LLB202 Study Guide - Final Guide: Collateral Contract, Covidien, Determinative
1. Pre-contractual Oral Statements – pg 227
Not all oral statements made prior to a contract being formed, will form part of the contract.
The legal implications will depend on the way in which the statement is classified. In the
negotiation stage of a contract many things are said by the parties. What must be determined
is which of those pre-contractual statements form part of the contract (terms) and which do
not (mere representations or puff). It is only those terms which form part of the contract
which will enable an injured party to sue for breach of the contract. If the statements or
assurances do not form part of the contract then an injured party will have to rely on other
areas of the law to provide a remedy.
12.1 Puff
Statements of puff are not intended to be taken seriously and no legal consequences result
from puff (Byers v Dorotea).
12.2 Representation or term
A statement will be considered a term if it is intended to be promissory in nature (Smythe v
Thomas). A statement will be considered promissory if the statement-maker ‘warrants its
truth’. If the statement falls short of this test, it will be considered a ‘representation’ only.
The court will consider a number of factors when determining whether the requisite intention
was present. It is important to note that these factors are not determinative in nature, but assist
the court in the decision making process
12.2.1 Words and Conduct of the Parties
If the words of the statement maker indicate that he/she is warranting its truth, this is a strong
indicator of a term (Harling v Eddy)
12.2.2 Knowledge or expertise of the statement-maker
If the statement maker has personal knowledge about the truth of the statement, it is more
likely that they are guaranteeing its truth (Oscar Chess v Williams).
Even if the statement maker does not have personal knowledge, if they are in a better position
to ascertain the truth of the statement, it is likely to be a term.
12.2.3 Statement-maker has control in relation to information
When the statement-maker is, or should be, in control of the subject matter, it is more likely
to be considered a promissory term (Hospital Products Ltd v United States Surgical
Corporation).
12.2.4 Oral Statement Not Reduced to Writing
Where a document is reduced to writing and does not include the oral statement, it is more
likely that the parties did not intend it to be contractual in nature (Routledge v McKay).
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Document Summary
Not all oral statements made prior to a contract being formed, will form part of the contract. The legal implications will depend on the way in which the statement is classified. In the negotiation stage of a contract many things are said by the parties. What must be determined is which of those pre-contractual statements form part of the contract (terms) and which do not (mere representations or puff). It is only those terms which form part of the contract which will enable an injured party to sue for breach of the contract. If the statements or assurances do not form part of the contract then an injured party will have to rely on other areas of the law to provide a remedy. Statements of puff are not intended to be taken seriously and no legal consequences result from puff (byers v dorotea).
