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Terms 1 Notes

GDL Law Notes > GDL Contract Law Notes

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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 Puf
?????Statements made during negotiations: o (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. o (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). o (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 pufery....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. o Implied in fact: gives efects to the presumed intentions of the parties. o Implied in law: either at common law; or by statute---in order to give effect to the provisions of a statute.

1 o 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?
o 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. o Bannerman v White (1861) o 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. o D treated the contract as repudiated. o 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. o 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: o If statement made at time of contracting ? more likely to be a term, than if made at an earlier stage. o If there's a delay between the statement the parties entering the contract ? less likely to be treated as a term. o Routledge v McKay (1954) o 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. 2

o In fact, was a 1930 model, buyer sued for breach. o 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 o 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. o 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. o See also Lightman J in Inntrepreneur v East Crown (2000) o 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: o Other factors may be considered. o 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 o Experts include shopping assistants. It's about who has the authority. o 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. o Eg Birch v Paramount (1956); Couchman v Hill (1947). o Oscar Chess v Williams (1957):
? Plaintif 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, Williams, confirmed this date in good faith.
? Some months later, discovered the date was actualy

1939. Car thus worth much less.
? HELD, majority CA: the age of the car was not a term of the contract, because the skill & expertise lay in the hands of the plaintiff car dealers, not Williams, who was making the statement. So was a representation.
? because Williams knows nothing about cars, and you were car experts---if anyone had known should be you.

3 o CF Dick Bentley v Harold Smith (Motors) (1965)
? Here, the skill & expertise lay in the hands of the statement maker, and thus the statement was a term of the contract.
? Mr Bentley wants a Bentley. Harold Smith is a car dealer, finds a Bentley and sells it to him, tells Bentley it was in good condition. Tells Bentley the card had done 20 thousand miles only.
? He bought the fact. In fact, was in bad condition, had clearly done more than 20 thousand miles.
? HELD, CA: the statement re the mileage done by the car, was a term of the contract---the statement maker, D, was a car dealer who should be take not have better knowledge of such matters then plaintif, who was not involved in motor trade.
?????Checks---Statement may become a term of contract where the vendor expressly accepts the responsibility for the soundness of the sale item in question o Schawel v Reade (1913)
? Plaintif required a horse; attempted to examine D's horse, but was told he need not look for anything and that the horse was sound in every way. Price agreed; delivery of horse took place.
? In fact, horse not fit for purposes.
? HELD: Because Reade stopped Schawel from checking, Reade took responsibility that any statement related to health of the horse would become a term of the contract. Held that (1) D, at time of sale, represented that the horse was fit for stud purposes; (2) the purchaser acted on that statement in purchasing the horse. o CF Hopkins v Tanqueray (1854)
? Here, horse sale in auction, which is without guarantee, this is an industry standard.
? Plaintif purchased D's horse at auction. One day prior, D, finding the plaintif buyer examining the horse's legs, declared "you need not examine his legs: you have nothing to look for. I assure you that he is perfectly sound in every respect."
? Hopkins goes to check the horse; Tanqueray says there's no need to check the horse, this is a perfectly sound horse. Tanqueray comes back the next day and buys the horse. The horse is not ok, it goes lame.
? Hopkins tries to argue it was a term of the contract that the horse was ok.
? HELD, Court of Common Pleas: D's statement was not a term, but a mere representation. o Why the difference between Schawel and Hopkins:

4 (1)---horses sold at auction are never warranted, this is an industry standard, unless expressly stated in the catalogue.
? (2) another reason, suggested by Lord Evershed MR in Harling v Eddy (1951): in Schawel, the contract was made on same day as the statement; CF Hopkins, contract made on day after the statement. So time lapse. o in Schawel, Defendant, by strength of his statement, actually dissuaded the plaintiff from making further checks himself with regard to fitness of the horse for stud purposes. CF Ecay v Godfrey (1947): where seller of a boat stated it was sound, but advised the buyer to have it surveyed---not a term, the onus of verification of soundness lay with the purchaser.Parol Evidence Rule (re adducing evidence extrinsic to a written contract).
?????Parol Evidence rule: Nothing outside the written contract can come into it--Extrinsic evidence, oral or otherwise, may not be adduced to add, vary or contract the terms of a written contract. o Jacobs v Batavia (1924): o Stated that 'parol evidence will not be admitted to prove that some particular term, which had been verbally agreed upon, had been omitted (by design or otherwise) from a written instrument constituting a valid and operative contract between the parties'.
?????Initially applied strictly by courts, but soon become apparent it was never intended to be applied as a rule of law; but merely as a presumption.
?????Non Paternalistic---Freedom of Contract
?????Due to the many exceptions (seen below), in 1976 the Law Commission proposed the 'parol evidence rule' should be repealed: this never occurred, but in 1986 the Law Commission conceded that legislation was no longer necessary as the 'rule' did not prevent the courts from looing outside the written document where the parties so intended.
?????Avoiding the rule: o (1) Not wholly written contracts (construing a contract as partly written/partly oral):
? Somewhat circular argument: if, on one hand, the written agreement really was the whole agreement, neither party would be seeking to introduce extrinsic evidence. Conversely, if some non-written terms were intended to be part of the contract, the parol evidence rule would never exclude them.

5 General approach: where one party is reasonably entitled to assume that the writing does contain all the terms of the contract, the other party will not be allowed to give evidence that it does not.
? J Evans & Sons v Andrea Merzario (1976)
? Claimants, importers of machines, regularly contracted with D's forwarding agents. On every occasion the machines were carried below deck in creates/trailers so as to avoid risk of corrosion. IN 1967, D's proposed to change to containerised transportation to enable them to carry goods both above and below deck.
? However, in discussions with claimants, Ds gave them an oral assurance that their machines would be packed in containers but would always be carried below deck. Year later, such a container was inadvertently carried on deck and lost overboard.
? HELD, CA: the oral promise did have contractual force---on basis that D attached great importance to the carriage of his goods under deck; and on basis he would not have agreed to the new mode of carriage but for the promise.
? Roskill and Geofrey Lane LJJ: this was a partly oral/partly written contract, because you had discussions; and so the parol evidence rule doesn't apply, and the oral term was admissible as a term.
? Also applied in Couchman v Hill (1948): HELD: the documents in the case were held to form not the whole but only part of the contract; the oral assurance could be laid side by side with them so as to constitute a single and binding transaction.
? See also: Harling v Eddy. BUT note Hopkins v Tanqueray. o (2) Collateral Contracts
? Court may hold there are in fact two contracts: the written contract, to which the parol evidence rule applies; and the oral collateral contract, to which the parol evidence rule does not apply.
? Basis: that an extrinsic oral assurance is given, the consideration for that promise being that the recipient then enters into the main written agreement---clearly a benefit to the other party.
? Concept summarized by Lord Moulton in Heilbut Symons & Co v Buckleton (1913):
?????' . . . there may be a contract consideration for which is the making of some other contract . . . It is collateral to the main6

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