Contract Law Essays Help : Terms of the Contract
Contract Law Cases referred to in this section:
Heilbut, Symons Co v Buckleton (1913) Ac 30
Couchman v Hill (1947) KB 554, (1947) 1 All ER 103, CA
Bannerman v White (1861) 10 CBNS 844
Oscar Chess Ltd v Williams (1957) 1 All ER 325, (1957) 1 WLR 370 at 375, 378, CA
Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) 2 All ER 65, (1965) 1 WLR 623 at 628, CA
Routledge v McKay (1954) 1 All ER 855, (1954) 1 WLR 615, CA
Gilchester Properties Ltd v Gomm (1948) 1 All ER 493
Van Raalte v Fitzroy (1956) Times, 10 March
Ecay v Godfrey (1947) 80 Ll L Rep 286
Bentsen v Taylor, Sons & Co (1893) 2 QB 274
Schuler (L) AG v Wickman Machine Tool Sales Ltd (1974) Ac 235
Maredelanto Compania Naviera SA v Bergbau-Handel Gmbh, The Mihalis Angelos (1971) 1 QB 164 at 205, (1970) 3 All ER 125 CA
Wickman Machine Tool Sales Ltd v L Schuler AG (1972) 2 All ER 1173, (1972) 1 WLR 840, CA.
In examining the terms of the contract, it is necessary to first determine what the actual terms are (as distinct from promises and statements made during negotiations which are not terms) and second, to classify and determine the importance of them.
In determining which are the terms of the contract, it is necessary to consider:
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which of the promises and statements made during negotiations are to be treated as terms, as part of the concluded contract?
in addition to the express terms of the contract, are there any implied terms (such as those implied by the Sale of Goods Act)? -
where the contract is embodied in a deed or in writing, is the document conclusive or is there other evidence that should be taken into consideration?
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where the contract contains exclusion clauses seeking to limit or evade liability, to what extent are these valid? These will be considered in a separate chapter.
The express terms of the contract must be distinguished from mere representations, which requires ascertainment of the intention of the maker of the statement ( Heilbut, Symons Co v Buckleton (1913) Ac 30). It may be that the person making the statement warranted its accuracy, or alternatively, it may be mere advertising ‘puff’ that praises and enhances the subject matter of the contract.
In looking at whether part of the contract is a term or representation, the Court may consider:
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the lapse of time between the making of the statement and the formation of the contract – if only brief, the court may be disposed to hold that the statement is a term of the contract (Couchman v Hill (1947) KB 554, (1947) 1 All ER 103, CA (statement made same day as sale held to be a warranty));
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where the party to whom the statement is made makes it clear that he regards the matter as so important that he would not contract without the assurance being given, that is evidence of an intention of the parties that the statement is to be a term of the contract (Bannerman v White (1861) 10 CBNS 844(a contract involving a sale of hops, where the purchaser making it clear that he would not buy if they contained sulphur, which vendor assured him they did not));
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where the party making the statement is stating a fact which is or should be within his own knowledge and of which the other party is ignorant, that is evidence that the statement is intended to be a term of the contract (Oscar Chess Ltd v Williams (1957) 1 All ER 325 at 329, 331, (1957) 1 WLR 370 at 375, 378, CA, per Denning and Hodson LJJ respectively (private sale of car to garage); Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) 2 All ER 65 at 67, (1965) 1 WLR 623 at 628, CA, per Lord Denning MR)
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where, subsequent to negotiations, the parties enter into a written contract and that contract does not contain the statement in question, that may point towards the statement being a mere representation (see for example Routledge v McKay (1954) 1 All ER 855, (1954) 1 WLR 615, CA, and Gilchester Properties Ltd v Gomm (1948) 1 All ER 493), though there have been cases where it has been found that such a preliminary statement constitutes a collateral contract;
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where the party making the statement suggests that the listener takes an independent survey or opinion (as will frequently be the case in replies to enquiries during the sale/purchase of property), that may show that no warranty was intended (Van Raalte v Fitzroy (1956) Times, 10 March; Ecay v Godfrey (1947) 80 Ll L Rep 286;
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where there is an inference of warranty, the maker of a statement can rebut this if he can show that he was innocent of fault in making it, and that it would not be reasonable in the circumstances to hold him bound by it (Dick Bentley Productions Ltd, supra).
In order to classify the terms, they must be divided between conditions (major) and warranties (minor). A breach of a condition of the contract enables the innocent party to treat himself as discharged from further performance, or to affirm the contract and claim damages. A breach of warranty however will only give rise to a claim for damages. The nature of the terms and the consequences of their breach are based on the intention of the parties as manifested in their agreement (Bentsen v Taylor, Sons & Co (1893) 2 QB 274; Schuler (L) AG v Wickman Machine Tool Sales Ltd (1974) Ac 235), with the exception of where statute specifically provides for whether the term is a condition or warranty (for example, sections 12 – 15 of the Sale of Goods Act 1979). Where the contract contains no indication of the status of the terms, the Court must look at the contract in the light of the surrounding circumstances in order to decide the intention of the parties and important factors to be taken into consideration are:
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the extent to which the fulfillment of the term would be likely to affect the substance and foundation of the adventure which the contract is intended to carry out
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whether the obligation arising from the term goes so directly to the substance of the contract that its non-performance may fairly be considered as a substantial failure to perform the contract at all.
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