Possibilities for Statements Made during negotiations

Statements made in the course of negotiations

Term

Collateral Contract

Puff

Representation

Contractual Intention
Test to assist in determining contractual intention

Time
Writing Special knowledge or skill Importance in the minds of the parties; and Precision of statement of the parties

Express Terms
Express terms are terms that the parties have expressly agreed upon. They may be in writing or they may be oral.

Pre-contractual statements are statements made by one of the parties before entering into the contract.

When will a pre-contractual statement be considered an express term of the contract?

A statement or assurance will only constitute a term of a contract if it was made with the intention that it should be binding as part of the contract. The test is an objective one: If an intelligent bystander would reasonably infer that a warranty [a promise] was intended, that will suffice'.[Lord Denning in Oscar Chess v Williams]
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Express Terms
Couchman v Hill [1947] KB 554
Question: Were the oral statements that the vendor gave to Mr

Couchman in relation to the heifer part of the

contract or were they overridden by the exclusion clauses?

Held: The statements were promissory and formed part of the contract because the vendor wanted the additional statement to induce Mr Couchman to purchase the heifer, the statement was made close to the time of contract, and the statement was by a party with knowledge of the facts surrounding the statement.
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Express Terms
Oscar Chess Ltd v Williams [1957] 1 WLR 370
Question: Whether the representation that the car was a 1948 model was a term of the contract of sale of the car.

Held: Denning LJ emphasised that the test for whether a representation is promissory is an objective one and it is vital to examine the form of words used in making the representation. Also relevant is the knowledge and expertise of the person making the

representation. All these elements led to the

conclusion in this case that the representation was not intended as a promise.
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Express Terms
Ellul & Ellul v Oakes (1972) 3 SASR 377
Question: Whether a statement in a real estate booklet that a

house was sewered was a term of the contract of

sale for the house.

Held: Using the objective test, the court concluded that a reasonable person would consider details contained in a public listing of a property for sale as being a promise as to the condition of the house. The expertise of the seller in relation to the details of the house (like sewerage) was an important factor.

Express Terms
Factors that courts take into account in an objective assessment of the promissory nature of a statement:
The language of the statement - the more promissory the language of the statement, the more likely it is to be considered a part of the contract.

Inducement - if the statement was made in order to

induce the other party to enter into a contract, then a

court is more likely to regard the statement as promissory.

Knowledge and expertise of the parties - a statement made by a person with greater knowledge and expertise in the particular area than the other party is more likely to be considered promissory.
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Express Terms
A Statement May Be a Collateral Contract A collateral contract is a second contract between the parties that induces the creation of the main contract.

All of the normal requirements of offer, acceptance, consideration and intention apply to collateral contracts.

The consideration is the entry into the main

contract by the party which is induced.
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Collateral Contract
A collateral contract formed when a promise is made to induce the promisee to enter into the

main contract

Entering into the main contract forms the consideration for the collateral promise and the

promise, thus brought, becomes independently

enforceable

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Collateral Contract...
Requirements for a valid and binding collateral contract

It must have been intended that the promise would be legally binding
The promisee must have entered into the main contract on the basis of the promise and in reliance upon it; and The promise must not be inconsistent with the terms of the main contract

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Express Terms
Sheppard v The Council of the Municipality of Ryde (1952) 85 CLR 1
Question: Whether a statement by the Council with respect to

land opposite the land purchased by the plaintiff was

a collateral contract in return for which the plaintiff agreed to enter the main contract of sale for his land.

Held: The courts will generally be reluctant to find that a collateral contract exists because often the promise alleged to support the collateral contract will be a promise which you would expect to find in the main contract. This was not the case here and the court was satisfied that the plaintiff would not have entered into the contract but for the statement made and that the defendants were in fact promising to maintain the land in question as a park.
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Express Terms
JJ Savage & Sons v Blakney (1970) 119 CLR 435
Question: Whether a statement about the estimated speed of an engine formed a collateral contract.

Held: A statement about estimated speed was an

opinion, not a promise. It is not enough to establish

a collateral contract simply by finding that the main contract would not have been entered into without the collateral statement; the question is whether

there was a promise intended in the statement in

question. Here, there was no such promise.
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Express Terms
Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133
Question: Whether a collateral contract existed where the defendant purportedly promised not to exercise a contractual right of termination unless certain circumstances occurred and in return for that promise the plaintiff signed the lease.

Held: There was no collateral contract because the alleged terms of the collateral contract were

inconsistent with the terms of the main contract.

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Express Terms
Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133
Isaacs J at 148 [HPR 441]:

"The truth is that a collateral contract, which may be

either antecedent or contemporaneous, being supplementary only to the main contract, cannot impinge on it, or alter its provisions or the rights created by it; consequently, where the main contract is relied on as the consideration in whole or part for the promise contained in the collateral contract, it is a wholly inconsistent and impossible contention that the other party is not to have the full benefit of the main contract as made..."

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Express Terms
This rule has been criticised on a number of grounds:

The rule does not adequately take into account the

fact that oral representations are a common part of negotiations;

The intention of the parties in contract is supposed

to be the overriding concern of the courts however the consistency rule means that this is difficult to achieve in most cases; and

It may be unconscionable to give an assurance about how a particular clause will operate and then to renege on that assurance.
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Effect of Signature
A party will be bound by the terms contained in a contractual document which he or she has signed, whether or not he or she has read the document.

L'Estrange v F Graucob Ltd [1934] 2 KB 394

Question:

Whether a very broad exclusion clause formed part

of a contract where the clause was included in an order form headed Sales Agreement that had been signed by the purchaser.

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Effect of Signature
L'Estrange v F Graucob Ltd [1934] 2 KB 394 Held: The presence of the signature of the plaintiff on the document indicated that the plaintiff had read and agreed to all of the terms contained within it. This was irrespective of whether or not the plaintiff had actually read the document.

The presence of a signature may not result in binding obligations where there has been fraud or misrepresentation by the other party, or where the document signed could not reasonably be considered to be a contractual document.
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Effect of Signature
Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805 Question: Was Mrs Curtis bound by the broad exclusion clause on the dry cleaning receipt that she had signed or did the narrower exclusion, as explained to her by the shop assistant, apply?

Held: LEstrange v Graucob represents the position at common law. However, it will not apply where:

the signed document could not have been

considered contractual there was fraud or misrepresentation
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Effect of Signature
Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805 Here, there was an innocent misrepresentation by the shop assistant regarding the breadth of the exclusion clause, therefore the shop was bound by that narrower exclusion.

Lord Denning added that had Mrs Curtis not realised that the dry cleaning receipt contained contractual terms, the court may have been prepared to find that she was not bound by the

exclusion clause because the receipt may not have

been considered a contractual document.

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Incorporation and Unsigned Documents

How does a court decide whether someone has agreed to terms contained on a ticket or a sign when the most obvious indicator of agreement signature - is lacking?

Incorporation by notice:

The party must be given reasonable notice of the terms;

Notice must be given usually at the time of or before entry into the contract.

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Incorporation and Unsigned Documents

Parker v South East Railway Co (1877) 2 CPD 416 Question: Whether the terms on the back of a cloak room

ticket were incorporated into the contract.

Held: There are three aspects to answering this question:

A plaintiff is bound if he or she actually knew there

were contractual terms on the ticket and read them, or decided not to bother reading them.

If a plaintiff is aware of the terms but not of their significance, the question is: is this a transaction where a reasonable person would expect to find contractual terms in a ticket? If yes, then the plaintiff is bound (ie its an objective test).
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Incorporation and Unsigned Documents

Parker v South East Railway Co (1877) 2 CPD 416
If the recipient did not know there was writing or that the ticket contained terms, did the person seeking to rely upon the ticket do all that was reasonable to bring notice of the terms to the attention of the recipient?

The document/notice in question must be contractual in nature.

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Incorporation and Unsigned Documents

Causer v Brown [1952] VLR 1

Question: Whether an exclusion clause contained in an

unsigned dry cleaning docket formed part of the

contract.

Held:

The docket was not the type of document that might

contain contractual terms. It was reasonable for it to be regarded only as a voucher for reclaiming the dress.

Would a similar decision be made in todays more litigious society?

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Incorporation and Unsigned Documents

The more onerous the terms contained within the ticket, the more onerous the requirement of notice.

Interfoto Picture Library Ltd v Stiletto Visual

Programs Ltd [1989] 2 QB 433

Question: Whether the term outlining the very severe fines for

late return of the photo transparencies was

incorporated into the contract.

Held:

The term was not included in the contract because

Interfoto had not done what was necessary to draw this unreasonable and extortionate clause fairly to [Stilettos] attention."
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Incorporation and Unsigned Documents

Tickets issued by machines
Thornton v Shoe Lane Parking [1971] 2 QB 163

Question: Whether the terms and conditions of parking in a car park where a ticket is issued by a machine and where the terms were contained on a sign inside the car park were incorporated into the contract.

Held:

This is different to the other ticket cases because,

where a ticket is issued by a machine, a customer has no opportunity to refuse it once paid for.
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Incorporation and Unsigned Documents

Thornton v Shoe Lane Parking [1971] 2 QB 163

The contract is concluded at the time the customer puts money into the machine. Customers will only be bound by the terms of the ticket if the terms are sufficiently brought to their attention before they go to the machine and not otherwise. Any terms issued after the customer has paid for a ticket (including on

the ticket itself) are not part of the contract.

In this case, the terms referred to in the ticket were not incorporated because Shoe Lane Parking had

not done what was reasonably sufficient to give Mr

Thornton notice of the conditions.

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Incorporation by course of dealing

Where the parties have a history of dealings, contractual terms introduced in earlier contracts may be incorporated into a subsequent contract even though the usual requirements for incorporation of terms have not been met in relation to that subsequent contract.

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Incorporation by course of dealing

Factors:

Number and frequency of previous dealings; Consistency of conduct in previous dealings; Contractual nature of document relied on;

Whether it is reasonable to expect that the

same terms are included in subsequent contracts.

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Incorporation by course of dealing

Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379

Question: Whether the requirement that one penny be paid

upon entering and leaving the wharf, regardless of

travel on the ferries, was incorporated into the contract.

Held:
The term was incorporated into the contract between Robertson and the Ferry Co. In this case, it was immaterial whether the Ferry Co had done enough to bring the notice of terms to the publics attention. Robertson was a regular user of the ferry service and thus must have been aware that the companys method was to release the turnstiles only on payment of a penny.
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Incorporation by course of dealing

Eggleston v Marley Engineers Pty Ltd (1979) 21 SASR 51 Question: Whether the limited liability clause on the back of a

docket that was always presented after the

completion of a job was incorporated into the contract.

Held: Evidence was that Marley was aware that the docket contained terms, but had never read them. The court decided that the terms could therefore not be implied by past dealings because Marley had no actual knowledge of the terms on which Mewett sought to rely.
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Incorporation by course of dealing

Eggleston v Marley Engineers Pty Ltd (1979) 21 SASR 51 This case is contrary to the objective test

for the incorporation of terms, ie courts

have usually held it to be enough that the party seeking to rely on the term sought to be incorporated does all that is reasonable

to bring the term to the attention of the

other party.

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Implied Terms
Terms may be implied into a contract:
as a matter of fact: Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Byrne v Australian Airlines (1995) 185 CLR 410;

as a matter of law: Liverpool City Council v Irwin [1977] AC 239; Sale of Goods Act 1923 (NSW); Trade Practices Act 1974 (Cth);

as a matter of trade usage or custom: Con-Stan

Industries of Australia Pty Ltd v Norwich

Winterthur (Australia) Ltd (1986) 160 CLR 226

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The Conditions under which Courts will Imply Terms

The terms must be reasonable and equitable It must be necessary to give the contract business

efficacy
It must be so obvious that it goes without saying It must be capable of clear expression It must not contradict any express term of the contract See BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266. Cited with approval in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.
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Implication through Trade Usage or Custom

Must be notorious, certain and reasonable Must not offend against any legislative provisions;

and
Must not be inconsistent with any express term of the contract

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