The Classification of Pre-contractual Statements as Terms of Contract
Issue
Whether statement made by Jafari becomes the term of the contract or not?
Law:
In some cases it becomes very difficult to differentiate the statements made by the party while entering into a contract. Pre-contractual statements are those statements which made by the parties before entering into the contract. Generally, Pre-contractual are classified in different forms and some of these forms are stated below:
- Terms of contract.
- Collateral contract.
- Mere representation
- Sales puff
Terms of contract:
For the purpose of classifying the statement as term of the contract, it is necessary that parties to the contract must be promissory in nature. In other words, parties who are making pre-contractual statements must be intended to create legal relations for the purpose of treating those statements as terms of the contract. For the purpose of pre-contractual statements, intention of the parties determined objectively. In other words, thinking of the reasonable person while making statements in those situations (ACL, n.d.).
This can be understood through case law Ellul and Ellul v Oakes, (1972) 3 SASR 377, Supreme Court of South Australia. In this case, judge consider the noting of two case laws Oscar Chess Ltd v Williams and Dick Bentley Products Ltd v Harold Smith (Motors) Ltd in which Lord Denning stated:
If parties to the contract made the representation while entering into the contract for any particular purpose or for the purpose of inducing the other party to enter into contract, and actually induced him to enter into contract. This fact can be considered as prima facie evidence for the purpose of determining that parties intended the representation as warranty of the contract. It is not necessary to consider such representation as collateral contract. It is the sufficient fact that party who made the representation intended that other party act on it and other party in fact acted upon it.
In this case, Justice Zelling stated that representation related to sewerage was made for the purpose of inducing the buyer to purchase the stated property. In this case, seller was even successful, and this was considered as prima facie evidence for treating the representation as the term of the contract. Burden lies on Oakes to state that representation was not the term, and on this Justice stated that only way to show that representation was not the term was by stating that subsequent checking of the premises displaced the impact of warranty, but this was not happened in this case.
The Difference between Puffery and Opinion in Contract Law
In this case, Zellling also consider the position of law stated in Anson’s Law of Contract, and as per this position:
For this purpose Court can consider various factors. First element was related to the time in which court consider the elapsed time between the making of the statement and final conclusion of the contract. If gap of time was long that such statement is considered as representation but if other party acted immediately then such term was considered as term of the contract. Secondly, Court considers the importance of the statement made by one party in the minds of the other party, and in this Court also considers whether such statement was that much important as it can be considered as terms of the contract. Thirdly, in case statement made by the party was result in the execution of the formal writing contract then it is definitely considered as the term of the contract. Lastly, if the party who made the position is in the better position to consider the accuracy of the statement, then Court considers it as the contractual term of the contract (ACL, n.d.).
In the present case, statement made by Jafari is considered as contractual term of the contract because both Aadhya and Vernon induced from the representation made by Jafari and enter into contract for the purpose of purchasing superannuation 1000 vaccum cleaner.
In this case noting of Ellul and Ellul v Oakes, (1972) 3 SASR 377, Supreme Court of South Australia can be used in which Zelling took the position of law in Anson’s Law of Contract,a nd as per this:
- There is no time gap between the representation made by Jafari and conclusion of the contract. Therefore, it can be considered as contractual term.
- Court considers the importance of the statement made by one party in the minds of the other party, and in this Court also considers whether such statement was that much important as it can be considered as terms of the contract. In the present case, representation made by jafari is very important because it induce the couple to enter into contract.
After considering the above facts it can be said that representation made by jafari in context of superannuation 1000 vaccum cleaner is important in nature and it is considered term because of which Jafari is under obligation to perform such term.
Conclusion:
Representation made by Jafari is not a sales puff, but it is considered as important term of the contract.
Answer 2
Issue:
Whether statement made by jafari is the example of puffery or opinion?
Law:
This section states the difference between the opinion and sales puff:
- Opinion under contract law is also considered as representation made by one party in the contract. Pre-contractual statements are also considered as opinion/representation. There are number of cases in which representations made by one party are not intended to be promissory in nature, and because of this such representation does not constitute contractual term. However, it must be noted that in case opinion or representation made by party proves wrong, then party to whom such representation is made have remedies under common law or under the statute. Common law states that if any party was induced to enter into the contract on the basis of false opinion then representee has right to cancel the contract (E-law resources, n.d.). Section 18 of the Australian Consumer Law state number of remedies in case of misleading conduct happened in trade or commerce.
- On the other hand, sales puff is considered as overstated talk related to sales. Such talk is not intended by the speaker to be considered literally and the person to whom such representation is made would recognize this on easy basis. It must be noted that sales puff does not considered as representation or term of the contract, and if such sales puff is false in nature then there is no remedy available to the party.
Application:
In the present case, statement made by Jafari is the opinion and not mere the sales puff, because statement made by Jafari is not an overstated talk related to sales and party to whom this representation is made take it seriously and entered in contract by relying on such statement.
The Validity of Exclusion Clauses in Contract Law
Conclusion:
It can be said that statement made by jafari is not a sales puff but it is a clear opinion to purchase the superannuation 1000 vaccum cleaner.
Answer 3
Issue:
Whether couple is bound by the clause 11 sated in the contract even though couple is not aware about the clause at the time of entering into contract?
Law:
Exclusion clause in the contract law is considered as term of the contract which excludes and limits the liability of the party in case of breach of contractual terms. It is necessary that exclusion clause must be legal in nature, which means law imposed some necessary obligations related to consumer on the trader and these obligations are implied by statute in the contracts related to consumer, and cannot be excluded. Section 64 of the ACL- schedule 2 states that it is not possible for trader to excludes the implied conditions and warranties and also the rights and remedies available to the consumer under Australian Consumer law. Section 64 further states that any attempt to exclude the liability related to implied condition and warranty is declared void by the terms of the contract, and also makes the trader liable to prosecution under the Act.
This can be understood through case law ACL in ACCC v Valve Corporation (No 7) [2016] FCA 1553. In this case, Federal Court provides number of remedies to the consumer and order valves to pay these remedies.
Application:
In the present case, clause 11 of the contract does not bound the Aadhya and Vernon even though they did not consider the clause at the time of entering into contract because section 64 states that it is not possible for trader to excludes the implied conditions and warranties and also the rights and remedies available to the consumer under Australian Consumer law. In this case, statement made by Jafari can be considered as implied warranty and implied warranty cannot be excluded by any exclusion clause (ACL, n.d.).
Conclusion:
Couple is not bound by the clause 11 presented in the contract.
References:
ACL in ACCC v Valve Corporation (No 7) [2016] FCA 1553.
ACL. Ellul and Ellul v Oakes, (1972) 3 SASR 377, Supreme Court of South Australia. Available at: https://www.australiancontractlaw.com/cases/ellul.html. Accessed on 5th January 2018.
ACL. Exclusion Clauses. Available at: https://www.australiancontractlaw.com/law/scope-exclusion.html. Accessed on 5th January 2018.
ACL. Terms of Contract. Available at: https://www.australiancontractlaw.com/law/scope-terms.html. Accessed on 5th January 2018.
Australian Consumer Law- Schedule 2- Section 18.
Australian Consumer Law- Schedule 2- Section 64.
Dick Bentley Products Ltd v Harold Smith (Motors) Ltd.
E-law resources. Contents of a Contract – Terms. Available at: https://e-lawresources.co.uk/Contents-of-a-contract.php. Accessed on 5th January 2018.
Ellul and Ellul v Oakes, (1972) 3 SASR 377, Supreme Court of South Australia.
Oscar Chess Ltd v Williams [1957] EWCA Civ 5.
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