Terms and Representations

Question 1

What are implications of differentiating if a statement is a term or representation?

Answer 1

If the statement is incorporated as a term, failure to comply = breach of contract
If the statement is not incorporated, then liability will be for misrepresentation

This is not very significant anymore (ever since negligent misrepresentation became an actionable cause), but primary role in distinction is for remedies.

Question 2

What is the case at the HEART of terms and representations?

Answer 2

Heilbut, Symons and Co v Buckleton (1913)

(1) Damages can only be recovered for breach of contract, and fraudulent misrepresentation.
(2) The courts decide if a statement has been incorporated into a contract based on the intention of the parties, objectively ascertained. No one factor predominates, and Lord Moulton states that “the intention of the parties can only be deduced from the totality of the evidence, and no secondary principles… can be universally true”

Question 3

What is the tripartite of terms and representation cases?

Answer 3

1. Oscar Chess Ltd v Williams (1957)
2. Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965)
3. Esso Petroleum Co Ltd v Mardon (1976)

All judgments by Lord Denning

Question 4

First up, Oscar Chess Ltd v Williams

Answer 4

P were car dealers, bought car from D.
Plaintiff’s salesman had sat in D’s car a few times, thought it was a 1948 Morris. D also honestly thought so too, since the registration book said 1948 was the date of first registration.
Only 8 months later they realised it wasn’t.

DENNING SAID:

1. This is innocent representation
2. Based on the facts and intention of parties, does not seem like D had guaranteed P about the 1948
3. Mistake was made on both sides. D was a non-expert seller, with reasonable belief that it was 1948 model based on registration book
4. P were car dealers, and could’ve checked properly, but did not do so until eight months later. They had specialist knowledge

HOWEVER, if ruled today, D may be charged for negligent misrepresentation… really depends. D was not liable for any damages because it was classified under innocent misrepresentation.
Denning relied on Heilbut for the “totality of evidence” method of ascertaining intention of parties.

Question 5

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965)

Answer 5

P told D he was looking for a well vetted Bentley Car. D found one and claimed certain details of the car, which P found out to be untrue later on, suing for breach of warranty. D admitted that he had made an honest mistake, but said it wasn’t a warranty.

Denning said it was a term, since Smith was a dealer who was in a position and specialist to know and check what he was selling. A buyer would act in reliance of such a statement. It is warranty! Would not be considered a fraudulent misrepresentation.

SUGGESTS that the court will place responsibility on who they think reasonably ought to bear responsibility (based on knowledge and other factors)

Question 6

Esso Petroleum Co Ltd v Mardon (1976) (probably not in case list)

Answer 6

NOTE THAT CAME AFTER HEDLEY BYRNE - negligent misrepresentation is actionable.

Esso found a new site for a petrol kiosk, and wanted to rent it out. One of their employees estimated that the throughput would be at an amount later found to be over-estimated, but was relied on when the tenant rented it.
Esso later sued Mardon when Mardon could not pay, and Mardon counterclaimed for breach of warranty and negligent misrepresentation.

Denning said that Esso could be liable for both, since there is reasonable presumption of guarantee in Esso’s statement that their forecast was made with reasonable care and skill. Esso made a fatal error in their forecast, and are liable for damages.
Also liable for negligent misrepresentation (assuming no warranty), since Esso did not take reasonable care to forecast, giving misleading opinion that induces the other into a contract.

DENNING ultimately chose to award damages based on misrepresentation (reliance damages) and not the expectations of the contract. Therefore, it was still considered a misrepresentation, more than a breach of contract - it was awarded on the basis of EXPECTATIONS AROUSED BY THE FORECAST.

Question 7

General factors to consider when looking at the totality of evidence to ascertain intention of parties, in deciding terms or representation?

Answer 7

1. Position of one party to the other in attributing fault and responsibility. i.e. if Seller is an expert, then the buyer would reasonably rely, and it should be interpreted as a term; if buyer is an expert, and seller is in an inferior position, then it’ll be more of a misrepresentation.
2. Nexus between statement and contract formation. If there is a causal nexus, then it’ll be interpreted as term. If there is a long period of time that lapsed between statement and contract, then likely representation. (Routledge v McKay)
3. Is the contract formalised? If yes, and the statement is not incorporated in writing, then it’s likely considered a representation.
4. Did the seller request the buyer to verify the item? If yes, then hard to find liability. If the seller waived the need to verify, then it’ll be a guarantee = term.