§ 5 TERMS OF PROMISE, AGREEMENT, OR CONTRACT

(1) A term of a promise or agreement is that portion of the intention or assent manifested which relates to a particular matter.

(2) A term of a contract is that portion of the legal relations resulting from the promise or set of promises which relates to a particular matter, whether or not the parties manifest an intention to create those relations.

COMMENTS & ILLUSTRATIONS:

Comment:

a. Agreed terms. The terms of a promise or agreement are those expressed in the language of the parties or implied in fact from other conduct. Both language and conduct are to be understood in the light of the circumstances, including course of dealing or usage of trade or course of performance. See Comment a to § 4. If a promise is binding, a term of the promise becomes a term of the contract unless it is rendered inoperative by some rule of law.

b. Contract terms supplied by law. Much contract law consists of rules which may be varied by agreement of the parties. Such rules are sometimes stated in terms of presumed intention, and they may be thought of as implied terms of an agreement. They often rest, however, on considerations of public policy rather than on manifestation of the intention of the parties. In the Restatement of this Subject, such rules are stated in terms of the operative facts which make them applicable.

c. Statutory contract terms. Statutes providing for contract terms vary in the extent to which they follow the terminology used here, and in the extent to which they permit variation by agreement. Under Uniform Commercial Code § 1-102(3), for example, the effect of provisions of the Code may be freely varied by agreement, with limited exceptions; at the other extreme are statutes or administrative regulations prescribing standard forms of such documents as insurance policies or bills of lading. Transactions entered into under statutes providing either optional or required terms commonly contain promises within the present definition, but they may also produce obligations which do not rest upon any manifestation of the intention of the obligor. Such statutory obligations are beyond the scope of the Restatement of this Subject. The statutes are sometimes written in terms of presumed intention, and they are sometimes properly interpreted as imposing the same legal consequences as if one of the parties to a contract had made a promise in the prescribed terms. If so, rules stated here may be applicable.

Illustration:

1. A contracts to sell B a described automobile. Both parties sign a printed contract form on which the description is typed and which contains the printed words, "Seller hereby excludes all warranties, express or implied." Under Uniform Commercial Code § 2-316 the quoted words do not exclude an implied warranty of merchantability, and under § 2-314 A warrants that the automobile is fit to drive. Under § 2-714 the warranty has the effect of a promise to pay for harm if the warranty is broken.