⇒ The terms of a contract lay down the rights and obligations of the parties to the contract
⇒ If a term is breached a cause of action can result
⇒ Terms bind and are contractual, whilst representations do not bind and are usually not contractual
⇒ Therefore, breaching a representation is not a cause of action for breach of contract
⇒ Whether something is a term or a representation depends on the objective intention of the parties - so if what was said was meant to form part of the agreement, then that will be a term
⇒ The “guiding factors” and “presumptions” the court asks itself are:
⇒ If a statement is written down it is more likely to be a term
⇒ If the statement is signed that is greater evidence it is a term (L’Estrange v F Graucob 1934)
⇒ Parole evidence rule:
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⇒ If a party relies on the specialist statement when entering a contract that can be a term e.g. if Party A makes a statement (which only they know because of their professional/knowledgeable understanding) which induces party B to enter into a contract, then that statement can be a term of the contract
⇒ See, for example, Dick Bentley Productions v Harold Smith [1965]. However, compare this case with Oscar Chess v Williams [1957]
⇒ The statement maker must know the other party thought the statement was important for it to be a term
⇒ Surrounding circumstances could make the statement important e.g. Bannerman v White (1861)
⇒ If the statement was made a long time before the contract was finalised the less likely it is a term e.g. Routledge v McKay [1954]
⇒ If a statement is identified as a term it is only binding if it forms part of the contract (incorporated)
⇒ 3 methods of incorporating a term (see exclusion clauses):
⇒ It is not always necessary for all terms to be agreed expressly; instead, the court will imply terms to reflect the party intentions
⇒ Parties must have intended such terms to be a part of the contract but felt it unnecessary to expressly state the term
⇒ Terms are implied in fact when:
⇒ 1) Business efficacy:
⇒ 2) The “Officious bystander” test:
⇒ 1) A term implied in law by the court
⇒ 2) Terms implied in law by statute
⇒ 3) Terms implied in law by customs
⇒ 1) Conditions
⇒ 2) Warranties
⇒ 3) Innominate (or intermediate) terms → although, these are not really terms!
⇒ Breaching a condition will end the contract
⇒ A condition is a fundamental term of a contract. Therefore, breaching a condition is a 'repudiatory' breach
⇒ Not as important as conditions, so a contract will not automatically end if a warranty is breached
⇒ However, damages can be sought
⇒ The innocent party can accept the breach of warranty and withdraw from the contract:
⇒ OR the innocent party can affirm and waive the right to withdraw
⇒ Often statute will expressly say whether a term is a condition or a warranty e.g. the Sale of Goods Act 1979 s12: an implied term as to title is expressly stated, so should be a condition
⇒ Also, the parties can identify a term as a condition or warranty
⇒ If both statute and the parties cannot deem whether a term is a warrants or a condition the court will look to the importance of such a term
⇒ An innominate term is a term which cannot be identified as either a condition or a warranty
⇒ The court will determine whether the term is a condition or a warranty depending on the seriousness of the breach and at the time of the breach
⇒ Bunge v Tradax: ‘unless the contract makes it clear (…) that a particular term is a condition or only a warranty, it is an innominate term’ Lord Scarman
⇒ Advantage of clarifying a term as innominate:
⇒ Disadvantage of classifying a term as innominate
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