Express Terms - CONTRACT LAW

• “Mere Puff” or Sales Talk - A boastful or flowery statement made in advertising a product or service.

• Representation - A statement made which induces another party to enter into a contract but which does not form part of the contract itself.

• Term - a promise, undertaking or “warranty” that becomes part of the contract itself.

Mere Sales Talk Representations Terms

No Legal Consequences

The ideais that you shouldn’t take them seriously

Liability for Damages

For misrepresentation, but requires proof of fault or negligence

Liability for Damages

For breach of contract (automatic right - no need to prove fault or negligence)

• Contract law, confusingly, uses the term “warranty” in two distinct ways.

• Meaning 1 - A general statement of promise that is incorporated into the contract as a term.

• Meaning 2 - A specific sub-type of contractual term, the breach of which entitles a party to some damages/reward, but which does not end the contract.

“In saying that he must prove a warranty, I use the word ‘warranty’ in its ordinary English meaning to denote a binding promise...That is the meaning which it has borne in English law for 300 years.”

“During the last hundred years, however, the lawyers have come to use the word ‘warranty’ in another sense. They use it to denote a subsidiary term in a contract as distinct from a vital term which they call a condition.”

Smith v Lynn (1954) 85 ILTR 57

• A property advertised as being “in excellent structural and decorative repair” was auctioned.

• Smith was successful in this auction, outbidding the defendant Lynn.

• Then, six weeks later, Smith put the property up for sale again, using the exact same advertisement.

• Lynn was successful in the second auction.

• It turned out that the property had extensive woodworm damage.

• Lynn refused to complete payment, arguing that

• there had been a misrepresentation. Smith sued for specific performance.

• Curran J held in favour of Smith. He argued that the statements in the advertisement were classic sales talk, and not something that Lynn could reasonably rely upon.

Curran J - Smith v Lynn

“[A]dvertisements, however, must be looked at in their true perspective. They do not purport to be detailed reports by experts as to the condition of the property to be sold. It is common knowledge that the purpose of such advertisements is to draw attention to the good points of the property, and that one usually finds in such advertisements rather flourishing statements.”

• The important distinction is the distinction between representations and terms...

• ...though this has become less important due to the possibility of claiming damages for negligent misrepresentation or “damages in lieu” of rescission for cases of innocent misrepresentation.

Reduced to writing

Context of Agreement Things said and done, in a particular context, resulting in contractual agreement

Not reduced to writing

Context of Agreement Things said and done, in a particular context, resulting in contractual agreement

Context of Agreement Things said and done, in a particular context, resulting in contractual agreement

Not reduced to writing

• The defendant purchased a new car from the plaintiff (a garage) on the basis of a part-exchange for his old car.

• The salesman in the garage was a neighbour of the defendant. He had been given a lift in the defendant’s car on several occasions.

• He thought the car was a 1948 Morris, and the defendant presented evidence to him that suggested this was the case (a registration book).

• The salesman then looked up a book which gave guide prices for secondhand cars and gave the defendant 290 towards the purchase of a new car.

• Eight months later, it was discovered that the car was not a 1948 Morris but, rather, a 1939 Morris.

• This car would have been worth 175.

• It was clear that the defendant had not lied about the age of the car; he was working off the information in the registration book.

• Nevertheless, the garage brought a case for damages against him on the basis of a breach of contract.

• They claimed that the age of the car was a crucial term of the contract, breach of which entitled them to recover damages.

• The CoA disagreed, holding that it was merely an innocent misrepresentation.

• Lord Denning argued that the crucial question was whether the age of the car was intended to be a “warranty” (meaning 1) of the contract. And to work this out you needed to look to the intention of the parties...

• ...but what does that mean?

Lord Denning - Oscar Chess Ltd. v Williams

“It is sometimes supposed that the tribunal must look into the minds of the parties to see what they themselves intended. That is a mistake. Lord Moulton made it quite clear, in Heilbut, Symons & Co. v. Buckleton [1913] AC, that ‘The intention of the parties can only be deduced fro”m the totality of the evidence’...”

“The question whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably

infer that a warrant was intended, that will suffice.”

Intelligent Bystander Test: X is a term of the contract if an intelligent bystander would have inferred that it was a term of the contract, based on everything that the parties said and did.

...Having set out this test, Denning turned to the facts of this particular case...

Lord Denning - Oscar Chess Ltd. v Williams

“...much depends on the precise words that were used. If the seller says: ‘I believe the car is a 1948 Morris. Here is the registration book to prove it’, there is clearly no warranty. It is a statement of belief, not a contractual promise. ”

“If, however, the seller says: ‘I guarantee that it is a 1948 Morris. This is borne out by the registration book, but you need not rely solely on that. I give you my own...