Contract Law. Contractual Term or Representation
Statements made during the course of negotiations could amount to a contractual term or 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
If the statement amounts to a term of the contract which is not fulfilled
the representative may cease the breach of contract. If the statement is merely a representation which turns out to be untrue
the representative may bring an action for misrepresentation. In deciding whether a statement amounts to a term or representation, the courts look at four factors
1. The parole evidence rule. 2. The relative expertise of the parties
3. The importance of the statement and reliance. 4. Timing of representation
1. The parole evidence rule. Where the contract has been put into writing, only the terms included in the written document are terms
Only verbal statements will be representations. 2. Relative expertise. If the representative has the greater knowledge, it is more likely to be a contractual term
Conversely, if the representative has the greater knowledge, it is more likely to be a representation
In Oscar Jeff v. Williams, the defendant traded his car in to get a newer car from a car dealer
You have misstated the date of registration. The court held this was merely a representation as the purchaser had greater knowledge on the year of car models
In Dick Bentley v. Hal Smith-Mosey, the claimant asked the defendant to find him a suitable car
The defendant was a car dealer specializing in the prestige market. The defendant recommended a Bentley and told him it had only done 20,000 miles since having a recent
In fact, it had done 100,000 miles. This statement was held to be a term as the defendant had specialist knowledge
3. The importance of the statement and reliance. Where the representative indicates to the representative the importance of the statement, this is likely to be held to be a term
In Bannerman v. Wright, the claimant asked the defendant if the hops had been treated with sulfur
He explained that if they had, he wouldn't buy them as he wouldn't be able to use them to make beer
The defendant assured him they had not been treated, when in fact they had
This statement was a term as its importance had been communicated. In R.K.V. Godfrey, the sayer of the boat stated
as far as he was aware the boat was sound and free from bugs, but advised the claimant to have it surveyed
The boat turned out to be defective. This statement was held to be a representation
Conversely, in Sherwell v. Reed, the seller of a horse stated the horse was sound and free from bugs
He said there was no need to get a vet to check them out. If there was anything wrong with him he would tell him
The buyer told him he wanted the horse for stud purposes. The horse had an hereditary eye disease
This statement was held to be a term. 4. Timing. The longer the time lapse between making the statement and entering the contract
the more likely it will be a representation. In Ravlidge v. Mackay, there was a three-week time lapse between the stating the year of the motorcycle and entering the contract
This meant the statement was a representation. In summary, in deciding if the statement was a term or representation
the courts look at whether it was in writing, who had the greater expertise
whether the importance of the statement was communicated, and the time lapse between making the statement and entering the contract
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