Some Problems about Fundamental Terms

Abstract

The doctrine of “fundamental term” has been recently invoked in yet another case concerned with the hire-purchase of a car in order to enable the borrower to obtain damages despite the presence in the agreement of an exemption clause. In this case, Charterhouse Credit Co., Ltd. v. Tolly a new point of law was decided. It may be said to be established law that a party to a contract who commits a breach of a fundamental term cannot escape liability for such breach by reliance on an exemption clause. But is the position altered if the innocent party, notwith-standing discovery of the breach, acts in a manner consistent with the continuance of some contractual relations? In the Charterhouse case the borrower of the car on discovering the breach, instead of returning the car, retained it, and indeed entered into negotiations about the time of payment of instalments.