Classification of Terms
Contractual terms are classified differently depending upon the context or jurisdiction. Terms establish conditions precedent. English common law distinguishes between important conditions and warranties, with a breach of a condition by one party allowing the other to repudiate and be discharged while a warranty allows for remedies and damages but not complete discharge. Whether or not a term is a condition is determined in part by the parties’ intent. In a less technical sense, however, a condition is a generic term and a warranty is a promise. Not all language in the contract is determined to be a contractual term.
Representations, which are often pre-contractual, are typically less strictly enforced than terms, and material misrepresentations historically was a cause of action for the tort of deceit. Statements of opinion may be viewed as “mere puff”.
In specific circumstances these terms are used differently. In the United Kingdom the courts determine whether a term is a condition or warranty.
Representations v Warranties
Statements of fact in a contract or in obtaining the contract are considered to be either warranties or representations. Traditionally, warranties are factual promises which are enforced through a contract legal action, regardless of materiality, intent, or reliance.
Representations are traditionally pre-contractual statements which allow for a tort-based action (such as the tort of deceit) if the misrepresentation is negligent or fraudulent; historically a tort was the only action available, but by 1778, breach of warranty became a separate legal contractual action.
In modern English law, sellers often avoid using the term ‘represents’ in order to avoid claims under the Misrepresentation Act 1967. Statements in a contract may not be upheld if the court finds that the statements are subjective or promotional puffery. English courts may weigh the emphasis or relative knowledge in determining whether a statement is enforceable as part of the contract.
Implied terms
A term may either be express or implied. An express term is stated by the parties during negotiation or written in a contractual document. Implied terms are not stated but nevertheless form a provision of the contract.
Terms implied in fact
Terms may be implied due to the factual circumstances or conduct of the parties. In the Australian case of BP Refinery Westernport v. Shire of Hastings the UK Privy Council proposed a five stage test to determine situations where the facts of a case may imply terms. The classic tests have been the “business efficacy test” and the “officious bystander test”. Under the “business efficacy test” first proposed in The Moorcock [1889], the minimum terms necessary to give business efficacy to the contract will be implied. Under the officious bystander test (named in Southern Foundries (1926) Ltd v Shirlaw [1940] but actually originating in Reigate v. Union Manufacturing Co (Ramsbottom) Ltd [1918]), a term can only be implied in fact if an “officious bystander” listening to the contract negotiations suggested that the term be included the parties would promptly agree. The difference between these tests is questionable.
Terms Implied in Law
In the United Kingdom, implied terms are created by the Sale of Goods Act 1979, the Consumer Protection (Distance Selling) Regulations 2000 and the Supply of Goods and Services Act 1982.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk