CONTRACT TERMS (Pg 113)

Puffs, Representation, and Terms (Pg 113)

Puffs (No legal effe t) Representation (Not part of t!e ontra t) Terms (Part of t!e Contra t) Statements which have no legal effect whatsoever. They tend to be statements which are vague because of imprecision or exaggeration. Dimmock v Hallet (1866) Court held that the description of the land fertile and improvable was a mere puff. A representation is a statement made before or at the time a contract is formed concerning some matter relating to the contract. Although it may be in writing it is not am integral part of the contract. Contract is not breached when the representation is held to be untrue. Behn v Burness (1863). !n this situation the party can only ta"e an action under the law of misrepresentation but cannot initiate an action for breach of contract. Terms are statement which form part of the contract. The only similarity between terms and representations is that they originate as oral and written statements before a contract is formed. Terms are part of the contract while representations are not. Terms and representations create different rights and obligations for the contracting party.

"uidelines to distinguis! terms from representations (Pg 11#)

Paramount Test$ Contra tual %ntention at t!e time of formation of ontra t& The closer to the time the contract was finally concluded then it is more li"ely to be a term rather than a representation. Routledge v McKa (1!"#) The #nglish court of appeal held that there was clear and significant interval of one wee" between the ma"ing of the statement and the ma"ing of the contract. This indicates that the statement was not a term of the contract. The greater the emphasis the more li"ely the statement is a term. Bannerman v $hite (1861) The court held that $annerman was found to have breached the contract thus entitling %hite to repudiate the contract. %here the ma"er of the statement has greater "nowledge concerning the statement as compared to the other party it is more li"ely that the statement is a term. %scar &hess 'td v $illiams (1!"() The court of Appeal held that %illiam&s statement was not a term of the contract because as a private individual %illiams was not in a position to guarantee the accuracy of the year of registration given. ,representationDick Bentle )roductions 'td v Harold *mith (Motors) 'td (1!6") The #nglish Court of Appeal held that there was a breach of contract because the defendant&s statement was a term of the contract. The seller a motorcar dealer was in a better position to "now the true facts regarding the $entley. ,term%n.itation to /erif0 Statement 'ritten Statement !f the ma"e of the statement invited the other party to verify the truth of the statement made then the statement is more li"ely to be a representation. +ca v ,od-re (1!#() the statement was held to be a representation. !f a statement was originally made orally and later reduced into writing then if is more li"ely to have become a term of the contract.

'!en Statement (as Made

Ma)er*s Emp!asis

Ma)er*s Spe ial +no(ledge

%mplied Terms (Pg 111)

An implied term is a term which has not been expressly agreed by the parties but is nevertheless implied into the contract. !mplied terms can be implied into the contract by a court to give efficacy to the contract or it may be implied by a statute. Custom 2 3sage Terms can be implied into the contract because such contracts are sub'ected to unwritten terms hallowed long usage or custom. Hutton v $arren (1836) !t was held that (utton was entitled to such the allowance because it was an accepted custom that a tenant was bound to a farm for the entire tenancy but upon )uitting may claim an allowance for seed and labor.

This means that the court will supply a term which it considers must have been intended by the parties so as to ensure that their contract will proceed on normal business lines. .he Moorcock (188!) The #nglish Court of Appeal held that even though the defendant did not give any warranty that the ground below the 'etty was safe there was in implied underta"ing to this effect. (ence the plaintiff succeeded. 4usiness Effi a 0 Offi ious 50stander test So obvious it goes without saying *hirla/ v *outhern 0oundries (1!16) 'td v 2nor (1!3!) +nerg *hi33ing &o 'td v 4D' *hi33ing (*inga3ore) )te 'td (1!!") The above tests were used in the case. (owever whichever test is adopted the important point to be implied must be ne essar0 to ensure business efficacy does not mean that a court will exercise its discretion. 6udges are relu tant to appl0 t!is rule as t!e0 ma0 go 5e0ond t!e intention of t!e ontra t7 Statute Terms can also be implied by statue. #.g. Sections *+ *, of the Sale of -oods Act serve to protect the interests of buyers of goods.

Classifi ation of Terms (Pg 189)

An express term is a term which has been expressly agreed between the parties. An express term can be made orally or in writing. E:press Term Parol E.iden e Rule (Pg ;1) !f the terms are reduced to writing what is orally agreed generally cannot be used as evidence. .nce an agreement is reduced to writing evidence cannot be raised to contradict vary add or subtract from the agreement. Ha/krish v Bank o- Montreal (1!6!). #xceptions to the case was evident in +5klusiv 2uto *ervices )te 'td v &han 6ong &hua +ris (1!!6). Conditions are those terms which are important essentially or fundamentally to the contract. They are statements of fact or promise which go to the root of the contract. Behn v Burness (1863) 7 .he Mihalis 2ngelo (1!1(/ 4rea ! A breach of condition gives the in'ured party the option to affirm the contract "eeping it on foot or alternatively discharging the contract. %arranties are less important terms and constitute secondary obligations. !f a warranty was breached the breach would not go to the root of the contract. 4rea ! A breach of warranty does not give the in'ured party the right to discharge the contract. The contract remains on foot and the in'ured party only has a claim in damages. Bettimi v , e (18(6) the court held that the rehearsal clause was not vital to the contract. $ettini&s breach of the warranty did not entitle -ye to repudiate the contract. The contract remains on foot and -ye could claim for damages. <o( t!e parties refer t!e term as is rele.ant 5ut not on lusi.e as to t!e term of t!e ontra t7 !nnominate terms can be breached in multiple ways resulting in trivial or serious conse)uences. The breach of an innominate term does not automatically entitle the in'ured party to terminate the contract0 it is dependent on the seriousness of the breach. RD& &oncrete )te 'td v *ato Kog o (*) )te 'td 8 2nother 233eal (199() )ara 113 ()g 18() Situation 3(a)$ Condition='arrant0 Approa ! where a party breaches a condition of the contract the innocent party is entitled to terminate the contract. The nature of the term depends on the intention of the parties to so designate it. Situation 3(5)$ t!e Hongkong 0ir Approa ! where the nature and conse)uences of the breach are so serious as to go to the root of the contract the innocent party is entitled to terminate the contract. Hong Kong 0ir *hi33ing &o 'td v Ka/asaki Kaisen Kaisha 'td (1!61) the basic test is whether the breach is such as to depri.e the in'ured party of su5stantiall0 t!e (!ole 5enefit which it was intended to obtain as the consideration for his own underta"ings.

Condition

'arrant0

%nnominate Term

E:emption Clause (Pg 18>)

An #xemption clause is a term in the contract which see"s to exclude the liability of the party relying on the clause. An exemption clause see"s to exclude liability totally while the limitation of liability see"s to limit the liability. T!e part0 (!o (is!es to rel0 on an e:emption lause must esta5lis! t!e four points 5elo( . *. %n orporation the clause must be incorporated into the contract +. Constru tion the clause properly construed must cover the loss of in'ury which occurred. 1. 3nusual fa tors There must not be any extraordinary facts in the case which prevents the operation of the clause 2. 3CTA the clause must not contravene the 3CTA. Signed (On e signed, appl0 ?*Estrange and don*t 5ot!er a5out an0t!ing else) ':+strange v ,rauco; (1!3#) the court held that the document containing contractual terms is signed then in the absence of fraud or misrepresentation the party signing it is bound and it is wholly immaterial whether he has read the documents or not. (Not signed, must satisf0 CONTEMPORANE%T@ and REASONA4?@ S3AA%C%ENT NOT%CE) 17 '!en Noti e is "i.en (CONTEMPORANE%T@) %lle v Marl;orough &ourt 'td (1!#!) The #nglish Court of Appeal held that the contract was already formed before the couple entered their room and that therefore the notice given on the bedroom wall was too late. .hornton v *hoe 'ane )arking 'td (1!(1) The #nglish Court of Appeal held that the contract was formed when Thornton paid his money into the machine which later issued the tic"et. The notice on the tic"et is too late to be incorporated into the contract. 87 Pre.ious Course of Bealings (used if CONTEMPORANE%T@ fails) !f there has been previous course of dealings between the parties which included an exemption clause then the exemption clause may be incorporated through the previous course of dealings. Henr Kendall 8 *ons v $illiams 'illico 8 *ons 8 %rs (1!6!) 4 The exemption clause formed part of the contracts 5$ut in this instance the e.c. was held to be ineffective from shielding from liability/ 6 *3urling v Bradsha/ (1!"6) 3a7 AdeCua 0 of Noti e (REASONA4?@ S3AA%C%ENT NOT%CE) 7ord 8enning 9: in .hornton v *hoe 'ane )arking 'td (1!(1) !n order to give sufficient notice it would need to be printed in red in" with a red hand pointing to it or something e)ually startling. .homson v 'ondon Midland *cottish Rail/a &o (1!39) the #nglish Court of Appeal held that reasonably sufficient notice was given since the tic"et made reference albeit rather circuitously to the exemption clause. T!e part0*s illitera 0 did not !elp !er. A different outcome may emerge if the party relying on the clause "nows from the very beginning that the in'ured part is under some disability. ,eier v Ku<a/a= $eston 8 $arne Bros (.rans3ort) 'td (1!(9) the court held that there was no sufficiency of notice because -eier did not ta"e the reasonable step of translating the notice. 357 '!ere noti e is pla ed (REASONA4?@ S3AA%C%ENT NOT%CE) &ha3elton v Barr 4r;an District &ouncil (1!#9) The #nglish Court of Appeal held that no reasonable person would expect to find contractual terms on the tic"et since it would be regarded simply as a receipt for money paid. 5Although in today&s context tic"ets are generally ta"en as contractual documents/

%n orporation (Pg 18#)

Boes t!e E: lusion Clause o.er t!e lia5ilit0E The wider the clause the more protection it will provide to the party relying on it. + rules of construction Contra Proferentum Rule The rule states that where there is any ambiguity in interpreting a clause the construction to be adopted is the one which is least favorable to the person who put forward the clause; Hollier v Ram;ler Motors (2M&) 'td (1!(1) applied in Singapore in .a +ng &huan v 2ce >nsurance 'td (1998) Main Purpose Rule The rule states that there is a general assumption that the parties do not intend an exemption clause to defeat or be repugnance to the main purpose of a contract. i.e. #xclusion Clause will generally be ineffective if there is a fundamental breach. )hoto )roduction 'td v *ecuricor .rans3ort 'td (1!89) The Court of Appeal held that the exemption clause was invalid because the breach was fundamental. The (.7 later ruled that the clause protected Securicor from the fundamental breach. Thus Securicor was not liable. The modern approach here is to .ie( t!e rule simpl0 as a rule of interpretation or onstru tionF if t!e e:emption lause uses lear and unam5iguous (ords, it an 5e effe ti.e e.en in t!e ase of fundamental 5rea !7 This decision has been approved by the Singapore Court of Appeal in *un .echnos stems )te 'td v 0ederal +53ress *ervices (M) *dn Bhd (199() E: lusion Clause and T!ird parties ?e/ @ealand *hi33ing &o 'td v 2M *atterrth/aite 8 &o 'td (1!(") the court allowed it. <rivity of contract involved but there is a loosening of the general rule. 3nusual Aa tors (Pg 131) &urtis v &hemical &leaning 8 D eing &o (1!"1) a misrepresentation to the true scope of the e.c. could render the entire clause invalid. +vans (A) 8 *ons ()ortsmouth) 't- v 2ndrea MerBario 'td (1!(6) The court held that the oral assurance which created a collateral contract neutrali=ed the written contract&s e.c. 17 Can 3CTA appl0E s1(3) 4&.2; 3CTA applies only to business liability 87 Can t!e lia5ilit0 5e e: ludedE s1(1) 4&.2; 7iability for personal in'ury or death cannot be excluded s1(1) 4&.2; 7iability for other losses or damages such as financial loss or property damage can be excluded if the clause is reasonable 37 %s t!ere ontra tual lia5ilit0E s3(1) 4&.2; 5i/ #xcludee must deal as a onsumer 5$+C/ or 5ii/ contract on the excluder&s standard (ritten terms of 5usiness 5$+$/ s3(1) 4&.2; #xcluder must show reasona5leness of exclusion clause 3nfair Contra t Terms A t (Pg 138) >7 4urden of Proof s11(") 4&.2; $urden of proof of reasonableness lies with the excluder > Am5iguit0 is not proof of reasonableness even if it may not be unreasonable #7 Criteria of Reasona5leness s11(1) 4&.2; the term must be a fair and reasonable one to be included having regard to the circumstances which were 5a tual )no(ledge/ or ought to have been "nown 5assumed )no(ledge/ in the contemplation of the parties when the contract was made s11(1) 4&.2; reference to the Second Schedule for -uidelines of the :easonableness Test 17 T!e 5argaining strengt! of t!e parties if the bargaining strengths of the parties are e)ual the e.c. is considered to be reasonable. &osmat *inga3ore ()te) 'td v 2merican ?ational .rust and *avings 2ssociation (1!!1) e.c. was held to be valid as both parties considered to have e)ual bargaining strength. 87 %ndu ement to agree to t!e e: lusion lause did the business offer to cover more liability if the customer is to pay a higher amount?

Constru tion (Pg 18D)

37 Customer*s (a tual=assumed) )no(ledge a5out t!e e:emption lause incorporation >7 Complian e (it! some ondition !f the clause includes conditions under which liability is limited then compliance with such conditions must be practicable0 if not then the clause is more li"ely to be unreasonable. ,eorge Mitchell (&hesterhall) 'td v 0inne 'ock *eeds 'td (1!83) the (ouse of 7ords held that the e.c. was unreasonable because the buyer could not discover the breach until the plants grew whereas the seller was at all times in a position where it should have "nown whether the wrong seed was supplied #7 Spe ial Order !f the goods are manufactured to the customer&s specifications but causes damage to the customer then the clause should be considered reasonable because any defect in the goods is due to the customer&s own specifications Note$ 3CTA does not appl0 to all ontra ts7 - contracts of insurance - contracts relating to the creation or transfer on interest in land - contracts relating to the creation or transfer of right or interest in patents trade mar"s copyrights registered designs or other intellectual property and - contracts relating to the creation or transfer of securities. s3 does not apply to international supply contracts (s16)

3nfair Contra t Terms A t (Pg 138)