WEEK ONE
• To understand the difference between terms and representations - how to establish
whether something is merely a pre-contractual representation or a term of a contract.
• To be familiar with the rules for incorporating terms into a contract - Many
contracts are not contained in a single written document signed by the parties, particularly where the
contract is based on pre-drafted standard terms. We will see how such terms could be incorporated
by giving reasonable notice.
• To understand the principles guiding the interpretation of a contract - the criteria which
have been developed in recent years to guide the process of interpretation. You will see that there is
a tension between a literal and a contextual approach to interpretation, and we will consider how this
has been tackled in the case-law.
• To be familiar with the criteria for implying terms into a contract - We will examine
when this can be done and what the conditions are that need to be satisfied.
1. EXPRESS TERMS OF THE CONTRACT
Reading: * Merkin and Saintier, Poole’s Textbook on Contract Law, 14th ed., ch.6, sections 6.1-6.3 (pp.197-220)
The terms of a contract set out the various rights and obligations which the parties have agreed to assume
under the contract. Terms will usually specify some or all of the following:
− Details of what each party promises/undertakes to do.
− Details about the specification or quality of the subject-matter of the contract
− Details of agreed performance and payment
− Terms dealing with contingencies which might arise (“risk allocation”)
− Terms qualifying one party’s obligations under the contract: e.g.,
(a) agreed excuses for specified defaults in performance
(b) terms restricting or excluding liability for breach of contract (exemption clauses; limitations of
liability – more on this in ‘Unfair Terms’)
Distinction between terms and representations
A distinction must be made between terms and mere representations. As we have already seen, some
statements made in the run-up to concluding a contract will take effect as pre-contractual representations
and will give rise to remedies misrepresentation but not damages for breach of contract.
Other statements will become (express) terms of the contract, and therefore form part of the binding
obligations each party assumes by entering that contract.
, A subsequent failure to comply with such a term will allow the party not in breach to access the remedies for
breach of contract – primarily damages (more later).
An objective test –
should a pre-contractual statement be regarded as part of the contract?
to establish the parties’ intention with regard to the status of any pre-contractual statement is used to
consider whether such a statement should be regarded as part of the contract. – distinguish whether it’s a
term or representation
Relevant factors include:
(a) how was particular statement expressed?
(b) at what stage was the statement made?
(c) how important was the statement?
(d) did statement maker have superior knowledge?
Some examples from the case-law:
These are before misrepresentation act – check emails
Oscar Chess v Williams [1957] 1 All ER 325 (CA)
Mrs Williams purchased a second hand Morris car on the basis that it was a 1948 model. The registration
document stated it was first registered in 1948. The following year her son used the car as a trade in for a
brand new Hillman Minx which he was purchasing from Oscar Chess.
The son stated the car was a 1948 model and on that basis the Oscar Chess offered £290 off the purchase price
of the Hillman. Without this discount Williams would not have been able to go through with the purchase.
8 months later Oscar Chess ltd found out that the car was in fact a 1939 model and worth much less than
thought.
They brought an action for breach of contract arguing that the date of the vehicle was a fundamental term of
the contract thus giving grounds to repudiate the contract and claim damages.
Held:
The statement relating to the age of the car was not a term but a representation.
The representee, Oscar Chess ltd as a car dealer, had the greater knowledge and would be in a better position
to know the age of the manufacture than the defendant.
Dick Bentley v Harold Smith Motors [1965] 2 All ER 65 (CA)
• To understand the difference between terms and representations - how to establish
whether something is merely a pre-contractual representation or a term of a contract.
• To be familiar with the rules for incorporating terms into a contract - Many
contracts are not contained in a single written document signed by the parties, particularly where the
contract is based on pre-drafted standard terms. We will see how such terms could be incorporated
by giving reasonable notice.
• To understand the principles guiding the interpretation of a contract - the criteria which
have been developed in recent years to guide the process of interpretation. You will see that there is
a tension between a literal and a contextual approach to interpretation, and we will consider how this
has been tackled in the case-law.
• To be familiar with the criteria for implying terms into a contract - We will examine
when this can be done and what the conditions are that need to be satisfied.
1. EXPRESS TERMS OF THE CONTRACT
Reading: * Merkin and Saintier, Poole’s Textbook on Contract Law, 14th ed., ch.6, sections 6.1-6.3 (pp.197-220)
The terms of a contract set out the various rights and obligations which the parties have agreed to assume
under the contract. Terms will usually specify some or all of the following:
− Details of what each party promises/undertakes to do.
− Details about the specification or quality of the subject-matter of the contract
− Details of agreed performance and payment
− Terms dealing with contingencies which might arise (“risk allocation”)
− Terms qualifying one party’s obligations under the contract: e.g.,
(a) agreed excuses for specified defaults in performance
(b) terms restricting or excluding liability for breach of contract (exemption clauses; limitations of
liability – more on this in ‘Unfair Terms’)
Distinction between terms and representations
A distinction must be made between terms and mere representations. As we have already seen, some
statements made in the run-up to concluding a contract will take effect as pre-contractual representations
and will give rise to remedies misrepresentation but not damages for breach of contract.
Other statements will become (express) terms of the contract, and therefore form part of the binding
obligations each party assumes by entering that contract.
, A subsequent failure to comply with such a term will allow the party not in breach to access the remedies for
breach of contract – primarily damages (more later).
An objective test –
should a pre-contractual statement be regarded as part of the contract?
to establish the parties’ intention with regard to the status of any pre-contractual statement is used to
consider whether such a statement should be regarded as part of the contract. – distinguish whether it’s a
term or representation
Relevant factors include:
(a) how was particular statement expressed?
(b) at what stage was the statement made?
(c) how important was the statement?
(d) did statement maker have superior knowledge?
Some examples from the case-law:
These are before misrepresentation act – check emails
Oscar Chess v Williams [1957] 1 All ER 325 (CA)
Mrs Williams purchased a second hand Morris car on the basis that it was a 1948 model. The registration
document stated it was first registered in 1948. The following year her son used the car as a trade in for a
brand new Hillman Minx which he was purchasing from Oscar Chess.
The son stated the car was a 1948 model and on that basis the Oscar Chess offered £290 off the purchase price
of the Hillman. Without this discount Williams would not have been able to go through with the purchase.
8 months later Oscar Chess ltd found out that the car was in fact a 1939 model and worth much less than
thought.
They brought an action for breach of contract arguing that the date of the vehicle was a fundamental term of
the contract thus giving grounds to repudiate the contract and claim damages.
Held:
The statement relating to the age of the car was not a term but a representation.
The representee, Oscar Chess ltd as a car dealer, had the greater knowledge and would be in a better position
to know the age of the manufacture than the defendant.
Dick Bentley v Harold Smith Motors [1965] 2 All ER 65 (CA)
