What is a term?

In finance the term is usually the duration: a fixed period such as 24 months, a periodic arrangement that rolls month to month until someone gives notice, or a facility that runs until an event happens. A term loan takes its name from exactly that.

In legal drafting the same word points at a single provision, the rule the parties agreed to follow: a payment term setting 30 days, a confidentiality term, a delivery term. Read the surrounding wording to tell them apart. Commencement, expiry and renewal signal duration, while obligations, liability and time to pay signal a clause. The distinction matters because the consequences of getting it wrong, from remedies to limitation periods, are different.

Express terms are the ones the parties put in words, written or spoken. Implied terms are read in by law, custom or necessity: statute implies terms under the state Sale of Goods Acts, a trade custom can imply a routine practice, and courts imply what is needed to make a contract workable. Separately, the Australian Consumer Law gives consumers guarantees that apply whatever the contract says and cannot be contracted out of. If you rely on an implied term, be ready to show its source, not just assert it.

Classification matters because it sets the remedy. Breach of a condition, a fundamental obligation, generally lets the innocent party terminate and claim damages. Breach of a warranty, a minor promise, normally gives damages only. Many terms are treated as innominate, where the remedy turns on how serious the breach actually was rather than on the label used in the contract.

The Australian Consumer Law prohibits unfair terms in standard-form consumer and small business contracts. A term is unfair if it causes a significant imbalance in the parties' rights, is not reasonably necessary to protect a legitimate interest, and would cause detriment if relied on. Broad unilateral variation powers, sweeping exclusions of liability and one-sided automatic renewals are the usual targets. If a court finds a term unfair it is void, though the rest of the contract can survive where a severability clause applies.

Where the term means duration, be precise. State the commencement trigger, the length, any renewal period and its notice window, how notice must be given, and when it takes effect. Ambiguous start dates and silent notice procedures are what disputes are made of.