Terms of the Contract – Express Terms
Introduction
-‐ Types of terms in a contract:
1. Express terms: what parties expressly discussed with each other, can be written down.
2. Implied terms: what is inferred by the contract but not directly stated. Through the operation of law, that the courts will imply or statute will imply.
Pre-‐Contractual Statements
-‐ Pre-‐contractual statements are representations that are made in the negotiations and never actually end up in the final statement.
-‐ All terms must be brought to your attention at the time of contract.
-‐ Statements can be oral, by conduct, written (e.g. drafts, written, web pages). They are categorised as either:
o Puffs
§ No reasonable person would believe it to be true.
§ No legal consequences s52 TPA puffs don’t usually form part of the contract.
o Representations
§ Intended to induce not guarantee BUT can become a term if the statement maker’s intention was to guarantee the truth of the statement.
§ There may be legal remedies depending on whether the representation was a fraudulent, innocent or negligent misrepresentation.
§ Apply objective test as to what conclusion a reasonable person in the position of the representee would have reached.
§ E.g. 'I reckon it can handle two large horses'
§ Misrepresentations – come under consent e.g. I did not consent, your right is then to void the contract
o Terms
§ Can a statement made in negotiation become a term? Need to apply objective test and look at the intention of the parties.
§ E.g. 'I guarantee it can handle two large horses' Objective test
• Would 'an intelligent bystander reasonably refer that a warranty was intended' (Oscar Chess v Williams [1957])
• Was it intended to be premissory?
• It is ultimately for the court to ascertain 'whether there is evidence of an intention by one or both of the parties that there should be contractual liability in respect of the accuracy of the statement' (Ellul & Ellul v Oakes (1972) at 387, per Zelling J
• The intention is to be determined by an objective analysis of the facts. Secret or uncommunicated thoughts in this respect are irrelevant (Hospital Products v USSC (1984))
Factors Relevant to Identifying the Intention of the Parties (Detailed below)
• Language of the statement (Oscar Chess v Williams; JJ Savage and Sons Pty Ltd v Blakney)
• Content and importance of the statement (Van Den Esschert v Chappell; Couchman v Hill)
• Timing of the statement (Harling v Eddy)
• Relative knowledge and expertise of the parties (Oscar Chess v Williams;; Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd; Ellul v Oakes)
• Whole of circumstances approach (Hospital Products Ltd v United States Surgical Corporation – the intention of the parties is to be ascertained objectively it 'can only be deduced from the totality of the evidence' (Heilburt v Buckleton)
• Existence of a written memo (Routledge v McKay)
• Signautre (L'Estrange v Graucob)
Distinguishing Pre-‐Contractual Statements from Contractual Terms Language of the Statement
-‐ Use of words such as ‘I promise, agree, guarantee, warrant’ all indicate that the statement was meant to be promissory.
-‐ Words such as ‘I believe, estimate, speculate, have heard’ are not a promise but rather a matter of hypothesis/ opinion, less likely to be a term.
o Oscar Chess v Williams: Williams sold a car described as being a 1948 Morris, and had a log book showing the car to be registered in 1948. Purchaser found out that the car was in fact a ‘39 model and took action for a breach of contract. Held: Court held that the statement was made by a non-‐expert to an expert (and the expert should have known better) The English court of appeal found that the fact that the car was stated as being a 1948 model was not a ‘binding promise’ and did not form a part of the contract; it was an innocent misrepresentation. Objective intention: ‘if an intelligent bystander would reasonably infer that a (term) was intended, that will suffice.’ (Lord Denning – p. 375 judgment).
o JJ Savage and Sons Pty Ltd v Blakney: purchasing motor for motor bike, Savage
manufacturer them, he is looking at three models, not sure which one, receives a letter from Savage, and it said the estimated speed for Model 2, he purchased that engine, found out it did a lot less, sued for breach of contract. They had promised it. It was not a term, it was not a promise. Not sufficiently binding, it was purely opinion.
Time of Statement
-‐ The closer in time between making the statement and entry into the agreement, the more likely it is to be construed as a term.
o Harling v Eddy: D put up a cow for auction. As there were no bids, a statement was made that the cow was in good health and that he would take it back if any problem arose. P then made the successful bid for the cow and entered into an auction agreement. Four months later, the cow died from tuberculosis that apparently it must have had at the time of the auction. Held: The court held that, given the close proximity between the statement and the auction agreement, the statement was a contractual term that was breached.
Content/Importance of Statement
-‐ If the content of the statement is important to the contract, then it may be more likely that the parties intended it to be a term. Needs to be important in the minds of the parties.
o Van Den Esschert v Chappell: About to buy a house, just before signing he asks if it is affected by white ants, the agent said no, signed the contract, no term said what he had asked. He is trying to sue based on this pre-‐contractual agreement. This statement is so significant, he would not have signed if they said there were white ants.
o Couchman v Hill: D sold P a young heifer by auction agreement. D made a statement that the heifer was ‘unserved’ (i.e. without calf) just prior to the P’s successful bid. The heifer was, in fact, pregnant and subsequently died of complications due to being too young for pregnancy. Held: The court held that the statement was a term of importance and therefore was incorporated into the contract. The statement was a term of the contract because it was of such importance that the bidder wouldn’t have entered into the contract without it.
Statement Made by a Party with Knowledge and Expertise
-‐ If an expert makes a statement and a non-‐expert enters into the contract, it will be more likely to be held a term.
o Oscar Chess v Williams: He was just selling the car for his mum, he did not have the knowledge, less likely to be promissory, more likely to be an opinion.
