Home | Law | Scope and content

 

Contract topics

Consumer topics

Scope and content

PrivityTermsConstructionClassificationExclusion

 

Privity of Contract

As a general common law rule, only parties to a contract will have rights or obligations under that contract. Consequently, a contract between A and B cannot impose obligations on C; conversely, a contract between A and B can not be enforced by C, even if the contract is intended to benefit C. Strict application of the doctrine can give rise to harsh results, particularly where contracts are intended to benefit a third party and a third party relies upon this. In some cases exceptions or alternative remedies have emerged to avoid or limit those harsh results.

 

Terms

The rights and obligations of parties to a contract are determined by the terms of that contract. These terms may be express (those articulated by the parties - whether in written or oral form) or implied. Terms might be implied by common law (as a result of conduct of the parties, necessity or normal commercial practice) or by statute; the latter is now much more common in the case of consumer contracts.

 

Construction

Once terms are established it is necessary to interpret them. As a general rule, a contract (and its terms) should be given the meaning intended by the parties; where this is not obvious the court will do its best to ascertain and give effect to that intention. A number of rules have emerged to aid the court in that regard.

 

 

Classification

There are a number of ways terms may be classified which may impact upon remedies available for breach. For example, terms classified as 'conditions' will, if breached, allow the innocent party to terminate the contract whereas terms classified as 'warranties' (less important terms) will generally only permit the innocent party to claim damages for breach. Consequently, it is necessary to understand how courts will classify the terms of a contract.

 

Exclusion Clauses

An exclusion clause (in the context of contract law) is a term of a contract which seeks to limit or exclude liability for contractual breach. For example, a contract between A and B might provide that B will not be liable in the event of a breach caused by negligence of its employees or that, if found guilty of a breach of contract B will not be liable for more than $500 in damages. Exclusion clauses like this, if properly drafted, are generally effective. There are, however, some statutory provisions which prevent or limit the use of exclusion clauses in some cases (most commonly in relation to consumer contracts)

 

`