ORAL STATEMENTS
If the document is signed then state the general rule with respect to signed documents
is that where a party signs a document, he or she is generally bound by its terms
L’Estrange v Graucob
Is the term a mere representation?
Objective test based on the intention of the parties Oscar Chess v Williams
Five subsidiary tests
1. Words and conduct of the parties
The importance of the term in the minds of the parties as indicated by words
and conduct Harling v Eddy; Couchman v Hill
2. Knowledge or expertise of the statement maker
If the party who made the statement is in a better position than the other party
to ascertain the accuracy of the statement, it is probably a term Oscar Chess
Ltd v Williams
3. Statement maker has control in relation to information
Hospital Products Ltd v United States Surgical Corporation
4. Oral Statement not reduced to writing
If the statement is made orally and it is not included when the contract is
reduced to writing, it is probably not a tem. This does not really help as it will
never satisfy pro making it a condition. However, if a pre-printed standard
form contract is used then it may be argued that this signifies the written
contract was not intended to contain all the terms.
5. Interval of time
If there is a long interval between the making of a statement and the
conclusion of the contract, it is probably not a term of the contract Routledge v
McKay
The parole evidence rule does apply where the parties contract partly in writing and
partly orally Couchman v Hill
If it is a term is it a condition, warranty or intermediate term (state everything below)
 condition – is a term which is essential or so important to the contract that is it
is breached the innocent party has the right to terminate the contract and sue
for damages Tramways Advertising Ltd v Luna Park
 Warranty – a term that is subsidiary to the main purpose of the contract. If
breached the innocent party is entitled only to damages Bettini v Gye
 Intermediate term – is a term which is not able to be categorised as either a
condition or a warranty. Remedy for breach depends on the seriousness of the
breach Hong Kong Fir Shipping
Identify which type of term you feel it is
If it is a mere representation then list below
There are three different types of misrepresentations
 Innocent misrep – damages only
 Negligence misrep – termination of contract and damages in tort
 Fraudulent misrep – termination and damages in tort
Is it a collateral contract (see above)
Define and apply three elements
Remedy is damages only
RREPRESENTATION OR TERM
The general test is the intention of the parties, that its, did the maker of the statement
intend to guarantee the truth of the statement.
Objective test – what would a reasonable third person have understood the statement
to be Oscar Chess Ltd v Williams
 Time – Where there is a long interval between the maing of a statement nd the
conclusion of the contract, it is probably not a term of the contract but merely
a representation Routledge v McKay
 Reduction of the statement into writing – where a statement is made orally
and is not included when the contract is reduced to writing, it is probably not a
term Routledge v McKay; If the contract is not reduced to writing the oral
statement would more than likely be viewed as a term United Hospital
Surgical Corporation v Hospital Products International Pty Ltd
 Importance in the minds of the parties – where a statement is important in
the minds of both parties it is probably a term Couchman v Hill
 Special Skill and knowledge – where the statement maker is in a better
position than the other party to ascertain the accuracy of the statement, it is
probably a term Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd
If the test indicates the statement was a representation which is shown to later be false
(misrepresentation) the innocent parties will not have remedies under the contract but
may have an equitable right to bring the contract to an end. If the misrepresentation is
fraudulent or negligent the innocent party may also have the right to sue for damages
in the deceit or negligence
COLLATERAL CONTRACTS
Where you have a promissory statement made which does not become part of the
main contract may have formed the basis of a collateral contract.
The consideration for the promise is usually the making of the main contract Heilbut
Symons v Buckleton
Bipartite – are made between the same parties who enter into the main contract
Shepperd v The Council of the Municipality of Ryde
Tripartite – where the promissory statements which induces the innocent party to
enter into the main contract may have been made by a third party eg manufacturer
makes statement and plt buy goods from def Wells (Merstham) Ltd v Buckland Sand
and Silic Co Ltd
Three elements must be established:
1. an intention by the statement maker that the statement be relied upon
2. reliance by the other party on the statement that has been made
3. an intention by the statement maker to guarantee the truth of the statement
Savage v Blakney
The terms of the collateral contract must be consistent with the terms of the main
contract Hoyts v Spencer
Only remedy for breach of collateral contract is damages cannot terminate or enforce
the main contract
EXEMPTION CLAUSES
First determine as per below whether or not the exemption clause is part of the
contract and binds the def and plt
Signed Document
The general rule with respect to signed documents is that where a party signs a
document, he or she is generally bound by its terms L’Estrange v Graucob
Exceptions:
1. If the document signed is thought to have no contractual effect DJ Hill and Co
Pty Ltd v Walter H Wright Pty Ltd (delivery docket)
2. If the person seeking to rely upon the clause has misrepresented its effect
Curtis v Chemical Cleaning Co
3. ‘Non est factum’ a person who signs a document may be able to plead non est
factum, that is, they did not know what was being signed. To succeed, plts
must show that there is a radical difference between what was signed and what
they thought they were signing and that they were not just careless in signing
Petelin v Cullen, hard to succeed but if plt is successful the document is
rendered void
Notice
A term may be incorporated into a contract is sufficient notice of the term of the
contract is given by the party who later may wish to rely upon it.
The party seeking to rely upon the exclusion clause must show that he or she did all
that was reasonable, in the circumstances of the case, to bring the term to the attention
of the other party Balmain New Ferry Co Ltd v Robertson
The notice must be given prior to or at the time of entry into to contract Olley v
Marlborough Court Ltd
Unsigned Documents
In the case of unsigned documents which contain an exemption clause, a party who
does not know of the exemption clause will only be bound by it if the following id
shown:
1. It would be assumed by a reasonable person to be a contractual document
Causer v Browne (nowadays less likely to prove as most consumers expect
recipts etc to include contractual terms)
2. Reasonable steps were taken to give the class of person, to which the recipient
belonged, notice of the existence of the term Parker v South Eastern Railway
Co
3. These steps were taken before the contract was made Thornton v Shoe Lane
Parking Ltd
4. It appears not to matter that the recipient did not read the terms or that they
were unable to read Thompson v LM and S Railway
Consistent Course of Prior Dealings
If there is no document signed the def wishes to rely on an exemption clause in
contracts signed during previous course of dealings Henry Kendall & Sons v William
Lillico & Sons
It is not necessary to show the plt had actual knowledge of the term, it is enough if it
can be shown they ought to have known about the clause Henry Kendall v Lillico
What constitutes consistent course of prior dealings depends on the facts of the case.
In Henry Kendall it was held three or four occasions over three years was sufficient.
However, in Hallier v Ramblin Motors three or four dealings over five years was held
to be not sufficient.
Once it is determined the exemption clause forms part of the contract it is necessary to
determine whether or not it covers the breach
The courts generally construe an exemption clause according to its natural and
ordinary meaning in light of the contract as a whole Darlington Futures
There are a number of rules on construction the courts use to assist in interpreting an
exemption clause
1. The party inserting the clause cannot be protected by it if they misrepresent the
meaning of it Curtis’s Case
2. The clause will be construed strictly Wallis v Pratt & Hayes
3. Clause is read contra proferentem (against the def) in case of ambiguity
Darlington Futures
4. In the case of negligence:
 Express exclusion is effective
 Where the only possible cause of action is an action in negligence, the court
will interpret a ‘wide’ clause to cover the def’s liability for negligence
Alderslade v Hendon Laundry Ltd
 Where a cause of action may be based on some other ground other than
negligence (such as breach of contract) a ‘wide’ clause must be confined to
the heads other than negligence White v John Warwick
5. Corners Rule Sydney City Council v West – relates only to the person relying
on the exemption clause
IMPLIED TERMS
Terms implied by law
Sale of goods and provision of services
Terms implied by custom or usage in the market
Con-Stan Industries of Aust Pty Ltd v Norwich Winterthur Insurance
1. the existence of a custom or usage that will justify the implication of a term
into a contract is a question of fact
2. there must be evidence that the custom or usage relied upon is so well known
and acquiesced in that everyone making a contract in that situation can
reasonably be presumed to have imported that term into the contract; however,
the custom need not be universally excepted
3. A term will not be implied on the basis of custom or usage where it is contrary
to the express terms of the agreement
4. A person may be bound by a custom notwithstanding that they had no
knowledge of it
Terms implied as a matter of fact for the purpose of business efficacy
When a term is said to be implied for the purpose of business efficacy, it generally
means that the partied require that term in order for the contract to work. Rules for
implying a term on the basis of business efficacy set out in BP Refinery (Westernport)
Pty Ltd v Shire of Hastings; Codelfa v State Rail Authority
1. it must be reasonable and equitable to imply the term
2. it must be necessary to give business efficacy – that is the contract will be
ineffective unless the term is implied
3. it must be so obvious that it goes without saying
4. it must be capable of clear expression
5. it must not contradict any express terms of the contract