Topic 4: Contents and Interpretation of a Contract; Operation of the Contract

(1)

Topic 4: Contents and Interpretation of a Contract; Operation of the Contract

Chapter 9(Page 180), Chapter 10 (Page 212)

Terms

Terms are fundamental inclusions in a contract. (Page 182) May be

• Express(Page 182); or

• Implied

Representations - are statements of fact to induce entry into a contract - turn out to be untrue, misrepresentation(Page 183)

Express Pre-Contractual Statement

Guidelines Court use to assist in determining if a statement made during negation is a contractual term or non-contractual

• Time taken from statement to formation of contract

• How important the statement is to the context of the contract

• If the state was made during negotiations and then reduced to wiring any statement not included is most likely regarded as a representation

• The relative knowledge and expertise of the parties. If the party making the statement was an expert of has more knowledge then it is more likely to be regarded as a term

Collateral Contract (Page 184)

Case: Van Den Esschert v Chappell (Page 184)

3 key criteria need to be met for a Collateral Contract 1. The statement was promissory

2. it was not inconsistent with the contract 3. Consideration was present

A court will only treat a statement or representation as a collateral contract where it is satisfied that the statement was intended to have contractual effect.

Example case Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (Page 185)

Express Terms

Condition

• An essential term of the contract

• Breach entitles innocent party to rescind and/or claim damages:Associated Newspapers Ltd vBancks(1951) 83 CLR 322 (Page 186)

(2)

Topic Case name/page Page Case info Relevant law Decision by court Topic 4

Contents and Interpretation of the Contract

Oscar Chess Ltd v Williams

183

Williams traded in his second-hand car as part payment for a new one. He told them it was a 1948 Morris. Dealer discovered it was actually a 1939 Morris which was not worth as much. Dealer sought to seek damages of the difference

• Representation

• Innocent

misrepresentation

Held that Williams was innocent as he

Topic 4 Contents and Interpretation of the Contract

Dick Bentley Productions Limited v Harold Smith

(Motors) Ltd 184

Purchaser of a car was told it has only travelled 20,000 miles since a new engine and gearbox had been fitted.

It had actually travelled 100,000 miles

• Representation

• Term of the Contract

Held that statement was a term of the contract as the vendor "possessed superior knowledge and expertise"

Ross v Allis-

Chalmers Australia Pty Ltd

184

Ross purchased a harvester, he told the salesman that he needed to harvest around 120 - 130 acres per day.

Salesman (who was experienced) told him this one could only do around 90 from his experience.

• Representation

• Term of Contract Held that the statement was a

representation as it was a statement of opinion, based on experience, and was not intended to be promissory

Van Den Esshert v Chappell

184

Purchaser asked the vendor before signing the

contract for a house if there were any termites. Vendor assured that there were none. Purchaser discovered termites months later. Sued for damages

• Collateral Contract Held that the statement was considered a collateral contract.

As the 3 criteria were met.

1. The statement was promissory 2. it was not inconsistent with the

contract

3. Consideration was present (promise of entering into the contract)

Hoyt's Pty Ltd v Spencer

185

The defendant subleased premises to the plaintiff, there was a verbal agreement that the defendant would not terminate the lease however the written agreement stated that they could terminate on giving 4 weeks notice. The lease was terminated

• Verbal Collateral

contract Held that as the agreement had been reduced to writing and the statements were inconsistent the written statement held.