Consumer Tribe

Topics: Contract, Contract law, Contractual term Pages: 19 (6551 words) Published: December 4, 2012
Business Law

David Kelly, Ann Holmes, Ruth Hayward 5th Ed

This chapter will consider what the parties have actually agreed to do. What they have agreed to do form the terms of the contract.

As the parties will normally be bound to perform any promise that they have contracted to undertake, it is important to decide precisely what promises are included in the contract. Some statements do not form part of a contract, even though they might have induced the other party to enter into the contract. These pre-contractual statements are called representations. The consequences of such representations being false will be considered below (see below, 7.3) but, for the moment, it is sufficient to distinguish them from contractual terms, which are statements which do form part of the contract. There are four tests for distinguishing a contractual term from a mere representation, as follows:

Where the statement is of such major importance that the promisee would not have entered into the agreement without it, it will be construed as a term. In Bannerman v White (1861), the defendant wanted to buy hops for brewing purposes and he asked the plaintiff if they had been treated with sulphur. On the basis of the plaintiff's false statement that they had not been so treated, he agreed to buy the hops. When he discovered later that they had been treated with sulphur, he refused to accept them. It was held that the plaintiff's statement about the sulphur was a fundamental term (the contract would not have been made but for the statement) of the contract and, since it was not true, the defendant was entitled to repudiate the contract.

Where there is a time gap between the statement and the making of the contract, the statement will most likely be treated as a representation.

In Routledge v McKay (1954), on 23 October, the defendant told the plaintiff that a motorcycle was a 1942 model. On 30 October, a written contract for the sale of the bike was made, without reference to its age. The bike was actually a 1930 model. It was held that the statement about the date was a pre-contractual representation and the plaintiff could not sue for damages for breach of contract. However, this rule is not a hard and fast one.

In Schawell v Reade (1913), the court held that a statement made three months before the final agreement was part of the contract. Where the statement is oral and the agreement is subsequently drawn up in written form, its exclusion from the written document will suggest that the statement was not meant to be a contractual term. Routledge v McKay (1954) may also be cited as authority for this proposition. Where one of the parties to an agreement has special knowledge or skill, then statements made by them will be terms, but statements made to them will not.

In Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965), the plaintiff bought a Bentley car from the defendant after being assured that it had only travelled 20,000 miles since its engine and gearbox were replaced. When this statement turned out to be untrue, the plaintiff sued for breach of contract. It was held that the statement was a term of the contract and the plaintiff was entitled to damages.

In Oscar Chess Ltd v Williams (1957), Williams traded in one car when buying another from the plaintiffs. He told them that his trade-in was a 1948 model, whereas it was actually a 1939 model. The company unsuccessfully sued for breach of contract. The statement as to the age of the car was merely a representation, and the right to sue for misrepresentation had been lost, due to delay.

Once it is decided that a statement is a term, rather than merely a pre-contractual representation, it is necessary to determine which type of term it is, in order to determine what remedies are available for its breach. Terms...
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