Chapter 5 Key facts checklists

Chapter 5 Key facts checklists

Terms and breach of contract

●  During contractual negotiations the parties may make various statements. Not all of these statements will necessarily become terms of any resulting contract. A term is a statement intended (assessed objectively as is the normal approach in contract law—see Chapter 1) to constitute a contractual promise. If the term/promise is broken, it amounts to a breach of contract, giving rise to remedies for breach of contract (see Chapter 7).

●  On the other hand, some pre-contractual statements do not become terms but are merely representations. Broadly, representations are statements which induce the contract but do not involve any binding promise. If a representation turns out to be false, there will be legal remedies in misrepresentation (see Chapter 9) which are not the same as remedies for breach of contract. In the consumer context, consumers are given certain ‘rights to redress’ for misleading actions under the Consumer Protection from Unfair Trading Regulations 2008 (CPUTRs 2008) and these may replace the remedies otherwise available such as the ability to recover damages for misrepresentation under other legislation (s. 2(4) Misrepresentation Act 1967).

●  Sometimes one party will, for example, claim that the resulting contract contains a particular clause proposed, displayed, or advanced by them. In order to form part of the contract such clauses need to have been incorporated as such into the contract (e.g. written terms on a coach ticket purchased from the booking office; see discussion in Chapter 6).

●  The terms of the contract, whether the contract is written, oral, or both oral and written, will consist of those promises expressly undertaken or agreed to by the parties. However, the terms may also consist of implied terms which the parties do not mention expressly but which are nevertheless implied into the contract. These terms are implied (i) by statute (e.g. in contracts for the sale of goods or supply of goods and services, including those with digital content in the consumer context), (ii) because the courts consider the term should be implied, or (iii) as a result of custom or trade usage. (The statutory implied terms are referred to as ‘statutory rights’ in the consumer context because they cannot be excluded or restricted (Consumer Rights Act 2015 (CRA 2015); see also Chapter 6).)

●  A breach of contract will occur where, without lawful excuse (e.g. frustration; see Chapter 8), a party either fails or refuses to perform a performance obligation imposed upon it under the terms of the contract or performs that obligation defectively, in the sense of failing to meet the required standard of performance.

●  Every breach of contract will give rise to a right to claim damages. However, unless the breach constitutes a repudiatory breach, the contract will remain in force. If the breach is repudiatory the non-breaching party will have the option either to accept the breach as terminating the contract (in which case both parties’ future obligations will be discharged) or to affirm the contract (in which event the contract remains in force for both parties).

●  Breaches of certain statutory rights (relating to goods and services) in the consumer context under the CRA 2015 give rise to a special extended range of remedies which are not limited to the right to reject, e.g. the right to repair or replacement of non-conforming goods or digital content, the right to a price reduction, and the right to repeat performance of a defective service. These rights are set out in the CRA 2015.

●  Breaches of certain types of terms (conditions) are, in the main, repudiatory breaches and breaches of innominate terms will be repudiatory breaches if the effects of the breach are serious. However, the process of identifying conditions and innominate terms is uncertain and there are risks for the non-breaching party in deciding to treat a breach as repudiatory as this may constitute wrongful repudiation.

●  The repudiatory breach may be an anticipatory breach, i.e. breach occurs before the time for performance because, for example, one party indicates that they will not be performing. The innocent party has the usual election to terminate, in which event they need not wait until the date for performance before claiming damages, or to affirm. There are risks in affirming but it may be possible to continue with performance and claim the contract price.

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