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Unformatted text preview: Contracts 01 – Incorporation P ART X – I NCORPORATION I E XPRESS T ERMS A General Principles In addition to within the agreement itself, express terms of a contract may be found in: • Pre-contractual communications • Notices or documents provided in addition to the contract • Signs displayed at business premises of one of the parties To be a term of the contract, the term must be promissory in nature ( Oscar Chess ). The law draws a distinction between representations, which are not contractually enforceable, and warranties or promises, which are contractually enforceable. B Warranties versus Representations Whether a statement is promissory or representational depends on the intention of the parties. The question is decided objectively on the facts. Test (from Hospital Products v USSC ): Would the statement reasonably be considered to be a promise by a reasonable person placed in the situation of the parties? The fact that a statement induced the other to enter into the contract does not make it into a promise ( Oscar Chess per Denning LJ). In general, three factors feature in judicial decisions about whether a statement is promissory in nature: 1 The language used by the parties 2 The relative experience of the parties 3 The importance of the statement In reaching a conclusion, the term is examined objectively: would a reasonable person see it as a promise? 1 Language The linguistic form of the statement will have a bearing on whether or not it should be regarded as promissory. However, statements expressed in factual rather than promissory terms can still be warranties if they are clearly promissory in substance ( Oscar Chess per Denning LJ). © Jaani Riordan 2004 Page 1 of 23 http://www.jaani.net/ Contracts 01 – Incorporation So, for example, representations couched as estimates or guesses may not be regarded as promissory, but guarantees may well be regarded as such. Note, however, that the statement- maker need not use the word ‘promise’ or ‘warranty’ in order to be making a promise (though such a statement would certainly indicate the existence of a term). In a commercial context, statements may still be promissory even if they are couched in factual or descriptive language. The seller may be impliedly promising that the contents of the sale conform to the factual description given (eg, ‘this car can go at this speed’). 2 Relative expertise of the parties The relative knowledge or strength of the parties may be relevant in assessing whether a statement was made as a promise. This is not a subjective factor; the experience of the representor only affects how a reasonable person would interpret their intention (ie, to what extent the alleged promisor is presumed to be correct)....
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This note was uploaded on 08/17/2010 for the course BUSLAW 730-202 taught by Professor N/a during the Three '07 term at Melbourne Business School.
- Three '07