FAQs about Contract Law

Why is it important to have standard business terms?

It is important to have standard business terms because general contract law will govern any transactions you make having an effect that you did not intend.  If you have standard business terms, you can, for example, decided when ownership of goods passes from you to the buyer.  Under general contract law, ownership will pass when the goods are in fact supplied.  In your standard terms, you could stipulate ownership passes when payment for the goods has been received.  Using standardised terms, you may also be able limit your overall liability for defects whereas under contract law your limited might be unlimited.  You can also include special terms regarding payment.  Under contract law, payment is expected when the goods are supplied.

What can be included in my standard business terms?

If you are selling goods or services, you could for example stipulate that you will charge interest for late payments, retain ownership of goods supplied until you have received payment, limit your liability whilst defining your responsibilities at the same time and retain intellectual property rights to goods you supply.

What is breach of contract ?

Breach of contract is a failure of either party to uphold what they have promised to do in the contract.  Breaches can either be fundamental or minor.  Fundamental breaches will breach terms which define the overall purpose of the contract and go to its very core.  If, for example, I agreed to build a house for you and I don’t, clearly that will be a fundamental breach.  If I do in fact build your house but use kitchen fittings which are slightly different to the ones agreed to in the contract, then in all likelihood that will be treated as a minor breach.  In interpreting contractual terms and their importance to the contract, it is important to use common sense and look at the intentions of both parties and the surrounding circumstances.  Remember contracts ,whilst usually agreed in writing, can also be verbal as well and both forms can co-exist.

What remedies are available for breach of contract?

If there has been a fundamental breach, you can rescind the contract which discharges you of any further liabilities under the contract and claim damages if appropriate.  If the breach is minor, you can claim damages for the part of the contract that was breached.  Damages in civil law are used to compensate you for the loss you have suffered and as such, do not punish the party at fault. It should also be borne in mind that you are under a duty to mitigate any losses you suffer and not let them get out of control by your own omission.

What is frustration ?

If the contract cannot be performed and neither party is at fault, the party can become frustrated.  As there is no element of fault, neither party will be entitled to recover damages.