Courtney Aarbo, Barristers and Solicitors

Courtney Aarbo Barristers and Solicitors

Providing Information to Assist in Business

Contract Terms

Contracts contain terms, which really embody what the agreement is.  Some terms of agreements are characterized as “conditions” others are called “warranties”.  Some terms in contracts are expressed, some are implied.

a)         Conditions versus Warranties

Essential terms of agreements are called conditions, a breach of which entitles the innocent party to an option not completing his or her side of the deal and sue for damages, or complete the deal and sue for damages.  Terms that are not essential, but are “subsidiary” or “collateral” are called warranties, which if broken only entitle the innocent party to receive damages, but does not give the right to not complete his or her side of the deal.

To illustrate what might be a condition versus warranty, your company has entered into an agreement to purchase a photocopier for $10,000.00 with a capacity to copy 10 pages per minute, and with a term that service would be provided within three hours of being called.  The supplying of a photocopier would be a condition of the agreement.  The provision regarding service within three hours, would probably be a warranty such that if it took four hours to service, the contract could not be repudiated.  In the event the copier could only copy eight pages per minute, that term might or might not be a condition.

Parties may agree that a contract term that one would thinkwould  normally be a warranty be given the characteristic of a condition, by calling it a condition in the agreement.  When entering into an agreement, you should be careful to describe essential matters as conditions, especially if without such a designation a judge might have trouble thinking of it as a condition.  You should be particularly careful of terms that the other side is calling a condition.

If you are unsure if the breach of contract is a breach of condition or warranty, you may have to consult a lawyer.  It you wrongly cancel a contract for a breach of warranty, the other side may sue you for damages.

 

b)         Express versus Implied Terms

An express term is a term verbally or in writing set into the agreement.  An implied term is a contract term that the parties have not expressly inserted, but the law will imply.

Implied terms are ones that need not be expressed, but are so obvious that it goes without saying, for example in the case of the photocopier purchase referred to above, an implied term might be that the machine could be plugged into the regular electrical system, or that it photocopied onto normal 11” x 14” paper.

Other implied terms may not be as obvious, but are implied by law.

For example in the Sale of Goods Act, R.S.A. 2000 C. S-2 it is implied by law into a contract for the sale of goods that:

i)          the vendor has the right to sell the goods;

ii)         the buyer shall have the goods free from claim by anyone else;

iii)        if the sale is by description or sample that the goods will correspond with the description or sample;

iv)        if the buyer lets the seller know he relies on the seller to give him goods fit for a particular purpose, that the goods will be fit for that purpose;

v)         goods bought by description will be of “merchantable” quality.

 

For more information contact Courtney Aarbo Barristers and Solicitors at www.courtneyaarbo.ca or info@courtneyaarbo.ca or phone 403 571-5120. .