Terms of a contract
Introduction
The rights and obligations of parties to a contract are determined by the terms of that contract. These terms may be express (those articulated by the parties - whether in written or oral form) or implied. Terms might be implied by common law (as a result of conduct of the parties, necessity or normal commercial practice) or by statute; the latter is now much more common in the case of consumer contracts.
Express Terms
Express terms are those terms that the parties have articulated prior to - or at the time of - concluding their contract. Sometimes identifying these terms is simple - for example, if they appear in a written contract. On other occassions it is less clear.
Pre-contractual statements
It can sometimes be difficult to classify statements (oral or written) made prior to entering into a contract. A party might be induced to purchase a second hand computer after being told it has had one previoius owner and/or was originally manufactureed in 2007. What happens if these statements turn out to be false? Did they constitute terms which might give rise to contractual breach or misrepresentations which might provide both contractual and non-contractual remedies or are they of no consequence? Categorisation of these terms is important because it will impact upon the remedies available. Typically, pre-contractual statements might be classified as either:
1. Sales puff
2. Term of a contract
3. Collateral contract
4. Mere representation
(as a statement may be both a term and a representation the word 'mere' is used here to refer to representations that are not also terms)
More detail forthcoming
Implied Terms
Implied terms are those terms which the law implies into a contract notwithstanding the fact that they have not been discussed by the parties or referred to in a contract. They may be implied at common law or by statute:
Common law
At common law terms are generally implied where it is necessary to give full effect to the intention of the parties - eg, it may imply a term requiring parties to do what is necessary to enable the contract to be performed. In some cases courts will ask whether or not the parties would have expressly agreed to the term if they had considered the issue when entering into their contract (ad hoc implied terms). In some cases the courts will imply 'standard' terms without the need for inquiry into the actual intent of the parties (standard implied terms). In the case of the latter, if there is a clear intention to the contrary the terms will not be implied. Some standard impliied terms include: that materials are of good quality and fit for purpose and that contracts for professional services will be supplied will be provided with reasonable care.
Statute
Until 1 January 2011 overlapping national and state legislation implied terms into consumer contracts. The Australian Consumer Law now applies nationally. It no longer implies terms into consumer contracts but instead provides statutory guarantees that are very similar to the terms previously implied. Because they are no longer terms implied into a contract they do not give rise to contractual remedies; instead, remedies are incorporated in the Australian Consumer Law.
See the consumer guarantees page.
For an historical discussion of the consumer implied terms regimes see implied terms - historical.
Note that state and territory legislation may still continue to imply terms into contracts, but those implied terms may be excluded by the parties - consumer guarantees cannot be excluded by the parties. Victoria's statutory implied terms are explained below.
Victoria
In Victoria, the Goods Act implies terms into contracts. These terms may be excluded by the parties. The key provisions are:
- Section 61 - Implied terms may be excluded or modified by the parties
- Section 17 - Implied term as to title - right to supply
- Section 18 - Implied term as to conformity with description
- Section 19(1) - Implied term that goods will be fit for purpose made known
- Section 19(b) - Implied terms that goods will be of merchantable quality
- Section 20 - where sale by sample, implied term that the bulk correspond to the sample
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