1.

What are terms

Underlying assumption
- Note: those reasonable assumptions does not always happen
- Parties of equal bargaining power
• The equal position of bargaining may affect the interpretation of the
implied term
- Standard form contracts (e.g., Butler v Ex-Cell-O [1979] 1 WLR 401)
• Even in the equal position, the parties do not always bargain
• Butler v Ex-Cell-O [1979] 1 WLR 401 -battle of forms – way of
interpretation
- Problems:

• Lack of comprehension(不周延，不全面)

 Some terms can be left out

• Non-negotiability
• Unfairness
 One party’ single liability in breach of contract

Essential element of the contract?

- civil law jurisdictions—“objet du contrat”/ “oggetto del contratto”
- common law jurisdictions—Butler v Ex-Cell-O [1979] 1 WLR 401 / LP(MP)A
1989, s2(1)
- terms are not essential elements of a contract
• essential element: offer, acceptance, consideration
• alternative approach: see the degree of overlap between the offer &
acceptance in Butler v Ex-Cell-O [1979] 1 WLR 401
 traditional approach: perfect overlap (we don’t really care what the
terms are, we just care the perfect overlap)
 ap: overlap over the essential elements of the contract

Terms defined as:

- what is not a term (representations, puffs)
 representation
 puff: we don’t really intend that to be true
- propositions of law made true by parties’ acts
- content of a contract

2. Terms v Representation
Terms
- Def: A term is an enforceable contractual undertaking to do (or refrain from
doing) something, or to guarantee the truth of something
- Remedies: damages for breach, rescission if serious (and statutory controls)
- damages for breach: common law remedy, no discretion
 - The innocent party can claim damages aimed at putting him in the
position he would have been in if the contract had been
performed.
- rescission : to get rid of the contract – the contract is died
Representations
- Def: A representation is a statement which asserts the truth of a given state of
affairs and invites reliance upon it, but it does not give an enforceable
guarantee of its truth.
- Remedies: damages for misrepresentation and rescission in any case
- Damages for misrepresentation: “backward looking” claim damages
aimed at putting him in the position he would have been in had he not
relied on the representation (ie not entered the contract).
- rescission in any case :any misrepresentation entitles the claimant to
rescind the contract, while only a serious breach (see 12.2.2) allows the
claimant to terminate the contract.
Note: potential overlap
- A party may be able to prove that the statement made to him is both a
misrepresentation and a contractual term, for a statement that induces the
contract may be incorporated as a, usually written, term of the contract:

How to distinguish—parties’ common intention:

- objective test (Oscar Chess Ltd v Williams [1957] 1 WLR 370)[a false statement
as to the year of the production of a car relying on the registration book was a
representation rather than term]
Oscar Chess Ltd v Williams [1957] 1 WLR 370)
Facts - The plaintiff car dealers bought a car from the defendant in a part-
exchange deal under which the defendant bought a new car from
the plaintiffs’ garage
- The salesman of P offered the defendant an allowance of £290
against the purchase of a new car, believing the old car is a 1948
Morris
- the car was not in fact a 1948 Morris but a 1939 model, which
worth only £175
- the defendant described the car to him as a 1948 10 h.p. Morris
and produced the registration book for it. The salesman checked
the registration book and it showed that 1948 was the date of first
registration
- The defendant honestly believed that the car was a 1948 model. T
Issue has the statement been incorporated into the contract as a term or is it
simply a statement that has induced the other party to enter into the
contract but does not form part of the contract itself?
Held “objective test”
- The question whether a warranty was intended depends on the
 conduct of the parties, on their words and behaviour, rather than
on their thoughts. If an intelligent bystander would reasonably
infer that a warranty was intended, that will suffice.
- The crucial factor would appear to have been the knowledge, or
rather the lack of it, of the defendant
- The transaction history: He only became owner after a great
number of changes. He must have been relying on the registration
book. It is unlikely that such a person would warrant the year of
manufacture
takeaways Objective test: The distinction therefore depends on the words used
by the parties and their behaviour; it does not depend upon their
innermost thoughts

- Indices
- importance of statement (Bannerman v White (1861) 10 CB NS 844)
- the more important the statement is, the more likely it will become a
term
Bannerman v White (1861) 10 CB NS 844
Facts
- W was expressly assured that the hops(啤酒花) on sale had not been

treated with sulphur( 硫 磺 ), after saying that he would not even

bother asking the price if they had.

- In fact, sulphur was used on a small portion of the hops.
issue Whether the assurance was a term or representation
Held The statement was held to be a term of the contract.

- special knowledge (Dick Bentley v Harold Smith [1965] 1 WLR 623)

- A court is more likely to find a term if the maker of the statement has
special skill or knowledge in the subject matter of the statement, or is
in a better position to ascertain, or bears more responsibility for
ascertaining, the accuracy of the statement than the other party
- why- the reliance compels the promiser to act in good faith
Dick Bentley v Harold Smith [1965] 1 WLR 623
Facts - a car deal bought and sold a car to P
- a car dealer made a false statement to a private buyer about the mile
age of the car since its engine replacement (‘20,000 miles’, when
actually 100,000 miles)
issue Whether the statement as to the mile age of the car was a term or
representation
Held

- verify truth of statement (Ecay v Godfrey (1947) 80 Lloyd’s Rep 286)

 - A statement is unlikely to be a term if the maker of the statement tells
the other party not to rely solely on the statement but to verify its
truth
Ecay v Godfrey (1947) 80 Lloyd’s Rep 286
Fact - a seller stated that the boat was sound but advised the buyer to have
it surveyed
Held - representation
Schawel v Reade (1913)
Fact - the seller said to the buyer: ‘You need not look for anything; the
horse is perfectly sound. If there was anything wrong with this
horse, I should tell you.’
Held - a term
- Formally recorded (Heilbut Symons v Buckleton)
 General rule A contract may be oral, but if it is recorded in writing,
the presumption is that the document records the complete terms and
anything not included therein is a representation.
Note:
- The relevant factors point to concerns beyond the stated one of the parties’
intention in making the term-representation distinction. They suggest that courts
are also concerned to protect the addressee’s reasonable expectations induced by
the statement, and to determine whether the maker of the statement should
reasonably bear the responsibility for that expectation, even if he has not actually
agreed to bear it.

3. Express terms
Express terms- parole evidence rule
- General rule: Contract parties are generally barred from adducing extrinsic (or
‘parole’) evidence to add to, vary, or contradict a document which purport to
record the parties’ agreement (Jacobs v Batavia & General Plantations [1924] 1
Ch 287)
- The four corners doctrine
- Contract law accords almost sacred status to written documents; they are
regarded as exclusively embodying the ‘four corners of the contract’.
- Exceptions:
 the contract is vitiated;
 the contract includes terms additional to those contained in the contractual
document, whether express (called ‘collateral’) or implied
 the contract should be rectified

Collateral terms/contracts
- A term (or a contract) may be collateral to the main terms (or contract)
- Test for collateral term/contract (Mendelssohn v Normand Ltd [1970] 1 QB
177):
  objective test + assurance so strong that claimant would not have
contracted
 an inducement that is so strong that it would be the reason for the party
to come into the contract
 consistent with the idea of – distinction between term vs.
representation
 Rationale of a stronger test
 stronger rights are conferred by collateral terms than by representation
 potential for collateral terms to override inconsistent terms in the
contractual document

Collateral terms ≠ collateral contracts?

- Collateral terms
- collateral contract: a second contract containing the promise, in consideration
of the promisee entering the main contract)
- Functions: Overriding inconsistent terms in the main written contract:
circumventing the parole evidence rule to allow a party to add to, vary, or
contradict a contractual document.(e.g., Curtis v Chemical Cleaning & Dyeing
Co [1951] 1 KB 805)
Mendelssohn v Normand Ltd [1970] 1 QB 177
Facts - M parked in N’s garage on terms that N would ‘accept no liability for
any loss or damage sustained by the vehicle its accessories or
contents howsoever caused’.
- M left the car unlocked on the insistence of N’s employee who
undertook to lock it for him.
Held - The latter undertaking was found to be collateral terms which
contradict the contractual term
Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805
Facts - C took a wedding dress to CCD for cleaning and was asked to sign a
‘receipt’ exempting CCD from liability for ‘any damage howsoever
arising’;
- C signed after being assured that the exemption only related to beads
or sequins on the dress
- the dress was returned badly stained
Held CCD could not rely on the wide exclusion clause beyond the limited extent
stated

Entire agreement clauses

- which may provides “accordingly, any promises or assurances made in the
course of the negotiations shall have no contractual force”
- Effect: An expressly agreed parole evidence rule is enforceable.
 Such clauses thus exclude liability for breach of collateral terms or
agreements outside the written contract (SERE Holdings 372 10.3
 EXPRESS TERMS Ltd v Volkswagen Group UK Ltd (2004
 BUT may not exclude liability for misrepresentation
4. Implied terms
General
- ‘[T]he implication of terms is so potentially intrusive’ (Philips Electronique v
British Sky Broadcasting [1995] EMLR 472)
- Function of courts in implying terms
- Ways to imply terms:
 Implication by custom
 implication in fact—based on circumstances
 implication in law—by statute, common law or custom

CONDITIONS AND WARRANTIES:

- Why it matters—remedies:
 breach of condition—repudiation and damages
 breach of warranty—damages
repudiation: kill the contract – the obligations don’t have to be complied with any more
warranty – damages
= still have to pay the flowers
= but the damages is lesser – because you just reduce the damages of the flowers
- Basic distinction:
 condition—essential term
condition: root of the quality
 warranty—non-essential term

how to classisfy
 By the parties—courts can override parties if unreasonable (Schuler v Wickman
[1974] AC 235)
 Court’s discretion to accept or not
 Schuler v Wickman [1974] AC 235
 Facts: sellers has to turn up on a certain venues at a certain time
perioediacly
 Held
 Though stipulated in the contract , the party’s c survive only when the
c is reasonable
 Why – reasonableness – repudiation the most fundamental remedy
 By statut (sale of goods o)
 SOGO s12—“stipulations as to time of payment are not deemed to be of the
essence of a contract of sale”
 Condition = of the essence
 SOGO s16—“there is an implied condition that the goods supplied under the
contract are of merchantable quality […]”
 1) imply a term – a general requirement of the quality – rather than quality
for certain purposes
  2) imply a condition
 Policy concerns : of good bargaining price – weaker party should not
be cheated with bad quality
 By precedent—e.g., time when vessel ready to load in voyage charterparties (The
Mihalis Angelos [1971] 1 QB 164
 Facts
 Charterparties – rental of the ship. Between who own the ship and who
wants use the ship
 Clause: on 20 July HK -Vietnam
 But on 17 July still lodaging
 Clause: notice of termination
 Issue
 Whether the loading or unloading term is of the essence of the contract
 Held
 Yes

DIFFICULTY
- Reasonableness test
- The real intention of the parties
- Very rare provisions about warranty

Approach where parties’ intention unclear

- Test (Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26):
 innocent party deprived of substantially the whole benefit under the contract
 high threshold (breach goes to root of contract—The Hansa Nord [1976] QB 44)
- requisite
 nameless term
- test
 whether the breach of the term would trigger nuclear option of the repudiation
 i.e. innocent party deprived of substantially (refers to the benefit) the whole
benefit under the contract
 if yes, it is a fundamental breach of term than trigger repudiation
 if no, i.e. deprived some part of the benefit
 substantial
 in the test: what is the benefit – how much they are expecting – how much
they won’t getting
- Guidelines under Grand China Logistics v Spar Shipping [2016] EWCA Civ 982:
• classification is question of interpretation
• when innominate
 term innominate if various degrees of gravity of breach (many ways
of breach)
• need to apply commercial approach (not clear)
 you don not want to kill the contract. You want to keep the
contract alive
  if not alive – trigger other questions
 damages + repudiation
• innominate term, not condition, is default
 1. any terms in contract is innominate in the default position
 2. Anything in contract points to the term implies it to be a
condition
 3. Applying the test