Terms and Representation

Introduction

  • Concerns the effect of statements made by parties prior to entering into a contract. These statements can become a term of a contract or a "mere" representation

Distinguishing between a contractual term and a misrepresentation:

  • Per Lord Moulton in Heilbut, Symons & Co v Buckleton (1913): depends on intention (objectively ascertained) of the parties
  • Do their words / conduct indicate a reasonable person that the statement intended to be a mere representation or a contractual term?

The factors and guidelines

If its a Misrepresentation, the following must be discussed:

What is a representation:

  • Statements made during negotiations / pre - contract statements to induce the other party to enter into a contract. Some of these statements will end up as terms of the contract, some will be representations

A) The importance of statements to parties

i) Where the buyer attaches importance to the statement and would not have entered into the contract if the statement was not true - Bannerman v White (1961) = TERM:

  • Facts: Buyer inquired whether sulphur was used in the cultivation of hops, where the seller assured him that sulphur was not used. But turns out that the hops indeed received sulpur treatment.
  • Held: Assurance by seller was a condition of a contract. It was a contractually binding term, and buyer was entitled to damages due to breach of term.

ii) Where the buyer specifically asks the seller to confirm a statement in the catalogue before the sale - Couchman v Hill = TERM

  • Facts: Buyer purchased cow, seller claimed it to be a heifer. Turns out the cow was pregnant and later suffered a miscarriage and died.
  • Held: Courts held that description of the cow as a heifer was a term of the contract. As the description is a substantial ingredient of the object sold, seller = liable for breach of contract

iii) Where the statement was made not in the same transaction as the sale, this will most likely NOT be a term - Hopkins v Tanqueray

  • Facts: D assured C that a horse was sound in every aspect but turns out to be untrue.
  • Held: Courts held that D's assurance was NOT a term of a contract but a representation = no breach of warranty

B) The relative degree of knowledge / skill between parties

  • Issue was whether the person making the statement has special knowledge or skill compared to the other party. If yes, courts will likely infer statement as a term

Oscar Chess v Williams (1957) = REPRESENTATION:

  • The statement was made by a private seller who had no real specialist skill or knowledge

Dick Bentley v Harold Smith Motors Ltd (1965) = TERM:

  • The statement was held to be a term as it was made by a car dealer who would claim to have special skill / knowledge

C) Was the Statement in writing

This will depend on whether the contract is:

i) Wholly written:

  • If the statement was not part of the written contract, it won't be regarded as a term

Routledge v McKay (1954):

  • Issue: Whether D's statement about the motorcycle's year constituted a contractual term or a mere representation
  • Held: Held that statement is a representation. Because the document was not prima facie evidence of a contractual term. Neither party was an expert and there was a laps of time between statement and contract, allows C to verify information. Th written agreement did not mention the date and explicitly stated that the transaction was closed.

ii) Partly oral and partly written:

  • Then it is still possible for the statement to be a term

Birch v Paramount Estates (1956):

  • Facts: D made a statement on quality of house. But when contract was reduced to writing it made no reference to this statement. Despite its omission in the written contract.
  • Held: CA regarded the statement as a contractual term.

D) The time the Statement is Made - Any time lag between the making of the statement and the eventual conclusion of the contract

i) At the start of the negotiation

  • Its from the start so there's a long lapse of time
  • If statement is made at this point, most likely treated as having made to further negotiations = NOT A TERM

Routledge v McKay:

  • Intervals between the time of statements made, and the contract entered into must be taken into account

Statements made shortly before / at the time was concluded = TERM

Schawel v Reade (1913):

  • C inspected a horse, intending to use it for breeding. D assured C that the horse was "perfectly sound". D further promised that if any issues arose, he will personally inform C. But the horse had significant hereditary defect rendering it unfit for its intended purpose
  • Issue: Whether the assurance about the stallion's health can be considered a effective term of the contract
    Held: statement is deemed a contractual term. D's explicit promise allowed C to rely on his word. C clarified the intended purpose of the horse, making a claim for reasonable lack of knowledge less feasible.
  • Although D didn't expressly say it, he was aware of C's interest and assured him it was fit for purpose. Case also highlighted the Court's willingness to consider all relevant circumstances when evaluating unusual / unfamiliar situation
  • [There's no fix rule, depends on circumstance / situation]

E) Accepting responsibility / advising on verification - Whether the statement was accompanied by a recommendation that it can be verified

Ecay v Godefroy (1947) = REPRESENTATION:

  • Facts: C purchased a sailboat from D. D had considerable expertise in boats. D asserted that boat was in reasonable condition but suggested that C should do a survey for better overview. Transaction completed but boat turned out to be very defected.
  • Held: Court held that D's remarks were mere representations rather than binding terms. D's advice indicated his assessment was not expert / definite. Even though D had more knowledge of ships, statement didn't qualify as a contractual term

Actionable Misrepresentation

Types of Misrepresentation

Remedies for Misrepresentation