CONTENTS OF A CONTRACT

After concluding a valid contract, the next matter of importance, is to determine the contents of
the contract. That is the terms that are well articulated and agreed upon by the parties to the
contract. Most times, you see on advertisements that invite you to enter a contract that ‘T’s &Cs
apply’. These are the Terms and Conditions that the parties will be obligated to observe as part of
that contract. So, whether a contract is orally or in writing, it must contain terms which will
determine the extent of the liabilities or obligations undertaken by the parties to the contract.
Very often when parties to a contract disagree it will be about the terms of the contract, that one
of the parties has not met the terms of the contract, that they have breached the contract.

Not all the statement made by the parties during negotiation will be binding as the terms of
contract. It is only those intended statements by the parties at the time of the agreement which
form part of the contract and it is called contractual terms. But a distinction must be made
between a term of contract and a mere representation.

A statement is a term of the contract if it creates a legal obligation while a mere representation is
a statement made in the course of negotiation which is intended to induce the other party into the
contract but which is not part of the contract. Whether a statement is taken or regarded as a term
of the contract or mere representation is a matter of construction but the importance of the
distinction between the two lies on the fact that the cause of action in the court will have to be
determined by reference to the classification.

i. Express and Implied terms

ii. Conditions and warranties
iii. Representations
iv. Excluding (or exemption) and linking terms (or clauses)
v. Fundamental breach of terms.

1. EXPRESS AND IMPLIED TERMS:

Express Terms: Contents of any contract may be expressed by the parties either orally or in
writing. Where a contract is reduced in writing, the parties try as much as possible to express all
their wishes, in terms of right and obligations in unambiguous and clear language. In that

1
instance, they may not be allowed to adduce any evidence to add to, vary or contradict the
express terms. The rule is that oral evidence will not be admitted by the parties to prove that
some additional term(s) (even though orally agreed to) has been omitted from the written
document. Rectification of mistakes in the written document however may be allowed if the
rules are observed. In a case where the written document is incomplete, and does not, in fact,
represent the whole transaction, the court would allow the parties to adduce oral evidence to
prove a collateral agreement- that is agreement that is subsidiary to the main intents and purposes
of the original one. (Couchman v. Hill (1947) KB 554; (1947 1 All ER 103;176 LT 278; 63 T.
L. R. 81).

IMPLIED TERMS

Parties to any contractual relationship carry out their transactions within the framework of
established practices and customs in the trade and other areas of social, commercial and
economic life of the society. These practices and usages are recognized by society and are
intended to supplement the formal express terms by parties to a contract as a matter of public
policy meant for public good and harmony. These practices are therefore construed as "implied".

There are three categories of implied terms, viz:

i. terms implied by custom or trade;

ii. terms implied by statute and
iii. terms implied by court

Terms implied by custom or trade.

A basic principle in this regard was laid down about a century and half ago by Park B in the case
of Button v. Warren (1836) IM & W. 466 at p. 475. In that case, the learned Judge stated thus:

"It has long been settled, that, in commercial transactions extrinsic evidence of
Custom, and usage is admissible to annex incidents to written contract in matters with
respect to which they are silent. This same rule has been applied to contracts in other
transactions of life, in which known usages have been established and prevailed, and

2
 this has been done upon the principle of presumption that in such transactions the
parties did not mean to express in writing the whole of the contract by which they
intended to be bound, but to contract with reference to those known usage”

However, it should be noted that an alleged custom can be incorporated into a contract only if
there is nothing in the express or necessarily implied terms of the contract to prevent such
inclusion and, further, a custom will only be imported into a contract where, it can be so
imported consistently with the tenure of the document as a whole". This principle was echoed by
Lord Jenkins in London Export Corporation v. Jubilee Coffee Roasting Co (1969) 3 A.L.R.
217 and the Nigerian case of Ahuronye v. University College, Ibadan (1959) W.R.N.L.R, 232;
Gottschalk V. Elder Dempster & Co. Ltd (1917) N.L.R 16, followed the same reasoning.

Terms Implied by Statute

As a matter of practice, the courts have accepted and enforced certain terms into contracts of sale
of goods even though those terms are not expressly stated by the parties. The idea is to protect
the buyer or the consumer, who, in most cases, is the weaker party. We noted earlier that the Sale
of Goods Act of 1893 of the United Kingdom contain certain provisions (Sections 12 to 15)
which stated that certain terms in all contracts for sale of goods are implied unless expressly
excluded by the parties. These terms implied are as to title, description, and suitability for
purpose, sample and merchantable quality. The Sale of Goods Act was a Statute of General
Application in Nigeria. However, many States of the Federation have enacted their sale of
Goods Laws on the same principles as the United Kingdom Law. Issues arising from the
interpretation of the provisions of these laws are therefore the same all over Nigeria. Nigerian
cases decided on the basis of these principles include: Akoshile v. Ogidan (1950) 19 N. L. R.
87; Ogwu v. Leventis Motors (1963) N. R. N. L. R, 115.

Breach of Terms Implied

The general rule is that any breach of terms implied in sale of goods transactions entitles the
party alleging breach to damages, (Section 11(J (C) of the Sale of Goods Act) Sec.12 (3) of
Western Region Law of 1958 states thus:

3
"Where a contract of sale is not severable, and the buyer has accepted the goods or part thereof,
or where the contract is for specific goods the property in which has passed to the buyer, the
breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty,
and not as a ground for rejecting the goods and treating the contract as repudiated.”

We should, however, note that the above provisions in the English law have been excluded in the
new Sale of Goods Act of 1979 which do not apply to Nigeria. The English buyer now seems to
be in a better position than his Nigerian counterpart when it comes to remedies to an injured
purchaser.

Term implied by Courts

We have seen that the courts may imply certain terms, although unexpressed, in order to give
them, what has been described as "Business Efficacy” that is to make the terms of the contract
workable. The idea is to make the terms capable of being implemented and not to substitute
arbitrary terms into the contract.

The guiding principle which the courts must follow was enunciated by Makinon L.J. in Shirlaw
V. Southern Foundries Ltd (1939)2 KB 206 at p. 227 CA, thus:

"Prima facie that which in any contract is left to be implied and need not be expressed is
something so obvious that it goes without saying; so that, if while the parties making their
bargain, an officious by stander were to suggest some express provision for it in their agreement,
they would testily suppress him with a common ‘oh of course’. A learned author, Glanville
Williams (1945) had identified three kinds of terms that may be implied. These are:

a. Terns that the parties probably have in mind but did not trouble to express.

b. Terms that the parties whether or not they actually had them in mind, would probably
have expressed if the question had been brought to their attention; and

c. Terms that the parties, whether or not they had them in mind would have expressed them
if they had foreseen the difficulty' -are implied by the court because of the courts view of fairness
or policy or in consequence of a rule of law.

One of the leading jurists of this century, Lord Denning (1979) is of the view that terms are
implied by the courts because they are just and reasonable and not because the parties had agreed

4
to them either expressly or implied. In the case of Liverpool City Council v. Irwin (1977) AC
239; (1976)2 All E. R. 39, the test of necessity" was propounded as an additional criterion to
imply terms in a contract.

2. CONDITIONS AND WARRANTIES:

A condition is an important term which goes to the root of the contract. Breach of a condition by
one party will entitle the other party to repudiate (terminate) the contract and claim damages.
Alternatively, the party may choose to leave the contract intact and claim damages only.

A warranty is a much less important term. Breach of which entitles the injured party to claim
damages only, but not to repudiate the contract.

In determining, which is which, the courts will consider the following:

a. the intentions of the parties, and

b. the seriousness of the consequences of the breach.

In Poussard v Spiers and Pond (1876) 1 QBD 410, an actress was employed to play the leading
role in a play. She fell ill and was unable to take up her role until a week after the theatre season
had begun. In her absence, the producers engaged a substitute and, when she eventually
appeared, they refused her services and purported to terminate her contract. Her action for breach
of contract failed. It was held that the opening night of the play was of the utmost importance.
Her late arrival amounted to a breach which went to the root of the contract, that is a breach of
condition.

In Bettini v Gye (1876) 1 QBD 183, a singer was contracted to perform for a whole season. One
of the terms of the contract required him to appear six days before the start of the season for
rehearsals but, because of illness, he arrived three days before. The producers sought to treat his
late arrival as a breach of condition and told him that his services were no longer required. The
court held that missing a few days rehearsals was not a breach that went to the root of the
contract and, therefore, there was no right to repudiate the contract. The late arrival was no more
than a breach of warranty and the producers were entitled to sue for damages only.

5
INTERMEDIATE OR INNOMINATE TERMS,

Authorities hold that this term, which is relatively very new, is actually a hybrid between a
condition and warranty. Sagay (1989) is of the view that "a breach of terms within this category
could lead either to damages or to repudiation, depending on the effects of the breach". He
further states that “if the breach is divesting as to deprive the injured party of substantially the
whole benefit which it was the intention of the parties that he should obtain from the contract,
then the remedy would be repudiation, otherwise it would be damages:

3. REPRESENTATIONS

A representation is a statement made by one party to the other before or at the time of contract,
with regard to some existing fact or to some past event, which is one of the causes that induced
the making of the contract. It follows from this definition that a statement is not a representation
if it is one of law, opinion, intention or of future event. Nor is a representation material if it does
not induce a contract, for example, if the party to whom it is made (the representee) did not
believe it, or ignored it, or did not hear or understand it, or forgot all about it.

These four factors can help us distinguish between a term and a representation:
i. Relative knowledge: Does one party have expert knowledge of the subject matter?
For example, if a car dealer tells you something about a car, it’s more likely to be a
term; but if you tell the dealer something, it’s more likely to be a representation.
ii. Reliance: Did one party obviously rely on what was said when they entered into the
contract? If you were particular about wanting a car with alloy wheels, if you told the
dealer that and if you made it clear you were buying the car because of its alloy wheel
then it’s more likely to be a term of the contract.
iii. Relative strength: The relative strength of the two parties. If there is an inequality of
bargaining power, the law will very often favour the weaker party. This is especially
so where the stronger party is an expert sales man and the weak is inexperience
members of the public, it will follow them that the statement of the stronger party
tends to be a term of the contract. In Shawel v Reade and Esso petroleum limited v

6
 Mardon, the statement in each case was made by an expert and relied upon by
layman and in both cases, the statements were held to be terms of the contract. If,
however the statement is made by a person who has less knowledgeable about the
subject matter of the contract, it is regarded as a mere representation.

There was also the case of a seller that said, “there’s no need to inspect the horse, I
assure you it’s a good horse”. That’s a pretty strong statement, and the court held it to
be a term of the contract.
iv. Timing: Did the statement immediately precede the making of the contract? Usually,
the time gap between the period a statement is made, and the actual formation is taken
into account.
If there is a long gap, it may imply that it is a statement of mere representation and
not intended as a term of contract. Thus, in Routledge v MCkay (1954) All Indian
Law Report P 255 where the time gap was one week, it was held that the statement
was mere representation. In this case, the interval between the negotiation and the
contract was well marked.

If the seller said “this car has alloy wheels” and you immediately said “I’ll buy it right
now”, then the alloy wheels are more likely to be a term of the contract.

A representation does not induce a contract if the representee afterwards makes his
own investigation to test the truth of the statement, Attwood v Small (1838) 6 C1.
And Fin. 232. However, a representation induces a contract a contract if, though
given an opportunity to test its veracity, the representee does not utilize that
opportunity, Redgrace v. Hurd (1881) 20 Ch. 1; Sule v Aromire (1951) 20 N.L.R.
20. But as long as a representation is one of the factors that induce a person to enter
into a contract, it is immaterial that there were other including factors as well. Thus,
in Edginton v. Fitzmaurice (1885) 29 Ch. D 46, the plaintiff was induced to take
debentures in a company partly by misstatement in the prospectus and partly by his
own incorrect belief about how the debentures would be secured.

7
 Not everything that is said during the negotiations for a contract end up being actual
terms of the contract; some information only amounts to a representation. Suppose
you buy a car from a second-hand car dealer. He tells you the car has alloy wheels.
You buy it, but you later discover the wheels aren’t alloy, and they are starting to rust.
If the car having alloy wheels was a term of the sale contract, then clearly the dealer
has breached the contract and you can sue him. But if it was just a representation, you
might have more difficulty suing him. Remember, if it’s a term, the buyer always
wins and always gets damages.

Furthermore, a statement will not be regarded as a term of the contract if the person who
made the statement requires the other party to verify the truth of the statement. This is
illustrated in Ecay v. Godfrey (1947) 80 LI. L Rep. 286. In this case, a seller of a boat
said it was sound but advised the buyer to examine it. The court held that the advice
negatives any intention to warrant the soundness of the boat. In another case of Shawel v.
Reade (1931) 21. R. 81 see all Bannerman v. White (1861) 10 CB. 844, the plaintiff
wanted to buy a horse for breeding purposes and started examining the horse for sale. The
defendant interrupted him saying ‘You need not look for anything’ the horse is perfectly
sound’. The plaintiff bought the horse and three weeks later, he discovered it was not
suitable for stud purposes. The court held that statement was a term of the contract.

Available remedy

The remedy available between a term of the contract and a mere representation when a breach
occurs is an important distinction in the two terms. In a contract, a breach of the terms will entitle
the aggrieved party to sue and obtain a remedy in damages. The party aggrieved may also obtain
remedy of both damages and repudiation of the contract.
Where there is a mere representation, there is no real remedy, but the aggrieved party can bring
an action for misrepresentation. Misrepresentation can be made fraudulently or innocently. It can
also be made negligently.
Misrepresentation is fraudulent where a person deliberately told a falsehood, which induces the
plaintiff to enter into the contract, and the remedy will be in damages.

8
At common law, there is no remedy for innocent misrepresentation, but there is some remedy in
equity. The decision in Hedley Byrne & Co. v. Heller and Partner (1964) AC 465 which was
applied to the same situation involving negligent misconduct, created ‘negligent
misrepresentation’ as a third category of misrepresentation known as negligent
misrepresentation. The House of Lords held that in certain circumstances, damage could be
obtained for negligent misstatements. In the case, Hedley Byrne, a firm of advertising agents,
who had placed orders for £8000-£9000 on behalf of a client, wanted to know whether the
company, East power, was credit-worthy and they ask their bank, the National Provincial Bank
to find out. The National Provincial Bank got in touch with Hellers and Partners and informed
‘in confidence and without responsibility on our part’ that Eastpower were good for £10, 000 per
annum on advertising contracts. Relying on the statement, Hedley Byrne placed further orders on
television and in newspaper on behalf of Eastpower Ltd. and as a result, lost £17, 000, when
shortly thereafter, Eastpower went into liquidation. The Court of Appeal held in the
circumstances that the respondents owned a duty of care to the appellant and these had been a
breach of this duty by negligence applicable in preparing the financial report. The court laid
down the principle applicable to negligent misstatement thus:
“If in the ordinary course of business or professional affairs, a person seeks advice or
information from another, who is not under contractual or information from another, who is
not under contractual fiduciary obligation to give the advice or information, in the
circumstances in which a reasonable man so asked would know that he was being trusted, or
that his skill or judgment was being relied on, and the person has chosen to give information
without clearly so quantifying his answer to show that he does not accept responsibility, the
person relying on accepts a legal duty to exercise such as the circumstance require and for a
failure to exercise that care, an action for negligence will lie if damage result”.

4. Excluding (or Exemption) and Limiting terms (or clauses)

As a general rule, parties are free to contract as they please; and the law recognizes and enforces
the rights of parties as stated in a contract. In exercise of this right, a person may decide to
exclude or otherwise limit the obligations which should ordinarily be binding on him arising
from that contract. Exclusion and limitation clauses are clauses inserted in a contract in order to
exclude or limit the liability of a party in the contract.

9
In Chevron Ltd v Titan Energy Ltd (2013) 5CLRN 54, the Court of Appeal , per Onyemenam
JCA explained the meaning of an exclusion clause as follows:
Article 8.9 which is an exclusion clause is a contractual provision providing that a party will not
be liable for damages for which that party would otherwise have ordinarily liable. An exemption
clause may take many forms, but one common thing in all such clause is that they exempt a party
from a liability which he would have been borne had it not been for the clause…

Problems often arise where one party fails to avert his mind to such clauses, or where the clauses
are sudden or in standard form contracts and this is what we are about to learn.

Exemption clauses and limiting terms are usually found in standard form contracts made by
commercial companies and public authorities. These clauses are usually found in contracts for
the supply of electricity, for laundry and dry-cleaning services, and for hotel accommodation.
They can also be found in contracts for journeys by land, rail, sea, and air. These exclusion
clauses are as a rule, contained in printed forms and are used for all contracts of the same
category. More often than not, the consumer is not even aware of these exclusion/exemption
clauses and when he cares to read them, he may still have no choice than to accept them. For
example, a passenger who is hurrying to reach a particular destination by air at a particular time
has no option than to accept the exclusion clauses contained in his airline-ticket, unless of
course, he can afford a private jet. This situation defeats the well accepted doctrine of freedom
of contract because the manufacturer, or in this case, the supplier of the services is in a core
powerful position, virtually dictating the terms of the contract.

Typically, exclusion and limitation clauses are binding on parties as there is a general
presumption of intention on contractual terms: Cannitec International Company Limited v.
Solel Boneh Nigeria Limited [2017] 10 NWLR (Pt. 1572), 66

In business, parties to a contract are free to limit or exclude obligations arising from their
transaction. Exclusion and Limitation clauses are more common in standard form contracts and
are more often than not used to reduce liability of an offending party. Standard form contracts,
otherwise called contracts of adhesion, are mostly used by banks, airlines, logistics and other

10
service providers etc. They are also used in hotels and restaurants where signs are placed in car
parks that read "cars are parked at owner's risk". In the Supreme Court (SC) case of Anyah v
Imo Concorde Hotels, [1992] 4 NWLR (Pt. 234) 210 it was held that a hotel proprietor was not
liable for a vehicle that was stolen in its premises. The rationale behind the decision was that
there did not exist a duty of care between the car owner and the hotel proprietor.

The enforcement of exclusion and limitation clauses depends on varying events such as the
excluding clause being part of the contract. It can either be part of the contract or referred to in
the contract as an appendix. This is to ensure that the other party is aware of the exclusion before
entering into the contract. That a party fails to read the portion of a contract containing the
exclusion/limitation clause despite being given the contract, is of no effect: Enemchukwu v.
Okoye (2016) LPELR-40027(CA).
Over the years, there has been a lot of injustice arising from the oppressive use of exclusion and
limiting terms, and in the light of this, the courts, in a bid to protect the consumer, have laid
down some set of rules that should guide the application of exemption clauses and limiting
terms.

We shall consider these rules under the following headings:

i. Unsigned Documents

In the case of Parker v. South Eastern RY Co. (1877)2 C.P.0. 416, Hellish L. J. laid down the
rules which should be used to determine whether an injured party is bound by an exclusion term
in a document not signed by him. In that case, the plaintiff deposited a bag in a cloakroom at the
defendant’s railway station, paid the clerk and received a paper ticket on which was printed a
number and a date and notices as to when the office would be open, and the words “see back”.
On the other side, several clauses were printed, including, “The company will not be liable for
any package exceeding the value of 10 pounds.” The rules laid down by the Court are as
follows:

a. If the person receiving the ticket did not see or know that there was any writing on the
ticket, he is not bound by the conditions;

11
b. If he knew that there was writing on the ticket, and knew or believed, that the writing
contained conditions, then he is bound by the conditions; and

c. If he knew that there was writing on the ticket, but did not know or believe that the
writing contained conditions, nevertheless he would be bound if the party delivering the ticket to
him had done all that was reasonably sufficient to give him notice that the writing contained
conditions.

However, in that case, where these rules were laid down, the Court emphasized, that "whether or
not a person, who knows there is writing on a document but does not know that it contains
conditions, will be bound by an exemption clause in the document, depends very much on the
type of contract and document”. For example, a toll-gate receipt given to a motorist could be
reasonably assumed to contain nothing other than evidence of payment, therefore, the motorist
would not be bound by any exemption clause contained in it. On the other hand, conditions
contained in an Airline ticket limiting the liability of the carrier in case of personal injury, death
or loss of luggage would apply whether the passenger reads them or not, and whether he is aware
of those conditions or not.

The reasoning here is that in great majority of cases, people travelling by air do know that airline
tickets contain the terms of the contract of carriage by air and the airline owners are entitled to
assume that the passengers have that knowledge. The judgment of Hellish, L.J. cited above
support this inference.

In Olley V. Marlbrough Court Ltd (1949) 1 KKB 532, a Mr. and Mrs. Olley checked into the
defendant’s hotel. In their room was a notice excluding the Defendant’s liability for loss of
guests’ belongings. Some of the Olleys’ personal goods were stolen by an employee of the
Defendant, who pleaded the exemption clause. The argument failed as one of the common law
principles state that the clause must be incorporated into the contract. This was not the case here
as the contract between the Plaintiffs and the Defendant had been made at the front desk when
the Plaintiffs
registered. From this often-confusing array of cases, the broad common law principles upon
which exemption clause are based can be outlined as follows:

12
a) A person is bound by the terms of the contract he/she sign, even though he/she has not
bothered to read them, unless there is some vitiating element. See L’Estrange V f Graucob Ltd
(1934) 2 KB 394; DC, where the clause was “regrettably small print.
b) The exemption clause must be incorporated into the contract at the time the contract is made.
c) Reasonable notice of the exemption clause must be given to the other party. The party relying
on the clause has the burden of establishing that he/she took such reasonable steps to draw it to
the other’s attention: Parker V South Eastern Raily C., (1877)
d) It is difficult for a plaintiff to set aside an exemption clause if there has been a history of past
dealing between the parties; (that is, there has been some form of continuing relationship and this
relationship is a question of fact).
The rules in Parker v South Eastern Ry. Co have been applied in the decided Nigerian cases of
Odeniyi v. Zard & Co. (1972)2 U.I.L.R 34 and Otegbeye V. Little, (1906)1. N.L. R

ii. Signed documents

In the case of signed documents, the position seems to be simple and straightforward. The
general rule is that in the absence of fraud, duress or misrepresentation, the person signing a
document is bound by the exemption and limiting clauses contained therein. This rule was
settled in the case of L’Estrange V, Graucob (1934) 2 KB 394, D.C in which a lady signed a
form printed by sellers of an automotive shot machine which she ordered from them. In addition
to the main (express) terms of the contract, an exemption clause contained in a very small print
contained the following term: ‘any express or implied condition, statement or warranty statutory
or otherwise not stated herein is hereby excluded”. When the machine was eventually delivered,
it did not work satisfactory and the buyer sued the supplier for breach of contract. The sellers
relied on the exclusion clause stated above as their defence. The lady, in turn stated that she did
not read the exclusion clause at the time of signing the contract, and that moreover, the letters
were too small to read. Scrutton L. J. in that judgment held that when a document containing
contractual terms is signed, then in the absence of fraud and misrepresentation, the party signing
it is bound, and it is wholly immaterial whether he has read the documents or not".

It should also be noted that if a party signs a document which by reference incorporates another
document(s) containing the exclusion clause, that party is also liable. One of the Nigerian cases
decided on the basis of these rules stated above is Chagoury v. Adebayo (1973) 3 U. I. L. R

13
532. But in Chike Alu v. Face to Face Million Dollar Fixed Odd Pools Ltd. (unreported)
High Court of the East Central State, Onitsha Judicial Division, Oputa J. Suit No.0/161/72),
the Court held that since the document signed by the plaintiff contained rules in the warning
"read our Rules", and in the absence of contrary evidence, the plaintiff could only be bound by
the rules contained in the signed document and not in any other. Sagay (1969) is of the view that
in that case, another way of looking at the matter is to regard the defendants conduct as
constituting a misrepresentation and therefore an exception to the rule that the party who signs a
document is bound by the terms contained in it". He further argues that, "the misrepresentation
here is that the defendant induced the plaintiff to sign a document under the impression that the
complete contract was contained in that document; whereas, unknown to the plaintiff, but known
to the defendant, other vital terms of the contract were contained in another document".

General Rules

There are other situations where general rules and principles restrict both the scope and effect of
exemption clauses and limiting terms in a contract. We shall only mention some of these
situations briefly:

(i) The “'Contra proferentem” Rule

Full maxim is: "verba chartarum fortius acceipiuntur contra preferential". This rule implies that
the words of written documents are construed more forcibly against the party using the words.
This means that any uncertainty or ambiguity in the meaning and scope of an exclusion clause,
will be resolved against the party inserting it in the agreement. In such circumstances, the rule of
strict interpretation can be applied. In Baldry v. Marshall (1925) I.K.B.260; (1924) All E.R.
Rep.155), the plaintiff bought a car from the defendants in a contract containing a term
excluding “any other guarantee or warranty, express or otherwise.” The car turned out not to be
suitable for the purpose for which the buyer needed it. This constituted a breach of the implied
condition in section 14(1) of the Sale of Goods Act, 1893. It was held that the exemption clause
did not apply since it covered only breaches of guarantees and warranties. The breach in question
was one of condition. The defendants were therefore liable. See also the case of Houghton v
Trafalgar Insurance (1954) 1 Q.B 247.

(ii) Negligence

14
The general principle here is that if a party's contractual liability could arise both from
negligence and any other cause of action, and unless an exemption clause specifically refers to
negligence, the court would not construe the terms to cover negligence. The reasoning is that it
is inherently improbable that one party to a contract could intend to absolve the other party from
the consequences of the latter's own negligence. (Gikllespie Bros. Ltd V. Bowles Transport
(1975): Q.B.400 at p.409; (1973), All E.R. 193; White v. Warrick (1953) All E.R.1021, CA);
AG Bendel State v UBA (1986) 4 NWLR (Pt 37) 547

(iii) Third Parties

In accordance with the doctrine of Privity of Contract, a contract cannot confer any rights and
obligations on anyone who is not a party to that contract. Therefore, an exemption clause will
not protect a person who is not a party to the contract in question. See Adler v Dickson (1955) 1
Q.B 158; Cosgrove v Horsfall (1945) 62 T.L.R 140

5. FUNDAMENTAL BREACH OF TERMS

The significance of this categorization is that obligations arising from contract are not all of
equal importance. For example, one term may be of major importance and any breach of that
term could lead to the discharge (repudiation) of the contract, while another term may be such a
minor one whose breach would only result in the other party claiming damages. Fundamental
terms are defined as those that underlie the whole contract, so that, if not complied with the
performance becomes totally different from that which the contract contemplates.

Fundamental breach is an event resulting from the failure of one party to perform a primary
obligation which has the effect of depriving the other party of substantially the whole benefit
which it was the intention of the parties that he should obtain from the contract -Lord Diplock in
Photo Productions Ltd v Securicor Transport Ltd (1980) AC 827

For example, ".... if a man offers to buy peas of another, and he sends him beans, he does not
perform his contract-; but that is not a warranty; "there is no warranty that he should sell him
beans; the contract is to sell peas and if he sends him anything else in their stead, it is a non-
performance of it" -Lord Abinger in Chanter V. Hopkins (1838)4 M. & W. 399 at p.404; 150 £.
R. 1484.

15
It is therefore a settled principle of law that a fundamental term is a term of greater importance
than a condition. Fundamental term constitutes the "heart and soul" of the contract and failure to
comply with it is equivalent to not performing the contact at all. As in the case of conditions,
any breach of a fundamental term entitles the injured party to a repudiation of the contact. In
addition, a party who breaches a fundamental term cannot rely on any exclusion clause to escape
liability.

CONCLUSION
Parties are free to enter into whatever bargain they please and product themselves. The court may
not interfere if parties are equal, and may where one party is in a stronger negotiating position. It
is important that the document containing the exclusion clause must be a contractual document.
It is not an excuse that the document was not read, provided it has been signed by the party.
Where it is not signed, he has to be put on notice. Ambiguity in an exclusion clause interpreted
against the party relying on it. A stranger cannot take advantage of an exclusion clause.

16