Terms of a Contract, Conditions and Warranties

Terms of contract, conditions and warranties are used to designate the responsibilities of the parties involved in the agreement. They are set out in a contract in order to determine remedies in a case of a breach of obligations on the part of either party.

What is a term of a Contract?

A contractual term is "any provision forming part of a contract". Each term gives rise to a contractual obligation, the breach of which may give rise to litigation.

In determining the terms of the contract, a court must establish what the parties intended. This is usually evidenced by what the parties wrote or said. Statements made during the course of negotiations can be determined as terms, but they may be determined as representations if they are found to be a statement of fact made by one party which induces the other to enter into the contract. A plaintiff's remedy depends on whether the statement is classified as a representation or a term.

What Is a Condition?

A condition is essentially the basis for a contract. It provides for the obligations of each party in an agreement. The simplest way to think of a condition in contract law is found in the terms “If…then.” “If” one party fulfills an obligation as contained in the agreement, “then” the other party to the agreement must fulfill their obligation to that party.

For instance, a condition in a contract for a sale of goods might include the terms that the successful completion of a contract relies upon an agreed upon delivery date of the goods. In order to fulfill the terms of that contract, the seller will only receive compensation for their goods if the buyer receives those goods by that set date.

If the seller should fail to meet that deadline, then the seller can be held in breach of the contract. The injured party can treat this failure of the seller to meet their obligations as “repudiatory,” meaning the injured party has two options:-

Terminate the contract (acceptance of the repudiation) and walk away from any obligations they may owe the seller; or

Treat the contract as continuing (affirmation of the contract).

In either case, the injured party can sue for damages, no matter the reason for the breach or how little the loss to the party may be.

Two Types of Conditions:-

Two types of conditions can be found in a contract: Expressed or Implied Conditions.

Expressed Conditions

As the name implies, these are conditions that have been clearly described and agreed upon by both parties to an agreement. If obligations laid forth in an expressed condition are not met, a breach of contract can be determined with liability assessed and damages awarded.

Implied Conditions

These are conditions that are assumed to be accepted by both parties regarding their obligations. These may include conditions that ownership is not in question, the goods are not damaged, or that it is not necessary to provide detailed descriptions of the goods being sold beyond its name. For instance it’s accepted that a bowling ball is a bowling ball and not a basketball, and thus no further description is required. 

However, implied conditions can be superseded by an expressed condition if the parties prefer to place emphasis on that issue.

Confusion Surrounding Representations:-

There are often misunderstandings as to whether a representation constitutes a condition in a contract. Throughout the negotiation process, discussions may have taken place that are considered to be “representations,” or statements of fact, that are made with the sole purpose of getting a person to sign a contract.

The major difference between the two is that failure to deliver on a representation can only result in liability for misrepresentation, not breach of contract. The responsibility for determining whether damages can be awarded for misrepresentation rests with the aggrieved party. They must prove that they relied on statement as a term of the contract, that they placed considerable importance on the statement, and they believed the statement was true.

What Is a Warranty?

All of us who have bought electronic items or similar devices, ask about the warranty periods. 

A warranty is a term in a contract that is more like a promise by one party than a condition agreed upon by both parties. A major difference is that if a party fails to live up to a warranty, the aggrieved party can sue for damages, but that failure does not provide cause for termination of the contract.

If the other party considers the warranty by one party important enough, then it could be classified as a condition. Generally, however a warranty is usually only a statement of facts. They can be expressed or implied and can be for the lifetime of the contract or be contractual only for a limited time.

If you suspect that an agreement has been breached, it’s always a good idea to seek legal counsel in order to more thoroughly identify the different terms in a contract and determine what remedies are available. Remedies can vary greatly depending on the type of term for which the other party has not met their obligations, and the strategies to deal with the failure may also be different.

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Finally, in summary conditions are the set stipulations of the contract, whereas warranties are considered to be an additional set of rules. They both might have time requirements, but the time limits set on the conditions of the contract are legally enforceable. The breach of warranty gives rise to a claim for damages.

For example, A man buys a particular car, which is warranted to be quite to drive and very comfortable. It turns out that after some days the car starts to make a very unpleasant noise every time it is operated. Also sitting inside it is also not very comfortable.

Thus the buyer’s only remedy is to claim damages. This is not a breach of the condition but rather a breach of warranty, because the stipulation made by the seller was only a collateral one.

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