1 Terms of contract
Statements made during the course of negotiations could amount to a contractual term or a representation.
It is important to know whether a particular statement is a contractual term or if it is a representation as this will determine the appropriate cause of action and remedy available. It may be difficult to establish which statements made in negotiating the contract amount to terms and which statements are merely representations
1.1 Representation
Representation is something which induces others to enter in the contract but does not become a part of the contract.
Case law: Rout ledge v grant 1954
1.2 Term
Term is the condition which is explicitly stated in an agreement and it becomes the part of a valid contract.
Example
Condition to pay £500 to purchase car, now in this payment of £500 is the term of the contract to purchase car.
Case law: Bannerman v white 1861
1.3 Difference between term and representation
it is important to distinguish between term and representation because different remedies of damages are available for the breach of contract or the breach of mere representation
In deciding whether a statement amounts to a term or representation the courts look at four factors
- Relative knowledge of expertise
- Reliance or importance of the statement
- Evidence or strength of the statement
- Timing
1.3.1 Relative knowledge of expertise
Does one party have expert knowledge of the subject matter? In our example, if a car dealer tells you something about a car, it’s more likely to be a term; but if you tell the dealer something, it’s more likely to be a representation
Case law: Dick Bentley production v Arnold smith motors 1965
1.3.2 Reliance or importance of the statement
Did one party obviously rely on what was said when they entered into the contract?
1.3.3 Evidence or strength of the statement
If it’s strong, it’s more likely to be a term (unless both parties understood that it wasn’t!).
1.3.4 Timing
Did the statement immediately precede the making of the contract?