4LW003 Contract Law Terms of the Contract Outline Notes Contractual Terms Terms of the contract will determine the respective contractual obligations of the parties. Terms and mere representations - Part 1 It is important to determine whether a statement (oral or written) is part of the agreement or whether it merely precedes the agreement. Statements which induce a contract are called mere representations (misrepresentation) and must be distinguished from terms of a contract which form part of the contract. When construing a contract and when determining whether a pre-contractual statement is a representation or a term, the courts adopt an objective analysis of the parties' intentions. Chartbrook Ltd v Persimmon Homes Ltd [2009] Oceanbulk Shipping and Trading SA v TMT Asia Ltd and Others [2010] Rainy Sky SA and others v Kookmin Bank [2011] Courts have developed a kind of 'checklist' to help determine whether a statement is a term or a mere representation. Judicial checklist/guidelines Timing of the statement At what stage of the negotiations was the statement made? As a general rule, the more time that elapses between the statement being made and the contract being concluded, the less likely it is that the statement is a term. Bannerman v White (1861) Schawel v Reade [1913] cf. Routledge v McKay [1954] Importance of the statement What importance was attached to the statement by the parties? A statement may be regarded as a term if such importance is attached to it that the injured party would not have entered into the contract but for the statement. Bannerman v White (1861) Couchman v Hill [1947] cf. Oscar Chess Ltd v Williams [1957] Strength of the inducement What was the strength of the inducement of the statement?
The more emphatically a statement is made, the more likely it is that the statement will be a term. Eg. did the maker of the statement accept responsibility for the statement, or did they advise the other party to verify it? Schawel v Reade [1913] Ecay v Godfrey (1947) Special knowledge or skill Did the maker of the statement have special knowledge or skill, as compared to the other person? Where a statement is made by someone who has expert knowledge or skill that is relevant to the subject in hand, it is more likely that the statement will be a term. Harling v Eddy [1951] Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] cf. Oscar Chess Ltd v Williams [1957] Reduction into writing Was the oral statement reduced to writing? If there has been an oral agreement which has later been reduced into a written contract, any statement that appears in the written contract will usually be regarded as a term. Conversely, any statement which is not included in the written contract is likely to be a mere representation. Routledge v Mackay [1954] Chartbrook Ltd v Persimmon Homes Ltd [2009] Parol Evidence Rule Where there is a written contract, the general rule is that extrinsic (parol) evidence will not be admitted