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How well did you answer the questions? Score your responses against the answer guidance here.
In brackets is the number of marks each answer is worth. There is a maximum of 23 points available.
1. What distinguishes a pre-contractual statement that is a term from a pre-contractual statement that is only a mere representation? (2)
Answer guidance:
A pre-contractual statement will be a term if the statement maker was promising or guaranteeing the truth of that statement. (1) A pre-contractual statement will be a mere representation if, although there was no promise as to truth, it is nevertheless a statement which induced the making of the contract. (1) (A statement can, of course, be both – i.e. induce the making of the contract and amount to a promise that the statement is true.)
2. What is the basic test for determining if a pre-contractual statement is a contractual term or mere representation? (1)
Answer guidance:
The intention of the parties as objectively ascertained, i.e. was the intention such that the statement maker was making a binding promise as to the truth of its statement? If so, it is a term. (1)
3. What differences exist where the statement is a term and where it is a representation in terms of the remedy of damages? (3)
Answer guidance:
(a) Breach of term = damages as of right, whereas misrepresentation = on proof of fault i.e. fraud or negligence. (1)
(b) Breach of contract = contractual measure of damages, whereas misrepresentation = tortious measure of damages. (1)
(c) Remoteness rule is different. Breach of contract = recover for losses within the reasonable contemplation of both parties when they made the contract as probable result of its breach. Remoteness test for fraud or negligent misrepresentation (s.2(1) Misrepresentation Act 1967) = all direct loss regardless of foreseeability. (1)
4. What is the effect of signature to a written document? (1)
Answer guidance:
Bound by the terms that the written document contains, regardless of whether they have been read (L’Estrange v Graucob), unless signature obtained as a result of fraud or misrepresentation. (1) (This is subject to legislative regulation of these terms, e.g. UCTA 1977.)
5. Explain the methods used by the Court of Appeal in J. Evans v Andrea Merzario to avoid the operation of the parol evidence rule. (2)
Answer guidance:
The parol evidence rule applies to written contracts and rules out evidence of other terms. However, the rule only applies to written contracts and the majority of the CA in Evans v Andrea Merzario (Roskill and Geoffrey Lane LJJ) held that the contract was not entirely written – but partly written and partly oral, i.e. they considered that the oral statement was a term. (1) The other member of the Court of Appeal (Lord Denning) reached the same conclusion by means of a finding that the oral assurance constituted a collateral contract (the consideration for which was the entering into of the main written contract). The parol evidence rule did not apply to this separate oral contract (whose terms overrode the inconsistent provisions of the written agreement). (1)
6. How may a party seek to ensure that it gives reasonable notice of written terms that it seeks to include in an oral contract? (3)
Answer guidance:
(a) Reasonable steps to bring existence of clause to notice of people in general. (1)
(b) In a contractual document. (1)
(c) In time, i.e. before or at the time that the contract was made. (1)
7. What did Lord Denning say in Thornton v Shoe Lane Parking about the process of contract formation in
(a) ticket cases (2)
(b) contracts involving automatic machines (2)?
Answer guidance:
(a) Ticket cases. (i) Offer = issue of ticket (1); (ii) Acceptance occurs when customer takes the ticket and retains it without objection. (1) Incorporation occurs in time and the ticket terms are incorporated.
(b) Automatic machines. (i) Offer = made by machine (1); (ii) Acceptance = putting money in slot or activating the machine. (1) Therefore any terms on the ticket or goods dispensed by the machine are not incorporated because they are too late.
8. Distinguish between terms implied in law and terms implied in fact. (6)
Answer guidance:
(a) Terms implied in law
(i) implied into all contracts of that particular type as matter of policy. (1)
(ii) a “necessary incident” of that type of contract i.e. “necessary” because of the subject matter of this type of contract. (1)
(iii) must be a reasonable term to imply. (1) (But note that this does not mean that a term can be implied simply because it is reasonable to do so.)
(Note that what is “necessary” in this context is determined by considerations of reasonableness, fairness and policy – Crossley v Faithful & Gould Holdings Ltd.)
(b) Terms implied in fact
(i) implied on a “one-off” basis into the particular contract. (1)
(ii) based on construing the contract so that it reflects what a reasonable person would understand it to mean. (1)
(iii) necessary to achieve that construction and make the contract work. (1)
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