P4 P5 D1 – Unit 21

P4: Describe the meaning of terms in a standard form contract P5: Explain the effect of terms in a contract D1: evaluate the effectiveness of terms in a given contract In this assignment I will be†¦ Describing the meaning of terms in a standard form contract. Explaining the effect of terms in a contract I will also be evaluating the effectiveness of terms in a given contract. A standard form contract is a contract made between 2 or more parities using their standard set of terms. A contract is a set of mutually agreed promises made between 2 or more parties with the intention of creating a legally binding agreement. It is important that the people involved in signing the contract know exactly what they are agreeing to. Types of terms The statements made by the parties under negotiation that are not meant to form part of the contract are called representations. The thing that the parties perform under the contract is called the terms of the contract. For example the co-operative UK breakdown cover has parts in the contract that will benefit both the customer and the insurer. These benefits have been made between the customer and the insurer under negotiation and will have to proceed with the terms of the contract. There are two types of terms which can be found in a contract, these are†¦ * The express term – Clauses in the agreement that are agreed to by both parties. * The implied term – Part of the contract not necessarily included by the parties but automatically included by the law to protect all parties. Express terms are statements made between the parties. These statements can either be made by word of mouth or in writing and the parties intend that these terms will create the fundamental part of the contract. For example, when a customer talks to the insurer of the co-operative UK breakdown cover the agreements of the statements that are going to be made can be made by talking about the agreement or writing the agreements down on paper and then signing it. It is more reliable if both the insurer and the customer write down the agreements because at least there is some sort of proof that these contractual terms have been made. Whereas, when talking about the terms and not having any form of evidence that these agreements have been made there will be no reliability in the contract. Express terms can either be conditions or warranties. Conditions A condition is an essential part of any contract, especially in standard form contracts. A condition is a fundamental part of the agreement and is something which forms the root of the contract. For example, when the co-operative UK breakdown cover is going through the contractual terms the condition of the contract would be the insurer selling themselves to the customer and gaining trust so the customer is more likely the sign the contract and both sides of the contractors are equally happy. If the insurer has sign the contract and the contract states ‘ when the vehicle breaks down, the co-operative UK breakdown cover will be there as soon as possible to help them get back on the road’ and then does not do their duties of the contract this is a clear breach of contract. A breach of contract will entitle the injured party to repudiate and claim damages. To repudiate means to treat the contract as if it is over and invalid. Warranties A warranty is a less important term that does not go to the root of the contract. A warranty will only give the injured part in a breach of contract the right to claim back the damages that have been made. The contract itself cannot be rejected. For example, when the insurer of the co-operative UK breakdown cover has promised to offer 24 hour bed and breakfast if and when their vehicle breaks down, so it gives the insurance company a chance to fix the vehicle in need, and then when the vehicle comes back to the owners and they notice extra faults that have been made in the vehicle this is not a vital part of the contract and will be seen as a warranty. This failure although it is annoying for the customer paying monthly for the insurance company will not mean the contract can be automatically voided. It is very common in business contracts to not only have express terms relating to conditions and warranties but also have a common express key terms included in the contract. For example, these may include†¦ * Exclusion clauses limiting the parties’ responsibilities under the contract * Terms relating to the amount of damages that the parties might receive if things go wrong. Terms allowing parties to vary the contract price known as a price variation clause. Implied Implied terms are not general stated in a contract. Implied terms are introduced into the contract by statute, custom and common law. Terms implied by statute To protect both parties in the Co-operative UK breakdown cover contractual agreements, terms are implied into the contract by virtue of legislation. The best example for the fault is the sale of goods ac t 1979. This sale of goods act has certain terms that have to be followed, such as†¦ * Every seller has the right to sell goods. Where there is a sale of goods by description there is an implied condition that the goods will correspond with that description. * Goods sold are of satisfactory condition and that they are fit for the particular purpose stated. * The sample sales have an implied term condition that the bulk order must correspond with the sample. For example, if the Co-operative UK breakdown cover have stated something in their contract and promised their customers this certain service when they are in need or in general, the exact promise will have to be made otherwise the law can then get involved and the situation will then be takes to the courts. Terms applied by custom An agreement may be subject to customary terms; these terms are not specified by the parties. These could be historical; for example, when a customer signs up to the Co-operative UK breakdown cover must find out if the terms in the contract actually exist. A customer can do this by asking other people who have also joined the insurance company. These should be noted. However, that such a custom will be overruled by any express clause to the contrary. Terms implied by the common law The courts dealing with the situation will be prepared to imply a term into the contract in order to validate the obvious intentions of the parties. For example, if a customer takes the co-operative UK breakdown cover to the courts, the courts will look at all angles. There may be a point that has been overlooked or may not have been clearly stated therefore, the courts will also look at the ‘business fairness’ so that the contract makes commercial common sense. The distinction between express and implied terms Express terms in a contract are those terms that the parties have negotiated between themselves. If any side of the parties have any problems with these negotiations these terms can then be cut out and re-negotiated until both sides of the party feel equal and they can both can come up with an agreement. For example when the UK breakdown insurer and customer do not like what they have agreed to they can then meet each other half way and come up with an alternative in the agreement. This way all the parties are happy with what they are signing up for. On the other hand, implied terms are those terms that the law insists are included in the contract. This way all the parties have no say in the contract. And if they wish to do business with each other they have to follow the implied terms precisely. Impact of contractual terms When the parties in the UK breakdown cover create a contract, the terms are expected to be followed by both sides. The most important part of any contract especially the UK breakdown covers insurance company are for the terms relating to what services that are going to be delivered to the customers. These terms must be delivered if it is stated in the contract. Other important terms would be the quality of the services; the services must be set to a professional level. Time for good performance and rejection of goods Usually in businesses that are delivering goods there would be a time and date set for this. But because the UK breakdown cover provides services, they have to be present for whenever they are needed and called by their customers. if the UK breakdown cover service fail to give the services they have promises to their customers, the customer can then sue for breach of contract. Price variation Many businesses including the Co-operative UK breakdown cover will include in their contracts a term which is known as a price variation this is included into the contract so both parties can feel secure from uncontrollable variations. The prices that were first agreed when the parties negotiated may have changed due to unforeseen rises, this may due to†¦ * Inflation * Fuel costs * Production costs Any business would not want to lose out on their profit and will do what they can to keep their business up and running but in moderation. Payment terms The payment for goods and services to be delivered by the seller is a very important but of the contract. Although for the UK breakdown cover, their services have to be delivered on the g. if a customer has a fault with their vehicle and calls up the UK breakdown cover service, they have to then drive to where their customers are and then deal with the situation in hand. The insurer has to do this because it is part of the terms in the contract. The payment of this will have been negotiated in the contract and will be expected to pay on the day. Quality and quantity of the services delivered When the UK breakdown cover brings forward their services it is expected that what was agreed in the contract will be delivered. The quality of the service will have to be at a professional standard and the insurer helping the customer will have to do anything they can to make the customer/s feel comfortable and happy with the service that has been delivered to them. The law implies into contracts, that the quality of the good and services that are being delivered to the customers are fit for purpose that they were intended. Customers should be free from minor defects in terms to finish and appearance and that they should be safe and lasting. The buyer will have time to examine the vehicle after it has been fixed and if any faults have been made they are allowed to reject the vehicle until the right approach has been made. If the wrong customer service has been delivered the customer has several options available regardless of what was agreed between the parties. if the person helping fix the vehicle produced an extra/larger service then was expected the customer can then†¦ * Accept the quantity expected and reject the rest. Reject the entire delivery/service * Accept the entire delivery at a new contract price. These three points are negotiable and have to be discussed between the insurer and the customer. Reservation of title Reservation of title is when parties retain ownership of the goods until the contract has been completed. It is not unusual for a seller, wishing to protect themselves, to in sert a clause into the contract that ownership of the goods is not to pass to the buyer until the seller has been paid. This is known as a reservation of title clause. For example, customers who have signed up for the UK breakdown cover service will not receive their services until each month or week they have paid what they need to, to be able to claim this. The insurer is allowed to reject them until the payment/s have been made. Exclusion clauses An exclusion clause is a term in a contract that tries to exempt or limit the liability of a party who is in breach of the agreement. ‘The Unfair contract erms act 1977’ came into effect as a parliamentary control over the law relating to exclusions clauses. For example if the customer does not pay for his/her insurance breakdown cover, then the insurer and the business can them restrict the customers right to this service until he/she decides to make payments. These terms are very effective to all the parties involved in a contract. The co-operative UK breakdown cover has terms in their contracts because it holds benefits for both sides of th e parties. Those benefits are†¦ * Terms in a contract give a UK breakdown cover a background and when customers research the business they will see that the business has a record of previous ruling. * If the contract is not genuine this is beneficial for the customer because these faults can be easily noticed and then will be disregarded of not being a ‘live contract’. The terms will then give the customer the right to take action to the breach of contract that has taken place. * All the parties have some sort of control over the contract. This is effective because all the parties get what they want in moderation and agreement.