Unit 4: Terms of Contract — Meaning of Terms of Contract; Contents and Status of Terms; Parole Evidence Rule; Standard Form of Contract; Exclusion Clauses; Statutory and Judicial Restrictions to the Exemption Clauses
1. Meaning and Status of Terms
Terms = the contract’s stipulated content — the parties’ promises with their incidents. The hierarchy of terms (the status map):
- Conditions — the root terms (breach = repudiation; the termination right);
- Warranties — the collateral terms (breach = damages only);
- Innominate/intermediate terms — the modern classification (the breach’s seriousness decides — Hongkong Fir by name only);
- Express vs. implied terms: the implied-by-law (the good-faith-and-usage standards of the Code), implied-by-fact (the business-efficacy-and-officious-bystander tests — names only), implied-by-custom.
Contents: the parties’ agreed terms + the statute’s default rules (the Code’s supplementary provisions — applying where the parties silent) + the usage-and-custom.
2. Parole Evidence Rule
The integration rule: where the contract is in writing (the final-and-complete instrument), the extrinsic prior-and-contemporary oral-or-statement evidence inadmissible to contradict-or-vary its terms — the document as the exclusive memorial. The exceptions (the exam’s list): to show the contract’s invalidity (fraud, mistake, illegality — Unit 5’s vitiators); the collateral contract (a separate oral agreement not inconsistent); ambiguity’s resolution-and-tradent (the interpretation’s aid); the usage-and-custom’s incorporation; the writing’s incompleteness (the “subject-to-contract” family). The Nepali position: the Evidence Act’s documentary rules + the Civil Procedure Code’s evidentiary frame (the writing’s primacy with the judicial discretion’s breadth — the rule’s spirit rather than its strict-English form; the registration-linked contracts’ own discipline — the unregistered likhit rule of Property Law, Semester 3).
3. Standard Form of Contract
The phenomenon: the non-negotiated contract — the insurance policy, the utility’s terms, the airline’s ticket, the employment form, the app’s T&C: the adhesion contract (the take-it-or-leave-it). The problems:
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