LAWS1204 10706 Week4 Terms Representations

1

Possibilities for Statements Made during negotiations

Term

Collateral Contract

Representation

Puff

Statements made in the course of negotiations

2

Contractual Intention

• “Test” to assist in determining contractual

intention

– Time

– Writing

– Special knowledge or skill

– Importance in the minds of the parties; and

– Precision of statement of the parties

3

Express Terms

• Express terms are terms that the parties have

expressly agreed upon. They may be in writing or

they may be oral.

• Pre-contractual statements are statements made by

one of the parties before entering into the contract.

• When will a pre-contractual statement be

considered an express term of the contract?

• A statement or assurance will only constitute a term

of a contract if it was made with the intention that it

should be binding as part of the contract. The test is

an objective one: ‘If an intelligent bystander would

reasonably infer that a warranty [a promise] was

intended, that will suffice'.’[Lord Denning in Oscar

Chess v Williams]

4

Express Terms

Couchman v Hill [1947] KB 554

Question:

• Were the oral statements that the vendor gave to

Mr Couchman in relation to the heifer part of the

contract or were they overridden by the exclusion

clauses?

Held:

• The statements were promissory and formed part of

the contract because the vendor wanted the

additional statement to induce Mr Couchman to

purchase the heifer, the statement was made close

to the time of contract, and the statement was by a

party with knowledge of the facts surrounding the

statement.

5

Express Terms

Oscar Chess Ltd v Williams [1957] 1 WLR 370

Question:

• Whether the representation that the car was a 1948

model was a term of the contract of sale of the car.

Held:

• Denning LJ emphasised that the test for whether a

representation is promissory is an objective one

and it is vital to examine the form of words used in

making the representation. Also relevant is the

knowledge and expertise of the person making the

representation. All these elements led to the

conclusion in this case that the representation was

not intended as a promise.

6

Express Terms

Ellul & Ellul v Oakes (1972) 3 SASR 377

Question:

• Whether a statement in a real estate booklet that a

house was sewered was a term of the contract of

sale for the house.

Held:

• Using the objective test, the court concluded that a

reasonable person would consider details contained

in a public listing of a property for sale as being a

promise as to the condition of the house. The

expertise of the seller in relation to the details of the

house (like sewerage) was an important factor.

7

Express Terms

Factors that courts take into account in an objective

assessment of the promissory nature of a

statement:

The language of the statement - the more promissory

the language of the statement, the more likely it is to

be considered a part of the contract.

Inducement - if the statement was made in order to

induce the other party to enter into a contract, then a

court is more likely to regard the statement as

promissory.

Knowledge and expertise of the parties - a statement

made by a person with greater knowledge and

expertise in the particular area than the other party is

more likely to be considered promissory.

8

Express Terms

A Statement May Be a Collateral Contract

A collateral contract is a second contract

between the parties that induces the

creation of the main contract.

All of the normal requirements of offer,

acceptance, consideration and intention

apply to collateral contracts.

The consideration is the entry into the main

contract by the party which is induced.

9

Collateral Contract

• A collateral contract formed when a promise is

made to induce the promisee to enter into the

main contract

• Entering into the main contract forms the

consideration for the collateral promise and the

promise, thus brought, becomes independently

enforceable

continued on next page...

10

Collateral Contract...

• Requirements for a valid and binding collateral

contract

– It must have been intended that the promise

would be legally binding

– The promisee must have entered into the

main contract on the basis of the promise and

in reliance upon it; and

– The promise must not be inconsistent with the

terms of the main contract

11

Express Terms

Sheppard v The Council of the Municipality of Ryde (1952) 85 CLR 1

Question:

• Whether a statement by the Council with respect to

land opposite the land purchased by the plaintiff was

a collateral contract in return for which the plaintiff

agreed to enter the main contract of sale for his land.

Held:

• The courts will generally be reluctant to find that a

collateral contract exists because often the promise

alleged to support the collateral contract will be a

promise which you would expect to find in the main

contract. This was not the case here and the court

was satisfied that the plaintiff would not have entered

into the contract but for the statement made and that

the defendants were in fact promising to maintain the

land in question as a park.

12

Express Terms

JJ Savage & Sons v Blakney (1970) 119 CLR 435

Question:

• Whether a statement about the ‘estimated speed’ of

an engine formed a collateral contract.

Held:

• A statement about ‘estimated speed’ was an

opinion, not a promise. It is not enough to establish

a collateral contract simply by finding that the main

contract would not have been entered into without

the collateral statement; the question is whether

there was a promise intended in the statement in

question.

• Here, there was no such promise.

13

Express Terms

Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133

Question:

• Whether a collateral contract existed where the

defendant purportedly promised not to exercise a

contractual right of termination unless certain

circumstances occurred and in return for that

promise the plaintiff signed the lease.

Held:

• There was no collateral contract because the

alleged terms of the collateral contract were

inconsistent with the terms of the main contract.

14

Express Terms

Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133

Isaacs J at 148 [HPR 441]:

"The truth is that a collateral contract, which may be

either antecedent or contemporaneous, being

supplementary only to the main contract, cannot

impinge on it, or alter its provisions or the rights

created by it; consequently, where the main

contract is relied on as the consideration in whole or

part for the promise contained in the collateral

contract, it is a wholly inconsistent and impossible

contention that the other party is not to have the full

benefit of the main contract as made..."

15

Express Terms

This rule has been criticised on a number of

grounds:

The rule does not adequately take into account the

fact that oral representations are a common part of

negotiations;

The intention of the parties in contract is supposed

to be the overriding concern of the courts however

the consistency rule means that this is difficult to

achieve in most cases; and

It may be unconscionable to give an assurance

about how a particular clause will operate and then

to renege on that assurance.

16

Effect of Signature

A party will be bound by the terms contained in a

contractual document which he or she has signed,

whether or not he or she has read the document.

L'Estrange v F Graucob Ltd [1934] 2 KB 394

Question:

• Whether a very broad exclusion clause formed part

of a contract where the clause was included in an

order form headed ‘Sales Agreement’ that had been

signed by the purchaser.

17

Effect of Signature

L'Estrange v F Graucob Ltd [1934] 2 KB 394

Held:

• The presence of the signature of the plaintiff on the

document indicated that the plaintiff had read and

agreed to all of the terms contained within it. This

was irrespective of whether or not the plaintiff had

actually read the document.

• The presence of a signature may not result in

binding obligations where there has been fraud or

misrepresentation by the other party, or where the

document signed could not reasonably be

considered to be a contractual document.

18

Effect of Signature

Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805

Question:

• Was Mrs Curtis bound by the broad exclusion

clause on the dry cleaning receipt that she had

signed or did the narrower exclusion, as explained

to her by the shop assistant, apply?

Held:

• L’Estrange v Graucob represents the position at

common law. However, it will not apply where:

• the signed document could not have been

considered contractual

• there was fraud or misrepresentation

19

Effect of Signature

Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805

• Here, there was an innocent misrepresentation by

the shop assistant regarding the breadth of the

exclusion clause, therefore the shop was bound by

that narrower exclusion.

• Lord Denning added that had Mrs Curtis not

realised that the dry cleaning receipt contained

contractual terms, the court may have been

prepared to find that she was not bound by the

exclusion clause because the receipt may not have

been considered a contractual document.

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Incorporation and Unsigned Documents

How does a court decide whether someone has

agreed to terms contained on a ticket or a sign

when the most obvious indicator of agreement -

signature - is lacking?

• Incorporation by notice:

• The party must be given reasonable notice of the

terms;

• Notice must be given usually at the time of or

before entry into the contract.

21


Parker v South East Railway Co (1877) 2 CPD 416

Question:

• Whether the terms on the back of a cloak room

ticket were incorporated into the contract.

Held:

• There are three aspects to answering this question:

• A plaintiff is bound if he or she actually knew there

were contractual terms on the ticket and read them,

or decided not to bother reading them.

• If a plaintiff is aware of the terms but not of their

significance, the question is: is this a transaction

where a reasonable person would expect to find

contractual terms in a ticket? If yes, then the

plaintiff is bound (ie it’s an objective test).

22


Parker v South East Railway Co (1877) 2 CPD 416

• If the recipient did not know there was writing or

that the ticket contained terms, did the person

seeking to rely upon the ticket do all that was

reasonable to bring notice of the terms to the

attention of the recipient?

• The document/notice in question must be

contractual in nature.

23


Causer v Brown [1952] VLR 1

Question:

• Whether an exclusion clause contained in an

unsigned dry cleaning docket formed part of the

contract.

Held:

• The docket was not the type of document that might

contain contractual terms. It was reasonable for it to

be regarded only as a voucher for reclaiming the

dress.

• Would a similar decision be made in today’s more

litigious society?

24


The more onerous the terms contained within the

ticket, the more onerous the requirement of notice.

Interfoto Picture Library Ltd v Stiletto Visual

Programs Ltd [1989] 2 QB 433

Question:

• Whether the term outlining the very severe fines for

late return of the photo transparencies was

incorporated into the contract.

Held:

• The term was not included in the contract because

Interfoto had not done “what was necessary to draw

this unreasonable and extortionate clause fairly to

[Stiletto’s] attention."

25


Tickets issued by machines

Thornton v Shoe Lane Parking [1971] 2 QB 163

Question:

• Whether the terms and conditions of parking in a

car park where a ticket is issued by a machine and

where the terms were contained on a sign inside

the car park were incorporated into the contract.

Held:

• This is different to the other ticket cases because,

where a ticket is issued by a machine, a customer

has no opportunity to refuse it once paid for.

26


Thornton v Shoe Lane Parking [1971] 2 QB 163

• The contract is concluded at the time the customer

puts money into the machine. Customers will only

be bound by the terms of the ticket if the terms are

sufficiently brought to their attention before they go

to the machine and not otherwise. Any terms issued

after the customer has paid for a ticket (including on

the ticket itself) are not part of the contract.

• In this case, the terms referred to in the ticket were

not incorporated because Shoe Lane Parking had

not done what was reasonably sufficient to give Mr

Thornton notice of the conditions.

27

Incorporation by course of dealing

• Where the parties have a history of

dealings, contractual terms introduced in

earlier contracts may be incorporated into a

subsequent contract even though the usual

requirements for incorporation of terms

have not been met in relation to that

subsequent contract.

28


Factors:

• Number and frequency of previous

dealings;

• Consistency of conduct in previous

dealings;

• Contractual nature of document relied on;

• Whether it is reasonable to expect that the

same terms are included in subsequent

contracts.

29


Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379

Question:

• Whether the requirement that one penny be paid

upon entering and leaving the wharf, regardless of

travel on the ferries, was incorporated into the

contract.

Held:

• The term was incorporated into the contract

between Robertson and the Ferry Co. In this case,

it was immaterial whether the Ferry Co had done

enough to bring the notice of terms to the public’s

attention. Robertson was a regular user of the ferry

service and thus “must have been aware that the

company’s method was to release the turnstiles

only on payment of a penny”.

30


Eggleston v Marley Engineers Pty Ltd (1979) 21 SASR 51

Question:

• Whether the limited liability clause on the back of a

docket that was always presented after the

completion of a job was incorporated into the

contract.

Held:

• Evidence was that Marley was aware that the

docket contained terms, but had never read them.

The court decided that the terms could therefore not

be implied by past dealings because Marley had no

actual knowledge of the terms on which Mewett

sought to rely.

31


Eggleston v Marley Engineers Pty Ltd (1979) 21 SASR 51

This case is contrary to the objective test

for the incorporation of terms, ie courts

have usually held it to be enough that the

party seeking to rely on the term sought to

be incorporated does all that is reasonable

to bring the term to the attention of the

other party.

32

Implied Terms

• Terms may be implied into a contract:

– as a matter of fact: Codelfa Constructions Pty Ltd v

State Rail Authority of NSW (1982) 149 CLR 337;

Byrne v Australian Airlines (1995) 185 CLR 410;

– as a matter of law: Liverpool City Council v Irwin

[1977] AC 239; Sale of Goods Act 1923 (NSW);

Trade Practices Act 1974 (Cth);

– as a matter of trade usage or custom: Con-Stan

Industries of Australia Pty Ltd v Norwich

Winterthur (Australia) Ltd (1986) 160 CLR 226

33

The Conditions under which Courts will Imply Terms

• The terms must be reasonable and equitable

• It must be necessary to give the contract business

efficacy

• It must be so obvious that it goes without saying

• It must be capable of clear expression

• It must not contradict any express term of the

contract

See BP Refinery (Westernport) Pty Ltd v Shire of

Hastings (1977) 180 CLR 266. Cited with

approval in Codelfa Construction Pty Ltd v State

Rail Authority of New South Wales (1982) 149

CLR 337.

34

Implication through Trade Usage or Custom

• Must be notorious, certain and reasonable

• Must not offend against any legislative provisions;

and

• Must not be inconsistent with any express term of

the contract