Essay question

Describe how the common law has developed tests to differentiate between terms and representations, and critically assess their effectiveness.

Answer:

There are no strict rules as to what will constitute a representation and a term, but guidance is available from case law:

•   Relative Degrees of the Parties Knowledge: Statements made by a party with the lesser knowledge will be more likely to be regarded as a representation (Oscar Chess Ltd v Williams).

•   Reliance Shown to be placed on the Statement: If a party reasonably relies on the statement made by the other party without examining the truth of this for him/herself, then reliance can elevate the statement to a term (Bannerman v White).

•   Strength of the Statement: The stronger and the more emphatic that the statement is made, the more likely that the statement will be considered a term (Schawel v Reade).

•   The Time at which the Statement was Made: If a statement is made which causes the other party to quickly agree to conclude a contract, this will be more likely to be considered a term.

•   Was the Statement Reduced into Writing: If a statement is made during the course of negotiations, and the agreement is subsequently reduced into writing, statements made prior to the contract will be viewed as representations (Routledge v McKay).

The tests provide good indications in identifying a term and representation but always note the statement of Moulton LJ in Helibut, Symons & Co. v Buckleton that all of the factors that led to the contract have to be considered to identify terms from representations, and whilst the previous authorities are good guides, no one of them can be universally true in every case. Hence, there is little certainty here and this may prove disadvantageous to the parties.