What is an express term in a contract?

An Overview on Express Terms

Contracts are generally reduced to written form to record the agreement and express terms reached between the parties. Often, disputes may arise whether a term was intended to form part of a contract as an express or implied term. These types of contractual disputes may include representations that an express term was incorporated and formed part of a contract, or by implication through implied terms.

In this article, we provide an introductory overview to the contractual principles relating to express terms, and the frequently asked questions regarding its operation in contract law, including:

What is a contract?

A contract is a legally binding agreement. For an agreement to be legally binding, it must generally satisfy the common legal elements that form a contract: Offer and Acceptance, an Intention to Create Legal Relations, Consideration, Certainty, Capacity and Formalities.

A summary of each legal element is set out below:

Legal ElementsSummary
What is Offer and Acceptance?
Offer and Acceptance must have been communicated between the parties to contract. The offeror makes an offer, and acceptance is communicated to the offeror by the offeree.
What is an Intention to Create Legal Relations?During the formation of a contract, an intention to create legal relations is required between the parties.
What is Consideration?Consideration is an exchange between the parties for a promise that the law regards as valuable. When examining whether there is consideration should be adequate, but it does not need to be sufficient. 
What is Certainty?The terms to a contract must be sufficiently certain and complete as to its essential terms.
What is Capacity?The parties to a contract must have contractual capacity, or alternatively, not lack capacity, when entering into a contract.
What are Formalities?Certain types or kinds of contracts may be required to comply with formal legal requirements as prescribed by statutes across the States or territories in Australia.

For example, in Victoria, the Instruments Act 1958 (Vic) prescribes the requirement that certain types of contract must be in writing.

Notes and Further Information on formation of contract

Other topics relating to the general principles on contract law, include:

How is an express term identified?

Generally, in a simple contract arrangement, the express terms between the parties will be identified by the terms written on a contract. However, there are situations that do not involve a simple contract arrangement. Express terms may be incorporated:

  • a notice or sign that incorporates express terms
  • a contract that is partly written and partly oral, such as statement made during negotiations
  • course of dealings between the parties, based on previous dealings

What is a notice or sign that incorporates express terms?

For a notice or sign to incorporate express terms, and to be binding between the parties, the notice is generally provided to the other party with the terms, or a sign is displayed with the terms. Whether the terms form part of a contract, will depend on two legal issues:

  • whether the terms were available to the other party before the making of a contract; and
  • whether reasonable steps were adopted to give notice of those terms to the other party.

For example, a common situation involving notices or signs incorporating express terms are car parks. At a car park, the signs at the front generally display the terms of entry into a car park. The sign may display terms, including the price to park and permitted hours of stay. A person can communicate acceptance of those terms by obtaining a ticket, and then entering into the car park. In this situation, there is no written contract signed between the parties.

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How are express terms incorporated by statements made during negotiations?

If there is an exception to the Parol Evidence Rule, or the rule is overcome in the event that statements are made during negotiations, then a party that intends to rely on a statement made in negotiations to form part of the contract will have to satisfy the Courts that the statement forms part as an express term.

Generally, the Court will assess the statement in consideration of the conduct between the parties and the words and behaviour conveyed. A number of factors may be assessed whether a statement was intended to be an express term before the making of a contract, including:

  • whether there is a written form contract in existence
  • the significance in the statement made or conveyed to the other party
  • the position of expertise of a party conveying the statement vis-à-vis the other party
  • whether the statement was intended to be promissory in nature or contractually binding

How are express terms incorporated by course of dealings?

An express term may also be incorporated by course of dealings, if the parties have had a past or history of dealings, or contractual terms that were relied on in previous transactions and then applied in later transactions. This express term arises by inference from the prior conduct of the parties. A number of factors will be involved to assess the situation, including:

  • the number of prior dealings,
  • the recency of those prior dealings;
  • the consistency relating to the prior dealing.

What is the effect of a signature on a written contract?

Generally, if a person voluntarily signs a contractual document, then they will generally be bound by the terms of the document, regardless of whether or not the person has read the contractual document.

Notwithstanding, there are exceptional situations that may cause a contract to be voidable and the person signing a document to not be bound. Examples of these situations may be non est factum (traditionally, a common law defence, and translated from Latin for ‘not my deed’) or misrepresentation; however, they are generally regarded to be scenarios that are narrow and occurs only in extraordinary circumstances for equitable relief to be applied.

How are express terms interpreted?

If an express term is identified, the parties must also be able to interpret an express term. Disputes regarding the construction of express terms often arise. When interpreting the terms of a contract, the terms are construed objectively.

Generally, this would involve obtaining the meaning of a term by standing in the position of a reasonable person having regard to all the background knowledge that were available to the parties at the time of making the contract. If the terms are ambiguous and has more than one meaning, the Courts will generally prefer an interpretation is not capricious, unreasonable, inconvenient or unjust.

However, generally, the Court does not have the power to remake a contract or amend a contract for the purpose of reinterpreting terms to avoid the contract being unjust. Therefore, there are limits to the principles of construction or construing an express term in situations when express terms are unambiguous and clear, such that the Court may give effect to its unambiguous and clear meaning.

What is the Parol Evidence Rule?

When a contract is wholly reduced or recorded in writing, the evidence that may be admissible to interpret the terms of the contract are limited and restricted by the Parol Evidence Rule. The Parol Evidence Role is intended to:

  • prevent extrinsic evidence to add, vary, contradict the terms of a written contract
  • limit the types and kind of evidence to assist with the interpretation of the terms of a written contract.

If a contract is wholly reduced in writing, then extrinsic evidence regarding the parties’ previous correspondence and statements made prior to a written document will generally not be admissible. Notwithstanding, there are certain exceptions to this rule, such as estoppel, misleading or deceptive conduct, rectification, and implied terms.

What is an exception to the Parol Evidence Rule?

A common exception is when ambiguity arises in the meaning of a term in a written contract. When ambiguity arises, extrinsic evidence may become relevant, such: the history, background, context and markets that the parties operate in when the contract was made. Notwithstanding the application of the Parol Evidence Rule is often complex by reason of different and contrasting legal concepts that are applied to interpret and construct meaning in the terms of a contract.

What is an Entire Agreement clause?

An entire agreement clause is often a term in a contract that states the contract is the entire agreement made between the parties. Generally, the clause will also state that any statements made in negotiations do not form part of the contract. In summary, entire agreement clauses are generally intended to have the written contract between the parties as being conclusive of their agreement made.

Implied Terms | Enforceable Contract | Frustration | Legally Binding Agreement | Termination | Consideration | Intention To Create Legal Relations | Offer and Acceptance | Certainty | Repudiation | Privity | Classification of Terms | Contract Law (Theories) | Causation | Remoteness | Damages |

If you are looking for legal expertise and have any questions, connect with an author or a member of our litigation and dispute resolution team.

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Authored by:
Ben Franklin, Managing Partner (LIV Accredited Specialist – Property Law), &
Matthew Tran, Lawyer.

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