Now that we have identified the prerequisites to a contract, it is time for us to take a closer look at the terms in a contract, after it has come into existence. Terms may be either express or implied. The terms in a contract can be made orally, in writing or part orally and part in writing.
Whether an oral statement made prior to entering into a contract becomes a term of the contract or otherwise is dependent on the facts of the case. When a statement is made, without which the parties would not have entered into the contract to start with, the statement becomes a part of the contract.
In Bannerman v White (1861), the plaintiff (claimant) agreed to purchase some hops from the defendant for brewing purposes. The plaintiff stipulated that the hops must not be treated with sulphur prior to the purchase because it was intended for use in the manufacture of a consumable product.
The defendant assured the plaintiff that the hops had not been treated with sulphur but as it turned out they were. The defendant argued that the representation was not a term in the contract but the courts determined otherwise because the plaintiff had emphasized the importance of the term, prior to concluding or formalizing the agreement.
Under normal circumstances the more time that has lapsed between the representation and the conclusion or the formalization of the agreement, the higher the probability that the term would not be regarded as part of the contract.
In Routledge v McKay (1954) the plaintiff acquired a motorcycle and a sidecar from the defendant. According to the supporting documents, the motorcycle was listed as a 1942 model which was exactly what the defendant told the plaintiff it was, prior to the purchase.
It later turned out that the motorcycle was a 1936 model and the plaintiff brought an action against the defendant. The purchase however was not made at the time of the negotiations but a few days later, after the terms had been communicated during which time the plaintiff could have made further checks or made further enquiries if he so desired.
It was held that the statement as to the model of the motorcycle was not a term in the contract but a mere representation, especially so, because there was no mention of the model in the written agreement which followed the verbal representation. If the term was crucial it only stands to reason that the parties would have incorporated it into the written agreement that followed.
If the defendant however professes to have specialized knowledge or claims to be an expert in the field than the courts will be more willing to deem that any oral representation he or she has made to be a term of the contract.
In Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) the plaintiffs were looking for a Bentley car and had certain criteria that they based their selection upon. The defendant a car dealer who was an expert on Bentley cars sold them a car based on the criteria that the plaintiffs had set. It later turned out that the car in question did not fit the criteria the plaintiffs had set and the plaintiffs sued. The courts held that the oral statements were indeed a part of the contract and the plaintiffs were successful in their claim.
In Oscar Chess v Williams (1957) however, the defendant had sold a car to the plaintiffs based on the model that was stated in the vehicle’s registration book. The car was in fact an older model and the market value of the car was much less to what the plaintiffs had paid. The plaintiffs sued for the difference but their claim failed because the defendant was not an expert on cars and he in good faith had sold them the car based on the details in the registration book which presumably had been altered by the previous owners.
When the terms of an oral agreement are transferred to a written contract the presumption is that all the terms that have been agreed upon would be condensed into writing and any term that has not been transferred to the written document is deemed to be a mere representation or part of the negotiations prior to entering into the contract and not as a term of the contract.
In Duffy & Ors v. Newcastle United Football Co. Ltd. the club offered its seasonal ticket holders the option to purchase a bond that guaranteed them a designated seat for 10 years. The seats however were subject to a clause in the contract which stipulated that should the seats not be available the club will provide them with the best possible alternative.
Relying on the clause the club later sought to move the seating of some of its supporters in order to expand the stadium. The supporters argued that there were verbal representations made, prior to entering into the contract that guaranteed them the best seats. It was held that the verbal representations did not form part of the contract and that the club was allowed to reallocate the seats if there was good and sufficient reason to do so.
Therefore, where possible it would be easier to incorporate any oral/verbal term(s) made during negotiations into a written agreement and if anything, it is evidence that goes to show that both parties intended the terms to be part of a binding agreement/contract (a contract is a legally binding agreement).
Despite the importance that is attached to the time factor or rather the lapse of it, if the term was of sufficient importance than it would be deemed to be part of the contract. Yet again it depends on the facts.
In Schawel v. Reade (1913) the plaintiff purchased a horse for stud purposes from the defendant. Prior to the purchase the plaintiff was told by the defendant that the horse was sound and that it suffered from no inherent illnesses. So sound in fact, that there wasn’t a need for a veterinary examination. The plaintiff accordingly purchased the horse without having it examined by a vet and it later turned out that the horse suffered from a hereditary disease and was not suitable for stud purposes.
It was held that the oral representation, despite the significant delay, was a term of the contract because the representation was so important that without it the purpose of the contract would be defeated.
Copyright © 2017 by Dyarne Ward