TERMS OF THE CONTRACT

1. TERMS OF THE CONTRACT Prepared by: Norazla Binti Abdul Wahab

3. INTRODUCTION • Terms: • Statements that govern the rights and obligations of parties concerned. • They are the elements of the contract and are binding. • If terms are broken there are legal consequences.

4. Introduction In order to identify the terms of a contract, one must analyze both express & implied terms

5. Express Terms: • Terms that are explicitly included in the contract – Important to identify what the express terms are. • have been specifically mentioned and agreed by both parties at the time the contract is made. They can either be oral or in writing.

6. Implied Terms: • Terms that will be read into the contract and which were never the subject of express agreement. • a term which has not been mentioned by either party will nonetheless be ‘included’ in the contract, often because the contract doesn’t make commercial sense without that term.

7. Implied terms aren't written down anywhere, but are understood to exist. • If there's nothing clearly agreed between you and your employer about a particular matter, then it may be covered by an implied term. Terms are implied into a contract for a number of reasons.

8. 1. Terms implied in Law • A. Common Law • Examples: • Contract of service, if no price is fixed-a reasonable price applied. • If no time is fixed for performance of a contract- it is implied that the contract will be performed within reasonable time.

9. 1. Terms implied in Law Examples: • Ahmad enter into a contract of hire of a car, and in this contract, it will be implied term that he will exercise reasonable care in the use of the car. • Contract of employment- it will be implied that an employee will exercise the standard care expected of him. • These terms though NOT expressly found in the contract- accepted in contract.

10. 1. Terms implied in Law • Statute 1) Sale of Goods Act 1979 • Section 12: the person selling the goods has to have the legal right to sell them. • Section 13: if you’re selling goods by description, e.g. from a catalogue or newspaper advert, then the actual goods have to correspond to that description.

11. 1. Terms implied in Law Section 14: the goods must be of “satisfactory quality” – that is, they should meet the standard that a reasonable person would regard as “satisfactory”. Also, if the buyer says they’re buying the goods for a particular purpose, there’s an implied term that the goods are fit for that purpose. Section 15: if you’re selling the goods by sample – you show the customer one bag of flour and they order 50 bags – then the bulk order has to be of the same quality as the sample.

12. Other statutes:- • Hire Purchase Act 1967 • implied conditions & warranties • Eg: Implies a warranty that the hirer shall have and enjoy quite possession of the goods. Section 7(1)(a). • An implied condition that the owner shall have the right to sell the goods at the time when the property is to pass. Section 7(1)(b)

13. Other statutes:- • National Land Code 1965 • Tenancy agreements & leases • Eg: S. 230 & S31- duties for lessee • Eg: S. S32 - duties for lessor

14. Terms & Representation • Not everything that’s said during the negotiations for a contract end up being actual terms of the contract; some information only amounts to a representation.

15. How to differentiate? • Based on the intention of the parties. • Language used • Expertise / knowledge of the parties • Precision (ringkasan)of the statement (depend on the imprecise (tidak tepat) of the statement-less-TERM).

16. Terms & Representation Example: • you buy a car from a second-hand car dealer. He tells you the car has alloy wheels. You buy it, but you later discover the wheels aren’t alloy, and they’re starting to rust. • If the car having alloy wheels was a termof the sale contract, then clearly the dealer has breached the contract and you can sue him. • But if it was just a representation, you might have more difficulty suing him/ no legal effect. • Remember, if it’s a term, the buyer always wins and always gets damages!

17. Baker v Asia Motor Co. Ltd [ 1962] MLJ 425 Court held: A statement that made by the D that the car was a 1958 model was a term of the contract. In fact it was 1953 model. Thus, the D breach of the contract.

18. Condition & Warranties A. CONDITIONS • A term which is essentialto contract; breach of it would allow the other party to treat the contract as repudiated. (s. 12(2) SOGA)‏ • If the condition is breached, the party not in default entitled to repudiate the contract because the contract can be deemed to be VOID

19. A. CONDITIONS • A condition is a term or oral written which goes directly 'to the root of the contract, or is so essential to its very nature that if it is broken, the innocent party  can treat the contract as discharged.  That party will not therefore be bound to do anything further under that contract.

20. B. WARRANTIES ‘Warranty’ – a less vital termof a contract (collateral to the main purpose) , breach of it would give rise to a claim for damages,not a right to discharge/reject the goods. (s.12(3) SOGA)‏ If the warranty is breached, the party not in default is not entitled to repudiate the contract because it is not voidable HOWEVER Party in default is entitled for damages

21. B. WARRANTIES A warranty is a term of the contract which is collateral or subsidiary to the main purpose of the contract. It is therefore not so vital as to affect a discharge of the contract. A breach of warranty only entitles the party to an action for damages; he cannot treat the contract as discharge.

22. Poussard v Spiers and Pond • Mrs. Poussardwas an opera singer. She agreed to sing in  opera   on 28 November. However, , she became ill and was unable to sing until 4 December. •  The opera company had to hire another singer so that the opera could start on 28 November. They could only get another singer if they hired her for all the performances of the opera. •  They did this and refused the services of Mrs  Poussard once she was better. Mrs. Poussard raised a court action, to try to make the company pay her. the court held: that Mrs. Poussard breached a Condition of the contract when she was unable to perform on 28 November. This was a basic term of the contract .

23. Bettini v Gye • Bettini was an opera singer. He agreed to sing in London in a number of theatres beginning on 30 March. He also agree that he would arrive in London 6 days before the first performance in order to practise. Bettini then, became ill and did not arrive in London until 3 days before the first performance. The opera company refused to allow him to sing and said he had breached the contract. However, the court said: the part of the agreement about practicing was a Warranty and not a term. That meant it was not a basic part of the contract.

24. Exemption Clause • Contracting party “ accept no responsibility” • Not responsible or liable for any loss or damage or injury • Term of contract that: • Modify the principal obligation arises under a contract • Limit or exclude the liability of the party which would arise as a result of breach of the contract.

25. Playing Cards (M’si) SdnBhd v China Navigation Co. Ltd [1980] 2 MLJ 182 • The A ordered paper board from a company in New York and arranged their shipment for consignment to the A at Penang on the R’s ship. • The ship was due on Dec 25, 1973 but the goods were not loaded on the ship but had be put on another ship of R which arrived on June 13, 1974. • The A then claimed from the R because of the delay.

26. Playing Cards (M’si) SdnBhd v China Navigation Co. Ltd [1980] 2 MLJ 182 • The court: Give effect to the exemption clause stated in the bill of lading that “the carrier shall not be liable for any loss or damage arising or resulting from delayed or early arrival of the goods and that any under or over carriage shall not be considered a deviation (menyimpang) or vitiate (merosakkan) any terms of the bill of lading”.

27. However , not applied on the case of “fundamental breach” whereby the party that seeking to rely on the exemption clause will loss its protection.

28. Leduc & Co. V Ward (1888) 20 QBD 475 & Glyyn v Margeston & Co. [1893] AC 351 • Case of international carriage of goods by sea • Any unjustifiable deviation involves the loss of protection by any exemption clause contained in the contract. • The vessel may not depart or deviate from the contracted or customary route even though the goods are ultimately carried to the agreed destination.

29. EC: How to protect consumer? • England/ UK: • Unfair Contract Terms Act 1977 • Unfair Terms in Consumer Contracts Regulations 19991 • Limit the effectiveness of the EC in consumer protection. • Australia: • Trade Practices Act 1974 • Victorian Goods (Sales & Leases) Act 1981 • South Australian Consumer Transactions Act 1971 -restrict or modify the application of such terms= void.

30. EC: How to protect consumer? • Malaysia? -existing: SOGA 1957 (S.62) & HPA 1967 (S. 34) . -contract Act 1950- nil. • Malaysian Parliament has passed the Consumer Protection (Amendment) Bill 2010 (“the Bill”). -Section 1(3) of the Bill provides that the new Part IIIA applies to contracts entered into after the Bill comes into force. However, presently no indication as to when the Bill will come into force. • the Malaysian Parliament had opted to amend the existing Consumer Protection Act 1999 (“the CPA”), by inserting a new Part IIIA entitled “Unfair Contract Terms”.