Contents of a contract 1: Sources and interpretation

Question 1

What does the term ‘puff’ mean?

Answer 1

An extravagant statement (often found in advertisements) that a reasonable person would recognise as not intended to have legal consequences - puffs do not have legal consequences

Question 2

What is a representation?

Answer 2

A pre-contractual statement that is not a promise that something is true but induces the other party to enter into the contract

Question 3

What is a term?

Answer 3

A pre-contractual statement that contains a promise that something is true which becomes part of the contract

Question 4

How can you tell whether a pre-contractual statement is puff?

Answer 4

If it is a statement that no reasonable person would take such a statement literally - ‘guaranteed to scare your socks off’

Question 5

How can you tell whether a pre-contractual statement is a term or a representation?

Answer 5

The courts will analyse the evidence objectively to determine whether the representor intended to make a contractually binding promise that the statement was true and for it to be incorporated into the contract. If the courts decides they did, it would be a term. If they did not but nonetheless intended the statement to induce the representee to enter into the contract then it is a representation

Question 6

What is the secondary common law test that can be applied to the interaction to determine whether the statement was a term or representation?

Answer 6

1. did the representor have special knowledge or expertise? Yes = term, No = representation
2. did the representor know that the representee would not have entered into the contract if the statement had not been made? Yes = term, no = representation
3. did the representor assume responsibility for the statement? Yes = term, no = representation
4. did the representor advise the representee to check/verify the statement? No = term, yes = representation