Basic Terminology

Question 1

What are the three categories of statements during negotiations of contracts?

Answer 1

1. Mere puff
2. Representations (pre-contractual statements intended to persuade the other party to enter into contract)
3. Terms (statements incorporated into contract)

Question 2

What are mere puffs?

Answer 2

Statements that are so out there that they cannot be true.

They have no legal effects

Question 3

What are the two types of terms?

Answer 3

1. Express
   A term that has clearly and distinctly been discussed and agreed by parties
2. Implied
   A term that has not been openly considered, but read into contracts by courts, statues or customs

Question 4

How can representations and terms be distinguished?

Answer 4

Courts consider several factors:

1. Importance attached to statement
2. Whether statement reduced into writing
3. Timing of the statement
4. Whether the parties involved had any special knowledge or skill

If term is not complied with - breach of contract.

If representation is not true - misrepresentation.

If the person would not have entered contract if the statement had not been made - more likely statement will be a term.

CASE: Bannerman v White

Question 5

CASE: Bannerman v White

(If statement was a term)

Answer 5

During negotiations, the buyer asked if items were made from sulphur and if they had - he would not have invested.

Seller confirmed that no sulphur used and contract entered.

Buyer tried to end contract when become clearer the sulphur had been used.

Held that, as contract would not have been entered without false statement - the statement was important enough to be a term.

Question 6

Is a statement a term or representation if it is in writing?

Answer 6

If statement made is not included in written contract - courts usually assume it was representation.

However, may consider oral statement to be a term.

CASE: Birch v Paramount Estates
Statement made to potential buyers that house would “be as good as show house”.
Contract made no mention of statement but court held it was still a term.

Question 7

How does the timing affect whether statement is a term or representation?

Answer 7

The longer the gap between making a statement and entering into the contract - more likely to be held statement NOT interested to be a term.

CASE: Routledge v McKay
Statement made 23 Oct - bike on sale was 1942
Contact entered 30 Oct - no mention of age
Buyers sued seller as bike was 1930
Held action should fail - statement not a term because of the length of time

Question 8

How does a knowledge or skills affect whether statement is a term or representation?

Answer 8

If person making statement has relevant specialist knowledge - more likely statement to be term.

CASE: Oscar Chess Ltd v Williams
Car dealer purchased car from private seller - car described as 1948 model
Unknown to seller - documents had been unlawfully amended and car was 1939 model.
Held not actionable - mere representation - sellers lack of knowledge and buyers superior position in terms of knowledge.

CASE: Dick Bentley v Harold Smith
Seller was a specialist car dealer and buyer wasn’t
Sellers statement was viewed as a term as they had specialist knowledge which implied that statement as accurate.