A contract may consist of express terms agreed between the parties and any terms that are deemed to be implied into the contract.
An understanding of the terms which may be implied into a contract, how they interact with the contract's express terms and when such terms may be excluded is important:
1. When drafting a contract, to clearly define each parties obligations.
2. When a dispute arises, so that a party can assess whether a court will imply a term into the contract which may have implications for a claim.
The express terms of a contract are those terms that have been expressly stated and agreed by the parties, either in writing or orally.
However, not all statements made by the parties during the negotiations leading up to a contract are intended to have contractual effect. Some statements may only be intended as representations, to induce the other party to enter into the contract, and therefore not capable of imposing liability for breach of contract.
Other statements may be sufficiently important that they will be deemed contractual terms, thereby giving rise to liability in damages in the event of breach. The distinction between representations and terms is important because the first gives rise to liability in misrepresentation only and the second to liability in contract and potentially also misrepresentation.
The parties' intentions shall determine whether a statement is a term or a representation. Factors that will be considered by the courts in attempting to establish the parties' intentions include:
1. The time between the making of the statement and conclusion of the contract.
2. The importance of the statement.
3. The relative ability of the parties to determine the truth of the statement.
