Terms 1 Notes

Contract Law: Terms 1

What is a term?

• The terms of a contract are its contents—determine the basis on which the parties are in agreement. They define the rights & obligations arising from the contract.

• Any term of a contract must be clear and certain

• Any ambiguity and there can be no agreement

Gibson v Manchester CC [1979]

• How do terms get into the contract?

• Is when a statement of fact is deemed by the court to become a contractual promise.

What is not a term?—Terms v Representations v Mere Puff

• Statements made during negotiations:

  • (1) Representation: statements of facts or law - which the parties do not intend to be binding = representations, if they help to induce the making of the contract.

  • (2) Terms: Statements of facts which the parties intend to be binding—can be seen as promissory in nature. These are the terms of the contract—can be sub-divided into conditions, warranties, innominate terms (ch 10).

  • (3) Mere puffs—statements of no legal significance.

• Distinction between non-contractual representations and contractual terms is important. Which are contractual terms; and which are non-contractual representations.

  • If a term is not fulfilled = breach of contract

  • If a representation is untrue = misrepresentation

• Distinction between term and representation less importance since Misrepresentation Act 1967: which makes it easier to obtain damages for misrepresentation.

• Also, one statement can be both a term and a representation: giving rise to an action for both breach of contract and misrepresentation.

• Mere puffery….Advertising hyperbole

  • Eg Carlsberg, ‘probably the best beer in the world’.

• Statements made to induce you into entering into a contract

  • A statement of future intention is not provable.

Terms—two ways in

• Expressed: express terms which the parties agree to be part of the contract. Can be written, oral or partly written and partly oral.

• Implied—either: Either implied in fact; or implied in law.

  • Implied in fact: gives effects to the presumed intentions of the parties.

  • Implied in law: either at common law; or by statute—in order to give effect to the provisions of a statute.

  • So terms implied in law = obligations which arise irrespective of the intentions of the parties.

EXPRESS TERMS

Express term or a representation?

• In seeking to discover whether the parties intended to be bound by a statement made by one of them, court will apply objective test—‘what would a reasonable man understand to be the intentions of the parties, having regard to al the circumstances’?

• Many factors used to apply this test ... .

Express terms—what do the courts consider?

• Remember: express terms can be made orally or in writing.

• Importance of the statement—how important was the statement to the buyer?

  • A statement may be regarded as a term if can be shown the injured party considered it so important that they would not have entered into the contract BUT FOR the statement.

  • Bannerman v White (1861)

  • Negotiations to purchase hops. D said: ‘if they have been treated with Sulphur, I am not interested in even knowing the price of them’. D assured Sulphur not used. In fact, Sulphur had been used.

  • D treated the contract as repudiated.

  • Agreed a price, then went away, then White found out the hops had been treated with Sulphur. B sued W, for enforcing the sale. W’s defence—hops had not been treated with Sulphur.

  • HELD: the statement was understood and intended by the parties to be a term of the contract of sale. The fact that W wasn’t even prepared to discuss price without knowing there had been no Sulphur—attached great importance to the statement that no Sulphur had been used, would not have entered the contract but for that statement.

• Timing:

  • If statement made at time of contracting more likely to be a term, than if made at an earlier stage.

  • If there’s a delay between the statement the parties entering the contract less likely to be treated as a term.

  • Routledge v McKay (1954)

  • Seller of a motor cycle told buyer, in good faith, that it was a 1941 or 1942 model. One week later, buyer and seller entered a contract of sale. The written memo of sale didn’t mention the year of the model.

  • In fact, was a 1930 model, buyer sued for breach.

  • HELD: the lapse of time between the making of the statement and entering into the contract the statement about the year of the model was not a term, was a representation instead.

• Reduction of the contract into writing

  • Also apparent from Routledge v McKay that the court was influenced by fact that the contract had been reduced into writing; and yet the previous oral statement was not included.

  • Inference drawn by court = the statement could not have been regarded as significant by the other parties, otherwise they would have included it in the written agreement. Hence was only a representation.

  • See also Lightman J in Inntrepreneur v East Crown (2000)

  • However, the fact that an oral statement was not included in an agreement reduced into writing is not necessarily decisive in classifying that statement as a mere representation:

  • Other factors may be considered.

  • Eg Birch v Paramount Estates (1956): D made a statement re the qualify of a house that was being sold; but the written contract made no reference to this. Nevertheless, CA HELD: the statement is a contractual term. The other factor taken into account was the special skill and knowledge of the defendants, who were making the statement.

• Specialist knowledge/skill

  • Experts include shopping assistants. It’s about who has the authority.

  • If the party who made the statement had exclusive access to info/special knowledge, cf the other party, this is likely to be taken into account in the latter’s favour.

  • Eg Birch v Paramount (1956); Couchman v Hill (1947).

  • Oscar Chess v Williams (1957):

    • Plaintiff car dealers, Oscar Chess, agreed on a trade-in of D’s old car as part of the arrangement when he purchased another car from them. The registration book of the car gave its date as 1948. D,...

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