Chapter 9
The sources of contractual terms
9.1 Introduction:
Two principle sources: express and implied terms.
Implied terms= terms which are not specifically agreed by the contracting parties but which
are implied into the contract by the courts or by Parliament.
Express terms= terms which are agreed specifically by the contracting parties.
Express terms; orally or in writing.
Difficulties arise in both^.
Orally; judge’s task= decide exactly what was said by each of the parties.
Writing; more difficult. Issues:
1. Whether the court can go beyond the written agreement in attempt to discover the
existence of additional terms to the contract.
2. Whether a person is necessarily bound by the terms of a contract which he has signed.
3. Whether written terms can be incorporated into a contract; either by notice or by a
course of dealing.
9.2 The parol evidence rule:
^ Rule= the parties cannot adduce extrinsic evidence to add to, vary or contradict the
written document; the document is the sole repository of the terms of the contract. Jacobs v
Batavia & General Plantations Trust Ltd [1924] 1 Ch 287.
Purpose of rule= certainty.
Lord Hobhouse in Shogun Finance Ltd v Hudson [2003] UKHL 62; [2004] 1 AC 919-> stated
that ‘the certainty of contract depends on it’. Claims the rule to be the reason behind the
successes of English contract law.
However, the rule is not absolute; subject of many exceptions as if it were to be applied
rigidly, it would result in injustice e.g. if the document may have been procured by fraud and
so one party would wish to lead extrinsic evidence to prove that fraud.
Exceptions:
1. Rule doesn’t apply where the written document was not intended to contain the whole
agreement; Allen v Pink (1983) 4 M & W 140. Wedderburn + Law Commission (1986) ->
parol evidence rule ‘is no more than a circular statement.’ The rule doesn’t give rise to
injustice as it will never prevent a party from leading evidence of terms which were
intended to be party of the contract. However, remember that the courts will presume
that a document which looks like the contract is the whole contract-> a presumption
that is rebutted and holds less weight now than it did before. Highly unlikely that the
rule will preclude a party from leading evidence of terms which were intended to be part
of the contract.
2. Parol evidence is also admissible to prove terms which must be implied into the
agreement (Gillespie Bros & Co v Cheney, Eggar & Co [1896] 2 QB 59
3. To prove a custom which must be implied into the contract (Hutton v Warren (1836) 1 M
& W 466)
4. To show that the contract is invalid on the grounds of misrepresentation, mistake, fraud
or non est factum (Campbell Discount Co v Gall [1961] 1 QB 431).
5. To show that the document should be rectified
The sources of contractual terms
9.1 Introduction:
Two principle sources: express and implied terms.
Implied terms= terms which are not specifically agreed by the contracting parties but which
are implied into the contract by the courts or by Parliament.
Express terms= terms which are agreed specifically by the contracting parties.
Express terms; orally or in writing.
Difficulties arise in both^.
Orally; judge’s task= decide exactly what was said by each of the parties.
Writing; more difficult. Issues:
1. Whether the court can go beyond the written agreement in attempt to discover the
existence of additional terms to the contract.
2. Whether a person is necessarily bound by the terms of a contract which he has signed.
3. Whether written terms can be incorporated into a contract; either by notice or by a
course of dealing.
9.2 The parol evidence rule:
^ Rule= the parties cannot adduce extrinsic evidence to add to, vary or contradict the
written document; the document is the sole repository of the terms of the contract. Jacobs v
Batavia & General Plantations Trust Ltd [1924] 1 Ch 287.
Purpose of rule= certainty.
Lord Hobhouse in Shogun Finance Ltd v Hudson [2003] UKHL 62; [2004] 1 AC 919-> stated
that ‘the certainty of contract depends on it’. Claims the rule to be the reason behind the
successes of English contract law.
However, the rule is not absolute; subject of many exceptions as if it were to be applied
rigidly, it would result in injustice e.g. if the document may have been procured by fraud and
so one party would wish to lead extrinsic evidence to prove that fraud.
Exceptions:
1. Rule doesn’t apply where the written document was not intended to contain the whole
agreement; Allen v Pink (1983) 4 M & W 140. Wedderburn + Law Commission (1986) ->
parol evidence rule ‘is no more than a circular statement.’ The rule doesn’t give rise to
injustice as it will never prevent a party from leading evidence of terms which were
intended to be party of the contract. However, remember that the courts will presume
that a document which looks like the contract is the whole contract-> a presumption
that is rebutted and holds less weight now than it did before. Highly unlikely that the
rule will preclude a party from leading evidence of terms which were intended to be part
of the contract.
2. Parol evidence is also admissible to prove terms which must be implied into the
agreement (Gillespie Bros & Co v Cheney, Eggar & Co [1896] 2 QB 59
3. To prove a custom which must be implied into the contract (Hutton v Warren (1836) 1 M
& W 466)
4. To show that the contract is invalid on the grounds of misrepresentation, mistake, fraud
or non est factum (Campbell Discount Co v Gall [1961] 1 QB 431).
5. To show that the document should be rectified
