Term or representation?
- Statement made before a contract is concluded could become a
term of the contract, meaning that if it’s false there will be a breach
of contract and you can recover expectation damages, or just a
representation
- Before Hedley Byrne and the Misrepresentation Act no
damages could be recovered for misrepresentations unless
they were fraudulent, so the term/representation distinction
was really important
- It’s still significant because it affects remedies – normally you
can recover reliance damages for a misrepresentation but
expectation damages for a breach of contract
- Not always though – for breach of a contractual
warranty that a prediction has been made with
reasonable care and skill, as opposed to that it’s true,
you only get reliance damages – analogous to Hedley
Byrne liability (Esso Petroleum v Mardon)
- But under s1 of the Misrepresentation Act rescission is
available for a misrepresentation whether or not it’s
become a term of the contract
- Whether it’s a term or a representation depends on the parties’
intentions – primarily whether the party making the statement
intended it to be contractually binding or whether they just wanted
to provide information (Oscar Chess)
- This is about objective intention – what an intelligent
bystander would infer from the parties’ conduct (Dick Bentley)
- Dependent on individual circumstances, but there are some
factors which point one way or the other:
- More important statements are more likely to be
contractual terms
- Statement by a party with expert knowledge who is in a
position to check that it’s true is more likely to be a
contractual term – conversely if they don’t claim any
special knowledge and are just passing on information
from someone else it’s less likely – Dick Bentley
- Contrast outcome of Oscar Chess with Esso
- Statements recorded in writing or included in the written
contract are more likely to be terms
- Statement made at or close to the time of the contract
is more likely to be a term
- Atiyah argued that in practice the courts base their decisions
on which party they think should take responsibility for the
statement being inaccurate – parties often don’t have clear
intentions
- Probably why expertise is so important
The parol evidence rule
- Traditional parol evidence rule is that if you have a written contract
it is taken to contain all the terms of the contract and you can’t
argue there are other terms
- Statement made before a contract is concluded could become a
term of the contract, meaning that if it’s false there will be a breach
of contract and you can recover expectation damages, or just a
representation
- Before Hedley Byrne and the Misrepresentation Act no
damages could be recovered for misrepresentations unless
they were fraudulent, so the term/representation distinction
was really important
- It’s still significant because it affects remedies – normally you
can recover reliance damages for a misrepresentation but
expectation damages for a breach of contract
- Not always though – for breach of a contractual
warranty that a prediction has been made with
reasonable care and skill, as opposed to that it’s true,
you only get reliance damages – analogous to Hedley
Byrne liability (Esso Petroleum v Mardon)
- But under s1 of the Misrepresentation Act rescission is
available for a misrepresentation whether or not it’s
become a term of the contract
- Whether it’s a term or a representation depends on the parties’
intentions – primarily whether the party making the statement
intended it to be contractually binding or whether they just wanted
to provide information (Oscar Chess)
- This is about objective intention – what an intelligent
bystander would infer from the parties’ conduct (Dick Bentley)
- Dependent on individual circumstances, but there are some
factors which point one way or the other:
- More important statements are more likely to be
contractual terms
- Statement by a party with expert knowledge who is in a
position to check that it’s true is more likely to be a
contractual term – conversely if they don’t claim any
special knowledge and are just passing on information
from someone else it’s less likely – Dick Bentley
- Contrast outcome of Oscar Chess with Esso
- Statements recorded in writing or included in the written
contract are more likely to be terms
- Statement made at or close to the time of the contract
is more likely to be a term
- Atiyah argued that in practice the courts base their decisions
on which party they think should take responsibility for the
statement being inaccurate – parties often don’t have clear
intentions
- Probably why expertise is so important
The parol evidence rule
- Traditional parol evidence rule is that if you have a written contract
it is taken to contain all the terms of the contract and you can’t
argue there are other terms
