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Contractual Terms and Their Usage Report

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Updated: Mar 25th, 2021

Contractual terms definition

Condition

By far the most basic concept, a “condition” is traditionally translated as any term of a contract. The given definition, however, is rather general; when considering “condition” from a more specific angle, one will be able to spot major differences between a condition and any other contractual term. According to Gillies, unlike other types of contractual terms, a condition is repudiable (Gillies 1988, p. 105) and, therefore, can be canceled in case one of the parties breaks one or more contract conditions.

Warranty

As it has been stressed above, a condition and a warranty share a number of features; basically, they are synonyms. However, when going into further detail, one will find out that, unlike a condition, a warranty is a promise that one of the parties makes to another and that the contract contains. Therefore, basic terms of the contract also fall under the category of warranty, seeing how each of them is a promise made to one of the stakeholders to another.

However, a warranty differs from a condition in that it is a subsidiary to the key conditions of the contract and that, if broken, it does not lead to immediate termination of the contract, but leaves a possibility for the parties to come to terms and work on a compromise. As Seatzu put it, a warranty “is distinguished from the general condition in that the latter, if broken, gives rise to both damages and discharge, but the discharge occurs only on the election of the party not in breach” (Seatzu 2003, p. 124)

Innominate term

Innominate or intermediate, term is traditionally defined as the term that, when broken, may have results of various seriousness levels. In other words, in some cases, the breach of innominate terms may result in justified repudiation, while in other situations, the repudiation claim coming from one of the parties cannot be considered justifiable. The given manner of considering the breach of contractual terms allows to consider “not the relative importance of the term, but the relative importance of the breach” (Gilles 1988, p. 109) as the top priority for the contract stakeholders.

When the terms are broken: remedy

Condition

As it has been stressed above, once a condition is broken, the party that suffered the loss has all the rights to terminate the contract with no legal repercussions from the partner whatsoever. A condition being one of the basic elements that a contract is composed of, its breach revokes the contract immediately, and there is literally nothing that the guilty party can possibly do to reach a compromise: “The breach of a condition, even trivial, gives the injured the promise the right to terminate and be discharged from his obligations to perform” (Rowan 2012, p. 72).

Warranty

In contrast to the breach of a condition, the violation of one of the warranties does not enable the victim to call the contract off, Rowan (2012) explains. While the breach of a warranty admittedly results in damages and the corresponding penalties that were defined in the contract previously, the violation of a warranty does not give the suffered party the right to terminate the contract. Instead, a monetary reward or any other kind of compensation is provided to the latter.

Innominate term

Incorporating the elements of both a warranty and a condition, an innominate term, when broken, “gives rise to a claim in damages” (Goldrein & Hanna 2013, p. 178). To evaluate the damage that was done and determine the further course of actions to be undertaken, one will have to analyze the relation of the term in question to the contract. As long as the former does not go to the root of the agreement, it is defined as non-repudiable. However, if the innominate term under consideration is defined as crucial to the agreement, the guilty party will have to compensate for the losses that the other party has suffered.

Contractual terms definition

Force Majeure

A term that has become a household symbol of extraordinary conditions is defined in a legal dictionary, reasonably enough, as extraordinary circumstances that have been induced by the forces of nature; therefore, force majeure is an umbrella term for natural disasters, such as storms, hurricanes, earthquakes, landslides, tornadoes, etc. As Glover and Hughes explain, the definition of force majeure is provided in Clause 19 and states that it is

An exceptional event or circumstance: a) which is beyond a party’s control; b) which such party could not reasonably have provided against before entering the Contract, and c) which, having arisen, such a party could not reasonably have avoided or overcome. (Glover & Hughes 2006, xxi).

Therefore, force majeure is any natural disaster that leads to the breach of one of the contract conditions.

Price Variation clauses

Often denoted as a variation of the obligation of the other party (Collins 2008, p. 155), the price variation clause can be described as the condition that allows for parties to vary their own obligations (Collins 2008, p. 155) and change the price of the product in question due to the specifics of the goods in question. One of the most often provided examples, the prices for petrol are especially prone to changes, which means that a price variation clause must be inserted into a contract.

Retention of title clauses

A contract condition that presupposes the retention of the product title by the owner until the partner pays for the product in question, a title retention clause is one of the key elements of a traditional sales agreement. It should be noted, though, that the breach of title cause retention rarely results in reimbursement to the party that suffered losses and the termination of the contract; instead, these are products and proceeds that create registrable charges (Worthington 1996, p. 11).

Results of contractual terms implementation

Force Majeure

Due to its unpredictability, as well as the immense effect that it has on every single stakeholder, the production of the goods process and especially the transportation procedures, force majeure may result in the termination of the contract, yet in many cases, its effect is restricted to major delays in the implementation of the contractual procedures. Since it takes much time to handle natural cataclysms, or at the very least wait until the natural process of destruction is over, force majeure often triggers an impressive financial loss, not to mention highly probable damage of the equipment required for the production process. Thus, force majeure implementation leads to delays and financial costs, the amount of which is often in direct proportion to the scale of the natural disaster.

Price Variation clauses

Judging by the nature of the given contract clause, one may claim that steep rises in the price of the product are the most obvious result of the given contractual term implementation. While the given clause states that the changes in price should be made only as of the necessity to do so arises, it is safe to say that changes in price are inevitable for any contract within the environment of the global market. Partially, incredibly high competition rates are to blame for the need to raise the prices should be blamed.

Retention of title clauses

As the definition of title retention term provided above shows, a contract termination cannot be considered a natural result of title retention. Instead, it is much more reasonable for the person buying particular products or services to wait until the given product or service is in his/her possession and then come up with a more appropriate title for the latter. Therefore, waiting for the deal to be made is the most typical result of title retention, which is used most frequently by both legal persons and natural persons.

Case Study Analysis: Notices and Their Significance

Defining the notices as the terms of the contract

Sadly enough, according to the current state law, the hotel staff, indeed, bears no responsibility for Peter’s bag whatsoever, since the client has been warned regarding the hotel’s policy concerning the clients’ property. The information about leaving personal possessions at the receptionists was stated clearly at the back of the ticket of receipt, and it was Peter’s fault that he did not bother reading the notice on the reverse.

Speaking of the damage to the laptop and to Peter’s arm, however, the situation is quite different from the issue mentioned above. As for the broken hand, the damage was done because of the hotel floors condition; in other words, the hotel staff offered facilities that did not correspond to the existing standards and, more to the point, posed an obvious threat to the customers’ lives. Therefore, Peter is fully eligible for filing a case against the hotel staff.

The same can be said about the broken laptop. While Peter did stumble over the hole in the floor on his own, it was the fault of the hotel managers that the hole was there, to begin with. It is the duty of the hotel staff to provide customers with the facilities approved by the state standards; the hole in the floor clearly poses a threat to people’s safety and, therefore, must be considered an infraction of the existing rules. Therefore, the hotel staff must be charged for negligence.

Notices and their effect on The Unfair Contract Terms Act 1977

Speaking of Peter’s injury in relation to the Unfair Contract Terms Act 1977, it had clearly been inflicted by the negligence of the hotel staff, as it was stressed above. Indeed, under section two-point one of the Unfair Contract Terms Act 1977, it is stated that “A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence” (The Unfair Contract Terms Act 1977 1977, para. 2.1).

The theft of the bag, however, does not fall under the category of staff negligence; quite on the contrary, Peter was clearly notified that his bag was not safe when he left it at the receptionists. The fact that Peter did not take care to read the notice on the back of his ticket does not help the owner of the bag in the given case. Though it might be argued that the hotel management could have informed their clients better on the instructions for the safety of their possessions, no legal charges can be pressed against the hotel staff as for the given notice according to the Unfair Contract Terms Act, 1977.

Peter’s breaking his arm cannot be viewed as the hotel managers’ contract infraction: “liability of an occupier of premises […] is not a business liability of the occupier unless granting that person such access for the purposes concerned falls within the business purposes of the occupier” (The Unfair Contract Terms Act 1977 1977, para. 1.3.b).

Notices and their effect on The Unfair Terms in Consumer Contracts Regulations 1999

In 1999, the concept of liability has been shaped considerably. Approaching the case in point from Unfair Terms in Consumer Contracts Regulations 1999, one will notice that Peter’s situation can be viewed in a different light. First, the theft of Peter’s bag becomes a chargeable issue, since the hotel staff did not inform Peter on the hotel policy towards customers’ possession: “A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights” (Customer protection 1999, para. 5.–(1)). The same argument can be applied towards the Notice 2 since the hotel managers’ policy puts customers in peril.

Reference List

Collins, H 2008, Standard contract terms in Europe: A basis for and a challenge to European contract law, Kluwer Law International, Frederick, MD.

Customer protection 1999, in,. Web.

Gillies, P 1988, Concise contract law, Federation Press, Annadale, NSW.

Glover, J & Hughes, S 2006, Understanding the new FIDIC red book: a clause-by-clause commentary, Sweet & Maxwell, London, UK.

Goldrein, I & Hanna, M 2013, Ship sale and purchase, 6th edn, CRC Press, New York, NY.

Rowan, S 2012, Remedies for breach of contract: a comparative analysis of the protection of performance, Oxford University Press, New York, NY.

Seatzu, F 2003, Insurance in the private international law: a European perspective, Hart Publishing, Portland, OR.

Worthington, S 1996, Proprietary interests in commercial transactions, Oxford University Press, New York, NY.

. 1977. Web.

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