LAWS104 Chapter Notes - Chapter 10: Parol Evidence Rule, Collateral Contract, Undue Influence
11 May 2018
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Express Terms
- Not all statements made in negotiations leading up to a contract qualify as terms of
the contract
o Promissory statements that give rise to contractual obligations are referred to
as express terms
o Non-promissory statements that do not give rise to contractual obligations and
are often referred to as mere representations
Terms and Representations
- A question often arises over whether statements constitute terms of the contract or
merely representations
- If a statement is a term and is not true usually means there has been a breach of
contract, which will entitle the innocent party to the breach to sue the other for
damages for breach of contract
- If a statement is a representation and is not true no such remedy as above
- A false representation may constitute a misrepresentation, which in turn may give rise
to a right to rescind the contract
- The false representation may attract one or other of the various remedies in relation to
the prohibition against misleading or deceptive conduct
- Ellul & Ellul v Oakes sets out factors that may be used to determine this issue
o The importance of the statement
o The time that has elapsed between the making of the statement and the making
of the agreement
o Whether the party making the statement was in a better position to ascertain
the truth of the statement
o Whether the statement was subsequently omitted when the agreement was
embodied in a more formal written document
- It is ultimately for the court of ascend whether there is evidence of an intention by one
or both of the parties that there should be a contractual liability in respect of the
accuracy of the statement
- Mihaljevic v Eiffel Tower Motors Pty Ltd, Gillard J
o “First, to establish that a statement made during the course of negotiation was
promissory or contractual in character, proof of a common intention of the
parties to impose a contractual obligation on the person making the statement
is essential”
o “Secondly, it is unnecessary that the statement must contain an express form
of words. It is sufficient if in the context the words used import the requisite
meaning to impose on the person making the statement a contractual
obligation by way of promise or guarantee”
o “Thirdly, whether a statement was intended to be contractual or not must be
determined objectively in the light of the whole of the circumstances”
o “Fourthly, whether an animus contrahendi exists is a question of fact and can
only be determined by looking at all the circumstances attending the
transaction”
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Document Summary
A question often arises over whether statements constitute terms of the contract or merely representations. If a statement is a term and is not true usually means there has been a breach of contract, which will entitle the innocent party to the breach to sue the other for damages for breach of contract. If a statement is a representation and is not true no such remedy as above. A false representation may constitute a misrepresentation, which in turn may give rise to a right to rescind the contract. The false representation may attract one or other of the various remedies in relation to the prohibition against misleading or deceptive conduct. It is ultimately for the court of ascend whether there is evidence of an intention by one or both of the parties that there should be a contractual liability in respect of the accuracy of the statement. Oscar chess ltd v williams innocent misrepresentation.
