What forms part of a contract? Some statements made leading up to the signing of a contract do not form part of the same.
Terms may be implied into a contract by common law or statute.
There are major (essential) undertaking and minor (inessential) undertakings.
Terms are subdivided into different categories. Different things happen when one breaks different types of term.
What is a breach of contract?
There are often many exchanges of info before a contract is signed. Some count as representations and some do not. The important statements will likely be representations.
A breach of contract gives on the right to claim damages and SOMETIMES the right to terminate a contract.
If a statement before a contract is signed does not form part of a contract then it is a representation.
If a representation is untrue this is a false representation it is NOT a breach of contract.
A warranty can be a type of term of the main contract or it can be part of a separate collateral contract.
A representation may be a mere puff which has no legal significance – a statement of unsupported opinion e.g. ‘that shirt looks nice on you.’
A misrepresentation may lead to a legal action – one can rescind a contract for misrepresentation.
1967 – Misrepresentation Act.
There is negligent misrepresentation – the misrepresentor did not KNOW that what he said was false but he did not make enough of an effort to verify what he was saying was true.
Negligent misstatement is a tort – Hedley Byrne & Co Ltd v Heller & Partners Ltd 1964.
Older cases see misrepresentations as a terM. Modern cases do not.
For a statement to be a term of a contract it should be made with the intention that it is a term of the contract. Lord Moulton 1913.nThis is objective.
Lord Denning 1957 Oscar Chess v Williams. ”if an intelligent bystander would reasonably infer that a warranty was intended that will suffice.”
Heilbut, Symins and Co v Bucketon . Lord Mlulton said –
1. importance of the statement – more important more likely it is a term.
2. one party is relaying on the statement
3. relative knowledge of parties matters.
terms of COLLATERAL CONTRACTS.
A statement may be a term of a collateral contract.
To falsely say that something is of economic value when it is not is to break a term of a collateral contract.
Where a contract is set in writing one is not allowed to assert that there are terms to it other than in riting. This is the PAROLE EVIDENCE RULE. Oral statements do not count as part of a contract.
THERE ARE EXCEPTIONS.
An express term is something actually said.
Sale of Goods Act 1979 – all good must be of satisfactory quality. This is an implied term of every contract. Satisfactory is not perfect nor is it above average – just good enough. The goods may not be less than good enough.
Courts may imply terms into a contract but are loathe to do so.
Courts are interpreter of contracts not makers of them.
Crossley v Faithful and Gould Holdings Ltd 2004. The court REFUSED to imply a term into the contract that the employer had to take care of the employees economic well-being. This would open a floodgate.
Courts imply terms in
1. When there is an established trade usage.
2. Because relationship between the parties.
3. to give an effect to an unexpressed intention of the parties.
4. by operation of statute.
In trade usage – there is standard practice.
The officious bystander rule. If such a person were there one party would answer his questions, ”is that a term” with ;;yes of course” – testily suppress him. MacKinnon LJ said this in 1939.
NATURE OF THE RELATIONSHIP.
Landlord and tenant.
Employer and employee –
Malik v BCCI – 1997. Employer must conduct business in a way not to damage the reputation of the employee.___
OPERATION OF STATUTE.
Sale and Supply of Goods Act 1994. It is a reasonable expectation that goods bought by a consumer will be of satisfactory quality – not merchantable.
Unfair Contract Terms Act. 1977.
Unfair Terms in Consumer Contracts Regulations. 1999.
Wilson v Best Travel (1993) – operator must have regard to the safety of the tourist.
CLASSIFICATION OF TERMS INTO MAJOR AND MINOR UNDERTAKINGS.
A undetaking is an obligation.
A contractual term is a primary obligation. A breach of a primary obligation engenders a secondary obligation to pay damages.
In some cases damages is the only remedy. There may be another remedy in other cases.
There is a remedy of rescinding or termination the contract.
A breach occurs then the injured party has a choice – EITHER Terminate the contract OR affirm it. To affirm it is to insist on contuned performance and claim damages.
An injured party only has the right to do this when the term breached is a condition or a sufficiently important innominate term.
A party is NOT allowed to terminate a contract for a breach of a warranty.
RESCINDING FOR BREACH – injured party may consider the contract to be discharged – brought to an end/. Injured party provides no fiurther performance nor may expect to receive any.
RESCINDING FOR MISREPRESENTATION – injured party claims this. This means the contract is cancelled FROM THE BEGINNING. Property etc… is returned to whoever owned it ebfore the contract was signed.
Termination for breach is rare. Those who have made a foolish deal sometimes rescined for breach to get out of this bad deal. This person may use a technical breach to do so – they will be penalised for breaching lightly.