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Air Asia, an airline company is entering into a contract with Delta Cargo.

You being the legal advisor of Air Asia have to explain to your company the following:

1. Describe to them specific contract terms with reference to their importance and impact if these terms are broken.

2. Explain the application and analyze the law on standard from contracts.
It is a pre-prepared contract where all the terms have already set. In standard form contract each of the party will have different duties such as a recipient; they have little or no prior negotiation. On the other hand the provider of the contract has their own standard terms and conditions. The standard form contract can usually be found in a contract between employees and the company. The terms in standard form can be in three types which are express term, implied term and innominate term. Firstly an express term is a clear stipulation in the contract (they are terms of the contract and may choose to do so orally, or in writing, or in a combination of these methods.) which the parties intend should be binding upon them. Traditionally, the common law had divided terms into two categories: conditions and warranties. Condition is a term which is vital to the contract, going to the root of the contract. While warranty is a less important term, it does not got to the root of the contract but is subsidiary to the main purpose of the agreement. A breach of condition will entitle the injured party to repudiate the contract and claim damages. A breach of warranty will only give the injured party the right to claim damages; he cannot repudiate the contract. On the other hand some undertakings may occupy an intermediate position, in that the term can be assessed only in the light of the consequences of a breach. If a breach of the term results in severe loss and damage, the injured party will be entitled to repudiate the contract; where the breach involves minor loss, the injured party's remedies will be restricted to damages. These intermediate terms have also become known as innominate terms. The last type of term is implied term. It is a term which, although not expressly stated by the parties by words or conduct, is by law deemed to be part of the contract. Implied term is one that is actually stipulated by one of the parties, requiring the other party to do certain things. Furthermore terms may be implied into contracts by: by custom, by the courts and by the statute. An exemption clause is a clause which seeks to release one of the parties from liability should something go wrong with the contract. If the parties negotiate their contract from positions of more or less equal bargaining strength and expertise, neither the courts nor Parliament have usually interfered. However there has been strong criticism of the use of exemption clauses in contracts made between manufacturers or sellers of goods or services and private citizens as consumers, standard form contract

(BPP Professional Education, 2004). In exemption clause there are four factors should be considered which are the incorporation, interpretation, unfair contract term act 1977 and Unfair Terms in Consumer Contracts Regulations 1999 (BPP Professional Education, 2004). Firstly the incorporation of exemption clause, the person wishing to rely on the exclusion clause must show that it formed part of the contract. An exclusion clause can be incorporated in the contract by: signature, notice or a course of dealing. On the other hand in deciding what an exclusion clause means, the courts interpret any ambiguity against the person at fault who relies on the exclusion. This is known as the contra proferentem rule. The rules is that if there is any ambiguity or uncertainty as to the meaning of an exclusion clause the court will construe it contra proferentem, in example against the party who inserted it in the contract (Doti Chee, 2009). The third factor is the Unfair Contract Term Act 1977, in general the Act only applies to clauses inserted into agreements in commercial concerns of businesses. In principle private persons may restrict liability as much as they wish. The Act uses two techniques or controlling exemption clauses: some types of clauses are void, whereas others are subject to a test of reasonableness (BPP Professional Education, 2004). However there is also an unfair term in consumer contracts regulations 1999. The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) protect consumers against unfair standard terms in contracts they make with traders. The Office of Fair Trading, together with certain other bodies, can take legal action to prevent the use of such terms. The UTCCRs can protect consumers from terms that reduce their statutory or common law rights and from terms that seek to impose unfair burdens on the consumer over and above the obligations of ordinary rules of law (Office of fair trading, accessed 2009). In addition clauses which are subject to reasonableness and fairness by UCTA obviously only apply if the courts decide it is reasonable for them to do so. The Act gives some guidelines as to the meaning of reasonableness for these purposes and the concept has been interpreted by the courts (Doti Chee, 2009). Section 11(2) refers to Schedule 2 to UCTA, which lays down a number of issues that the court may consider when deciding whether a term is reasonable for the purposes of Sale and Supply of Goods ss.6 and 7 and those points were mentioned above. Furthermore the battle of form should also be analyzed. A problem arises if one party sends a form saying that the contract is made on those terms but the second party accepts by sending a form with their own terms on and stating that the contract is on the second party's terms. The "rule of thumb" here is that the contract will be made on the last set of terms sent. There was a case example of battle of form which is the case of British Road Services v Arthur Crutchley Ltd 1968 (referred to Appendix E). In this case BRS delivered whisky to AC's warehouse; BRS's driver gave AC a delivery note which contained BRS' conditions. AC stamped the note "Received under AC's conditions". It was held that AC stamping the delivery note was a counter offer which was accepted by BRS handing over the whisky. In application of the rule of battle form the contract was made on AC's conditions. Lastly for the fundamental breach, it is a tool to define how far an exemption clause could exclude liability in a case where the breach of contract was a failure to perform the contract altogether (BPP Professional Education, 2004). So according to the rule of standard form contract, the term of contract, exemption clauses, battle of form and the fundamental breach in the case of Tuan and Keith, as the contract was signed and both parties were binding by it. However when Keith breached the contract the

exemption clauses will affect and Tuan will withdraw from the contract. However according to the fundamental breach, it was reasonable and fairness for Tuan to breach the contract with Keith. In conclusion Tuan should buy his plaster in the future from Fred who had indicated that he would supply the plaster at $4,500 a ton.