Statements and Terms Flashcards
What are the 3 types of statement made when parties negotiate before making a contract?
> Mere puffs
> Representations
> Terms
What is a mere puff?
What legal effect does it have?
An exaggerated statement used in marketing
e.g. “red bull gives you wings”
No legal effect
What are representations?
What is significant about a representation?
What legal effect do they have?
Statements made about the contract
It might be the reason you entered into a contract
Not legally binding
- untrue representation doesn’t result in breach of contract
(but in certain cases, misrepresentation might result in a remedy)
What is a term?
What legal effect does it have?
A statement incorporated into the contract which defines the obligations of the parties
Legally binding
- breach of a term = breach of contract
What are the 2 ways a term can be incorporated into a contract?
Define them
Expressed
= specifically agreed upon by the parties
(contained in the offer)
Implied
= put into the contract, by the courts, by a statute or by custom, without the parties needing to express them
What do the courts do to decide the nature of a statement?
How do they do this?
Consider if the parties intended for a statement to be a term
-> the courts are only concerned about the parties’ apparent intentions, not their actual intentions
They can apply 6 tests
What are the 6 tests used to help the courts decide the nature of a statement?
What are the caveats to these tests?
- The relative degrees of the parties’ knowledge
- The reliance shown to be placed on the statement
- The strength of the statement
- The time at which the statement was made
- Written contracts
- Statements of opinion
The tests are not conclusive and all of the circumstances must be considered.
Explain how ‘the relative degrees of the parties’ knowledge’ test is applied
One party often has more knowledge of the contract’s subject matter
e.g. garage owner will know more about cars than most customers
-> this puts that party in a better position to know whether a statement is true or not
Statements made by those with more expertise
= like to be terms
Statements made by those with less expertise
= likely to be representations
Explain how ‘the reliance shown to be placed on the statement’ test is applied
If the party to whom the statement was made demonstrates that they relied upon it
= likely to be a term
Explain how ‘the strength of the statement’ test is applied
A statement made very strongly
= likely to be a term
A guarded statement
= likely to be a representation
Explain how ‘the time at which the statement was made’ test is applied
Statement immediately prompts making of a contract
= likely to be a term
Considerable amount of time passes between a statement and contract formation
= likely to be representation
(Shorter the delay between making the statement and forming the contract
= more likely the parties intended to rely on it
= more likely to be a term)
Explain how the ‘written contracts’ test is applied
What is the general rule of written contracts?
In a written contract, the Parol Evidence Rule prevents extrinsic evidence from being introduced to add to or vary what was written
General rule:
Written statements = entire contract
Oral statements = not included in the contract
What are the 4 exceptions to written contracts?
- If an oral contract has been previously made and the written record of this was incorrect
- > equitable remedy of rectification allowed to correct written version - Extrinsic evidence is allowed to show that the contract wasn’t to operate until a condition was fulfilled
- Extrinsic evidence is allowed to show that the contract was rendered invalid by some rule of law
- It may be possible to introduce extrinsic evidence to show that what was agreed was not the whole contract
Explain how the ‘statements of opinion’ rule is applied
A statement of pure opinion cannot amount to a term or representation
What is the case law example for the ‘statements of opinion’ test?
Give a brief description
Bisset v Wilkinson [1927]
Claimant (Bisset) purchased some land to keep sheep on.
He asked the seller (Wilkinson) how many sheep the land would hold. W had not used it as a sheep farm but estimated 2000 sheep.
In reliance of this statement B bought the land. The estimate was wrong, and B sued W for misrepresentation.
Held:
Statement = statement of opinion, not statement of fact
Not actionable misrepresentation
Can terms implied be statute be removed?
No
- even if there is a term expressly stating that they should be
What are the implied terms from the Sales of Goods Act 1979?
- The seller has the right to sell the goods
- If the contract for the goods was by description, the goods will correspond with it
- If the contract for the goods was by sale, the goods will match the sample in quality and the bulk of the goods will not contain defects not apparent in the sample
AND if the seller is a business, implies that the goods are:
- of satisfactory quality
- reasonably fit for any purpose which the buyer expressly or impliedly made known
What are the implied terms from the Supply of Goods and Services Act 1982?
The supplier will carry out the service with reasonable care and skill
(Virtually identical terms to those implied in the SGA 1979, but these goods are supplied, not sold)
What terms are the 2 ways that the court implies terms?
Matter of fact
Matter of law
How are terms implied by the courts as a matter of fact?
When are these terms implied?
On the grounds that the parties to the contract intended the term to be a part of their agreement, even though they did not agree the term verbally
When it is necessary and obvious that the term should be implied in order to give the agreement ‘business efficacy’
What test do the courts use to decide whether or not to imply a term?
Officious bystander test
- how would the parties react if an officious bystander has suggested the term should be expressly included in the contract?
a) Parties irritably tell the bystander that the term was obvious, so didn’t need to be included
= term would be implied by the courts
b) Not supposed that the parties would have reacted in this way
= term not implied
Give a caselaw example of the officious bystander test
The Moorcock (1889)
While moored alongside the defendant’s jetty, at low tide the Moorcock was damaged.
Held:
The defendants who owned the jetty were liable.
It was inevitable that the steamship would touch the bottom at low tide, so the defendants had impliedly promised that they had taken reasonable care to make sure the river bed by the jetty was in good enough condition so as not to damage the boat
How are terms implied by the courts as a matter of law?
Implied if 3 conditions are satisfied:
- the contract is a sufficiently recognisable type of contract
- the parties have not dealt with the issue the term is concerned with
- it is necessary to imply the term to make the contract work
How are terms implied by custom?
If a term is customary in a particular trade, locality or between the parties.
The term will be imposed by the courts on the grounds that the parties were fully aware of the custom and intended for it to be part of the contract.
