#14773 - Terms Of A Contract - GDL Contract Law

Express Terms

Express terms and representations

• Express terms: statements of fact which are intended to bind the parties. Express terms can be written, oral or both. They can be classified as conditions, warranties or innominate terms (defined below).

• Representations: statements of fact which are not intended to bind the parties – just help induce parties to enter into the contract. Can sue for misrepresentation.

• Mere Puff: not a term or representation – cannot bring a claim as it’s just advertising boasts.

• Prima facie inference that a statement of fact is intended to be a binding term, but can be rebutted by showing that it would be unreasonable for the statement to bind the party.

  • Importance of the statement: if a statement is shown to be so important that without it, the party would not have entered into the contract, it will be regarded as a term.

    • Bannerman v White: sale of hops. C stated ‘if they have been treated with sulphur, I am not interested’. Found out they had been after sale. Statement was held to be a term.

  • Timing: more likely to be a term if it is made at the time the contract is made. If there is a long delay between making the statement and concluding the contract, it is less likely to be deemed a term.

    • Routledge v McKay: one week delay between making statement and entering into the contract meant that the statement was taken to be a representation.

  • Reduction into writing

    • It is more likely that a statement will be considered a term if it is written into the contract.

      • Routledge v McKay: the court placed emphasis on the fact that the oral statement was not included in the written contract.

    • However, the court will consider other factors if the oral statement was not included in the written contract.

      • Birch v Paramount Estates: an oral statement about the quality of a house was not included in the contract. The court considered the special skills and knowledge that the defendants had in concluding that the statement was a term, notwithstanding its omission in the contract.

  • Special skill or knowledge:

    • A statement made by the defendant will be held as a representation if the claimant is considered to be the expert.

      • Oscar Chess v Williams: Car sale – it turned out that the model was an older one than stated in the registration book, resulting in a decrease in its value. C was a car dealer and, as an expert, should have known. The age of the car was therefore held to be a representation.

    • A statement by the defendant will be held to be a term if the defendant is the one who is considered to be the expert.

      • Dick Bentley v Harold Smith: D made a statement about the mileage of a car he was selling which turned out to be untrue. D was a car dealer so was regarded as an expert – the statement was held to be a term.

    • Compare the following cases when the vendor expressly accepts responsibility for the quality of the goods being sold.

      • Schawel v Reade (1913): D stopped C from examining a horse by assuring him that the horse was ‘sound’ in every way. The horse was not fit for the purpose C bought him for.

HELD: D had made a representation that the horse was fit for C’s purpose and C had bought the horse on that representation so it was deemed to be a term of the contract.

• Hopkins v Tanqueray (1854): C purchased horse at auction from D. C was examining the horse’s legs when D assured him that was not necessary as the horse was ‘sound in every respect’ – this turned out to be untrue.

HELD: court held that the assurance was not a term, it was a representation. Possibly because horses at auction could only be warranted via an express statement in the catalogue.

• Lord Evershed MR stated in Harling v Eddy that the distinction in the two cases lay in the fact that in Hopkins there was a delay between the making of the statement and the creation of the contract whereas in Schawel there was not.

• Ecay v Godfrey: seller told buyer boat was sound but advised him to check it nonetheless.

HELD: in advising the buyer to examine the boat, it was clear that the buyer did not intend for his statement to be taken as a contractual term.

The parol evidence rule

• GR: No extrinsic evidence can be used to vary, add to or contradict the terms of a written contract.

  • Jacobs v Batavia General: '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'

• Exception: partly written and partly oral contracts.

  • J Evans & Sons v Andrea Merzario: D, a forwarding agent, told C they would switch to containerised transportation to enable them to carry machinery above deck. They made an oral promise that C’s goods would still be carried below deck as usual, but C’s container was then carried above deck and was lost overboard.

HELD: oral promise was a binding term as C would not have agreed to the new method of transportation without it being made. The contract was deemed to be partly written and partly oral.

• Avoiding the parol evidence rule: collateral contracts – when a party says he will sign an agreement based on an oral promise on how the contract is to be construed, this gives rise to a collateral contract. In such a case, two contracts are created (written and oral) and the parol evidence rule does not apply to the oral contract.

  • City and Westminster Property v Mudd: D was a tenant and slept at the back of the shop he rented. C’s agent brought a new contract which prohibited the use of the shop as a place for dwelling or sleeping, but the agent assured D that if he signed, C would not object to him sleeping there. C later claimed forfeiture of the lease because C had broken the covenant by sleeping in the shop.

HELD: D only signed the lease because of the oral assurance given by C’s agent – this was a collateral contract and was binding for as long as D was in occupation of the shop.

• Collateral contract can also be between only one of the parties of the original contract and a third party.

  • Shanklin Pier v Detel: C wanted to refurbish – entered into a contract with builders. D told Pier that their paint would last 7-8years. C then went and told builders that they must contract with D for paint. After 3months, the paint started to wear off. C took legal action against D.

HELD:

The court held that there was a collateral contract between C and D. D’s assurance was a binding warranty and they had breached the warranty. C awarded damages.

• Entire agreement clause: this clause provides that what is written in a document/set of documents = the entire agreement made between the parties (Inntrepreneur Pub v East Crown)

  • However, courts will not allow a party to rely on an entire agreement clause where it is seen as a way to escape liability for a misrepresentation (Axa Sun Life v Campbell Martin)

Onerous/unusual terms

• Onerous terms must be brought to the attention of the other party, or will otherwise be unenforceable.

  • Interfoto Picture Library v Stiletto Visual Programmes: C ran a library of photographic transparencies and delivered a set of photographs to D with a delivery note stating the holding charge as 5 per transparency per day. When the transparencies were returned, the holding charge was 3783.50 and D refused to pay.

HELD: the clause on the delivery note was onerous and since C had not brought the clause to D’s attention, it was unenforceable.

Implied Terms

• While the general presumption = all terms of a contract have been expressed (orally/in writing), there are circumstances in which the court may infer an implied term.

  • However, the court will never imply a term which is contrary to an unambiguous express term in the contract (Trollope Colls v North West Regional Hospital Board)

Terms implied in fact

• Trade/professional customs: a term can be implied on the basis that the parties intention to be bound by the custom

  • British Crane Hire v Ipswich Plant: contract for the hire of cranes. Term implied that cranes would be insured as this was the trade custom.

• Course of dealing: a term can be implied on the basis that there has been regular dealings between the parties over a long period of time.

  • McCutcheon v MacBrayne: course of dealing between parties must be ‘regular and consistent’. In this case, C would sometimes get C to sign a form containing an exemption clause (risk form) and on this occasion he did not.

HELD: No term was implied as the practice of signing the form was not consistent.

• Hollier v Ramblers: C had used garage services offered by D 3-4 times over a 5year period. The garage made him sign a form containing an exemption clause during every transaction. This time, the transaction took place over the phone and the exemption clause was not brought up.

HELD: 3-4 times over 5years is not regular so could not be considered a course of dealing.

• Business efficacy: a term can be implied on the basis that without it, the contract would be so unreasonable that no sensible people would have entered into it.

  • The Moorcock: ’business efficacy’ test – the term must be implied in order for the contract to operate. In this case, the court implied a term that D would ensure the river bed was safe to give commercial purpose to the contract.

    • The business efficacy test was followed in Equitable...