Week 4 - Interpretation of a contrcact Flashcards
what are expressed terms
Express terms in a contract are terms that the parties have agreed to and this includes contracts which are in writing.
main difference between ‘terms’ and ‘representations’
terms = promissory in nature
for a statement to constitute as a term the party must have promised they would perform it as part of the contractual bargin
Representations = inducing
Types of PRE contractual statements (3)
mere bluff:
exaggerated talk
no legal consequences
Representations:
Induce contract
if wrong.. consequences depend on kind of representation
Terms:
Promissory
if breached consequences depend on type of term
What is parol evidence rule:
written statements + oral statements = contract (expressed terms)
- however
e. g. statement - ‘all terms relating to the sale of the car should be in contract and no other place’
if the parties have stipulated that the entire contract should be in writing and any other statements outside the contract would be invalid
collateral warranties = entered into contract because of promise than parole evidence rule is exempt
If there is a collateral guarantee or promise then
e.g. main contract = purchasing paint
collateral contract = believing statement is true
> consideration for the collateral contract is that you entered into the main contract
Terms of a contract can be divided in to
conditions:
curial terms / fundamentally important
Warranties:
lesser important
Warranties are of lesser importance than a condition which goes to the heart of the contract. An innominate term is one which is unclear as to whether it is a condition or a warranty. Its importance to the contract determines how it is classified.
Remedies differ - a breach of condition can result in rescission and/or damages: see Associated Newspapers Ltd v Bancks (1951) 83 CLR 322.
important to distinguish as they have different legal consequences:
breached condition = remind, terminate contract or claim damages
Warranty=entitles innocent party to damages for loss suffered
Terms can be incorporated into a contract in 3 ways:
1.) by signature
> indirectly agrees to reading the document, understanding the document and agreeing to the document
2.) by notice e.g. Car park:
> Reasonable notice must be given of the existence of a term PRIOR to, or at the entering into of a contract. This is particularly true of terms which seek to exclude liability.
3.)by previous course dealings:
If it can be shown that a party had a course of dealings in circumstances where they should have been aware of inclusions or terms, then the party seeking to rely on them may be permitted to do so:
anti decides to order her meals online from Fresh and Go. The delivery driver arrives and asks her to sign a docket, which she does. Yanti opens the box and finds all the food is mouldy, off and out of date. Yanti contacts Fresh and Go who tell her there are terms and conditions in the docket she signed, which exclude them from liability. Yanti thought she was signing a delivery docket. Is Yanti bound by the terms of the docket?
ssue: The issue is whether the exclusion clause on the docket is operative.
Rule: Exclusion clauses will only be valid if they have been incorporated into a contract either by signature or reasonable notice.
Yanti signs the docket believing only that it was for taking of the delivery. Prima facie this clause would be incorporated by signature. (L’Estrange v Graucob). However she signs the docket AFTER the contract is formed – the notice of the term is too late. (Olley v Marlborough Court and Thornton v Shoelane).
Additionally, dockets are generally deemed not to form part of the contract (Causer v Browne).
Apply: The exclusion clause is not incorporated into the contract either by signature or notice.
Conclude: Yanti is not bound by the terms.
Please note that the wording of the clause may also be at issue, which is not stated on these facts.
Marco wishes to sell his 5-acre hobby farm. Marco tells Jing that he will include all the pet animals in the contract if Jing buys the farm. Jing tells him on that basis then he will buy the hobby farm. Shortly after that they both sign a written contract, which unfortunately does not mention anything about the pet animals. Marco claims he doesn’t have to sell Jing the pet animals, as they are not in the contract. Advise Jing if he can enforce Marco’s promise to sell the pet animals.
The issue is whether Marco’s promise of including the pet animals has become a term of the contract or a collateral contract.
Rule: The general rule is that the court will not enforce any oral promises if it has not been included in the written contract. (The Parole Evidence Rule) (See rules bottom p.68) The court will enforce things said dependent on these factors, which do seem on the balance to be present. (Dick Bentley v Harold Smith) This authority did however take into account the expertise of the seller, arguably not at issue here.
A collateral contract can also be formed if the statement was promissory and not inconsistent with the main contract. (Van Den Esschert v Chappell).
Apply: It does seem that the statement was promissory, and it was said right before the contract was formed. Although it was not added to the written contract it was integral to the contract, so on these facts Marco’s promise will be incorporated into the contract. The court may also view the promise as a collateral contract.
Conclude: This is likely to be viewed as a term of the contract and/or a collateral contract.
Bruno Moon, a famous rock star, signs a contract with Rear Touring to hold 5 concerts in Melbourne. The contract contains a term that Bruno will arrive one week before the concerts begin to do promotional appearances. Bruno unfortunately gets sick and only arrives one day before the concerts start. Rear Touring wishes to terminate the contract and seek damages for Bruno’s breach. Can they?
Issue: The issue is whether the contract term is a condition or warranty.
Rule: If it is a warranty Rear Touring cannot terminate the contract, they can only claim damages. If it is a condition then termination will be a remedy available to Rear Touring. The facts appear similar to Bettini v Gye, where the court held the term to be a warranty.
Apply: This is not a condition because it does not go to the heart of the contract, it is thus a warranty.
Conclude: Rear Touring cannot terminate they can only seek damages.
