Section B - Incorporating Terms

Question 1

What are terms?

Answer 1

Terms are the details of what has been agreed between the two parties. Some contracts will be in writing, particularly commercial/business contracts where it is important that the two parties to the contract know exactly what they agreed. However, many consumer contracts are purely verbal with no written terms, e.g. buying goods in a shop. The main problem with such contracts is the little evidence of agreed terms.

Question 2

What are pre-contractual statements (PCS)?

Answer 2

Any verbal/written statements made before the official contract is made.

Question 3

What may happen if it’s decided that PCS have been incorporated into that contract as terms?

Answer 3

There may be a claim for breach of contract if the term is not lived up to.

Question 4

What happens if it’s decided that PCS have been incorporated into that contract as terms?

Answer 4

The term is simply a representation.

Question 5

What are terms?

Answer 5

Statements within a contract setting out the rights and obligations of the parties.

Question 6

What is the contractual effect of terms?

Answer 6

They are part of the contract and create legal obligations. Can be breached.

Question 7

What are representations?

Answer 7

Statements made at the time or before making a contract.

Question 8

What is the contractual effect of representations?

Answer 8

A representation is not part of the contract and does not create legal obligations. Cannot be breached.

Question 9

What are misrepresentations?

Answer 9

Untrue statements made before or at the time of making the contract.

Question 10

What are some examples of terms?

Answer 10

• Adverts
• Websites
• Sales talks
• Q and A’s
• Notices

Question 11

Whether a pre-contractual statement is a term or a representation depends on the…

Answer 11

Intention of the parties.

Question 12

The court may have to decide what the parties intended if this is not clear from the circumstances. The court will look at ? when making this decision.

Answer 12

Several factors.

Question 13

1) Did the representee place particular importance on the statement?

Answer 13

The more important the PCS is to the representee, the more likely it will be a term of the contract.

Question 14

Which cases are used for 1) Did the representee place particular importance on the statement?

Answer 14

• Birch v Paramount Estates
• Routledge v McKay

Question 15

Birch v Paramount Estates case facts

Answer 15

Paramount were holding a house viewing and told Birch that they were selling another house that was ‘just as good as the show house’. Birch quickly agreed to buy the house without seeing it, but there was nothing written into the final contract about the quality of the house. The house turned out to be very different to the show house.

Question 16

Why did the court hold that the verbal statement was an incorporated term in Birch v Paramount Estates?

Answer 16

Birch clearly considered the statement important as he agreed to buy the house then and there, without seeing the other house - the statement was one of the main reasons he agreed.

Question 17

Routledge v McKay case facts

Answer 17

A seller made an incorrect statement about the date a motorcycle was manufactured. A week later, the sale was made but there was no mention of the date when buying, nor was it in mentioned in the written contract.

Question 18

Why was the statement not incorporated in the contract in Routledge v McKay?

Answer 18

If the buyer had to think about the purchase for a week and did not care to put the date into the written contract, the date was not so important that it compelled him to buy it.

Question 19

2) Did the representor have special knowledge (expert opinions)?

Answer 19

If the representor has special knowledge, the statements they make are more likely to be relied on so may be part of the contract.

Question 20

Which cases are used for 2) Did the representor have special knowledge (expert opinions)?

Answer 20

• Dick Bentley v Harold Smith
• Oscar Chess v Williams

Question 21

Dick Bentley v Harold Smith case facts

Answer 21

A car dealer stated that a car had done 20,000 miles even though it had done 100,000. The buyer agreed to buy this car, but nothing about the miles was written in the contract.

Question 22

Why was the statement incorporated into the contract in Dick Bentley v Harold Smith?

Answer 22

The seller was a car dealer who should know details about the car - it is reasonable to rely on an expert’s opinion.

Question 23

Oscar Chess v Williams case facts

Answer 23

A private seller was trying to sell his car and believed it to be a 1948 model. He told this to the buyer who bought the car, but the model was actually much older.

Question 24

Why would D not have expert knowledge in Oscar Chess v Williams?

Answer 24

The seller was a private seller so would not necessarily know the exact model of the car - not reasonable to rely on a non-expert’s opinion.

Question 25

3) Timing

Answer 25

If there is a long period of time between the statement and the agreement, it suggests that the statement was not very important and should not be part of the contract. If there is a very short gap, this suggests the statement is very important to the representee and should be part of the contract.

Question 26

How was the timing of the statement relevant in Birch v Paramount Estates and Routledge v McKay?

Answer 26

If the buyer had to think about the purchase for a week and did not care to put the date into the contract, the date was not so important that is compelled him to buy it. Comparatively, in Birch v Paramount Estates - C decided to buy the house soon after the statement was made, showing how important it was to him.

Question 27

4) Signing a written document/contract.

Answer 27

If verbal PCS are not included in a written contract, the law will usually infer it was not the intention of the parties for the statement to be a term of the contract - Routledge v McKay (not putting the date of manufacture in writing suggested it was not important to the buyer).

Question 28

L'Estrange v Graucob

Answer 28

If something is written into the contract and the contract is signed, this is incorporated even if not read or understood.

Question 29

Which cases are used as exceptions to L'Estrange v Graucob?

Answer 29

- Interfoto v Stiletto - Grogan v Robin Meredith - Curtis v Chemical Cleaning and Dyeing

Question 30

Interfoto v Stiletto said that...

Answer 30

Unusual or onerous (harsh) terms (for example, ones excluding all liability for any damage) may not be incorporated without specific attention being drawn to them.

Question 31

Grogan v Robin Meredith case facts

Answer 31

An employer and employee had a signed contract of employment. The employer also made the employee sign timesheets, which outlined extra terms not included in the employment contract. The employee breached one of the statements on the timesheet, and the employer argued this had been incorporated due to the signature.

Question 32

Grogan v Robin Meredith decision

Answer 32

The rule from L'Estrange only applies to contractual documents. Signing a non-contractual document will not automatically incorporate those statements.

Question 33

Curtis v Chemical Cleaning and Dyeing case facts

Answer 33

Mrs Curtis took her wedding dress to be cleaned and signed a document that exempted the cleaners from all damage, however it occurred. Before signing, Mrs Curtis asked what she was signing and she was told that the cleaners would not be liable for damage to sequins or beads. The dress was returned with a large stain on it, so Mrs Curtis sued; CCD wanted to rely on the exclusion clause which prevented them from being liable for all damage.

Question 34

Curtis v Chemical Cleaning and Dyeing decision

Answer 34

Even though the exclusion clause had been signed, the exclusion could not be relied on due to the oral statements/assurances made by the cleaners about what the contract said.