Contract 2
Classifying Pre-Contractual statements
− Terms: Those statements which contain the obligations expected of each party to a
contract. They form part of a contract. If breached, contract law provides a remedy.
− Representation: Those statements of fact that induce a party to enter a contract, but
which do not form part of the contract. If false, contract law provides a remedy.
− Puffs: Statements made without the intention that they can be taken seriously. If false,
contract law provides no remedy.
Distinguishing between Terms v Representations: It determines the cause of breach and the
remedies available. They use an objective test. Term breached = party can sue for breach of
contract. Misrepresentation- party can sue for misrepresentation.
1. Has the statement been reduced into writing? - If a statement is reduced into writing,
it is most likely that it was intended to be a term. Parties are bound by the terms of a
document that they sign whether they read it or not [ L’Estrange v Graucob 1934]. Parol
Evidence: if the contract has been reduced into writing, courts are unwilling to permit
any external evidence which seeks to change the contract of the written
agreement. There are exceptions to this rule. Oral evidence can be adduced to prove a
custom, to imply a term, to prove fraud, or provide evidence of consideration.
2. Does the maker have specialist skill or knowledge? - If the maker of the statement has
specialist skill or knowledge, the statement is most likely to be a term. Dick Bentley Production
Ltd v Harold Smith Motors (1996): Statement about a car’s mileage held to be a term because
the statement’s maker was a motor dealer with specialist knowledge. Oscar Chess Williams
(1957) Statement about age of a vehicle held not to be a term because the statement’s maker
had no specialist knowledge. Not a term.
3. What is the importance attached to the statement? - If it is objectively clear that the other
party takes a statement seriously and would not have contracted without it, it is most likely a
term. Bannerman v White (1861): Statement that hops were not treated with sulphur held to
be a term because D had stressed requirement. Schawel v Reade (1913): Statement that horse
was sound for breeding purpose for purchasing stallion.
4. Has there been a lapse of time b/w the statement being made & the contract being formed?-
The greater the lapse of time b/w the making of the statement and the formation of the
contact, the less likely that the statement is a term. Routledge v McKay (1954): Statement held
to be a representation because of the interval between negotiations and formations of contract
to purchase motorcycle was to wide.
5. Was there an invitation to externally verify the statement?- Where a party makes a
statement and invited. The other party to independently verify the truth of the statement, it is
, clear they do not take responsibility for the statement. It is not a term. Ecay v Godefroy (1974):
Invitation to confirm statement that boat was sound showed it was not intended to be a term.
Schawel v Reade- “You need not look for anything, the horse is perfectly sound”.
Classification of contract terms
Contract terms can be classified according to their:
Nature-
1. Express terms
2. Implied terms
Type-
1. Conditions
2. Warranties
3. Innominate Terms
A condition, warranty or innominate term maybe an express or implied term.
Nature of expressed terms: When interpreting a contract, the court ascertains the parties’ intention by
identifying the meaning of the relevant words. To do this, it considers -
• the natural and ordinary meaning of those words,
• the overall purpose of the document,
• any other provisions of the document,
• the facts known or assumed by the parties at the time that the document was executed, and
• common sense.
Express Terms- Oral Statements
• Courts will decide if the statement is truly or a term or a representation
• Objective test used- Recall factors
Express Terms- Written Statements
• Courts will decide if it is really part of the contract, I.e. Has it been incorporated?
• Written terms can be incorporated by: signature, reasonable notice and previous course of
dealing
• If contract has been written down = Parole Evidence Rule- Courts unwilling to accept extrinsic
evidence, whether oral statements or other written material, which will change the express
terms in a written contract.
Nature of implied terms: it is not always possible state everything they agree on, some terms put in
contract to fill gaps. Implied by statute, custom and common law.
Classifying Pre-Contractual statements
− Terms: Those statements which contain the obligations expected of each party to a
contract. They form part of a contract. If breached, contract law provides a remedy.
− Representation: Those statements of fact that induce a party to enter a contract, but
which do not form part of the contract. If false, contract law provides a remedy.
− Puffs: Statements made without the intention that they can be taken seriously. If false,
contract law provides no remedy.
Distinguishing between Terms v Representations: It determines the cause of breach and the
remedies available. They use an objective test. Term breached = party can sue for breach of
contract. Misrepresentation- party can sue for misrepresentation.
1. Has the statement been reduced into writing? - If a statement is reduced into writing,
it is most likely that it was intended to be a term. Parties are bound by the terms of a
document that they sign whether they read it or not [ L’Estrange v Graucob 1934]. Parol
Evidence: if the contract has been reduced into writing, courts are unwilling to permit
any external evidence which seeks to change the contract of the written
agreement. There are exceptions to this rule. Oral evidence can be adduced to prove a
custom, to imply a term, to prove fraud, or provide evidence of consideration.
2. Does the maker have specialist skill or knowledge? - If the maker of the statement has
specialist skill or knowledge, the statement is most likely to be a term. Dick Bentley Production
Ltd v Harold Smith Motors (1996): Statement about a car’s mileage held to be a term because
the statement’s maker was a motor dealer with specialist knowledge. Oscar Chess Williams
(1957) Statement about age of a vehicle held not to be a term because the statement’s maker
had no specialist knowledge. Not a term.
3. What is the importance attached to the statement? - If it is objectively clear that the other
party takes a statement seriously and would not have contracted without it, it is most likely a
term. Bannerman v White (1861): Statement that hops were not treated with sulphur held to
be a term because D had stressed requirement. Schawel v Reade (1913): Statement that horse
was sound for breeding purpose for purchasing stallion.
4. Has there been a lapse of time b/w the statement being made & the contract being formed?-
The greater the lapse of time b/w the making of the statement and the formation of the
contact, the less likely that the statement is a term. Routledge v McKay (1954): Statement held
to be a representation because of the interval between negotiations and formations of contract
to purchase motorcycle was to wide.
5. Was there an invitation to externally verify the statement?- Where a party makes a
statement and invited. The other party to independently verify the truth of the statement, it is
, clear they do not take responsibility for the statement. It is not a term. Ecay v Godefroy (1974):
Invitation to confirm statement that boat was sound showed it was not intended to be a term.
Schawel v Reade- “You need not look for anything, the horse is perfectly sound”.
Classification of contract terms
Contract terms can be classified according to their:
Nature-
1. Express terms
2. Implied terms
Type-
1. Conditions
2. Warranties
3. Innominate Terms
A condition, warranty or innominate term maybe an express or implied term.
Nature of expressed terms: When interpreting a contract, the court ascertains the parties’ intention by
identifying the meaning of the relevant words. To do this, it considers -
• the natural and ordinary meaning of those words,
• the overall purpose of the document,
• any other provisions of the document,
• the facts known or assumed by the parties at the time that the document was executed, and
• common sense.
Express Terms- Oral Statements
• Courts will decide if the statement is truly or a term or a representation
• Objective test used- Recall factors
Express Terms- Written Statements
• Courts will decide if it is really part of the contract, I.e. Has it been incorporated?
• Written terms can be incorporated by: signature, reasonable notice and previous course of
dealing
• If contract has been written down = Parole Evidence Rule- Courts unwilling to accept extrinsic
evidence, whether oral statements or other written material, which will change the express
terms in a written contract.
Nature of implied terms: it is not always possible state everything they agree on, some terms put in
contract to fill gaps. Implied by statute, custom and common law.
