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Terms - Contract law: Notes with case law

Contract law (University of London)

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Terms
 How do the courts find intention to conclude whether a statement is a term or a
warranty?
1. When the statement maker has special knowledge on the subject matter- Term
 Dick Bentley v Harold Smith Motors
 Oscar Chess v Williams
2. Whether the maker of the statement accepted responsibility for the soundness of the
statement- Term
 Shawal v Reede
3. Importance attached to the statement-Term
 Banneman v White(Objective test)
4. Where the statement is accompanied by a recommendation that truth be verified
 Ecay v Godfrey
5. Where one party clearly relied upon a clause(reasonable reliance)
 Esso Petroleum v Mardon

*In the case of Heilbut Symons and co v Buckleton it was recognized that none of the above mentioned
factors are decisive tests and the intention of the parties is deduced from meth totality of the evidence.

 Parol Evidence Rule

This applies to situations where the parties have a written contract and as the general rule
parties can’t add or reduce anything to contradict the written document
Exceptions
1. Where the contract wasn’t intended to cover the whole agreement
2. In order to prove a custom or a general trade usage to imply a term in the contract
3. Evidence can be adduced to show that the contract is void by reason of misrepresentation or by
mistake
4. It may be admitted to prove the existence of a collateral contract

*Recently contracts include an obligation clause to serve the purpose of the rule.

 Terms implied by Courts

Expressed Terms: Terms agreed by both parties (oral or written)
Implied Terms: Even if not agreed by both parties, can be included into the contract, courts
imply the terms.

1. Trade Usage
Based upon customs or normal business practice (Only businesses)
2. Existing Relationship between Parties
Existing prior relationships one is obligated to continue the same thing
3. Terms implied by Statue
In order to regulate contract terms are implied by statutes by the regulatory authorities
 Business to Business contracts
Terms are implied by SGA 1979

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 Business v Consumer contracts

Terms implied by the CRA 2015
4. Common Law principles
Implied in accordance with the common law

 Officious Bystander Test

4th reasonable bystander overlooks the situation and so the contracts objectively.(Used to
determine the unexpressed intention of the party)

 Expressed Terms:
1. Condition: any term that goes to the heart of the contract, if it is breached the contract can
be nullified and damages will be given
2. Warranty: not as important as a condition, if a warranty is breached only damages will be
given.
3. Innominate term:
Hong Kong FIR case, created by the courts to overcome ambiguity between warranties and
conditions to see how serious the impact/ consequence was at the breach of the term.
Con:
Lack of certainty, varies from judge to judge, case to case.
Pro:
Promotes low usage of resending from contracts which is considered a severe/ harsh
remedy

 Remedies
When a primary obligation is undertaken a secondary obligation applies in form of damages
 Expressed term: Once the injured party establishes a breach they have the option of
either terminating or affirming the contract, either way they will be eligible to receive
damages.
*This remains a drastic remedy and not easily granted.
 Condition breach: if a warranty is breached only damages will be given, a party
rescinding the contract need not show any actual loss
Bowes v Shand
 Warranty breach: if a warranty is breached only damages will be given

Q/ How does the court distinguish b/w conditions and warranties?

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