Fundamentals of Business

Terms

Terms Clause or provision that constitutes a substantive part of a contract and may create a contractual obligation breach of which could be cause for legal action. Depending upon its importance, a term may either be a condition (essence of a contract) or a warranty (material part of a contract).

A term may either be an express term (clearly and directly stated) or an implied term (inserted by the courts or a statute). A Term may either be expressed or implied. An Express term is stated by the parties during negotiation or written in a contractual document. Implied terms are not stated but nevertheless form a provision of the contract.

Widespread use of standard contracts
Catalyst - Globalisation

A standard form contract (sometimes referred to as an adhesion contract or boilerplate contract) is a contract between two parties that does not allow for negotiation, i.e. take it or leave it it. It is often a contract that is entered into between unequal bargaining partners, such as when an individual is given a contract by the salesperson of a multinational corporation. The consumer is in no position to negotiate the standard terms of such contracts and the company's representative often does not have the authority to do so.

Theoretical issues

There is some debate on a theoretical level whether, and to what extent, courts should enforce standard form contracts. On the one hand they undeniably fulfil an important efficiency role in society. Standard form contracting reduces transaction costs substantially by precluding the need for buyers and sellers of goods and services to negotiate the many details of a sale contract each time the product is sold.

On the other hand, there is the potential for inefficient, and even unjust, terms to be accepted by those signing these contracts. Such terms might be seen as unjust if they allow the seller to avoid all liability or unilaterally modify terms or terminate the contract. They might be inefficient if they place the risk of a negative outcome, such as defective manufacturing, on the buyer who is not in the best position to take precautions.