LAW503 notes

ADDITIONAL NOTES:

1) STATEMENT (MERE REPRESENTATION) & TERMS

- Before entering into a contract, various statements will often be made by one party in order to encourage or induce the other party to enter into the contract. A dispute may later arise as to which of the statements made should be considered a part, or a term, of the contract, and which should be taken as merely pre-contract talk, and therefore not a part or term of the contract. Parties to a contract are bound only by its terms, not by any peripheral statements that may have been made.

- A mere representation is a statement made during negotiations but it may not form part of the contract. A mere representation (if breach) will not give rise to contractual liability whereas a term of the contract will.

- TIMING:  the longer the interval is between the making of the statement and the reaching of the final agreement and contract, the less likely it is that the statement will be considered to be a term of the contract.

-RELATIVE EXPERTISE:  The fact that the maker of the statement had a special knowledge or skill compared with the other party will make the statement more likely to be a term. Where the agreement was subsequently reduced to writing and the statement was not included, it is less likely to be a term.

-THE PAROLE EVIDENCE:  If an agreement is eventually put into writing, then the statement is more likely to be a term of the contract.

2) TERMS MAY BE CONDITION OR WARRANTIES

-Contracts will always contain different types of terms (said or written), some more important than others. The more important terms are called "conditions", the less important terms are called "warranties".

- Conditions are so important that without them one or other of the parties would not enter into the contract. Consequently, to make a condition falsely, or to breach a condition, is viewed so seriously that the wronged party will be entitled to treat the contract as void, voidable or rescinded.

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-Where the term is a warranty, the wronged party will only be able to seek monetary damages for any loss suffered. The contract itself will remain binding on both parties.

- In making a decision as to whether a term is a condition or a warranty, the court will consider all the surrounding circumstances, including the seriousness of the consequences if the contract is held to be non-binding, and the intentions of the parties at the time they made the contract.

3) EXCLUSION CLAUSES

- It is possible to have a term in the contract which excludes one of the parties from responsibility for something that may go wrong in the performance of the contract or limits that responsibility. It is called an exclusion clause or an exemption clause. For example, an exclusion from liability for damage done to the lawn by a builder's backhoe might be included in a contract between the builder and a home owner who is having an extension built to their home.

- Where a contract is a document signed by the parties, they will generally be bound by the exclusion clause in it.

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