S5: Terms and Misrepresentation

Question 1

Classification of a term or representation

Answer 1

This can impact the course of action an innocent party can take. If something goes wrong, it’ll affect the remedies that the innocent party is able to claim or whether they are entitled to a remedy at all.

Question 2

The two different courses of action

Answer 2

Breach of Contract
Misrepresentation

Question 3

Questions for the court

Answer 3

1. Is a statement a term of the contract, or merely a representation ?
2. If the statement is a term, is it a condition, a warranty or an innominate term ?
3. Can any other terms be implied into the contract in fact or in law ?

Question 4

Mere Puffs

Answer 4

A statement of opinion or ‘puffs’ that have no legal effect
Mere puffs or Representation aren’t part of the contract

Question 5

Terms

Answer 5

A statement made that forms part of the contract
Whether a statement is a contractual term, or a representation depends on the intention with which the statement was made

Question 6

Crest Nicholson Ltd v Akaria Investment Ltd

Answer 6

Sir John Chadwick stated- “When seeking to ascertain parties intention under the terms of a contract which both accept has been made…the question is ‘what did the parties intend by word used in agreement which they made?”

Question 7

Key principles of Terms and Representations

Answer 7

1. Verification - If a statement that has been made prior to contract and was verified by another source by one of the parties, then it’s more likely to be treated as a term of the contract than as a representation.
2. Whether the statement was written down- It makes it more certain and therefore more likely that one of the parties intended that the statement becomes a term of the contract in the future.
3. Importance- It will be more likely to be treated as a term of the contract.
4. Specialist knowledge- The statement will be considered as a term of the contract as opposed to representation.
5. Time Lapse- The longer the amount of time between the statement being made and the contract being created, the less likely it is that the term of the statement will be treated as a term of the contract and more likely to be treated as a representation.

Question 8

Key Cases for Terms

Answer 8

Schawel v Reade [1913]- courts concluded that the statement should be treated of the contract and their basis on the fact that Reid had made it clear that she could rely on his word, and he’d actually dissuaded hm from consulting a veterinarian.

Bannerman v White [1965]- courts found that the statement made by the seller was in fact a term of the contract

Question 9

Key Cases for Representations

Answer 9

Ecay v Godfrey (1947)- court concluded that the defendant’s remarks should be treated as a representation and not as a term of the contract.

Routledge v McKay [1954]- courts stated that the statement was in fact a representation and not a contractual term

Question 10

Conditions

Answer 10

-Aterm on ‘a substantial ingredient in the identity of the [thing sold]’
- Important Term
- - Breach of a condition permits the injured party to:
1. Affirm the contract and claim damages; or
2. Terminate the contract and claim damages

Question 11

Key case for Conditons

Answer 11

Poussard v Spiers [1876] – breach of conditions in her contract and she had right to terminate the contract and to claim damages for any losses they’ve suffered.

Question 12

Warranty

Answer 12

• A term of a contract as opposed to representation
• A less important term than a condition
• When breached, it allows the injured party to:
  1. Claim damages only;
  2. Claimant can’t terminate the contract;

Question 13

Key Case for Warranties

Answer 13

Bettini v Gye (1875-76)- contract was breached and ended and so couldn’t terminate the contract

Question 14

Innominate Terms

Answer 14

• A hybrid term, neither a condition nor a warranty
• It is categorized by considering the consequences of the breach
• Sometimes its breach gives rise to a termination and sometimes it gives rise only to damages

Question 15

Key Case for Innominate Terms

Answer 15

Hong Kong Fir Shipping Ltd v Kawaski Kisen Ltd [1962]- The Court held that the term was not a condition but an innominate term. The breach of an innominate term requires an assessment of the consequences to determine whether it deprives the other party of substantially the whole benefit of the contract.

Question 16

Expressed and Implied Terms

Answer 16

• Expressed terms are those terms which are agreed specifically by the contracting parties and those set out in the contract in writing or orally, even both…
• Implied terms are those terms which are not specifically agreed by the parties but are those which are read into (added to = implied) the contracts by the courts, by custom, or by statute…

Question 17

The Parol Evidence Rule

Answer 17

• If a contract is written, then there is no difficulty in ascertaining its express terms of the contract.
• The Parol Evidence Rule states that if a contract is written then that writing is the whole contract and the parties cannot adduce extrinsic evidence, and especially oral evidence, to ‘add to, vary or contradict the writing’ (Henderson v Arthur [1907] 1 KB 10)
• Extrinsic evidence can also include written matter such as draft contracts and correspondence…

Question 18

The Parol Evidence Rule in relation to expressed terms

Answer 18

• It has been argued that contractual certainty can be achieved at the expense of justice, since it may be clear that certain terms have been agreed but have not been included in the written document. How does contract law deal with this in order to ensure justice?
• It creates a list of exceptions to the Parol Evidence Rule! … which are not going to deal with here.
• An oral statement may also create a collateral contract (aka a collateral warranty) – De Lassalle v Guildford (1901); Shanklin Pier Ltd v Detel Products Ltd (1951)

Question 19

Express Terms: Written Contracts and the Importance of signature
Key Cases?

Answer 19

• L’Estrange v E. Graucob Ltd [1934] 2 KB 394 at 403 – Signature Rule:
• Lord Justice Scruton stated when a document containing contractual terms is signed, the party signing it is bound and it is wholly immaterial whether to read the document or not.
• Curtis v Chemical Cleaning and Dyeing Co. [1951] 1 KB 805 - L’Estrange does not apply where the party claiming to be bound was misled
• Electronic Communications - Signature include Electronic Signature (Elec. Comm Act 2000, s.7)
• MWB v Rock Advertising (2018): a written contract which states that variations need to be in writing, an oral variation cannot be effective.

Question 20

How can terms be implied ?

Answer 20

By Fact
By Custom
By Law

Question 21

By Fact- key case

Answer 21

Attorney General of Belize v Belize Telecom Ltd [2009]

Question 22

By Custom- key cases?

Answer 22

Liverpool City Council v Irwin [1977]- Courts concluded council hadn’t breached a term even though it was implied into the contract / Hutton v Warren (1836)/ Smith v Wilson (1832) “…goes without saying, some terms not expressed but necessary to give the transaction such business efficacy as the parties must’ve intended”- Luxor Ltd v Cooper [1941]

Question 23

By Law- key cases ?

Answer 23

Regulatory Obligations- Timeload v British Telecommunications (1995)

Policy Considerations- Scally v Southern Health & Social Services Board

Statute- e.g., CRA 2015 s.9: Goods to be of a satisfactory quality

Question 24

Misrepresentation

Answer 24

Something that hovers at the edge but is on the outside of the contractual agreement between parties

Question 25

Actionable Representations

Answer 25

• False statement of fact made by one party to another, which induces the other party to enter into the contract
  The remedies for misrepresentation are diff for breach of a term of the contract
• The effect of an actional misrepresentation is to make the contract voidable
• Damages may be available for misrep, depending on how the misrepresentation is categorised

Question 26

What constitutes a misrepresentation ?

Answer 26

The nature of the statement and the inducement

Question 27

False statement

Answer 27

-Something which is said to be untrue or later becomes untrue
- Silence or non-disclosure will not amount to liability unless…
- The statement is deemed as continuing. giving rise to a duty to disclose (With v O’Flanagan 1936)
- There is an implied representation (Spice Girls Ltd v Aprila World Services (2002))

Question 28

Existing or Past Facts

Answer 28

Statements of fact need to be distinguished from:
- mere puffs
- genuine belief or opinion
- statements of future intention and
- statement of law

Question 29

Key Cases ?

Answer 29

Bisset v Wilkinson (1926)
Esso Petroleum Co Ltd v Mardon (1976)

Question 30

Made by one party to another

Answer 30

Conduct can lead to misrep
Spice Girls v Aprilla World Service (2000)
Amisrep can also be made through a 3rd party
Cramaso LLP v Ogilvie- Grant

Question 31

Induces the contract

Answer 31

The representee mustv’e relied on the statement
If there’s no evidence of reliance and the contract would’ve been entered inton anyway, there’s no inducement
An action may still be brought if the representee had the opportunity to check the truth of the statement- Redgrave v Hurd (1881)

Question 32

Effects of Misrepresentation

Answer 32

A contract will become voidable

Question 33

How may the innocent party lose the right to rescind ?

Answer 33

• Affirmation
• Lapse of time
• Impossibility’ or
• The acquisition of rights by a third party
• Damages may also be availabe, depending n the category of misrep

Question 34

Categories of Misrepresentation

Answer 34

Fraudulent Misrep
Innocent Misrep
Negligent Misrep

Question 35

Fraudulent Misrep

Answer 35

• This is when a misrepresentation is made knowingly or unkowingly and/or without a genuine belief in the truth of the statement
  -Measure of damages isn’t contractual but tortious
• Damages for fraud aren’t subject to the requirement of being ‘reasonably foreseeable

Question 37

Key Cases

Answer 37

Derry v Peek (1889)
Doyle v Olby (1969)
Smit New Court Securities v Scrimegour Vickers (1996)

Question 38

Negligent Misrepresentation

Answer 38

• Negligent Misstatement: Hedley Byrne & Co Ltd and Heller & Partners Ltd (1964)
• Howard Marine &Dredging Co Ltd v Ogden & Sons Ltd

Question 39

What does the Misrepresentation Act 1967 s.2 (1) say ?

Answer 39

Misrepresentation Act 1967 s.2(1): ‘ where a person has entered into a contract after a misrepresentation has been made to him by another party… [that person shall] be liable to damages… unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made to the facts represented were true’.

Question 40

Fiction of Fraud - Key Case

Answer 40

s.2(1) of the Misrepresentation Act 1967: ‘if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudently, that person shall be so liable not withstanding that the misrepresentation wasn’t made fraudently’.
Royscot Trust Ltd v Rogerson (1991)

Question 41

Innocent Misrep

Answer 41

An innocent representation will occur where a representor believed the facts they represented were true and the could prove that they had reasonable grounds for believing those statements.

Question 42

Damages

Answer 42

Fraudulent Misrepresentation: East v Maurer [1991]/ Smith New Court Securities Ltd v Citbank [1997]

Negilgent Misrepresentation:
- Negligent Misstatement’ and Negligent Misrepresentation
- Innocent Misrepresentation; Whittington v Seale-Hayne [1990]