UNIT 2

TERMS OF CONTRACT

1. Express Terms: These are terms that the parties have explicitly agreed upon, either orally or in writing.
2. Implied Terms: These are not expressly stated but are inferred from the nature of the agreement, the conduct of the parties, or the law.

CATEGORIES OF TERMS

1. Conditions: these are essential terms that go to the root of the contract. A breach of a condition allows the aggrieved party to terminate the contract and claim damages. See the case of Poussard v Spiers and Pond (1876) 1 QBD 410.
2. Warranties: these are minor terms that do not go to the essence of the contract. A breach of a warranty allows the aggrieved party to claim damages but not to terminate the contract. See the case of Bettini v Gye (1876) 1 QBD 183.
3. Innominate Terms: these are terms that cannot be strictly classified as conditions or warranties. The remedy for breach depends on the severity of the breach and its impact on the contract. See the case of Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26.

TERMS IMPLIED BY STATUTES

The Sale of Goods Act implies certain terms into contracts for the sale of goods to ensure fairness and protect buyers.

1. Title: this is where the seller has the right to sell the goods. ee section 12 of the Sale of Goods Act.
2. Description: this is where the goods sold by description must correspond to that description. See section 13 of the Sale of Goods Act.
3. Quality and Fitness: this is where goods must be of satisfactory quality and fit for the purpose for which they are bought. See section 14 of the Sale of Goods Act.
4. Sample: this is where goods are sold by sample, they must correspond with the sample in quality. See section 15 of the Sale of Goods Act.

EXCLUSION CLAUSES

Exclusion clauses are terms that seek to limit or exclude liability for breaches of contract or other specified risks. Below is the incorporation and enforceability of exclusion clauses.

1. Signature: this is where a signed document containing an exclusion clause generally binds the parties. See the case of L’Estrange v F Graucob Ltd [1934] 2 KB 394.
2. Notice: this is where the party must have had reasonable notice of the exclusion clause before or at the time of contracting. See the case of Olley v Marlborough Court Ltd [1949] 1 KB 532.
3. Course of Dealing: this is where a consistent history of dealing may incorporate an exclusion clause. See the case of Spurling Ltd v Bradshaw [1956] 1 WLR 461.
4. Reasonableness Test: this is where the courts apply this test to ensure exclusion clauses are fair. See the Nigerian Consumer Protection Council Act.
5. Contra Proferentem Rule: this is where ambiguous exclusion clauses are interpreted against the party relying on them. See the case of Houghton v Trafalgar Insurance Co Ltd [1954] 1 QB 247.

FUNDAMENTAL TERMS

Fundamental terms are core terms that are central to the performance of the contract. Breach of these terms undermines the entire contract and allows the aggrieved party to terminate the contract and seek remedies, as it goes to the essence of the agreement.

FUNDAMENTAL BREACH

A fundamental breach occurs when one party fails to perform a critical obligation, thereby defeating the contract's main purpose. The aggrieved party can terminate the contract and also claim damages. See the case of Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 (not a Nigerian case but influential in common law jurisdictions).
Generally, an exclusion clause cannot be relied upon to exclude liability for a fundamental breach unless it clearly and explicitly covers such breaches. See the case of Suisse Atlantique Societe d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 (again, not Nigerian but influential).

CONCLUSION

Understanding the terms of a contract, including express and implied terms, exclusion clauses, fundamental terms, and fundamental breach, is vital in commercial transactions. Nigerian law, through statutes and judicial decisions, provides a robust framework to ensure these elements are fair, reasonable, and enforceable. Properly navigating these terms helps prevent disputes and promotes smooth commercial operations.