DISTINCTION BETWEEN REPRESENTATIONS AND TERMS

The importance of identifying those pre-contractual statements which do not form part of
the contract arises from the question of the remedies that will be available in each case. If
a statebreaks it will be liable for the full range of contractual remedies discussed in Chapter 19.
In particular, the claimant will normally be entitled to damages which will compensate
for any profits that may have been lost as a result of the broken promise. A statement
which is not a term, however, and which turns out to be untrue, or which contains a
promise which is broken, may still give rise to a remedy, but on a different, and often
more restricted basis. This is discussed in the next section (see 8.3 below) on remedies for
pre-contractual statements.ment amounts to a promise which forms part of a contract, then a person
who
Where there have been statements made prior to a contract, and there is then a
dispute as to whether they were intended to form part of the contract or not, how do the
courts resolve the issue? The courts’ professed approach is (as in many other areas of
contract law) to try to determine the intentions of the parties. Did they intend the
statement to be contractually binding? In looking at this, the courts generally adopt an
approach based on ‘detached objectivity’,4 that is, asking what the reasonable third party
would have taken the parties to have intended. 5

in trying to identify the answer to this, there are a number of matters which will be
considered. For example, the importance apparently attached to the statement by the
claimant may be very significant, as in Bannerman v White.6 A buyer of hops had been
assured that sulphur had not been used in their production. He had made it clear that he
would not be interested in buying them if it had. When it turned out that sulphur had
been used he was entitled to reject them for breach of contract. The undertaking that no
sulphur had been used was a ‘preliminary stipulation’.7 If it had not been given then the
purchaser would not have bothered to inquire about the price, and would not have
continued to negotiate towards a contract. Evidence, such as was given in this case, that
the truth of a pre-contractual statement is a pre-condition of any binding agreement being
reached, will strongly support the view that it was intended to form part of the contract. 8
In this case, there was, in effect, a guarantee by the seller that sulphur had not been
used, breach of which entitled the buyer to reject the goods. Even where the matter is of
importance to the recipient of the statement, however, the maker will not be taken to have
intended to guarantee its truth if it has been made clear that the truth should be verified
independently. In Ecay v Godfrey,9 for example, the seller of a boat made statements as to
its condition, but also advised the buyer to have it surveyed. In this situation, it was clear
that the seller could not be taken to have intended his statements to have formed part of
the contract. The same principle will apply where such verification would normally be
expected, even if it has not been actively encouraged. This will normally be the position,
for example, in relation to the sale of real property, where a purchaser will generally be
expected to commission an independent survey, rather than relying on the statements of
the seller.10
It would be possible, of course, to engage in a full scale inquiry in each case as to the
evidence of the parties’ intentions. This would be time-consuming, however, and
therefore not a very efficient way of proceeding. In practice, in situations where it is not
clear that the pre-contractual statement amounted to a pre-condition for making the
contract, the courts have developed three rather more specific tests which they use as a
means of determining whether it should be regarded as creating a contractual obligation.
These tests tend to operate as presumptions of an intention as to whether the statement is
part of the contract, which may, of course, be rebutted by other evidence suggesting the
contrary intention. The tests focus on: whether the contract was put into written form;
whether the claimant was relying on the skill and knowledge of the defendant; and the
lapse of time between the statement and the contract.