BetterLawNotes-5 (2)

CONTRACT LAW

Statements Made During Negotiation of the Contract: Terms, Representations and Puffs

Various statements may be made by the parties during the negotiations leading up to the actual formation of their contract. Some of these statements may be incorporated into the subsequent contract as express terms, or, to put it another way, will be included in the offer which is accepted. Others, while perhaps inducing one of the parties to enter into the contract are not, objectively considered, intended by the parties to have contractual effect. Nevertheless, such statements may still have legal effect as misrepresentations. A misrepresentation is a false or misleading statement of fact which induces the representee to enter into the contract (we will examine misrepresentation in more detail in semester 2). Yet others may have no legal force at all. Such statements, commonly called ‘puffs’, are viewed as not having been intended as legally binding: they are too vague, or are clearly statements of personal opinion, or are not meant to be taken seriously or at face value.

Dimmock v Hallett (1866) LR 2 Ch App 21

Land being sold at auction was described as ‘fertile and improvable’. The land was neither. Nevertheless the statement attracted no liability: it was a ‘mere flourishing description’ with no legal force.

Weeks v Tybald (1605) Noy 11

The defendant ‘affirmed and published that he would give £100 to him that should marry his daughter with his consent’. Held: the defendant was not legally liable ‘for such general words spoken to excite suitors’

Suppose that S is negotiating the sale of his car to B. S is asking £3,000 for it. S tells B that he will be heart-broken to get rid of the car and that £3,000 is a great price. He also states that the car has only done 500 miles since its last service. Relying on these statements, B agrees to buy the car for £3,000. A few months later, B discovers the car has never been serviced. Furthermore a friend of B’s overheard S saying that he could not believe his luck in getting rid of the car, particularly since it was hugely over-priced. What liability does S have?

S’s statements as to being heart-broken and as to the price are unlikely to attract legal liability: these are examples of sales puffs. S’s liability for the car’s lack of servicing will depend upon the status of the statement. It was a statement of fact which induced B to enter into the contract. So S may be liable for misrepresentation. But on the facts B may not be entitled to any remedy. S may have had reasonable grounds for making the statement, meaning that B has no right to damages. Further the time which has elapsed since the sale means it is unlikely that B can rescind the transaction, i.e., return the car and get his money back. B’s best hope of an effective remedy lies in showing that the statement as to the car’s service history was incorporated as a term of the contract. In this way, S would be liable for breach of contract, and thus liable to pay damages to B, even if he was not at fault. For if the statement was incorporated as a term, S is effectively promising, or guaranteeing, that the statement is true (a term commonly used, particularly in the older cases, is ‘warranting’). Note that if the statement is held to have been incorporated as term of the contract, S may be liable for misrepresentation and breach of contract. Where a statement of fact is not incorporated as a term of a contract, it is commonly referred to as a mere representation.

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