LLB170 Lecture 2: Week 2 – Express Terms
Week 2 – Express Terms
When is a statement a term of the contract?
• When there are problems with the parol evidence rule, a party can show that a
statement made during negotiations forms part of the contract
• Two requirements:
1. Whether extrinsic evidence of a term supplementing a written contract can be
admitted
2. Whether that evidence establishes the existence of the term being alleged
• Oral term → statement must have been intended by the party to be a promise
• Intention judged objectively → court assesses whether or not a person in the
circumstances of the parties would reasonably have considered the statement a
contractual promise (Oscar Chess v Williams)
When determining if a statement is a mere representation or term of the contract:
1. Significance of the written contract (Equuscorp)
2. Significance of the language used (JJ Savage)
3. Relative expertise of the parties (Oscar Chess; Dick Bentley)
4. Importance of the statement (Van den Esschert)
5. Timing of the statement
6. Form of the written contract
Existence of written contract
• Presumption that all relevant terms have been included
• Priority is given to the written contract
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55
Facts
A group of investors subscribed for limited liability partnerships formed to develop and operate an aquaculture
farm in Queensland. They also entered into written loan agreements with a lender related to the the promoter to
borrow the subscription moneys and pay the interest, management fees, rent and licence fees paid, resulting in a
minimum deduction of $5061 for a cash outlay of $781. The project failed and the investors defaulted the loans.
The lender assigned the loan debts and sought to enforce the written loan agreements. The investors argued the
earlier oral agreements limited recourse to the prepaid interest and two capital payments.
Held
The argument of the investors was dismissed by the High Court. The court was influenced by the fact that the
parties had made a written formal contract and that the alleged oral terms contradicted those in the written
contract. The written contract discharged any prior oral agreement
The oligatios of itte ageeets etee paties aot sipl e igoed o ushed aside
oral statements cannot contradict the written contract
find more resources at oneclass.com
find more resources at oneclass.com
JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 - the words used
• poise, agee, guaatee, aat – suggests promissory intent
Facts
Blakney entered into a contract with Savage to have a boat built. During the negotiations Savage said that the boat
would, when fitted with a particular engine, have an estimated speed of 15 mph. No reference was made to this
speed in the subsequent written contract. The boat did not go 15 mph and Blakney sued for breach.
The trial judge found that the statement was an estimate
Held
The High Court concluded the statement about the speed was not promissory in nature, but a mere
representation. The words used indicated an expression of opinion only
Oscar Chess Ltd v Williams [1957] 1 WLR 370 – the relative expertise of the parties
• a statement made by a person with expertise is more likely to be promissory
Facts
Williams offered his mothers car to a car dealer as part payment for a new car. Williams described the car as a 1948
model, the date in the cars registration book. The car dealer paid Williams 290 pounds for the car. It turned out the
car was a 1939 model and only worth 175 pounds. The dealer sought damages for the difference of the value (115
pounds) on the grounds that it was a term of contract that the car was a 1948 model.
The trial judge held that the model year was a condition and that the Plaintiff would have rescinded the contract if
they knew they year was wrong
Held
On appeal, the Court of Appeal held that the defendant had no personal knowledge of the model year and that he
was relying solely on the registration book, therefore, the claim was rejected
Dick Bentley Productions v Harold Smith (Motors) [1965] 2 All ER 65
Facts
Dick Bentley bought a car from Harold Smith. Harold Smith stated that the car had only done 20,000 miles since it
was last fitted ith e pats. The Plaitiff had ealie said that he as afte a ell etted Betle a ad the
defedat stated that he as i a positio to dig out the histo of as. The stateet aout the ileage as
untrue so the plaintiff sought damages for breach of contract. Bentley succeeded at first instance and Smith
appealed
Held
The Court of Appeal found that the dealer who was experienced in the area of cars made a statement which
proved to be false. Due to his experience, position of power and ability to check, his statement was considered
promissory and so the appeal was dismissed
Van den Esschert v Chappell – importance of the statement
• A statement that shows the the statement was highly significant is more likely to be regarded as a promise
Facts
The purchaser of a house, before signing the contract for sale, asked the vendor whether or not the house had any
white ants. The vendor assured the purchaser that there were none
Held
The Full Court of the Supreme Court of WA held the statement was a term of the contract:
I ould thik that o the puhase of a house a iui egadig the pesee of hite ats ost ipotat
find more resources at oneclass.com
find more resources at oneclass.com
Other documents giving effect to statements made in negotiations
• Collateral contracts
- When one party makes a promise that is connected to another main promise and
as consideration for that promise, the party enters into the main contract
- The buyer may avoid the parol evidence rule by showing there are two separate
contracts – main contract and collateral contract consisting of the seller
- The stateet ust e poisso ad ot eel epesetatioal , iteded
to induce entry into the contract and consistent with the terms of the main
contract
- Requirement is the rule in Hoyts v Spencer
• Estoppel
- May apply to provide a relief to a party who has relied on assumption that the
other party would modify/refrain from enforcing the terms of a contract in
writing
• Consumer protection
- One who has been induced to enter into a contract or has relied on a pre-
otatual stateet that doest fo a term of the contract may have claims
in misrepresentation or under consumer protection → claims for misleading or
deeptie odut o fo failue to opl ith a epess aat
Hoyts v Spencer
Facts
A itte lease poided that the lesso ight at a tie teiate the lease giig the lessee at least fou
eeks otie i itig of his itetio to do so. The lesso late gae otie to teiate the lease. The lessee
alleged that, in consideration of his taking the lease, the lessor agreed to not give such notice except in certain
circumstances.
Held
The High Court held that this alleged collateral contract was not binding on the lessor because it was inconsistent
with the main contract. It explained that the requirement of consistency meants that while a collateral contract
may add to the main contract, it must not alter the provisions of the main contract → it ust e suppleeta
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Intention judged objectively court assesses whether or not a person in the circumstances of the parties would reasonably have considered the statement a contractual promise (oscar chess v williams) Existence of written contract: presumption that all relevant terms have been included, priority is given to the written contract. Equuscorp pty ltd v glengallan investments pty ltd [2004] hca 55. A group of investors subscribed for limited liability partnerships formed to develop and operate an aquaculture farm in queensland. The project failed and the investors defaulted the loans. The lender assigned the loan debts and sought to enforce the written loan agreements. The investors argued the earlier oral agreements limited recourse to the prepaid interest and two capital payments. The argument of the investors was dismissed by the high court. The court was influenced by the fact that the parties had made a written formal contract and that the alleged oral terms contradicted those in the written contract.
