How does partnership working deliver better outcomes

Puffs are exaggerated or obviously insincere statements made by a contracting party to engage, attract or excite others into contracts.

Puffs do not become part of the contract

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But note this may change in the context of the facts (i.e. an accountant providing an opinion as to the ROC of a business that was for sale).

There are other areas of law that may cover these type of situations – but not contract law.

Representations

A representation is a statement of fact made by one party when negotiating a contract.

If it can be inferred from the circumstances that the statement was not intended to be a binding promise, the statement does not become part of the contract, even if it induced the other party to enter into the contract.

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Representations

A representation that proves untrue is called a misrepresentation. Misrepresentations can be deliberate (fraudulent), careless (negligent) or simply the result of error (innocent).

Misrepresentations (even fraudulent ones) are NOT terms of the contract’. But the law provides other relief.( ie NOT in contract)

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But remember

Not always clear from the form of the statement whether promissory or not.

Will depend on context- what appears as a mere statement of fact might be construed as a promise.

Term or other…

Sometimes there is disagreement about whether a statement made was intended to be a term of the contract, or whether what was said was merely a representation.

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What is said in negotiations could be...

Salesman’s puff.

Not part of the contract.

Opinion

Not part of the contract.

Representation.

Not part of the contract.

Term.

Part of the contract.

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Term of the contract or mere representation?

The courts may consider a number of factors in determining whether a statement is a term or a representation, including:

whether the statement was promissory in nature;

the time that the representation was made relative to the making of the contract;

the importance of the representation;

whether the person making the statement had any special skill or knowledge; and

whether the representation was followed by a written contract.

Handbury v Nolan (1977) 13 ALR 339

Oscar Chess v Williams [1957] 1 All ER 325

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Terms of contract or representation?

Test used by the court:

What can reasonably be inferred from the circumstances?

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Handbury v Nolan (1977) 13 ALR 339

Oscar Chess v Williams [1957] 1 All ER 325

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Classifying the terms in a contract

Some of the terms in a contract are more important than others.

One way to distinguish between the important and less important terms is to classify them as conditions and warranties.

It is important to classify these terms correctly as the remedies for a breach of condition is different from a breach of a warranty.

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Why classify? Remedies for breach

Breach of a condition –

injured party can terminate contract and/or sue for damages or affirm and sue for damages

Breach of a warranty –

injured party can sue for damages.

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Distinguishing ‘conditions’ and ‘warranties’

Conditions are terms that are of fundamental importance in the agreement. Failure to perform a condition entitles the aggrieved party to reject performance tendered, or to terminate further performance of whole contract, and to claim damages for the breach.

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Distinguishing ‘conditions’ and ‘warranties’

Warranties are terms which are of lesser importance than conditions. Failure to perform a warranty does not justify rejecting performance or terminating future performance. It only justifies a claim for damages.

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