13. Terms of the contract

A contract may be made by words or conduct. The words, written or spoken, are the express terms. They are not always the whole contract. Terms can be implied by statute or to give effect to what the parties must have meant. Implied terms have their own chapter.

If the contract is wholly in writing, the terms may sit in more than one document. A document that is expressly referred to is incorporated, so far as the reference goes. The hard case is a mix of writing and speech. People say a great deal before they agree. The court has to separate contractual terms from mere representations.

The test is objective. Would a reasonable person have understood the statement as a promise in the contract? It depends on the exact words and the setting. If it is a term, breach gives a common law action.

Schawel v Reade: the seller of a horse told the buyer he need not look, the horse was perfectly sound, and if anything were wrong he would say so. The buyer bought without an examination. The House of Lords held the statement was a warranty.

Bannerman v White: a buyer of hops said he would not even ask the price if sulphur had been used. The seller said none had. Sulphur had been used on five acres out of three hundred. The assurance was a term. The buyer could refuse the hops. This can be so even where it sits uneasily with an earlier written statement. The whole interview was one transaction, and the seller knew the answer mattered.

Conditions and warranties

Not every term is of equal weight. Important terms are conditions. Lesser terms are warranties. Breach of a condition lets the innocent party treat the contract as ended, because it would be unjust to force them to take something importantly different from what was promised. They need not end it. They may affirm, and in either case they may claim damages. Breach of a warranty gives damages only. A minor breach is adequately met by money.

Exclusion clauses and the outline's "exceptions" are promises that cut down liability. They are construed against the person who relies on them, and a statute may stop a party excluding liability for certain breaches altogether. They come in as part of the content of the contract rather than working through the modern statutory controls.