this is nothing more than typical advertising exaggeration. We are not expected to take such sales talk seriously and, consequently, there could be no civil remedy if the statement turns out to be untrue or not to the satisfaction.
Representation, for example, this is a statement of fact made by one party which induces the other to enter into the contract. This is legally not acceptable. The type of misrepresentation determines the remedy for such misrepresentation.
Term of a contract, for example payment of the rent, breach of this term of the contract entitles the deprived party of substantially what agreed upon between the parties, moreover, he will also be able to repudiate the contract. We are highlighting this to indicate the importance of the distinction between a mere representation and a statement which becomes a term of the contract.
Many courts declined to give the plaintiffs what they were looking for and damages were not available for a misrepresentation unless it was made fraudulently, and the only remedy, rescission, could be easily lost. The injured party, therefore, would be keen to establish that the statement had been incorporated into the contract, so that he could claim damages for a breach of a contractual term.
This, in common law, generated a considerable body of complex case law and different opinions and rulings. The law in England (The Misrepresentation Act ), however, opened the way for an award of damages for non-fraudulent misrepresentation and, as a result, the distinction between terms and representations has become much less important.
It should be noted that the civil remedies in respect of false statements are complemented by criminal sanctions for breaches of certain laws that prohibit the use of certain false or misleading trade descriptions.. The main offences in this area are as follows:
Applying a false trade description to any goods or supplying or offering to supply any goods to which a false trade description is applied, e.g. selling a car which indicates a false reading on the odometer. Making misleading statements as to the price of goods or expiry date of certain items, e.g. suggesting that the price of goods has been reduced.
The terms of a contract delineate the obligations of the contracting parties and these may vary greatly in importance according to the nature of the contract and the intention of the parties at the time of negotiations.
Another way in which the contents of a contract can be classified is according to whether the terms are express or implied at the time of negotiations between the contracting parties. Express terms are all the details of a contract which have been specifically agreed wholly in a written document or ascertained entirely from what the parties said to each other and agreed to be part of the contract between them. In some cases, the terms may be partly written and partly verbal.
The most common types of express terms, which are often a particular feature of standard form contracts, are exemption clauses, liquidated damage clauses and price variation clauses. The term, exemption clause, is used to describe an express term in a contract or a statement in a notice or sign which seeks to exclude or limit the responsibilities that might otherwise belong to a party, such as disclaimer clauses.
The term, liquidated damage clause, in a contract lays down the amount of damages that will be payable to the aggrieved party in the event of a breach of contract. Calculating a contract price in a period of inflation can be a very hit and miss operation. A contractor may find himself bound by a fixed price which has failed to take sufficient account of increases in the cost of raw materials, wages or other overheads, such as rates.
One solution to this problem, that could happen in many contracts, is to insert a specific term in the contract between the parties which allows a variation to the contract price under certain circumstances that could happen or take place at the time of executing the contract. Construction contracts for big projects is a good example wherein such term should be included to safeguard prices differences.
In certain ready-made contracts, if we could say, there are certain terms which require the attention and discussion of the parties before signature. A good example could be insurance contracts or loan agreements contracts with banks. The terms in these contracts are standard and normally the insurance or the bank inserts their terms and conditions, this is why I call them ready-made contracts. The interested party is advised to understand these terms before signature so as not to be taken by surprise in future or when it is too late. Generally, in each contract, parties are to be careful as the contract is their will.
Dr. AbdelGadir Warsama Ghalib