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contractual term is
any provision
forming part of a contract.
Terms are therefore promises capable of
enforcement. When a party to a contract
makes a statement prior or at the time of
contracting with which he intended to be
bound, such a statement becomes a term
of the contract and is legally enforceable.
The determinant factor is the intention of
the parties at the time of making the
statement as viewed objectively.

Each term gives rise to a contractual

obligation, breach of which can give rise to

Not all terms are stated expressly and
some terms carry less legal gravity as they
are peripheral to the objectives of the
Terms of contract can be divided into three
categories, which are essential, natural or

A termterm
of the
which if
breached, by any of the party to it, the
substantial performance of the contract is

not possible, such a term is important


The term(s) which form the very

basis of the contract is an important term
and rests other terms are general terms.
Important terms are also known as material
term, essential term or vital term.

On the other hand, in case of breach of any

condition the such a term is general term.

substantial performance of the contract is
condition is of such nature where the future even
is uncertain to happen because of chance or
because of decision of any third party, such is a
casual condition.
For example, if A will be successful in tender,
which is to be decided by the city council (the third
party), he will get the services performed by B.

Potestative and Mixed


While, if the future event which is

within the power of any of the party to the
contract, in whose favour the obligation
potestative condition.

combination of both these two condition, it
is a mixed condition.

Conditions or warranties.
In a contract there may be various terms or

stipulation. Such stipulations may be either

conditions or warranties.
Conditions- If stipulations forms the very
basis of the contract and is essential to
the main purpose of the contract, it is
called condition.
The term condition is also defined as it is a
qualification which renders the operation
and consequences of the whole contract
dependent upon an uncertain future event.

If the stipulation is not essential to the

main purpose of the contract but is of only

secondary importance, in other words, it is
collateral to the main purpose of the
contract, is called warranty.

It may be impossible to classify a term

neatly in advance as either a condition or a

warranty. Some undertakings may occupy
an intermediate position, in that the term
can be assessed only in the light of the
consequences of a breach.

If a breach of the term results in severe loss

and damage, the injured party will be

entitled to repudiate the contract;
where the breach involves minor loss, the
injured party's remedies will be restricted to
damages. These intermediate terms have
also become known as innominate terms.
See: Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha [1962] 1 All ER
474; The Mihalis Angelos [1971] 1 QB 164 The Hansa Nord [1976] QB
Reardon Smith Line v Hansen-Tangen [1976] 3 All ER

find outterms

For example, Lorettos marriage is fixed on

Sunday, she enters into a contract with

Daniel, the gown supplier to supply of
particular white gown with the terms that
on the evening of Saturday the gown to be
supplied, packed in a carton box with a nice
gift paper and ribbon, to be supplied at her
home through hand delivery, the payment
will be made through cash currency notes
at the time of delivery.

In such a contract the particular gown and

the time is the conditions as these terms

are essential to the main purpose of the
contract and the mode of payment,
packaging, mode of delivery such terms are
not so essential but have secondary
importance and hence are warranties.

Please note.
There is no hard and fast rule that which

term is condition and which is warranty.

It can be determined by the court, in case of
dispute, on the basis of facts and
circumstances of case.
This also depends on the construction of
the contract. At the time of determining
that such a term is condition or a warranty,
the intention of the parties to a contract
at the time of entering into it, must be
looked into.

Suspensive condition and

Resolutive condition.

can further be divided into two

categories. Suspensive ConditionBy
virtue of a stipulation or condition of a contract,
its operation or consequence is suspended
until uncertain event in future, such
condition is a suspensive condition.
For example the agreement of hire purchase
where change of ownership is suspended on the

When in case
of happening of uncertain
future event the operation or consequences
of a contract are dissolved or the contract

may come to an end, such condition is

resolusive condition.
For example, parties to a contract of sale
and purchase of land may agree that in
case of higher offer by any third party, the
contract will be terminated.

Consequence of the breach of

In case of the breach of a condition by one
party, entails the other (injured) party the
right to repudiate/cancel the contract, sue
for specific performance of the contract
and/or recovery of damages.
On the other hand in case of breach of
warranty entails the injured party the right
of recovery of damages only.

Exemption or the limitation

An exemption clause is a term in a

contract which seeks to exempt from or

limit the liability of one of the parties to the
There are two types of exemption clauses:
Exemption Clauses embodied in a signed
document; and
Exemption Clauses embodied in an
unsigned document.

1. Exemption Clause in a Signed Document The general rule is that a person who signs a

document is deemed to have read it and understood it.

Therefore if a person signs a document in which an
exemption clause is embodied, he is bound: The maxim
is caveat subscriptor.
Exceptions-i.Where offeree signs through
ii. Where the signor signed the document under a
fundamental mistake as to its nature as in Foster v
Mackinnon 1869 the defendant was induced to sign a
promissory note on assumption that it was a guarantee.

2. Exemption Clauses in an Unsigned


These are usually in the form of notices,

tickets, receipts, etc.
Here the offeree is bound if:
A reasonable man would assume the
document to be contractual e.g. that it is not
merely a receipt.
See: Chapelton v Barry Urban District Council
[1940] 1 ALL ER 356

Plaintiff who wished to hire a deck chair on a beach,

went to a pile of deck chairs belonging to defendant

council near to which was displayed a notice in the
following terms 'Barry UDC Cold Knap. Hire of chairs
2d per session of 3 hours. The notice went on to
state that the public were requested to obtain
tickets for their chairs from the chair attendants and
that those tickets should be retained for inspection.
There was nothing on the notice relieving defendant
council from liability for any accident or damage
arising out of the hire of a chair. Plaintiff obtained
two chairs from the attendant for which he paid 4d
and received two tickets therefor.

Plaintiff glanced at the tickets and slipped them into his

pocket and had no idea that they contained any

conditions. On one side of the tickets were the words
'Barry UDC Cold Knap, Chair Ticket 2d not transferable',
with half hours printed on the side of the tickets. On the
other side of the tickets were the words 'Available for
three hours. Time expires where indicated by cut-off and
should be retained and shown on request.
The council will not be liable for any accident or damage
arising from the hire of the chair.' Plaintiff put the chairs
up in the ordinary way on a flat part of the beach, and
then sat down on a chair which gave way, the canvas
having come away from the top of the chair.

In an action against defendants the city court judge

found that the accident was due to the negligence

of defendants but that defendants were exempted
from liability as plaintiff had sufficient notice of the
special contract printed on the ticket. On appeal:
Held the ticket was a mere voucher or receipt for
the money paid for the hire of the chair, and the
conditions upon which the local authority offered to
hire out the chairs were those contained in the
notice put up near the pile of chairs, and as that
notice contained no limitation of liability for any
accident or damage arising from the hire of the
chairs, the local authority were liable to plaintiff.

However, the other party is required to do the

following things:
Prior notice the offeror must give offeree
reasonable notice of the existence of the clause.
Contemporaneous notice. The offeror must draw
the attention of the offeree to the existence of
the clause contemporaneously to the making of
the contract:
See: Olley v Malborough Court Ltd [1949] I ALL

The general principle of law in regard to exemption

clauses is that a party contracting without duress

or fraud and understanding what he does, may
freely waive any of his rights.
There are certain exceptions to the rule however,
on consideration of public policy. For an exception
on the basis of public policy to succeed it must be
contravenes or tends to induce contravention of
some fundamental principle of justice or of general
statutory law, or that it is necessarily to the
prejudice of the interests of the public.
Morrison v Angelo Deep Gold Mines Ltd. 1905 TS
775 p779

It is not every exemption clause that will absolve the

defendant from his obligations under the contract. As

a matter of public policy the courts as the public
protector have set limits to the exemption clauses
they will permit by interpreting clauses narrowly.
In Baldry v Marshall [1925] KB 260, the buyer of a car
stipulated that it should be suitable for touring
purposes, and the seller recommended a Bugatti,
which the buyer bought; finding it unsuitable for
touring purposes he complained. The seller relied on
an exemption clause excluding all warranties. The
court of appeal held that the term in question was not
a warranty but a condition, and was therefore not
excluded by the clause.

In Weinberg v Olivier 1943 AD 181, a garage keeper contracted

to garage a car subject to the exemption clause cars garaged at

owners risk. An employee of the garage keeper wrongfully
drove the car to his own house and damaged it on the way back
to the garage.
Referring to the exemption clause, Watermeyer J A said at p188:
In my opinion it means that the plaintiff took it upon himself
certain risks of damage occurring while it was in the garage.
Clearly, while the car was in the garage it was exposed to risks
arising from the ordinary activities carried on in the garage. I do
not propose, however, to attempt the task of defining accurately
the type of risk which plaintiff took upon him, because the only
risks which he undertook to bear were risks attendant on the
garaging of the car in Scotts garage. He did not undertake to
bear any additional risks to which the car might become exposed
to, if in breach of the contract between the parties it was out of
the garage into the public streets.