Business Law 2: Task 3 - Analysis of Contractual Clauses and Terms

This report analyzes three key clauses within a business contract: Clause 4, Clause 19, and Clause 26. Clause 4 is identified as a time-based term, emphasizing the importance of timely performance. Clause 19 is examined as a condition, highlighting its significance as a fundamental term, the breach of which allows the aggrieved party to terminate the contract and seek damages. Finally, Clause 26 is discussed as an exclusion clause, exploring its purpose in limiting the contractor's liability for breaches and negligence, while also considering its validity based on proper insertion and signature, referencing the case of L'Estrange v Graucob. The report concludes by summarizing the roles of each clause and their implications for the contracting parties.

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Introduction
When it comes to the contracts which are formed between two parties, it becomes important to
clarify each and every item, so that it can be clarified what kind of an item that it and the
consequence of the breach of such a term. With regards to the contract drawn between the
contractor and the client, there are three key points which need to be clarified and this has been
done in the following parts.
Clause 4
Whenever a contract is formed, it is formed for a particular purpose and the contract generally
comes to an end when the purpose of the contract is fulfilled. The contract can also come to an
end when the time period covered under the contract lapses. When a term of the contract states
that each aspect of the contract is to be undertaken in a timely manner, it becomes a term of the
contract and the same has to be properly fulfilled (Andrews, 2015). In case this is not done, it
results in the contract being breached. The terms of a contract are a very crucial element and it is
obligatory for the term to be clear and not result in ambiguity. One of the essential elements in
the creation of contract is the clarity of the terms of contract (Elliot, 2011).
The clause 4 of this term is a term of contract and each aspect of the construction and payment
has to be undertaken in a time based manner. In case the same is not done, the contract would be
breached. In other words, even though the construction and payment is undertaken, but when the
same is not done in a time bound manner, the contract would be deemed to have been breached.

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This clause is a time based term of the contract and has to be adhered properly. Also, the same
would be valid as it is very clear and is not ambiguous.
Clause 19
A condition is deemed as a key term of the contract, which goes to the very root of the contract.
Where any condition is contravened, the aggrieved party gets the option of ending the contract,
by repudiating the same and also apply for damages (Marson and Ferris, 2015). In Poussard v
Spiers and Pond [1876] 1 QBD 410, the court held that owing to the breach of the condition, the
contract had been breached. Hence, a condition is deemed as a key part of the contract and where
the same is not fulfilled, it results in a breach of contract, which makes the remedies available to
the aggrieved party (Latimer, 2012).
In the given contract, clause 19 is a condition of the contract. So, where the contractor fails to
engage in completing the formal exterior presentation of building, with the requisite shrubs and
trees, which were a minimum of four years old and were also native to Sydney Basin, it would be
deemed as a breach of condition. This is because this clause was a condition of the contract and
thus, forms a crucial part of it. And the breach of this clause would give the aggrieved party, i.e.,
the client the option of rescinding the contract.
Clause 26
An exclusion clause can be defined as such a clause under the contract, which has the power of
limiting or restricting the liabilities, which are born from the contract or for something else. In
short, the exclusion clause helps in extinguishing the liability of one of the contracting parties,

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usually of the one which includes such clause into the contract (Treitel and Peel, 2015). There
are some requisite elements which have to be fulfilled when it comes to the validity of an
exclusion clause. Apart from this, this has to be properly inserted in the contract for the same to
be valid and has to be brought to the attention of the party, particularly against whom the same is
inserted. Also, an exclusion clause can only restrict the liability which is raised under the
contract and the same cannot be used to restrict the liability under the common law or any
statutory law (Mulcahy, 2008).
With regards to the exclusion clauses which are covered under the contract, the same is given
legal validity where the exclusion clause is properly inserted into the contract and is signed later
on by the contracting parties (Paterson, Robertson and Duke, 2012). A leading example of this is
the case of L'Estrange v Graucob [1934] 2 KB 394 in which the exclusion clause was signed by
the parties but the same was not read by the claimant. And yet, the court held that the exclusion
clause was valid due to the clause being signed in a contract and being properly inserted into the
contract (Gibson and Fraser, 2014).
In the given case study, the clause 26 is an exclusion clause which is meant to extinguish the
liability of the contractor for the breach of contract, for its own actions, for the actions of its sub-
contractors, the employees, and this liability was not only restricted for breach of contract but
also for negligence. However, this exclusion did not restrict the applicability of any statute. And
due to this reason, it would be a valid clause. Also, this clause was properly inserted into the
contract and even if the client does not read the same, it would be deemed as a valid one, on the
basis of L'Estrange v Graucob, provided that the client and the contractor both sign this contract.
And even with the breach of this clause, no penalties will be imposed on the contractor.

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Conclusion
On the basis of the discussion carried above, it becomes clear that Clause 4 is a term of the
contract, Clause 19 is the condition of the contract, and Clause 26 is the exclusion clause under
the contract, which is meant to restrict and limit the liability of the contractor for a breach of
contract and for liability arising out of his own acts and that of his employees, along with
negligence. And as the terms of the contract are clear now, the parties can proceed with the
signing of the contract.

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References
Andrews, N. (2015) Contract Law. 2nd ed. UK: Cambridge University Press
Elliot, C. (2011) Contract Law. 8th ed. London: Pearson.
Gibson, A., and Fraser, D. (2014) Business Law 2014. 8th ed. Melbourne, Pearson Education
Australia.
Latimer, P. (2012) Australian Business Law 2012. 31st ed. Sydney, NSW: CCH Australia
Limited.
Marson, J., and Ferris, K. (2015) Business Law. 4th ed. Oxford: Oxford University Press.
Mulcahy, L. (2008) Contract Law in Perspective. 5th ed. Oxon: Routledge.
Paterson, J.M., Robertson, A., and Duke, A. (2012) Principles of Contract Law. 4th ed. Rozelle,
NSW: Thomson Reuters (Professional) Australia.
Treitel, G H., and Peel, E. (2015) The Law of Contract. 14th ed. London: Sweet and Maxwell.