Terms of a Contract versus Non-contractual Representations PDF

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Terms of a Contract versus Non-contractual Representations (see James, Busines Law (4th ed) chapter 8, page 314-318)

Pre-contractual statements may be classified as: 1.

a term of contract (eg, “the car is a 2012 model”)

2.

a contract that is collateral to the main contract (eg, “the fuel consumption is 20 kms per litre”)

3.

a representation, which, if false, may amount to misrepresentation under common law or misleading/deceptive conduct under ACL s 18 (eg “you won’t need to service the car for the next 10,000 kms”, but you do after 2,000 kms)

4.

a sales puff (eg, “smoothest drive you’ll ever have”)

A term is a promise which amounts to a guarantee by the maker of the statement of its truth. Advertising exaggerations are mere puffs and have no legal effect. Likewise, expressions of opinion.

There is no formula that will instantly solve the problem of deciding whether a pre-contractual statement is a term or representation. The overall test is that there must be evidence of an intention by one of the parties that there should be contractual liabilityfor the accuracy of the statement. Factors used to distinguish between terms and representations: 1. 2.

how important was the truth of the statement? how much time elapsed between making the statement and the final agreement? (the longer the interval, the more likely it will be a representation)

3.

was there reliance on special skills or knowledge of the other party? If so, term.

4.

did the statement cause the party to enter the contract?

5.

was the statement later omitted from the written contract? If so, mere representation.

Consider Oscar Chess v Williams (p 314 of Business Law, 4th ed). Why was the seller ʼs statement as to the age of the car a mere representation, not a term? In each case, the above factors help determine whether a pre-contractual statement is a term or a representation.

Once it is determined that a statement is a term, you need to consider whether the term is a condition or a warranty as the remedies for breach of these terms differ (discussed in week 8 lecture)....