Scribd
Upload
8 views

Chp4. CLASSIFICATION OF CONTRACT

The document outlines the classification of contracts, distinguishing between ordinary and specialty contracts, as well as oral and written contracts. It explains the implications of contractual terms, including conditions and warranties, and discusses the parol evidence rule and its exceptions. Additionally, it covers the nature of unilateral and bilateral contracts, express and implied terms, and the significance of the Sales of Goods Act in defining contractual obligations.

Uploaded by

oppongasamoah0551
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
8 views

Chp4. CLASSIFICATION OF CONTRACT

The document outlines the classification of contracts, distinguishing between ordinary and specialty contracts, as well as oral and written contracts. It explains the implications of contractual terms, including conditions and warranties, and discusses the parol evidence rule and its exceptions. Additionally, it covers the nature of unilateral and bilateral contracts, express and implied terms, and the significance of the Sales of Goods Act in defining contractual obligations.

Uploaded by

oppongasamoah0551
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 22

BUSINESS LAW 1

CLASSIFICATION OF CONTRACT
INTRODUCTION
Contracts may be:

• ordinary- simple or
• deed – specialty ;
• oral or
• written and
• bilateral or
• unilateral

Contractual terms may also be:

• expressly stated
• Implied

Implied by:
• statute
• custom
• courts
SIMPLE CONTRACT
A simple or ordinary contract is one between
parties and which requires consideration.

This contract is informal in nature.

Simple contract may be made in any of the


following ways:

• oral

• written or

• implication from conduct.


SPECIALTY CONTRACT
A specialty contract is also called a contract
under seal or a deed.

A deed is a written document, signed,


sealed and delivered.

There are two types of deed. These are:


• deed indented (indenture) and
• deed poll.
SPECIALTY CONTRACT
Deed indented or indenture is the one executed or
purporting to be executed in parts, between two
or more parties.

The deed poll on the other hand, is a deed which


is made by one party only: the party making it
executes it or binds himself by it as a deed.

NOTE: In specialty contract consideration is not


required.
Also, all specialty contracts are written, but not all
written contracts are specialty contracts.
Actions founded on simple contracts have a six
year limitations period whereas those founded
on a contract under seal have a twelve year
limitation period.
ORAL CONTRACTS
Oral contracts are also called verbal or parol
contracts.

Oral contracts have the force of law and


unless legislation requires a contract to
be written, they may be oral.

Cases: Chatlan v. Haroutunain (1974),


Domins Fisheries Ltd v. Bremen –
Vegesacker Fisheries (1974).
WRITTEN CONTRACT
Although contracts may be oral, it is advisable
for them to be written because writing
facilitates proof of contractual terms.

Written contracts manifest themselves in two


ways. These are by:

• a principal, key or main document, with or


without additions or amendment (agreement)
or

• a series of letters or correspondence, in


which case it is the totality of letters that will
reveal the terms of the contract.
WRITTEN CONTRACT
Written contracts, whether by way of a main
document or by a series of letters are
preferable to oral ones. But generally
contracts are not required to be in writing.

However, three notable transactions that are


require by law to be in writing are:

• contracts of guarantee

• representation about the creditor or


character of third parties to enable the third
parties to get goods or credit or money and

• contracts relating to land.


PAROL EVIDENCE RULE
The parol evidence rule is that, barring fraud, parties
to a contract cannot lead oral evidence to
contradict, vary, add to or subtract from the terms
of their written contract.
Case: Wilson v Brobbey (1974)

Oral evidence is admissible to explain the


circumstances and terms of a document; and in any
event, the court is to consider the totality of
evidence-oral documentary-before arriving at its
judgment.
Case: Peters v Peters (1963)
PAROL EVIDENCE RULE-EXCEPTIONS
The scope of, and exceptions to, the parol evidence rule are as
follows:

• if the statements in the contractual document are unclear and


ambiguous, parol or extrinsic evidence may be resorted to in
order to clarify the terms stated in the document by way of
addition, subtraction or variation of the written terms.

• if the contract was induced by fraud, parol evidence may be


resorted to in order to expose the fraud and avoid the written
contractual terms.

• parol evidence is admissible when a written contract is


tainted with illegality.

• the recitals and terms of a written of a written contract do not


apply to third parties.

• parol evidence is also admissible if it relates to a matter not


directly and immediately covered by the written contract.
UNILATERAL AND BILATERAL
CONTRACTS
Unilateral contracts arises when one party
makes an offer to the world at large, which
is taken up by another. Example is the case
of Carlill v Carbolic Smoke Ball Co (1893).

Bilateral contracts on the other hand, are the


usual type of contract where two parties
exchange promises based on negotiated
specific terms.
CONTRACTUAL TERMS
Terms of a contract refers to the exact
undertakings that the parties have agreed
to carry out under the agreement.

A term imposes a contractual obligations on


the parties.

Contractual terms may be a:


• condition or
• warranty.
CONTRACTUAL TERMS-CONDITIONS
Conditions are essential terms which are vital
to the contract.

Conditions create the fundamental obligations


of the contracting parties.

Breach of a condition by one party entitles the


other party to rescind or terminate the
contract and claim damages.

Alternatively, the aggrieved party may, if he


wishes to do so, go on with the contract but
then recover damages for the breach of this
term.
CONTRACTUAL TERMS-WARRANTY
Warranties are also terms but create minor
obligations.

A warranty is a minor term.

A warranty may also be a representation that


induces the contract or collateral term of the
contract.

A breach of a warranty entitles the aggrieved


party to sue for damages but not to
terminate the whole contract.

Case: Frafra v Boakye (1976).


SALES OF GOODS ACT - ACT 137
Classification of Contractual Terms
• Contractual terms are statements that form part of the contract. They
basically determine the obligation each side undertakes and the
representations made in respect of discharging the contractual obligations.

• Contractual terms may be conditions or warranties.

Definition of a Condition
• A condition is a vital term, going to the root of the contract, breach of which
normally entitles the innocent party to repudiate the contract and claim
damages.

Definition of a Warranty
• A warranty is a stipulation which is not of such importance to go the root the
contract. The sales of Goods Act defines a warranty as a term collateral to
the main purpose of the contract, breach of which gives rise to a claim for
damages but not a right to reject the goods and treat the contract as
repudiated.

• Whether a term is a condition or warranty depends on the construction of


the particular contract of sale.
INNOMINATE TERMS
Innominate terms are terms which are difficult to classify either
as conditions or warranties until they are breached.

Thus, innominate term lies between condition and warranty.


The remedy for the breach depends on the nature of the
breach.

If such terms are breached in a very serious manner, there is


said to be a breach of a condition and the aggrieved party can
rescind the contract.

But where the breach is not a serious one, then there is said to
be a breach of a warranty and the aggrieved one can continue
with the contract and claim damages.

Case: Hong Kong Fir Shipping Co Ltd v Kawasaki Kisa Kaisha


Ltd (1962)
EXPRESS AND IMPLIED TERMS
Contractual terms may be:

• expressly agreed upon by the parties

• implied by:

o Parties
o Courts
o Statute
o Custom or
EXPRESS TERMS
Express terms are clearly discussed and
agreed to by the parties.

In examining a contract, the court will look first


at the terms expressly agreed by the parties.

An apparently binding legal agreement must be


complete in its terms to be a valid contract.

Case: Scammell v Ouston (1941)


TERMS IMPLIED BY PARTIES
Terms are implied by the parties when not
expressly agreed to but which if brought
to their attention they would have all
agreed to.

Here, what the reasonable person would


have done is what is implied by the courts
and ascribed to the parties.

Case: Danquah v Timber and Transport Co


Ltd (1971)
TERMS IMPLIED BY THE COURT
Terms may be implied if the court concludes
that the parties intended those terms to apply
to the contract.

In Chantlani v Haroutunain (1974), the high court,


absent express agreement, said notice period
to terminate employment of managerial rank
was three months.

Also, in Arkurst v Ghana Museum and


Monuments Board (1971), Abban J held there
to be, in a contract of service, an implied term
imposing an obligation on an employee to
serve his employer with good faith and fidelity,
breach of which constitutes grave misconduct.
TERMS IMPLIED BY STATUTE
A number of statutes contain implied terms.

For instance, the Sale of Goods Act, 1962 is


applicable to mercantile transactions unless the
contracting parties decide otherwise.

Also, the Conveyancing Act, 1973 implies various


terms for both transferors and transferees.

Note: when a statute implies terms, the


contracting parties need not expressly provide
for those terms-unless they wish to vary the
statutory terms.
TERMS IMPLIED BY CUSTOM
A term is implied by custom when:

• a course of dealing between the parties establishes


a pattern of consistent arrangements which can be
deemed to apply their continued dealings; or

• the practice in the industry is to incorporate various


well-known terms in their business transactions.

Case: Hutton v. Warren (1836)


British Crane Hire Corp v Ipswich Plant Hire (1974)

Note: any express term overrides a term which might


be implied by custom. Les Affreteurs v Walford (1919)

You might also like