contract terms: term or representation?

Question 1

what is a representation?

Answer 1

a statement prior to the creation of a contract that is only for the purpose of encouraging a party to enter the contract.

Question 2

what is a contract term?

Answer 2

anything written into the contract

Question 3

what must a court do when there is disagreement regarding a contract?

Answer 3

Balancing the conflicting interests -to decide what the parties intended in their discussions.

Question 4

what do the courts categorise the negotiations/agreements of a contract into?

Answer 4

1. puffs
2. terms
3. representations

Question 5

what is a puff?

Answer 5

A ‘puff’ is a statement which cannot give rise to legal consequences, as they are never meant to be taken literally and there is no intention to be legally bound. (eg. ‘red bull gives you wings’)

Question 6

what is the case for ‘what is a puff’?

Answer 6

carlill v carbolic smoke ball

Question 7

what is the difference between a term and a representation?

Answer 7

A term is essentially a promise that a statement is true and will be/has been acted upon

A mere representation is not a promise but is a statement that encourages C to enter into an agreement

Question 8

what occurs if a term is breached?

Answer 8

If a term is breached, C can automatically claim damages and repudiate (end) the contract

Question 9

what occurs if there is a misrepresentation?

Answer 9

If there is a misrepresentation, damages will only be available if it can be proven that the statement was made negligently or fraudulently. The main remedy is rescission (i.e. to put the parties into the position they would have been in if the contract had not been made)

Question 10

how do the courts decide whether a statement is a term or representation?

Answer 10

The courts consider the following:

1. The importance attached to the representation
2. Special knowledge or skill of the person making the statement
3. Any time lag between making the statement and making the contract
4. Whether there is a written contract

Question 11

what is the case for importance attached to the representation?

Answer 11

Couchman v Hill (1947)
An auction catalogue stated that a heifer was unserved (not pregnant). The auctioneer and the farmer selling the animal confirmed this. In fact, the heifer was pregnant and died while calving. The statement was clearly important to the purchaser of the animal and so was taken as a contract term rather than a representation.

Where the statement is obviously important to the contract, it will be seen as a term of the contract.

Question 12

what are the cases for special knowledge or skill?

Answer 12

The law is more likely to treat a statement by an expert as a term of a contract than a statement by a person without specialist knowledge

Oscar Chess v Williams (1957)
The private seller of a car believed it to be a 1948 model but it was actually much older. The statement was not a term of the contract but a representation.

Dick Bentley v Harold Smith Motors (1965)
The car dealer stated the car had done 20,000 miles when in fact it had done 100,000. Even though that statement was not written in the contract, it was taken to be a term of the contract rather than a mere representation

Question 13

what is the case for time lag?

Answer 13

C exchanged a motorcycle and £30 for D’s motorcycle, which D had stated was a 1942 model (as shown in the registration document), but it was 1936 model. 7 days after negotiations, the parties signed a written agreement that didn’t mention the motorcycle’s age. CA held that the statement about the date was a mere representation, not a term of the contract, partly because of the time gap and its omission from the final written agreement. The principle established is that whether a statement is a term or a representation depends on the parties’ intention, and factors such as timing and whether it is included in the written contract are important

Question 14

what does the court assume in presume about written contracts?

Answer 14

The court tends to presume that everything the parties wanted to include as a term of the contract is put in the written contract.