Contractual terms in English law

Contractual terms in English law is a topic which deals with four main issues.
The terms of a contract are the essence of a contract, and tell the reader what the contract will do. For instance, the price of a good, the time of its promised delivery and the description of the good will all be terms of the contract.
A contractual "[a]ny provision forming part of a contract" Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the contract.
It is an objective matter of fact whether a term goes to the root of a contract. By way of illustration, an actress' obligation to perform the opening night of a theatrical production is a condition, whereas a singers obligation to perform during the first three days of rehearsal is a warranty.
Statute may also declare a term or nature of term to be a condition or warranty; for example the Sale of Goods Act 1979 s15A provides that terms as to title, description, quality and sample (as described in the Act) are conditions save in certain defined circumstances.
Status as a term is important as a party can only take legal action for the non fulfillment of a term as opposed to representations or mere puffs. Legally speaking, only statements that amount to a term create contractual obligations. Statements can be split into the following types:
There are various factors that a court may take into account in determining the nature of a statement. These include:
The parol evidence rule limits what things can be taken into account when trying to interpret a contract. This rule has practically ceased operation under UK law, but remains functional in Australian Law.
A term may either be expressed or implied. An express term is one 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.
The Privy Council established a five stage test in BP Refinery (Westernport) Pty Ltd v Shire of Hastings:
In Australia, the High Court has ruled that the test in BP Refinery applies only to formal contracts, while the test in Byrne and Frew v Australian Airlines Ltd shall apply to informal contracts:
These are terms that have been implied into standardised relationships.
Common law.
These terms will be implied into all contracts of the same nature as a matter of law.
Statutory.
The rules by which many contracts are governed are provided in specialized statutes that deal with particular subjects. Most countries, for example, have statutes which deal directly with sale of goods, lease transactions, and trade practices. For example, each American state except Louisiana has adopted Article 2 of the Uniform Commercial Code, which regulates contracts for the sale of goods. The most important legislation implying terms under United Kingdom law are the Sale of Goods Act 1979, the Consumer Protection (Distance Selling) Regulations 2000 and the Supply of Goods and Services Act 1982 which imply terms into all contracts whereby goods are sold or services provided.
One is generally bound by the custom of the industry that one is in. To imply a term due to custom or trade, one must prove the existence of the custom, which must be notorious, certain, legal and reasonable.
If two parties have regularly conduct business on certain terms, the terms may be assumed to be same for each contract made, if not expressly agreed to the contrary. The parties must have dealt on numerous occasions and been aware of the term purported to be implied. In Hollier v Rambler Motors Ltd, four occasions over five years was held to be sufficient. In British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd, written terms were held to have been implied into an oral contract in which there was no mention of written terms.
It is common for lengthy negotiations to be written into a heads of agreement document that includes a clause to the effect that the rest of the agreement is to be negotiated. Although these cases may appear to fall into the category of agreement to agree, Australian courts will imply an obligation to negotiate in good faith provided that certain conditions are satisfied
The test of whether one has acted in good faith is a subjective one; the cases suggest honesty, and possibly also reasonably. There is no general obligation to act in good faith term under English contract law: an attempt was made by Lord Denning in a series of case during the 70s and 80s but they are no longer considered 'good law'. European legislation imposes this duty, but only in certain circumstances. For the circumstances when an obligation of good faith may in certain circumstances be implied see Yam Seng PTE Ltd v International Trade Corporation Ltd.
The Unfair Terms in Consumer Contracts Regulations 1999 reg 8 will render ineffective any 'unfair' contractual term if made between a seller or supplier and a consumer. Regulation 5 of the Statutory Instrument further elaborates upon the concept of 'unfair', which is rather novel to English law. 'Unfair' is a term that was not individually negotiated (i.e. standard form) that "causes a significant imbalance in the parties' rights and obligations arising under the contract to the detriment of the consumer". This is not possible if the term is not contrary to 'good faith'; such as in Director General of Fair Trading v First National Bank, wherein the lack of a seemingly unfair interest term would leave the bank open to a very poor deal whereby no interest could be charged.
If a contract specifies "subject to contract", it may fall into one of three categories:
Subsequent authorities have been willing to recognize a fourth category in addition to those stated in Masters v Cameron.
If a contract specifies "subject to finance", it imposes obligations on the purchaser:
This may also refer to contingent conditions, which come under two categories: condition precedent and condition subsequent. Conditions precedent are conditions that have to be complied with before performance of a contract. With conditions subsequent, parties have to perform until the condition is not met. Failure of a condition repudiates the contract this is not to necessarily discharge it. Repudiation will always gives rise to an action for damages.