Terms of Contracts - Essay Example

For the church restoration, Reverend Jones entered into different contracts with Fixit Builders Ltd and Art Deco Ltd. Unfortunately things did not turn out as planned because of issues with the letter and the execution of the contracts.

In the contract between Reverend Jones and Fixit Builders Ltd, the parties are in disagreement as to the specifications of the slate to be used in the building. The parties admit that “Reverend Jones specified that cream Welsh slate should be used”. However, there is confusion as to whether the said statement consists of a term of the contract or a mere representation; furthermore, if it is a term, whether it is a condition or a warranty.

This issue can be resolved by an examination of the intention of the parties to the contract. Through the landmark case of Heilbut, Symons & Co v Buckleton, the House of Lords established that whether or not a statement is a term of the contract shall be decided by employing the intention of the parties as the overall guide. This intention shall be ascertained under the four tests of timing, importance of the statement, reduction of terms to writing, and possession of special knowledge or skills.

First, under the test of timing, the use of cream Welsh slate can be considered as a term of the contract if the reverend’s statement was made within a short interval of time from the writing of the contract. Otherwise, if there was a long lapse of time, then it is a mere representation and not part of the terms of the contract.

The second test that could be used to determine the true intention of the parties is the importance of the statement. If the court determines that the statement was the principal reason for the aggrieved party to enter into the contract in question, then it is a term. Otherwise, if it was not the essential cause for the conclusion of the contract, then it is a mere representation. The 19th-century case of Bannerman v White is the leading authority for the test of importance which declares that if without the truth of the statement, the other party would not have entered into the contract, then the disputed declaration is a term of the contract.

The reduction of the terms into writing is the third test in determining whether a statement is a term of the contract or a mere representation of one of the parties. It is established that when a contract is reduced into writing, it contains all the stipulations agreed by the parties, and all those not mentioned on paper are deemed not part of the contract. However, this rule admits some exceptions where statements were considered as part of the terms of the contract although they were omitted in the written contract.

The final test for the intentions of the parties is the possession of special knowledge or skills. If the person who made the disputed statement has special knowledge or skills thus placing him in a better position to know the truth or validity of his claim than the other party, then the statement is a term of the contract. For example, between a veteran car dealer and a first-time car owner, the statements made by the former about the conditions of the car shall be considered as part of the terms of the contract.

If after applying the foregoing tests it shall be found that the statement about the use of cream Welsh slate is a term of contract, it shall then be determined whether the term is one of condition or warranty. A condition is a key term of the contract which is important to its very existence while a warranty is a minor term that does not affect the main purpose of the contract. In addition, a breach of condition entitles the injured party to repudiate the contract and to claim damages while a breach of warranty only entitles the injured party to a claim for damages without the remedy of repudiation. Moreover, despite the breach of condition, the aggrieved party has the option to simply demand damages and proceed with the execution of the contract. Finally, a breach of condition gives rise to a remedy for specific performance and damages while a breach of warranty only allows for the remedy of damages.

However, the question of whether a specific term is a condition or warranty may not always be properly delineated. There are instances where the term is identified as a condition or a warranty only after a breach has occurred using the test of severity of loss or damage. If the breach results in major loss and damage, the term is a condition and the injured party has all the rights and remedies appurtenant thereto. Otherwise, if it causes just a minor loss, then it is a warranty. In the interim, before the breach, the term is referred to as an intermediate term.

Speaking of termination of contracts, this brings us to the contract entered into by Reverend Jones with Art Deco Ltd. The issue in this case is whether or not there is frustration of the contract. Workers of Art Deco Ltd. had been refused entry into the church because the warden did not approve of the physical appearance of the restorer who wore dreadlocks and tattoos. Frustration of contracts allows the innocent party to terminate the contract when its fulfillment has been rendered impossible or illegal.

Parties enter into contracts voluntarily. However, once it has become binding on all parties concerned, they are governed by the laws on contracts. They may no longer terminate the contract on a whim or change its terms arbitrarily. The contract becomes the law between and among the parties involved and the execution or termination of the contract is governed by the laws of the land.