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Collateral Contracts; Parol Evidence Rule; Written Terms Or Notices from Signed Contractual Documents; and Notice of Contractual Terms from Unsigned Documents

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Collateral Contracts; Parol Evidence Rule; Written Terms Or Notices from Signed Contractual Documents; and Notice of Contractual Terms from Unsigned Documents City Research Online City, University of London Institutional Repository Citation: Chuah, J. C. T. (2015). Contents. In: Furmston, M. (Ed.), Butterworths Common Law Series: Law of Contract. Butterworths Common Law Series. London, UK: LexisNexis. This is the accepted version of the paper. This version of the publication may differ from the final published version. Permanent repository link: https://openaccess.city.ac.uk/id/eprint/14671/ Link to published version: Copyright: City Research Online aims to make research outputs of City, University of London available to a wider audience. Copyright and Moral Rights remain with the author(s) and/or copyright holders. URLs from City Research Online may be freely distributed and linked to. Reuse: Copies of full items can be used for personal research or study, educational, or not-for-profit purposes without prior permission or charge. Provided that the authors, title and full bibliographic details are credited, a hyperlink and/or URL is given for the original metadata page and the content is not changed in any way. City Research Online: http://openaccess.city.ac.uk/ [email protected] Chapter 3 Contents Jason Chuah The first four editions of this chapter were written by Elizabeth Macdonald. The editors would like to say that it still owes a great deal to her. Most contracts can be made orally, in writing, or a combination of both. A question of whether what is said is an express term of the contract will depend on a number of factors developed and discussed in-depth in this document. The following are addressed: statements in contracts; collateral contracts; parol evidence rule; written terms or notices from signed contractual documents; and notice of contractual terms from unsigned documents. A Express Terms Statements Basic approach [3.1] Most contracts can be made orally or in writing or there may be a combination of oral and written terms1. The question will be whether what was said became a term of the contract and it is often put in terms of whether the statement was a warranty or a representation. In this context warranty is used ‘in its ordinary English meaning to indicate a binding promise’2, rather than a particular type of term, in contrast to those situations in which what is in question is the type of term and ‘warranty’ is then used in distinction to the classification of terms as conditions or innominate terms3. A statement may be both a term and a misrepresentation, and if it is not a term but a mere representation, a remedy may, nevertheless, be available, if it is untrue, if it constitutes a misrepresentation. Damages4 are now quite readily available for 1 But see para 2.261 ff. 2 Oscar Chess Ltd v Williams [1957] 1 All ER 325, [1957] 1 WLR 370, Lord Denning MR at 374. 3 Oscar Chess Ltd v Williams [1957] 1 All ER 325, [1957] 1 WLR 370, Lord Denning MR at 374: ‘They use [warranty] to denote a subsidiary term in a contract as distinct from a vital term which they call a “condition”. In doing so they depart from the ordinary meaning not only of the word ‘warranty’ but also of the word “condition”. There is no harm in this, so long as they confine this technical use to its proper sphere, namely to distinguish between a vital term, the breach of which gives the right to treat the contract as at an end, and a subsidiary term which does not. But the trouble comes when one person uses the word “warranty” in its ordinary meaning and another uses it in its technical meaning …’ On conditions, warranties and innominate terms see para 3.34. 4 Damages are awarded on different bases for a breach and a misrepresentation. misrepresentation5, but, before the mid-1960s, they were only available for misrepresentations which were fraudulent6 and, although any misrepresentation makes a contract voidable7, at that time, their very limited availability for misrepresentation provided an added impetus for the courts to find that such statements had become terms8. It is possible that a statement may be found not to be a term of the main contract but of a collateral contract9. ‘To create a warranty no special form of words is needed’10 but it is well established that a statement ‘can only be a warranty provided it appear on evidence to be so intended’11. In other words, the basic test is that of the intention of the parties12, and it ‘depends on the conduct of the parties, on their words and 5 Section 2(1) Misrepresentation Act 1967: see chapter 4. 6 Ie prior to the provision of a damages remedy in Misrepresentation Act 1967, s 2(1) and prior to the provision of a common law remedy for negligent misstatement in Hedley, Byrne & Co v Heller & Partners [1964] AC 465 (and the recognition that it was still available even if the statement became a term: Esso Petroleum Co Ltd v Mardon [1976] QB 801. 7 Rescission may become barred: para 3.51 ff. 8 See Esso Petroleum v Mardon [1976] QB 801, Lord Denning MR at 817: ‘Ever since Heilbut, Symons & Co Ltd v Buckleton [1913] AC 30 we have had to contend with the rule as laid down by the House of Lords that an innocent misrepresentation gives no right to damages. In order to escape from that rule, the pleader used to allege … that the misrepresentation was fraudulent, or alternatively a collateral warranty. At that time we nearly always succeeded on collateral warranty … more often than not the court elevated the innocent misrepresentation into a collateral warranty and thereby did justice in advance of the Misrepresentation Act 1967.’ 9 See para 3.3. 10 De Lasalle v Guildford [1901] 2 KB 215, AL Smith MR at 222. 11 Heilbut Symons & Co v Buckleton [1913] AC 30, Viscount Haldane at 38, Lord Moulton at 50; Oscar Chess Ltd v Williams [1957] 1 All ER 325, [1957] 1 WLR 370, Lord Denning MR at 375, Hodson LJ at 378; Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 2 All ER 65, [1965] 1 WLR 623, Salmon LJ at 629; De Lasalle v Guildford [1901] 2 KB 215 at 222; Routledge v McKay [1954] 1 All ER 855, [1954] 1 WLR 615. 12 But see the dictum of Lord Denning MR in Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 2 All ER 65, [1965] 1 WLR 623 at 627: ‘It seems to me that if a representation is made in the course of dealing for a contract for the very purpose of inducing that other party to act upon it, by entering into the contract, that is prima facie ground for inferring it was intended as a warranty … But the maker of the representation can rebut this inference if he can show that it really was an innocent misrepresentation, in that he was in fact innocent of fault in making it, and that it would not be reasonable in the circumstances for him to be bound by it.’ behaviour, rather than on their thoughts’13. It is their intention, objectively ascertained. It must be deduced ‘from the totality of the evidence’14. There are factors which have been identified as highly relevant15 in the determination of whether the requisite intention that the statement was to have contractual effect was present, but none of them is decisive16. Factors [3.2] The importance of a statement to the making of the contract may be a highly relevant factor. It may be clear to both sides that a certain element was very important to one of the parties in the decision to contract. It may be that, in the absence of a statement on that element, by the other party, there would have been no contract1, or no contract at the price agreed2 and the statement may then well be found to have been intended as a term3. As, for example, where one party stated that he would not even ask the price of the other party's hops if sulphur had been used in growing them and that other party then named his price. It was found to be a term of the contract that sulphur had not been used in growing the hops4. An indication that a statement by one party, can be relied upon, and need not be verified, may indicate that it should be regarded as a term. A prospective seller may indicate to a potential buyer that he, or she, can rely upon the seller's statement as to the condition of the goods, and need not check them for him-, or The latter part of this may be seen as indicating a test of reasonable reliance for a term but when it was referred to in Esso Petroleum v Mardon [1976] QB 801, it was only the first part, with its reference to intention which was quoted. In addition, it is possible to see the latter part of the dictum as merely in keeping with the fact that the intention test is objective. 13 Oscar Chess Ltd v Williams [1957] 1 All ER 325, [1957] 1 WLR 370, Lord Denning MR at 375; Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 2 All ER 65, [1965] 1 WLR 623 Lord Denning MR at 627; Eyre v Measday [1986] 1 All ER 488, Slade LJ at 492–3; Thake v Maurice [1986] QB 644. 14 Heilbut Symons & Co v Buckleton [1913] AC 30, Lord Moulton at 50. 15 Delay between the making of the statement and the contract has been seen as of some relevance: Routledge v Mckay [1954] 1 All ER 855, [1954] 1 WLR 615.
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