Week 6 - Modified Slides Sem 2-2016 - Chapter 6 Contents of...

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Chapter 6 Contents of a Contract
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Intended Learning Outcomes At the end of this lecture, you should be able to 1. Distinguish: i. a term v a representation ii. a term v a puffery (mere representation) 2. Identify express terms: i. Inside a signed and written contract ii. Outside a signed and written contract, but incorporated by reasonable notice 3. Identify implied terms 4. Distinguish Conditions from Warranties
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During negotiation, parties may make a number of statements. Some statements may turn out to be untrue. However, not all false statements will give rise to legal consequences. Moreover, different types of false statements => different types of legal consequences .
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Example Mathew sold Tom a car for $37.000, and during negotiation, Mathew made the following statements: It is a 2012 BMW car In fact, a cheap BWM car made in 2002. “I only used it to go shopping” In fact, it was used to travel interstates. “It has done only 35,000 km” In fact, the true mileage is 165,000 km. However, Mathew asked Tom to have it checked by a mechanic. “Seat covers were made in Japan” In fact – made in Vietnam. “It is the most beautiful little car in the world”. “If you buy the car, I will give you my bike as well” In fact, Mathew never gives Tom the bike.
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Part I Terms, Representations, and Puffery
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Terms, representations, and puffery A statement made during negotiation can be … 1. a term of the contract 2. a representation A STATEMENT OF FACTS - BUT NOT INTENDED TO BE PART OF THE CONTRACT. 3. a puffery
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Statements (made during negotiation) Terms of a Contract Representations Collateral contract Misrepresentation Enforceable “zone” Unenforceable “zone” Puffery
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REMEDIES ARE DIFFERENT ! Breaching a term => the innocent party can sue for breach of contract. Representation Untrue => the innocent party may bring an action for o misrepresentation, or o breach of a collateral contract For a puffery - untrue => No remedy ! Why a distinction needed ?
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Terms of the contract Terms = the contents of the contract, o represent what parties have agreed to do. o contain each party’s obligations. If a party fails to comply with its obligations, there is a breach of the contract, and the other party has the right to sue.
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TERMS Express terms Implied terms
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A statement is a binding term of the contract IF it is … a promise, o For example, a car seller may say: “This is a 2012 BMW ”; o The seller GUARANTEES the buyer something => a promise o “I think this may be a 2012 BMW – NO GUARANTEE => Not a promise verifiable, i.e. a statement of facts – not a statement of opinion. o For example, “this motorbike is two years old”; that watch is a real Rolex o Are they verifiable ?
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