Contents of a contract: expressed terms
- Courts look for what parties intended to agree to
- Courts do not rectify errors or re-write contracts ; they do not take on the bargaining role
- Contract is made up of terms
- Terms of contract can be express, implied or incorporated
- Terms cannot be communicated retrospectively
- Most contracts do not always have to be in writing but it is prudent to do so ; for obvious reasons it is easier for the courts to enforce a written contract than a verbal court.
Explain the importance of terms;
- Parties negotiate before the formation of a contract, the points of agreement and what is to be contained in the actual contract
- The terms provide the content of legally enforceable contracts
- The contract may not always contain what has been agreed upon
- Some terms may not have been stated in contract, but are implied or incorporated
- Once you have a legally enforceable contract (where the elements of contract creation have been satisfied) the terms outline the parties legal obligations to each other
- Only once the terms of the contract are known can the parties effectively discharge them
- Failure to perform in accordance with terms gives rise to breach of contract, entitling the innocent party to sue.
- If failure to perform is significant, the innocent party may be able to terminate the contract along with claiming damages ; this can’t be done if the breach is just warranty (they can claim compensation for contractural breach)
Explain the notion of freedom of contract;
- In general persons are free to choose the contractural terms they will be bound
- Courts does not interfere by large but sets parameters e.g. won’t enforce illegal contracts such as drug deals
- The law provides contractural protection for vulnerable parties
Puffs
statement given in exaggerated and non-specific language, clearly over-exaggerates characteristics the part of a contract.
Opinions
personal views or beliefs, do not become part of the contract. If it is honestly given it cannot be actioned by the other party. If it is dishonestly given it may amount to an actionable misrepresentations
(not in contract law but in tort law- tort of deceit or under the provisions of the Competition and Consumer Act 2010 (Cth) In other contexts, an opinion given by a professional may carry greater weight as to make it actionable if it conveys incorrect information.
Representations
a representation is a statement of fact made by one party during process of negotiation. It is not considered a term of contract, unless it can be inferred from the circumstances that the maker of the statement intended to make it promissory. It may arise legal implications such as negligence if it reduces a party to contract. If it is promissory it will become legally enforceable term of the contract. If a term of the contract is breached it allows the innocent party to rescind the contract and claim damages.
Term of contract or mere representation;
whether the statement is promissory in nature;
- the time that the representation was made relative to the making of the contract
- whether the person making the statement had any special skill or knowledge and;
- whether the representation was followed by a written contract
Parol evidence rule
- A rule of evidence that a written document expresses the whole contract
- External evidence of intention and negotiations cannot be considered
- The rule excludes oral statements of extra terms
- Exceptions: where custom or trade usage is relevant to the written agreement
- Where an ambiguity in the language of the contract needs to be resolved
- Where the subject matter or a party to the contract are not identified in the written agreement
- Another exception is when the contract is partially written / oral ; explicit in case 2
- No retrospective changes allowed to a contract as it has been reduced to writing
Lg Thorne & Co v Thomas Borthwick & Sons (1955) 56 SR (NSW) 81
- Guy asked for a sample, liked it and wished to purchase
- Placed order of 50 drums of oil
- No mention in contract that the order must match the quality of the sample oil
- Court decision- bad luck via application of the Parol evidence rule.
Van den Esschert v Chappell [1960] WAR 114
- Before I sign the contract ; old woman checks if there is “no white ants on the property”
- The seller assures her otherwise, however, is clever enough not to put this in writing on purpose.
- The court allows an exception to the parol evidence rule in this instance, because the verbal statements were so serious
- The lady was awarded damages due to breach of contract
Handbury v Nolan (1977) 13 ALR 339
- Facts; auctioneer offered cow, the Glen Nola, for sale at an auction
- Before the sale, auctioneer announced that pregnancy test had been done, outcome, positive
- The buyer bid the cow at $3,200
- The cow was actually not pregnant and in fact proved to be infertile
- Issue; was it an expressly agreed term of the contract of the sale that the cow was fertile and pregnant when she was sold?
- Decision; the auctioneer’s statement was an express term of the contract
- Reason; the announcement of the test result was not a mere opinion, it was a statement of fact that the cow had been tested and was pregnant. In deciding that this was intended to be a contractually binding promise the court took note of the fact that it was promissory and the circumstances in which it was made at a breeder’s sale alluded to higher prices paid for a cow that was pregnant. Furthermore, the statement was made before the bids were invited. Therefore it became an express term of the contract.
Oscar Chess v Williams (1957) 1 All ER 325
- Facts; Mother asked son to take 1948 Morris Minor motor car to the used car dealer to trade it in
- Son traded in car “I would like to trade in my mothers 1948 mode car. Here are all the relevant documents”
- “This is a 1939 model NOT 1948”
- “Williams you breached our contract! Statement about age of car in documents was a promise and intended to be contractually binding”
- Issue; was it salesmen puff, term of contract or alternatively a warranty?
- Decision; it was unlikely that Williams intended for his statement to be binding due to the lack of expertise and personal knowledge in making a statement to a professional.
Proving the terms of a contract;
- For wholly oral contracts, the parties themselves or other witnesses must provide evidence of what was agreed
- For wholly written contracts, only the written agreement itself can be referred to - the ‘parol’ evidence rule ; the courts will generally not allow other evidence to be incorporated
Classifying terms in contract
A term in a contract is either a condition or warranty
Conditions
terms of such fundamental importance to the contract that without them the contract could not properly operate.
‣ A breach of condition entitles the innocent party to:
• Reject performance tendered by the offending the party
• Terminate further performance of the contract
• Claim damages for the breach
Associated Newspapers Ltd v Bancks (1951) HCA 24; (1951) 83 CLR 322
- Facts; Bancks, a cartoonist agreed to produce a weekly full page drawing for A.N
- A.N agreed to pay Bancks a salary and to publish the drawing on the front page of newspapers comic section
- For 3 weeks, Bancks drawings appeared on page 3 due to paper shortage and prod problems
- Bancks decided to terminate further performance after A.N ignored his complaints
- Issue; was the promise to publish Bancks drawings on front page an essential term that would justify terminating further performance of the contract
- Decision; the term was an essential one (a condition) and Bancks was therefore justified in terminating further performance of the contract
Warrantys
terms that are of lesser importance, without which the contract as a whole could still function.
‣ A breach of warranty entitles the innocent party to only claim damages for the breach.
Bettini v Gye (1876) 1 QBD 183
- Facts; 15 month contract to perform at various events
- “Bettini, you must arrive six days before your engagement for rehearsal purposes”
- 4 days late “I am terminating our agreement as you have missed four days of rehersals”
- Issue; was Ms Bettinis failure to arrive on time a condition that warranted termination of contract?
- Decision; the term was not in this case a condition precedent: the clause was a warranty only and a breach would not amount to a repudiation of the contract but would only give rise to an action for compensation in damages.
- Reason; “Parties may think some matter, apparently of very little importance, essential; and if they sufficiently express an intention to make the literal fulfilment of such a thing a condition precedent, it will be one.”
Identify express terms;
• Express terms are those terms that the parties have specifically made and which they intended to be part of the contract
• Oral contracts have expressly stated spoken terms
• Written contracts contain expressly stated written terms
◦ It is not always clear whether particular terms have been included in the agreement. This ambiguity must be resolved by looking at the circumstances in which the parties have reached agreement.
Causer v Browne (1952) VLR 1
- Facts; Causer took his wife’s dress to Browne for dry cleaning
- When he gave the dress to Browne, Causer handed a “docket” on which the following statement was printed: “no responsibility is accepted for loss or injury to articles through any cause whatsoever”
- Causer did not read what was written on the docket and the statement was not specifically drawn to his attention
- Dress was stained and Causer claimed damages from Browne to compensate for the ruined dress
- Issue; had the statement on the docket that excluded Browne’s liability become a term of the contract?
- Decision; the statement had not become a term of contract.
- Reason; the document handed to Causer did not appear to be a contractural document or a document likely to contain contractural terms. It was reasonable for Causer to assume it was just a normal receipt for the goods to be collected. It could not be inferred that Causer was agreeing to exempt Browne from liability for Negligence. Would be different if it had been brought to his attention
