1 How do terms arise?

2 Types of terms

3 Misrepresentation

4 How does representation become misrepresentation?

5 Remedies for misrepresentation

1 How do terms arise?

1.1 Express terms1.2 Implied terms

Term

s

Express terms Offer + Acceptance

Implied termsBy statute

By court

By custom

Case 1: The Moorcock (1889)Jetty(Pier) owner made a contract with ship owner allowing

him to moor (unload) ship there.

They knew the ship would be grounded at low tide.

When the ship did ground, it was damaged by a ridge of rock beneath the mud. Ship owner asked for compensation.

Court of appeal: Y. It was necessary to imply such a term to make the contract commercially effective.

Case 2: Hutton v Warren (1836) A lincolnshire farmer was asked to quit the farmer. He

asked the owner to pay allowance for seeds and labor.

Court: Y. It was agricultural custom there.

Case 3: Bakery trade: a dozen means 13 rather than 12.

1.3 Exclusion of implied terms

(1) Terms implied by statute can’t be excluded.

(2) Terms implied by court can be excluded by express terms.

2 Types of terms

Term

s

ConditionsVitally important

Cancellation

Damages

WarrantiesNot vitally important

Damages only

Innominate terms

Damages onlyNot depriving whole benefit

Cancellation + Damages

If depriving whole benefit

2.1 Conditions and warranties

(1) Conditions: go to the root

(2) Warranties: don’t go to the root

Case 1: Bettini v Gye(1876)

• Bettini, opera singer made a contract to give a series of performance over 3 months period. He should attend all 6 days rehearsal. He fell ill and missed half of them. He broke the term. His employer argued it was violation of condition and demanded cancellation of the contract. Bettini argued it was merely warranty.

• Court:

Warranty.

Case 2: Pousard v Spiers (1876)

• Similar contract. Mrs. Pousard seriously ill 5 days before first performance. She missed first 4 performances of her 3 months contract. Her employer sacked her and found a substitute.

• Court:

Y. Condition.

2.2 Innominate terms(1) The term with no name.(2) Distinction:

Backward looking: conditions and warranties

Forward looking: innominate terms(3) Innominate terms have not replaced

conditions and warranties.

Case: HK Fir Shipping Co v KK Ltd (1962)KK, defendant chartered a ship from plaintiff for 24 months. The engines

were in poor condition and the crew was inefficient. They lost 5 weeks immediately and another 15 weeks for carrying out the repairs. After repair they still had 20 months to operate. One term saying the ship should be “ in every way fitted for ordinary cargo service”. Defendant cancelled the contract. Plaintiff disagreed and argued it was merely warranty.

Court of appeal:

Innominate term, which could not be classified in advance. The defendant’s whole benefits of the contract were not deprived substantially. There unable call the contract off.

3 Misrepresentation

Statem

ent

Term If untrueContract violation

remedies

RepresentationIf

untrue

Remedy for misrepresentation

3.1 Written contract: terms and representations

(1) Express terms

(2) Statements not in written document are representations.

3.2 Oral contract: terms and representations

(1) Harder to tell a term from representation.

(2) Objective test: opinion of reasonable man• Strong statement are likely to be terms (how strong)

Case 1: Schawel v Reade(1913)• Schawel was considering buying racing horse.

Reade said, “You need not look for anything; the horse is perfectly sound. If there was anything the matter with it I would tell you.” 3 weeks later Schawel bought the horse which turned out to be utterly useless for racing purpose.

Court:

The statement is a term.

Case 2: Ecay v Godfrey(1947)• Ecay bought a motor cruiser for $7500. Godfrey

said that the boat was sound and capable of going overseas, but advised him to have a survey before purchase. Ecay bought it without survey and soon discovered it was not sound.

• Court:

Mere statement.

The reliance placed upon the statement. (how serious)

Case: Bannerman v White (1861)• Bannerman, hop (flower plant) trader sent around notice to

his entire hop farmers saying he would no longer buy hops treated with sulfur as the brewers wouldn’t use them. In buying a consignment of hops, he asked if it was treated with sulfur adding that he wouldn’t buy them at any price if so. White said he did not do so, but he did.

• Court:

White’s statement was a term.

Knowledge of the parties (How much knowledge)

Case 1: Chess v Williams (1957)• Chess, car dealer took Williams’ car, private motorist, in

part exchange. Williams told Chess it was 1948 model. Chess believed because the forged registration documents indicated so. In fact it was 1939 model and was therefore worth far less.

• Court of appeal:

Williams’ statement was representation.

Case 2: Dick Ltd v Harold Ltd (1965)

• Harold, motor dealer sold a car to Dick saying the car had only done 20000 miles since having new engine fitted. In fact it had done 100000 miles.

• Court of appeal:

Harold’s statement was a term.

Statement of opinion

Case: Esso Ltd v Mardon (1976)• Esso persuaded Mardon to take on a filling station by

telling that it would sell 200000 gallons a year within 3 years. It soon became apparent that no matter how hard they worked, they couldn’t achieve such figure.

• Court of appeal:

Such a term was implied that the opinion had been made using reasonable care and skill. Mardon was entitled to damages.

4 How does representation become misrepresentation?

Rep

resentation

Statement of fact

Induced other party

Misrepresentation

Mere representation

No No Silence

Only 4 situations

4.1DefinitionUntrue statement of fact inducing

the other part to make the contract

4.2 Two requirements(1) The statement must be one of fact.Case1: Bisset v Wilkinson (1927)• Bisset bought a farm as Wilkinson told that it

would support 2000 sheep. Bisset knew it was never before used for sheep farming. In fact no matter how hard he worked, it couldn’t support anything like 2000 sheep.

• Court: Just an opinion.

Case 2: Smith v Land Co (1884)

• Smith offered his hotel for sale saying a rich man Mr. Fleck occupied it. Before sale, Mr. Fleck went through bankrupt. Land co found Mr. Fleck was badly in arrears with his rent for some time. They refused to buy it.

• Court of appeal:

The statement was misrepresentation.

(2) The statement must induce other party to make contract

Case: Attwood v Small (1838)• Attwood bought a mine as Small greatly

exaggerated the capacity of it. Before buying, he used his expert to check the statement. His expert mistakenly agreed with Small’s statement.

• House of Lords:

Not misrepresentation as Attwood didn’t rely on it.

4.3 Silence

(1) Silence normally can’t be misrepresentation.

(2) Exception: 4 situationsChange of circumstance

Case: With v O’Flanagan (1936)• A doctor selling his practice said it was worth

$2000 p.a. This was true, but as the sale went ahead 3 months later it was worthless since he had been ill.

• Court of appeal:

Failure to reveal such change was misrepresentation.

• Insurance: utmost good faith

• Fiduciary relationship: doctor-patient, solicitor-client

• Silence makes statement misleading.

Case: Nottingham Co v Butler (1886)

• A solicitor selling a house for his client was asked if there were any restrictive covenants. He replied that he was not aware of that. This was true, but it was because he didn’t read the document. The buyer agreed to buy but pulled out of the contract when discovering the restrictive covenants.

• Court of appeal:

The solicitor’s silence was misrepresentation.

5 Remedies for misrepresentation

Misrepresentation

FraudulentRescind

Tort damages

NegligentRescind

Tort damages

Innocent Rescind

5.1 Fraudulent misrepresentation

(1) 3 situationsKnowing it was untrueNot believing it was trueRecklessly, not caring if it was true or

false

(2) Two remedies

5.2 Negligent misrepresentation

(1) Made honestly but unreasonably

5.3 Wholly innocent misrepresentation

(1) Made honestly and reasonably.

5.4 Losing the right to rescind

(1) If the contract is affirmed

Case: Leaf v Int’l galleries (1950)• Leaf bought a painting from International Galleries due to an

innocent misrepresentation it was by Constable. 5 years later he found this wasn’t by Constable and immediately applied to the court for rescission of contract.

• Court of appeal:

N. Too late to rescind it.

(2) If third party has acquired rights

Case: Universal Finance Co. Ltd v Caldwell (1965)• A rogue bought a car with bad cheque. The rogue sold it

to third party in good faith. Before sale, original seller found the misrepresentation. It couldn’t locate the rogue and told the police and the AA.

• Court of appeal:

Telling police and AA was sufficient to rescind. If it failed to do so before resale, it couldn’t get the car back.

(3) If subject matter no longer exists.