laws relating to online contracts

8/9/2019 Laws Relating to Online Contracts

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Laws relating to online contracts

Before we consider the particularities of the online world, we must take a step back andexamine contractual formation in the offline world which is the background againstwhich the relevant rules which have now been applied to the online world were

established.

The Offline World

In the traditional world, it has long been clear when a contract has been concluded. It iswhen both parties put their pens to the signature section of a physical document whichsets out the agreed terms. It is true that a contract may be concluded orally but if eitherparty subsequently denies the existence of the contract, there are often enormousevidential problems in establishing that the agreement actually did come into place.

Before we consider the impact of the Internet on the contractual process, we need toconsider the legal components which enable a contract to come into existence.

The 4 Contractual Components

There are four such elements. These are consideration, the intention to create legalrelations, offer and acceptance,. The concept of consideration really means that eachparty should derive something beneficial from the transaction, hence if I offer to give youmy car as a gift, I derive no consideration. The second element, namely the intention tocreate legal relations may be passed over swiftly as this is usually understood to exist byvirtue of the fact that the parties are in negotiations. This leaves us with the essence of the

conract; offer and acceptance.

Offer or Invitation to Treat?

By way of example, an offer is made when one party proposes to another that it shouldbuy a particular item on particular terms, including the precise nature of the item, theprice to be paid, the mode of delivery and the date of payment. An offer must not beconfused with an invitation to treat. The latter is an intimation by one party to anotherthat it may be willing to do business in relation to a particular article on particular termsand that the other party, if interested should make the first party an offer in relationthereto. This can be a very subtle distinction but is, from the contractual perspective, a

crucial one. For example, perverse as it may sound, if you go to the check-out in asupermarket with a basket full of items of food and drink, the person at the check-out, ifhe/she were very well informed about the nuances of the law, would be fully entitled toturn you away and inform you that the supermarket does not wish to accept your offer forthose items. Indeed, the items that you see with price labels on the supermarket shelvesare deemed by the law to constitute invitations to treat not offers and therefore notcapable of acceptance by the customer. In summary, you cannot accept an invitation totreat and thereby conclude a contract.


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Acceptance when does it occur and what are the

effects?

This brings us on to the final element, acceptance. Let us assume that there is a proper

offer on the table. For example, A offers B to sell him his car for 10,000 p.a. plusdelivery costs of 250. Let us also assume that this offer is acceptable to B. The questionthen arises of how B can accept this offer. Again in the traditional environment, thiswould usually be achieved by both parties signing a document containing those and otherrelevant terms or, possibly by an exchange of correspondence. The moment of acceptancewould generally determine not only the time the contract was entered into but also, ifnothing contrary were stated in the terms of the contract, the nationality of the laws thatwould apply to the contract and the jurisdiction that would be the appropriate forum inwhich any disputes would be adjudicated. This can become very important if the 2 partiesare in different countries with different legal systems. Most contracts avoid the risk byexpressly stating the choice of law and jurisdiction. Readers should note the difference

between an acceptance and a counter-offer. For example, if in response to As offerabove, B were to write back and say, yes I accept your offer to sell me the car for10,000 including delivery, that would not constitute acceptance as the terms are notidentical and therefore at this point no contract would enter existence.

On-line Acceptance

With the advent of the online world, the law of contract has not altered; rather it has hadto apply the existing concepts to a new medium. There are two mainstream ways ofconcluding a contract online.

By Email

The first is by way of exchange of emails. This is similar to the exchange of physicalcorrespondence. As long as the email of acceptance does not vary the terms set out in theemail of offer, a contract will be concluded by the second email. However, questions canarise as to when the acceptance is valid. This is especially so when there is a limitedsupply. For example, what happens if a computer company has a total of 5 PCs to selland sends out emails to all of its clients on 2nd January notifying them of the PCs andtheir price. If 6 of the companys customers send emails of acceptance on 3rd January,which customer loses out? In the offline world to cover the equivalent situation, the firstletter to be posted is the one which is deemed to be the successful acceptance even if ithappens to arrive on the desk of the offeror after the other letter has already arrived. Inthe online world, it has not yet been unequivocally determined as to what constitutes theequivalent of posting in a letter box is it the moment of transmission of the email, themoment it arrives in the addressees inbox or the moment that the addressee opens thatemail. The particular circumstances will usually dictate the answer. To avoid doubt, thecompany should specify in its terms and conditions how, in the event of competingemails of acceptance, it will determine which email has been deemed to arrive first.


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By a Website

The other method of concluding an online contract is via a website when you go onto awebsite, select certain items and proceed to the checkout. The issue discussed above as towhether the display of certain items on a website constitutes an offer of invitation to treat

or offer is also relevant to the website environment as Argos and other retailers who havemade mistakes in the prices advertised on their website have discovered. In order for acompany to run a proper e-commerce operation, it needs to ensure that its terms andconditions are property adapted to the online environment, that potential clients havesight of the terms and conditions which will govern the contract before conclusion of thecontract and that it constructs its site in such a way as clearly to indicate whether the siteis an offer capable of acceptance or an invitation to treat which is not. The acceptancewill generally be by way of a click on the word accept. Clickwrap acceptance hasnow been granted similar status to the offline signature although, understandably,evidentially, the former is still preferable.

The SLA must also set out the maximum credit available in respect of any period and thatthe service credits cannot give rise to a refund or credit against fees due under any otheragreement in place between the parties.

Summary

To conclude a valid online contract on the legal basis that you wish, you must ensure thatthe terms and conditions:

are clearly displayed on the website or integrated into the exchange of emails;

have been adapted properly to the online environment certain changes arenecessary to reflect legislation which only applies to online transactions; clearly set out whether the site constitutes an offer or invitation to treat; what will constitute valid acceptance.

This article is copyright Simon Halberstam 2008 and should not be construed as

legal advice or opinion in any specific facts or circumstances. the contents are

intended for generic information purposes only. You are urged to contact a suitably

qualified lawyer for specific advice.


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In law, a contract is an agreement between two or more parties which, if it contains theelements of a valid legal agreement, is enforceable by law [1] or bybinding arbitration. Alegally enforceable contract is an exchange of promises with specific legal remedies forbreach. These can include compensatory remedy, whereby the defaulting party isrequired to pay monies that would otherwise have been exchanged were the contract

honoured, or an Equitable remedy such as Specific Performance, in which the personwho entered into the contract is required to carry out the specific action they havereneged upon.

Agreement is said to be reached when an offer capable of immediate acceptance is metwith a "mirror image" acceptance (i.e., an unqualified acceptance).[2] The parties musthave the necessary capacity to contract and the contract must not be eithertrifling,indeterminate, impossible, or illegal. Contract law is based on the principle expressedin the Latin phrasepacta sunt servanda(usually translated "agreements are to be kept",but more literally "pacts must be kept").[3]Breach of contract is recognized by the law andremediescan be provided.

As long as the good or service provided is legal, any oral agreement between two partiescan constitute a binding legal contract. The practical limitation to this, however, is thatgenerally only parties to a written agreement have material evidence (the written contractitself) to prove the actual terms uttered at the time the agreement was struck. In daily life,most contracts can be and are madeorally, such as purchasing a book or a sandwich.Sometimeswritten contracts are required by either the parties, or by statutory law withinvarious jurisdiction for certain types of agreement, for example when buying a house[4] orland.

Contract law can be classified, as is habitual in civil law systems, as part of a general law

of obligations (along with tort, unjust enrichmentorrestitution).

According to legal scholar SirJohn William Salmond, a contract is "an agreementcreating and defining theobligations between two or moreparties".

As a means of economic ordering, contract relies on the notion of consensual exchangeand has been extensively discussed in broader economic, sociological andanthropological terms (see "Contractual theory", below). In American English, the termextends beyond the legal meaning to encompass a broader category ofagreements.[5]

This article mainly concerns contract law incommon law jurisdictions (approximately

coincident with the English-speaking world and anywhere the British Empire once heldsway). Common-law jurisdictions usually offer proceedings in the English language,which has become to an extent a lingua franca of international business[6]. The commonlaw retains a high degree offreedom of contract, with parties largely free to set their ownterms, whereas civil-law systems typically apply certain over-arching principles todisputes arising out of contract (see, for example theFrench Civil Code). It is verycommon for businesses not located in common-law jurisdictions to opt in to the commonlaw through a Choice of law clause[citation needed].
http://en.wikipedia.org/wiki/Contract#cite_note-0%23cite_note-0http://en.wikipedia.org/wiki/Binding_arbitrationhttp://en.wikipedia.org/wiki/Binding_arbitrationhttp://en.wikipedia.org/wiki/Contract#cite_note-1%23cite_note-1http://en.wikipedia.org/wiki/Latinhttp://en.wikipedia.org/wiki/Pacta_sunt_servandahttp://en.wikipedia.org/wiki/Pacta_sunt_servandahttp://en.wikipedia.org/wiki/Pacthttp://en.wikipedia.org/wiki/Contract#cite_note-2%23cite_note-2http://en.wikipedia.org/wiki/Contract#cite_note-2%23cite_note-2http://en.wikipedia.org/wiki/Breach_of_contracthttp://en.wikipedia.org/wiki/Legal_remedyhttp://en.wikipedia.org/wiki/Legal_remedyhttp://en.wikipedia.org/wiki/Oral_contracthttp://en.wikipedia.org/wiki/Oral_contracthttp://en.wikipedia.org/wiki/Legal_instrumenthttp://en.wikipedia.org/wiki/Legal_instrumenthttp://en.wikipedia.org/wiki/Househttp://en.wikipedia.org/wiki/Househttp://en.wikipedia.org/wiki/Contract#cite_note-3%23cite_note-3http://en.wikipedia.org/wiki/Househttp://en.wikipedia.org/wiki/Civil_law_(legal_system)http://en.wikipedia.org/wiki/Law_of_obligationshttp://en.wikipedia.org/wiki/Law_of_obligationshttp://en.wikipedia.org/wiki/Torthttp://en.wikipedia.org/wiki/Unjust_enrichmenthttp://en.wikipedia.org/wiki/Unjust_enrichmenthttp://en.wikipedia.org/wiki/Restitutionhttp://en.wikipedia.org/wiki/John_William_Salmondhttp://en.wikipedia.org/wiki/Obligationhttp://en.wikipedia.org/wiki/Obligationhttp://en.wikipedia.org/wiki/Party_(law)http://en.wikipedia.org/wiki/Party_(law)http://en.wikipedia.org/wiki/Gentlemen's_agreementhttp://en.wikipedia.org/wiki/Gentlemen's_agreementhttp://en.wikipedia.org/wiki/Gentlemen's_agreementhttp://en.wikipedia.org/wiki/Contract#cite_note-4%23cite_note-4http://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/Lingua_francahttp://en.wikipedia.org/wiki/Contract#cite_note-5%23cite_note-5http://en.wikipedia.org/wiki/Freedom_of_contracthttp://en.wikipedia.org/wiki/French_Civil_Codehttp://en.wikipedia.org/wiki/French_Civil_Codehttp://en.wikipedia.org/wiki/Choice_of_law_clausehttp://en.wikipedia.org/wiki/Choice_of_law_clausehttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Contract#cite_note-0%23cite_note-0http://en.wikipedia.org/wiki/Binding_arbitrationhttp://en.wikipedia.org/wiki/Contract#cite_note-1%23cite_note-1http://en.wikipedia.org/wiki/Latinhttp://en.wikipedia.org/wiki/Pacta_sunt_servandahttp://en.wikipedia.org/wiki/Pacthttp://en.wikipedia.org/wiki/Contract#cite_note-2%23cite_note-2http://en.wikipedia.org/wiki/Breach_of_contracthttp://en.wikipedia.org/wiki/Legal_remedyhttp://en.wikipedia.org/wiki/Oral_contracthttp://en.wikipedia.org/wiki/Legal_instrumenthttp://en.wikipedia.org/wiki/Househttp://en.wikipedia.org/wiki/Contract#cite_note-3%23cite_note-3http://en.wikipedia.org/wiki/Civil_law_(legal_system)http://en.wikipedia.org/wiki/Law_of_obligationshttp://en.wikipedia.org/wiki/Law_of_obligationshttp://en.wikipedia.org/wiki/Torthttp://en.wikipedia.org/wiki/Unjust_enrichmenthttp://en.wikipedia.org/wiki/Restitutionhttp://en.wikipedia.org/wiki/John_William_Salmondhttp://en.wikipedia.org/wiki/Obligationhttp://en.wikipedia.org/wiki/Party_(law)http://en.wikipedia.org/wiki/Gentlemen's_agreementhttp://en.wikipedia.org/wiki/Contract#cite_note-4%23cite_note-4http://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/Lingua_francahttp://en.wikipedia.org/wiki/Contract#cite_note-5%23cite_note-5http://en.wikipedia.org/wiki/Freedom_of_contracthttp://en.wikipedia.org/wiki/French_Civil_Codehttp://en.wikipedia.org/wiki/Choice_of_law_clausehttp://en.wikipedia.org/wiki/Wikipedia:Citation_needed


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However, contract is a form of economic ordering common throughout the world, anddifferent rules apply in jurisdictions applying civil law (derived from Roman lawprinciples), Islamic law, socialist legal systems, and customary or local law.

Contents

[hide]

1 Contract formationo 1.1 Offer and acceptance

1.1.1 Invitation to treato 1.2 Consideration and estoppel

o 1.3 Intention to be legally bound

o 1.4 Third parties

o 1.5 Formalities and writing

2 Bilateral and unilateral contracts 3 Uncertainty, incompleteness and severance 4 Contractual terms

o 4.1 Boilerplate

o 4.2 Classification of term

o 4.3 Status as a term

o 4.4 Implied terms

4.4.1 Terms implied in fact 4.4.2 Terms implied in law

4.4.2.1 Common law 4.4.2.2 Statute law

4.4.3 Coercive vs voluntary contractive exchanges 5 Setting aside the contract

o 5.1 Misrepresentation

o 5.2 Procedure

6 Other contract 7 Contract theory 8 National contract law

o 8.1 German contract law

o 8.2 English contract law

o 8.3 Australian contract law

9 See also 10 Notes 11 References

12 External links

[edit] Contract formation
http://en.wikipedia.org/wiki/Roman_lawhttp://en.wikipedia.org/wiki/Contract#%23http://en.wikipedia.org/wiki/Contract#Contract_formation%23Contract_formationhttp://en.wikipedia.org/wiki/Contract#Offer_and_acceptance%23Offer_and_acceptancehttp://en.wikipedia.org/wiki/Contract#Invitation_to_treat%23Invitation_to_treathttp://en.wikipedia.org/wiki/Contract#Consideration_and_estoppel%23Consideration_and_estoppelhttp://en.wikipedia.org/wiki/Contract#Intention_to_be_legally_bound%23Intention_to_be_legally_boundhttp://en.wikipedia.org/wiki/Contract#Third_parties%23Third_partieshttp://en.wikipedia.org/wiki/Contract#Formalities_and_writing%23Formalities_and_writinghttp://en.wikipedia.org/wiki/Contract#Bilateral_and_unilateral_contracts%23Bilateral_and_unilateral_contractshttp://en.wikipedia.org/wiki/Contract#Uncertainty.2C_incompleteness_and_severance%23Uncertainty.2C_incompleteness_and_severancehttp://en.wikipedia.org/wiki/Contract#Contractual_terms%23Contractual_termshttp://en.wikipedia.org/wiki/Contract#Boilerplate%23Boilerplatehttp://en.wikipedia.org/wiki/Contract#Classification_of_term%23Classification_of_termhttp://en.wikipedia.org/wiki/Contract#Status_as_a_term%23Status_as_a_termhttp://en.wikipedia.org/wiki/Contract#Implied_terms%23Implied_termshttp://en.wikipedia.org/wiki/Contract#Terms_implied_in_fact%23Terms_implied_in_facthttp://en.wikipedia.org/wiki/Contract#Terms_implied_in_law%23Terms_implied_in_lawhttp://en.wikipedia.org/wiki/Contract#Common_law%23Common_lawhttp://en.wikipedia.org/wiki/Contract#Statute_law%23Statute_lawhttp://en.wikipedia.org/wiki/Contract#Coercive_vs_voluntary_contractive_exchanges%23Coercive_vs_voluntary_contractive_exchangeshttp://en.wikipedia.org/wiki/Contract#Setting_aside_the_contract%23Setting_aside_the_contracthttp://en.wikipedia.org/wiki/Contract#Misrepresentation%23Misrepresentationhttp://en.wikipedia.org/wiki/Contract#Procedure%23Procedurehttp://en.wikipedia.org/wiki/Contract#Other_contract%23Other_contracthttp://en.wikipedia.org/wiki/Contract#Contract_theory%23Contract_theoryhttp://en.wikipedia.org/wiki/Contract#National_contract_law%23National_contract_lawhttp://en.wikipedia.org/wiki/Contract#German_contract_law%23German_contract_lawhttp://en.wikipedia.org/wiki/Contract#English_contract_law%23English_contract_lawhttp://en.wikipedia.org/wiki/Contract#Australian_contract_law%23Australian_contract_lawhttp://en.wikipedia.org/wiki/Contract#See_also%23See_alsohttp://en.wikipedia.org/wiki/Contract#Notes%23Noteshttp://en.wikipedia.org/wiki/Contract#References%23Referenceshttp://en.wikipedia.org/wiki/Contract#External_links%23External_linkshttp://en.wikipedia.org/w/index.php?title=Contract&action=edit&section=1http://en.wikipedia.org/wiki/Roman_lawhttp://en.wikipedia.org/wiki/Contract#%23http://en.wikipedia.org/wiki/Contract#Contract_formation%23Contract_formationhttp://en.wikipedia.org/wiki/Contract#Offer_and_acceptance%23Offer_and_acceptancehttp://en.wikipedia.org/wiki/Contract#Invitation_to_treat%23Invitation_to_treathttp://en.wikipedia.org/wiki/Contract#Consideration_and_estoppel%23Consideration_and_estoppelhttp://en.wikipedia.org/wiki/Contract#Intention_to_be_legally_bound%23Intention_to_be_legally_boundhttp://en.wikipedia.org/wiki/Contract#Third_parties%23Third_partieshttp://en.wikipedia.org/wiki/Contract#Formalities_and_writing%23Formalities_and_writinghttp://en.wikipedia.org/wiki/Contract#Bilateral_and_unilateral_contracts%23Bilateral_and_unilateral_contractshttp://en.wikipedia.org/wiki/Contract#Uncertainty.2C_incompleteness_and_severance%23Uncertainty.2C_incompleteness_and_severancehttp://en.wikipedia.org/wiki/Contract#Contractual_terms%23Contractual_termshttp://en.wikipedia.org/wiki/Contract#Boilerplate%23Boilerplatehttp://en.wikipedia.org/wiki/Contract#Classification_of_term%23Classification_of_termhttp://en.wikipedia.org/wiki/Contract#Status_as_a_term%23Status_as_a_termhttp://en.wikipedia.org/wiki/Contract#Implied_terms%23Implied_termshttp://en.wikipedia.org/wiki/Contract#Terms_implied_in_fact%23Terms_implied_in_facthttp://en.wikipedia.org/wiki/Contract#Terms_implied_in_law%23Terms_implied_in_lawhttp://en.wikipedia.org/wiki/Contract#Common_law%23Common_lawhttp://en.wikipedia.org/wiki/Contract#Statute_law%23Statute_lawhttp://en.wikipedia.org/wiki/Contract#Coercive_vs_voluntary_contractive_exchanges%23Coercive_vs_voluntary_contractive_exchangeshttp://en.wikipedia.org/wiki/Contract#Setting_aside_the_contract%23Setting_aside_the_contracthttp://en.wikipedia.org/wiki/Contract#Misrepresentation%23Misrepresentationhttp://en.wikipedia.org/wiki/Contract#Procedure%23Procedurehttp://en.wikipedia.org/wiki/Contract#Other_contract%23Other_contracthttp://en.wikipedia.org/wiki/Contract#Contract_theory%23Contract_theoryhttp://en.wikipedia.org/wiki/Contract#National_contract_law%23National_contract_lawhttp://en.wikipedia.org/wiki/Contract#German_contract_law%23German_contract_lawhttp://en.wikipedia.org/wiki/Contract#English_contract_law%23English_contract_lawhttp://en.wikipedia.org/wiki/Contract#Australian_contract_law%23Australian_contract_lawhttp://en.wikipedia.org/wiki/Contract#See_also%23See_alsohttp://en.wikipedia.org/wiki/Contract#Notes%23Noteshttp://en.wikipedia.org/wiki/Contract#References%23Referenceshttp://en.wikipedia.org/wiki/Contract#External_links%23External_linkshttp://en.wikipedia.org/w/index.php?title=Contract&action=edit&section=1


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Contract law

Part of the common law series

Contract formation

Offer and acceptance Mailbox rule

Mirror image rule Invitation to treatFirm offerConsideration

Defenses against formation

Lack of capacity

Duress Undue influence

Illusory promiseStatute of frauds

Non est factum

Contract interpretation

Parol evidence rule

Contract of adhesion

Integration clause

Contra proferentem

Excuses for non-performance

MistakeMisrepresentation

Frustration of purposeImpossibility

Impracticability Illegality

Unclean hands Unconscionability
http://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Offer_and_acceptancehttp://en.wikipedia.org/wiki/Mailbox_rulehttp://en.wikipedia.org/wiki/Mirror_image_rulehttp://en.wikipedia.org/wiki/Invitation_to_treathttp://en.wikipedia.org/wiki/Invitation_to_treathttp://en.wikipedia.org/wiki/Firm_offerhttp://en.wikipedia.org/wiki/Considerationhttp://en.wikipedia.org/wiki/Considerationhttp://en.wikipedia.org/wiki/Capacity_(law)http://en.wikipedia.org/wiki/Duresshttp://en.wikipedia.org/wiki/Undue_influencehttp://en.wikipedia.org/wiki/Illusory_promisehttp://en.wikipedia.org/wiki/Illusory_promisehttp://en.wikipedia.org/wiki/Statute_of_fraudshttp://en.wikipedia.org/wiki/Statute_of_fraudshttp://en.wikipedia.org/wiki/Non_est_factumhttp://en.wikipedia.org/wiki/Parol_evidence_rulehttp://en.wikipedia.org/wiki/Standard_form_contracthttp://en.wikipedia.org/wiki/Integration_clausehttp://en.wikipedia.org/wiki/Contra_proferentemhttp://en.wikipedia.org/wiki/Mistake_(contract_law)http://en.wikipedia.org/wiki/Mistake_(contract_law)http://en.wikipedia.org/wiki/Misrepresentationhttp://en.wikipedia.org/wiki/Misrepresentationhttp://en.wikipedia.org/wiki/Frustration_of_purposehttp://en.wikipedia.org/wiki/Frustration_of_purposehttp://en.wikipedia.org/wiki/Impossibilityhttp://en.wikipedia.org/wiki/Impossibilityhttp://en.wikipedia.org/wiki/Impracticabilityhttp://en.wikipedia.org/wiki/Illegal_agreementhttp://en.wikipedia.org/wiki/Unclean_handshttp://en.wikipedia.org/wiki/Unconscionabilityhttp://en.wikipedia.org/wiki/File:Scale_of_justice_2.svghttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Offer_and_acceptancehttp://en.wikipedia.org/wiki/Mailbox_rulehttp://en.wikipedia.org/wiki/Mirror_image_rulehttp://en.wikipedia.org/wiki/Invitation_to_treathttp://en.wikipedia.org/wiki/Firm_offerhttp://en.wikipedia.org/wiki/Considerationhttp://en.wikipedia.org/wiki/Capacity_(law)http://en.wikipedia.org/wiki/Duresshttp://en.wikipedia.org/wiki/Undue_influencehttp://en.wikipedia.org/wiki/Illusory_promisehttp://en.wikipedia.org/wiki/Statute_of_fraudshttp://en.wikipedia.org/wiki/Non_est_factumhttp://en.wikipedia.org/wiki/Parol_evidence_rulehttp://en.wikipedia.org/wiki/Standard_form_contracthttp://en.wikipedia.org/wiki/Integration_clausehttp://en.wikipedia.org/wiki/Contra_proferentemhttp://en.wikipedia.org/wiki/Mistake_(contract_law)http://en.wikipedia.org/wiki/Misrepresentationhttp://en.wikipedia.org/wiki/Frustration_of_purposehttp://en.wikipedia.org/wiki/Impossibilityhttp://en.wikipedia.org/wiki/Impracticabilityhttp://en.wikipedia.org/wiki/Illegal_agreementhttp://en.wikipedia.org/wiki/Unclean_handshttp://en.wikipedia.org/wiki/Unconscionability


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Accord and satisfaction

Rights of third parties

Privity of contract

AssignmentDelegation

NovationThird party beneficiary

Breach of contract

Anticipatory repudiationCover

Exclusion clause Efficient breach

Fundamental breach

Remedies

Specific performance

Liquidated damages

Penal damagesRescission

Quasi-contractual obligations

Promissory estoppel

Quantum meruit

Related areas of law

Conflict of lawsCommercial law

Othercommon lawareas

Tort lawProperty law

Wills, trusts and estates

Criminal lawEvidence
http://en.wikipedia.org/wiki/Accord_and_satisfactionhttp://en.wikipedia.org/wiki/Privity_of_contracthttp://en.wikipedia.org/wiki/Assignment_(law)http://en.wikipedia.org/wiki/Assignment_(law)http://en.wikipedia.org/wiki/Delegation_(law)http://en.wikipedia.org/wiki/Delegation_(law)http://en.wikipedia.org/wiki/Novationhttp://en.wikipedia.org/wiki/Novationhttp://en.wikipedia.org/wiki/Third_party_beneficiaryhttp://en.wikipedia.org/wiki/Third_party_beneficiaryhttp://en.wikipedia.org/wiki/Breach_of_contracthttp://en.wikipedia.org/wiki/Anticipatory_repudiationhttp://en.wikipedia.org/wiki/Anticipatory_repudiationhttp://en.wikipedia.org/wiki/Cover_(law)http://en.wikipedia.org/wiki/Cover_(law)http://en.wikipedia.org/wiki/Exclusion_clausehttp://en.wikipedia.org/wiki/Efficient_breachhttp://en.wikipedia.org/wiki/Fundamental_breachhttp://en.wikipedia.org/wiki/Legal_remedyhttp://en.wikipedia.org/wiki/Specific_performancehttp://en.wikipedia.org/wiki/Liquidated_damageshttp://en.wikipedia.org/wiki/Penal_damageshttp://en.wikipedia.org/wiki/Penal_damageshttp://en.wikipedia.org/wiki/Rescissionhttp://en.wikipedia.org/wiki/Rescissionhttp://en.wikipedia.org/wiki/Quasi-contracthttp://en.wikipedia.org/wiki/Estoppelhttp://en.wikipedia.org/wiki/Quantum_meruithttp://en.wikipedia.org/wiki/Contract_(conflict)http://en.wikipedia.org/wiki/Contract_(conflict)http://en.wikipedia.org/wiki/Commercial_lawhttp://en.wikipedia.org/wiki/Commercial_lawhttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Torthttp://en.wikipedia.org/wiki/Torthttp://en.wikipedia.org/wiki/Property_lawhttp://en.wikipedia.org/wiki/Property_lawhttp://en.wikipedia.org/wiki/Will_(law)http://en.wikipedia.org/wiki/Trusts_and_estateshttp://en.wikipedia.org/wiki/Criminal_lawhttp://en.wikipedia.org/wiki/Criminal_lawhttp://en.wikipedia.org/wiki/Evidence_(law)http://en.wikipedia.org/wiki/Evidence_(law)http://en.wikipedia.org/wiki/Accord_and_satisfactionhttp://en.wikipedia.org/wiki/Privity_of_contracthttp://en.wikipedia.org/wiki/Assignment_(law)http://en.wikipedia.org/wiki/Delegation_(law)http://en.wikipedia.org/wiki/Novationhttp://en.wikipedia.org/wiki/Third_party_beneficiaryhttp://en.wikipedia.org/wiki/Breach_of_contracthttp://en.wikipedia.org/wiki/Anticipatory_repudiationhttp://en.wikipedia.org/wiki/Cover_(law)http://en.wikipedia.org/wiki/Exclusion_clausehttp://en.wikipedia.org/wiki/Efficient_breachhttp://en.wikipedia.org/wiki/Fundamental_breachhttp://en.wikipedia.org/wiki/Legal_remedyhttp://en.wikipedia.org/wiki/Specific_performancehttp://en.wikipedia.org/wiki/Liquidated_damageshttp://en.wikipedia.org/wiki/Penal_damageshttp://en.wikipedia.org/wiki/Rescissionhttp://en.wikipedia.org/wiki/Quasi-contracthttp://en.wikipedia.org/wiki/Estoppelhttp://en.wikipedia.org/wiki/Quantum_meruithttp://en.wikipedia.org/wiki/Contract_(conflict)http://en.wikipedia.org/wiki/Commercial_lawhttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Torthttp://en.wikipedia.org/wiki/Property_lawhttp://en.wikipedia.org/wiki/Will_(law)http://en.wikipedia.org/wiki/Trusts_and_estateshttp://en.wikipedia.org/wiki/Criminal_lawhttp://en.wikipedia.org/wiki/Evidence_(law)


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The case ofCarlill v Carbolic Smoke Ball Company is an example of a 'unilateralcontract', obligations are only imposed upon one party upon acceptance by performanceof a condition[disambiguation needed]. In the United States, the general rule is that in "case ofdoubt, an offer is interpreted as inviting the offeree to accept eitherby promising toperform what the offer requests orby rendering the performance, as the offeree

chooses."[11]

Offer and acceptance does not always need to be expressed orally or in writing. Animplied contractis one in which some of the terms are not expressed in words. This cantake two forms. A contract which isimplied in fact is one in which the circumstancesimply that parties have reached an agreement even though they have not done soexpressly. For example, by going to a doctor for a checkup, apatient agrees that he willpay a fair price for the service. If one refuses to pay after being examined, the patient hasbreached a contractimplied in fact. A contract which is implied in lawis also called aquasi-contract, because it is not in fact a contract; rather, it is a means for the courts toremedy situations in which one party would be unjustly enriched were he or she not

required to compensate the other. For example, a plumber accidentally installs a sprinklersystem in the lawn of the wrong house. The owner of the house had learned the previousday that his neighbor was getting new sprinklers. That morning, he sees the plumberinstalling them in his lawn. Pleased at the mistake, he says nothing, and then refuses topay when the plumber delivers the bill. Will the man be held liable for payment? Yes, ifit could be proven that the man knew that the sprinklers were being installed mistakenly,the court would make him pay because of aquasi-contract. If that knowledge could notbe proven, he would not be liable. Such a claim is also referred to as "quantum meruit".[12]

[edit] Invitation to treat

Main article: Invitation to treat

Where a product in large quantities is advertised in a newspaper or on a poster, itgenerally is not considered an offer but instead will be regarded as an invitation to treat,since there is no guarantee that the store can provide the item for everyone who mightwant one. This was the basis of the decision inPartridge v. Crittenden[13]a criminal casein which the defendant was charged with "offering for sale" bramblefinch cocks andhens. The court held that the newspaper advertisement could only be an invitation totreat, since it could not have been intended as an offer to the world, so the defendant wasnot guilty of "offering" them for sale. Similarly, a display of goods in a shop window isan invitation to treat, as was held inFisher v. Bell[14]another criminal case which turnedon the correct analysis of offers as against invitations to treat. In this instance thedefendant was charged with "offering for sale" prohibited kinds of knife, which he haddisplayed in his shop window with prices attached. The court held that this was aninvitation to treat, the offer would be made by a purchaser going into the shop and askingto buy a knife, with acceptance being by the shopkeeper, which he could withhold. (Thelaw was later amended to "exposing for sale".) A display of goods on the shelves of aself-service shop is also an invitation to treat, with the offer being made by the purchaserat the checkout and being accepted by the shop assistant operating the checkout:
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Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd.[15] If theperson who is to buy the advertised product is of importance, for instance because of hispersonality, etc., when buying land, it is regarded merely as an invitation to treat. InCarbolic Smoke Ball, the major difference was that a reward[disambiguation needed] was includedin the advertisement, which is a general exception to the rule and is then treated as an

offer.

The Carbolic Smoke Ball offer

One of the most famous cases on invitation to treat is Carlill v. Carbolic Smoke BallCompany,[16] decided in nineteenth-century England. A medical firm advertised that itsnew wonder drug, asmoke ball, would prevent those who used it according to theinstructions from catching the flu, and if it did not, buyers would receive100 and saidthat they had deposited 1,000 in the bank to show their good faith. When sued, Carbolicargued the ad was not to be taken as a serious,legally bindingoffer. It was merely an

invitation to treat, and a gimmick(a 'mere puff'). But thecourt of appeal held that itwould appear to a reasonable man that Carbolic had made a serious offer, primarilybecause of the reference to the 1000 deposited into the bank. People had given good"consideration" for it by going to the "distinct inconvenience" of using a faulty product."Read the advertisement how you will, and twist it about as you will," said Lindley LJ,"here is a distinct promise expressed in language which is perfectly unmistakable".

[edit] Consideration and estoppel

Main articles: Consideration and estoppel

Considerationis known as 'the price of a promise' and is a requirement for contracts

undercommon law. The idea behind consideration is that both parties to a contract mustbring something to the bargain. A party seeking to enforce a contract must show that itconferred some benefit or suffered some detriment (though it might be trivial, see below)that is recognized by law. For example, money is often recognized as consideration, butin some cases money will not suffice as consideration (for example, when one partyagrees to make partial payment of a debt in exchange for being released from the fullamount).[17]
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Some common-law and civil-law systems[18]do not require consideration, and somecommentators consider it unnecessarythe requirement of intent by both parties tocreate legal relations by both parties performs the same function under contract. Thereason that both exist in common law jurisdictions is thought by leading scholars to bethe result of the combining by 19th century judges of two distinct threads: first the

consideration requirement was at the heart of the action ofassumpsit, which had grownup in the Middle Ages and remained the normal action for breach of a simple contract inEngland & Wales until 1884, when the old forms of action were abolished; secondly, thenotion of agreement between two or more parties as being the essential legal and moralfoundation of contract in all legal systems, promoted by the 18th century French writerPothier in his Traite des Obligations, much read (especially after translation into Englishin 1805) by English judges and jurists. The latter chimed well with the fashionable willtheories of the time, especially John Stuart Mill's influential ideas on free will, and gotgrafted on to the traditional common law requirement for consideration to ground anaction in assumpsit.[19]

Although several rules govern consideration, the following are the principal rules.

Consideration must be "sufficient" (i.e., recognizable by the law), but need not be"adequate" (i.e., the consideration need not be a fair and reasonable exchange forthe benefit of the promise). For instance, agreeing to sell a car for a penny mayconstitute a binding contract.[20]

Consideration must not be from the past. For instance, inEastwood v. Kenyon,[21]

the guardian of a young girl obtained a loan to educate the girl and to improve hermarriage prospects. After her marriage, her husband promised to pay off the loan.It was held that the guardian could not enforce the promise because taking out the

loan to raise and educate the girl was past considerationit was completed beforethe husband promised to repay it.

Consideration must move from thepromisee. For instance, it is goodconsideration for person A to pay person C in return for services rendered byperson B. If there are joint promisees, then consideration need only to move fromone of the promisees.

The promise to do something one is already contractually obliged to do is not,traditionally, regarded as good consideration. The classic instance is Stilk v.Myrick[22], in which a captain's promise to divide the wages of two desertersamong the remaining crew if they would sail home from the Baltic short-handed,was found unenforceable on the grounds that the crew were already contracted tosail the ship through all perils of the sea. (The case has been much criticized ongrounds that the ship was in port at the time of the promise.) A very specificexample is the "rule inPinnel's Case"[23], brought into the modern law ofconsideration by the House of Lords inFoakes v. Beer[24]. This rule is to the effectthat a smaller sum of money cannot be good consideration for the release of alarger debt, though if the smaller sum is accompanied by something non-monetary
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in addition, for instance "a horse, a hawk or a robe", or payment is to be madeearly or in some special place or way, then there will be good consideration forthe promise to discharge the debt. This rule has suffered some inroads recently. InWilliams v. Roffey Bros & Nicholls (Contractors) Ltd[25]the English Court ofAppeal held that a promise by a joiner to complete the contracted work on time,

where this was falling behind, was good consideration for the contractor's promiseto pay extra money. The reasoning adopted was that the strict rule ofStilk v.Myrickwas no longer necessary, as English law now recognized a doctrine ofeconomic duress to vitiate promises obtained when the promisor was "over abarrel" for financial reasons. Therefore, where the promise to pay extra could beseen as conferring a practical benefit on the promisor, that could be goodconsideration for a variation of the terms. The rule inPinnel's Case has also beeneffectively sidestepped in England by the Court of Appeal in the case ofCollier v.P & MJ Wright (Holdings) Ltd[26] which held that a promise to accept less indischarge of a pure debt (as opposed to, say, accepting reduced rent, which haslong been recognized) could give rise to a promissory estoppel.[27]

The promise must not be to do something one is already obliged by the generallaw to do - e.g., to give refrain from crime or to give evidence in court: Collins v.Godefroy.[28]

However, a promise from A to do something for B if B will perform a contractualobligation B owes to C, will be enforceable - B is suffering a legal detriment bymaking his performance of his contract with A effectively enforceable by C aswell as by A.[29]

Civil law systems take the approach that an exchange of promises, or a concurrence of

wills alone, rather than an exchange in valuable rights is the correct basis. So if youpromised to give me a book, and I accepted your offer without giving anything in return,I would have a legal right to the book and you could not change your mind about givingme it as a gift. However, in common law systems the concept ofculpa in contrahendo, aform of'estoppel', is increasingly used to create obligations duringpre-contractualnegotiations.[30]Estoppel is anequitable doctrine that provides for the creation of legalobligations if a party has given another anassurance[disambiguation needed] and the other hasrelied on the assurance to his detriment. A number of commentators have suggested thatconsideration be abandoned, and estoppel be used to replace it as a basis for contracts.[31]

However, legislation, rather than judicial development, has been touted as the only wayto remove this entrenched common law doctrine. Lord Justice Denningfamously statedthat "The doctrine of consideration is too firmly fixed to be overthrown by a side-wind."[32]

See also: Consideration under English law and Consideration under American law

[edit] Intention to be legally bound

Main article: Intention to be legally bound
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There is a presumption for commercial agreements that parties intend to be legally bound(unless the parties expressly state that they do not want to be bound, like in heads ofagreement). On the other hand, many kinds of domestic and social agreements areunenforceable on the basis ofpublic policy, for instance between children and parents.One early example is found inBalfour v. Balfour.[33]Using contract-like terms, Mr.

Balfour had agreed to give his wife 30 a month as maintenance while he was living inCeylon (Sri Lanka). Once he left, they separated and Mr. Balfour stopped payments. Mrs.Balfour brought an action to enforce the payments. At the Court of Appeal, the Courtheld that there was no enforceable agreement as there was not enough evidence tosuggest that they were intending to be legally bound by the promise.

The case is often cited in conjunction withMerritt v. Merritt.[34] Here the courtdistinguished the case fromBalfour v. Balfourbecause Mr. and Mrs. Merritt, althoughmarried again, were estranged at the time the agreement was made. Therefore anyagreement between them was made with the intention to create legal relations.

[edit] Third partiesMain article: Third parties

The doctrine of privity of contract means that only those involved in striking a bargainwould have standing to enforce it. In general this is still the case, only parties to acontract may sue for the breach of a contract, although in recent years the rule of privityhas eroded somewhat and third party beneficiaries have been allowed to recover damagesfor breaches of contracts they were not party to[citation needed]. In cases where facts involvethird party beneficiaries or debtors to the original contracting party have been allowed tobe considered parties for purposes of enforcement of the contract .A recent advance hasbeen seen in the case law as well as statutory recognition to the dilution of the doctrine of

privity of contract .The recent tests applied by courts have been[citation needed]

the test ofbenefit and the duty owed test .The duty owed test looks to see if the third party wasagreeing to pay a debt for the original party[needs elaboration] and whereas the benefit testlooks to see if circumstances indicate that the promisee intends to give the beneficiary thebenefit of the promised performance. Any defense allowed to parties of the originalcontract extend to third party beneficiaries.[74] A recent example is in England, wherethe Contract (Rights of Third Parties) Act 1999 Contracts (Rights of Third Parties) Act1999 was introduced.

[edit] Formalities and writing

Main article: Statute of frauds

A verbal exchange of promises may be binding and be as legally valid as a writtencontract.[35]An unwritten, unspoken contract, also known as "a contract implied by theacts of the parties", which can be eitherimplied in fact orimplied in law, may also belegally binding.

Most jurisdictions have rules of laworstatuteswhich may render otherwise valid oralcontracts unenforceable. This is especially true regarding oral contracts involving large
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amounts of money or real estate. For example, in the U.S., generally speaking, a contractis unenforceable if it violates the common law statute of frauds or equivalentstatestatutes which require certain contracts to be in writing. An example of the above is anoral contract for the sale of a motorcycle forUS$5,000 in a jurisdiction which requires acontract for the sale of goods over US $500 to be in writing to be enforceable. The point

of the Statute of frauds is to prevent false allegations of the existence of contracts thatwere never made, by requiring formal (i.e. written) evidence of the contract. However, acommon remark is that more frauds have been committed through the application of theStatute of frauds than have ever been prevented. Contracts that do not meet therequirements of common law or statutory Statutes of frauds are unenforceable, but are notnecessarily thereby void. However, a party unjustly enriched by an unenforceablecontract may be required to providerestitutionforunjust enrichment. Statutes of fraudsare typically codified in state statutes covering specific types of contracts, such ascontracts for the sale ofreal estate.

In Australia and many, if not all, jurisdictions which have adopted thecommon law of

England, for contracts subject to legislation equivalent to the Statute of frauds,

[36]

there isno requirement for the entire contract to be in writing. Although for property transactionsthere must be a note or memorandum evidencing the contract, which may come intoexistence after the contract has been formed. The note or memorandum must be signed insome way, and a series of documents may be used in place of a single note ormemorandum. It must contain all material terms of the contract, the subject matter andthe parties to the contract. In England and Wales, the common lawStatute of frauds isonly now in force for guarantees, which must be evidenced in writing, although theagreement may be made orally. Certain other kinds of contract must be in writing or theyare void, for instance, for sale of land under s. 52,Law of Property Act 1925.

If a contract is in a written form, and somebody signs the contract, then the person isbound by its terms regardless of whether they have read it or not,[37] provided thedocument is contractual in nature.[38] Furthermore, if a party wishes to use a document asthebasis of a contract, reasonable notice of its terms must be given to the other partyprior to their entry into the contract.[39] This includes such things astickets issued atparking stations.

See also:Non est factum

[edit] Bilateral and unilateral contracts
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Unilateral contract of adhesion on timekeeping ticket dispensed by vending machine atparking lot entrance

Contracts may bebilateralorunilateral. Abilateral contract is the kind of contract that

most people think of when they think "contract." It is an agreement in which each of theparties to the contract makes apromiseor promises to the other party. For example, in acontract for the sale of a home, the buyer promises to pay the seller $200,000 in exchangefor the seller's promise to deliver title to the property.

In a unilateral contract, only one party to the contract makes a promise. A typicalexample is the reward contract: A promises to pay a reward to B if B finds A's dog. B isnot obliged to find A's dog, but A is obliged to pay the reward to B if B finds the dog.The consideration for the contract here is B's reliance on A's promise, or B giving up hislegal right to do whatever he wanted at the time he was engaged in the finding of the dog.

In this example, the finding of the dog is a condition precedent to A's obligation to pay,although it is not a legal condition precedent, because technically no contract here hasarisen until the dog is found (because B has not accepted A's offer until he finds the dog,and a contract requires offer, acceptance, and consideration), and the term "conditionprecedent" is used in contract law to designate a condition of a promise in a contract. Forexample, if B promised to find A's dog, and A promised to pay B when the dog wasfound, A's promise would have a condition attached to it, and offer and acceptance wouldalready have occurred. This is a situation in which a condition precedent is attached to abilateral contract.

Condition precedents can also be attached to unilateral contracts, however. This would

require A to require a further condition to be met before he pays B for finding his dog.So, for example, A could say "If anyone finds my dog, and the sky falls down, I will givethat person $100." In this situation, even if the dog is found by B, he would not beentitled to the $100 until the sky falls down. Therefore the sky falling down is a conditionprecedent to A's duty being actualized, even though they are already in a contract, sinceA has made an offer and B has accepted.
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An offer[disambiguation needed] of a unilateral contract may often be made to many people (or 'tothe world') by means of an advertisement. In that situation,acceptance will only occur onsatisfaction of the condition[disambiguation needed] (such as the finding of the offeror's dog). Ifthe condition is something that only one party can perform, both theofferorand offereeare protected the offeror is protected because he will only ever be contractually obliged

to one of the many offerees; and the offeree is protected, because if she does perform thecondition, the offeror will be contractually obliged to pay her.

In unilateral contracts, the requirement that acceptance be communicated to the offeror iswaived. The offeree accepts by performing the condition, and the offeree's performance isalso treated as the price, or consideration, for the offeror's promise. The offeror is masterof the offer; it is he who decides whether the contract will be unilateral or bilateral. Inunilateral contracts, the offer is made to the public at large.

A bilateral contract is one in which there are duties on both sides, rights on both sides,and consideration on both sides. If an offeror makes an offer such as "If you promise to

paint my house, I will give you $100," this is a bilateral contract once the offeree accepts.Each side has promised to do something, and each side will get something in return forwhat they have done.

[edit] Uncertainty, incompleteness and severance

If the terms of the contract are uncertain or incomplete, the parties cannot have reachedan agreement in the eyes of the law.[40]An agreement to agree does not constitute acontract, and an inability to agree on key issues, which may include such things aspriceor safety, may cause the entire contract to fail. However, a court will attempt to giveeffect to commercial contracts where possible, by construing a reasonable construction of

the contract.[41]

Courts may also look to external standards, which are either mentioned explicitly in thecontract[42]or implied by common practice in a certain field.[43] In addition, the court mayalso imply a term; if price is excluded, the court may imply a reasonable price, with theexception of land, and second-hand goods, which are unique.

If there are uncertain or incomplete clauses in the contract, and all options in resolving itstrue meaning have failed, it may be possible to sever and void just those affected clausesif the contract includes a severability clause. The test of whether a clause is severable isanobjective testwhether a reasonable personwould see the contract standing even

without the clauses.

See also: Contra proferentem

[edit] Contractual terms

Main article: Contractual term
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A contractual term is "[a]ny provision forming part of a contract".[44]Each term gives riseto a contractual obligation,breach of which can give rise to litigation. Not all terms arestated expressly and some terms carry less legal weight as they are peripheral to theobjectives of the contract.

[edit] Boilerplate

As discussed in Tina L. Stark'sNegotiating and Drafting Contract Boilerplate, whenlawyers refer to a boilerplate provision, they are referring to any standardized, onesize fits all contract provision. But lawyers also use the term in a more narrow context torefer to certain provisions that appear at the end of the contract. Typically, theseprovisions tell the parties how to govern their relationship and administer the contract.Although often thought to be of secondary importance, these provisions have significantbusiness and legal consequences.[45] Common provisions include the governing lawprovision, venue, assignment and delegation provisions, waiver of jury trial provisions,notice provisions, and force majeure provisions.[46]

[edit] Classification of term

Condition or Warranty.[47]Conditionsare terms which go to the very root of acontract. Breach of these terms repudiatesthe contract, allowing the other party todischarge[disambiguation needed] the contract. A warranty is not so imperative so thecontract will subsist after a warranty breach. Breach of either will give rise todamages.

It is an objective matter of fact whether a term goes to the root of a contract. By way ofillustration, an actress' obligation to perform the opening night of a theatrical production

is a condition,[48]

whereas a singers obligation to perform during the first three days ofrehearsal is a warranty.[49]

Statute may also declare a term or nature of term to be a condition or warranty; forexample the Sale of Goods Act 1979 s15A[50] provides that terms as to title, description,quality and sample (as described in theAct) are conditions save in certain definedcircumstances.

Innominate term. Lord Diplock, inHong Kong Fir Shipping Co Ltd v. KawasakiKisen Kaisha Ltd,[51] created the concept of an innominate term,breach of whichmay or not go to the root of the contract depending upon the nature of the breach.

Breach of these terms, as with all terms, will give rise to damages. Whether or notit repudiates the contract depends upon whether legal benefit of the contract hasbeen removed from the innocent party. Megaw LJ, in 1970, preferred the legalcertainty of using the classic categories of condition or warranty.[52] This wasinterpreted by the House of Lords as merely restricting its application inReardonSmith Line Ltd. v Hansen-Tangen.[53]
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[edit] Status as a term

Template:Status (law)as aterm is important as a party can only take legal action for thenon fulfillment of a term as opposed to representations or merepuffery. Legallyspeaking, only statements that amount to a term create contractual obligations. There are

various factor that a courtmay take into account in determining the nature of a statement.In particular, the importance apparently placed on the statement by the parties at the timethe contract is made is likely to be significant. InBannerman v. White[54] it was held aterm of a contract for sale and purchase of hops that they had not been treated withsulphur, since the buyer made very explicit his unwillingness to accept hops so treated,saying that he had no use for them. The relative knowledge of the parties may also be afactor, as inBissett v. Wilkinson[55]in which a statement that farmland being sold wouldcarry 2000 sheep if worked by one team was held merely a representation (it was alsoonly an opinion and therefore not actionable as misrepresentation). The reason this wasnot a term was that the seller had no basis for making the statement, as the buyer knew,and the buyer was prepared to rely on his own and his son's knowledge of farming.

[edit] Implied terms

A term may either be express or implied. An express term is stated by the parties duringnegotiation or written in a contractual document. Implied terms are not stated butnevertheless form a provision of the contract.

[edit] Terms implied in fact

Terms may be implied due to the facts of the proceedings by which the contract wasformed. In the Australian case ofBP Refinery Westernport v. Shire of Hastings[56] the UK

Privy Council proposed a five stage test to determine situations where the facts of a casemay imply terms (this only applies to formal contracts in Australia).[57] However, theEnglish Court of Appeal sounded a note of caution with regard to the BP case inPhilipsElectronique Grand Public SA v. British Sky Broadcasting Ltd[58] in which the Master ofthe Rolls described the test as "almost misleading" in its simplicity.[59] The classic testshave been the "business efficacy test" and the "officious bystander test". The first of thesewas proposed by Lord Justice Bowen in The Moorcock.[60]This test requires that a termcan only be implied if it is necessary to give business efficacy to the contract to avoidsuch a failure of consideration that the parties cannot as reasonable businessmen haveintended. But only the most limited term should then be implied - the bare minimum toachieve this goal. The officious bystander test derives its name from the judgment of

Lord Justice Mackinnon in Shirlaw v. Southern Foundries (1926) Ltd[61]

but the testactually originates in the judgment of Lord Justice Scrutton inReigate v. UnionManufacturing Co (Ramsbottom) Ltd[62] This test is that a term can only be implied in factif it is such a term that had an "officious bystander" listening to the contract negotiationssuggested that they should include this term the parties would "dismiss him with acommon 'Oh of course!'". It is at least questionable whether this is truly a separate test orjust a description of how one might go about arriving at a decision on the basis of thebusiness efficacy test.
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19/23

Somejurisdictions, notably Australia, Israel and India, imply a term ofgood faith intocontracts. A final way in which terms may be implied due to fact is through a previouscourse of dealing orcommon trade practice. The Uniform Commercial Code of theUnited States also imposes a duty of good faith in performance and enforcement ofcontracts covered by the Code, which cannot be derogated from.

[edit] Terms implied in law

These are terms that have been implied into standardized relationships. Instances of thisare quite numerous, especially in employment contracts and shipping contracts.

[edit] Common law

Liverpool City Council v. Irwin[63] established a term to be implied into allcontracts between tenant and landlord in multi-storey blocks that the landlord isobliged to take reasonable care to keep the common areas in a reasonable state ofrepair.

These terms will be implied into all contracts of the same nature as a matter of law.

[edit] Statute law

The rules by which many contracts are governed are provided in specializedstatutes thatdeal with particular subjects. Mostcountries, for example, have statutes which dealdirectly with sale of goods, lease transactions, and trade practices. For example, mostAmerican states have adopted Article 2 of the Uniform Commercial Code, whichregulates contracts for the sale of goods. The most important legislationimplying termsunderUnited Kingdomlaw are the Sale of Goods Act 1979, the Consumer Protection

(Distance Selling) Regulations 2000and the Supply of Goods and Services Act 1982which imply terms into all contracts whereby goods are sold or services provided.

See also: Good faith

[edit] Coercive vs voluntary contractive exchanges

There are a few ways of determining whether a contract has

laws relating to online contracts

Documents