Contractual Terms Class 8Today’s OverviewContractual Terms: What does a contract say?1. A contractual term2. Pre-contract representation (statements)• Misrepresentation3. Types of contractual termsA. Express termsB. Implied terms4. Standard form agreements1. A Contractual Term• Contractual v. Pre-Contractual Statements• What are Contracts?• The communicationsmade by parties during the course of negotiations• To understand the contentof the contract:• We need to identify whichof these statements are intended to be partof the contract, andwhichstatements are just pre-contractualstatementsExampleSeymour is a supplier of custodial cleaning products. While negotiating a contract to sell a crate of floor wax, Seymour makes thefollowing statements:a) Studies have shown that this floor wax is the best made anywhere in the worldb) If after trying this floor wax, you do not agree that it is unquestionably the best made anywhere in the world, you will be refundedthe full price.How to Distinguish?Theintention of the partiesis key to understanding the difference between representationand terms:1.Representation (pre-contract statement):Made by one partyto induce the other to enter into an agreement (a puff)Versus2.Term of the agreement: A statement intended by both partiesto form a part of the contractObjective test: Whether a reasonable person would have considered that the parties meant this to be a part of the contract?Pre-contractual statements1. Assertion of existing factone party makes with intention of inducing another party to enter into a contract2. They are not a sourceof contractual obligations3. If they prove false, they are an actionable misrepresentationContractual terms1.Promissory statement: Voluntary undertaking to act in a certain way in the future2.Contractual terms are a source of obligationsunder the contract3.If a contractual term is not fulfilled, one of the parties is in breach of contractPuffs vs FactsPUFFS• “This is the most stylish car you will ever drive!”• “This car outranks and outpaces all others in its class!”FACTS• “This car has leather interior.”• “This car was voted #1 by Car Dealers Association in 2011.”
Let’s Summarize2. Pre-contract representation (statements)• Misrepresentation is a false statement of an existing fact that causes recipient to enter into a contract• Three elements of the test:A. A statement of anexisting factB. That isfalsewhen madeC. May be actionable if itinduced a contractA. Misstatement of Fact• Not every misstatement is a misrepresentation• Misrepresentation occurs only if the speaker claimed to state an existingfact• People often make non-factual statements during negotiations:1. Opinion2. Statement of Future Conduct3. Inaccurate Description of The Law•RULE: In general, non-factual statements do not constitute misrepresentation,unlessthey contain an implied statement of fact.