5. The Terms Of A Contract

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Van den Esschert v Chappell

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Facts: Immediately before agreeing to buy X’s house, Y asked if it was free from infestation by white ants. X said it was, but this assurance was not included in the written contract of sale that Y then signed. Y sued X for breach of contract when the house turned out to be infested with white ants.

Issue: Was Y entitled to lead evidence of a term, orally agreed, that the house was free of white ants?

Decision: The court was of the view that, taking all the circumstances into account, the contract was partly written and partly oral. In such circumstances the parol evidence rule does not exclude evidence of additional orally agreed terms.

Reason: Before signing a contract, a specific request was made. Y was therefore entitled to prove the existence of the oral term in addition to the terms contained in the written portion of the contract.

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LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd

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Facts:To complete the agreement, Y sent a document to X to sign. Describing itself as a contract, the document set out quite detailed particulars about the oil but made no mention of the sample. When the oil was delivered, X found that the oil in the 50 drums did not have the same qualities as the sample he had tested. X claimed it was a term of the contract that it should have been the same.

Issue: Was it part of the agreement that the sale was made by reference to the sample provided?

Decision: The parties had not included any reference to the sample in their agreement and the sale was not “by sample”.

Reason: The buyer needed to show the sale was agreed to be “by sample”. However, the written contract contained no reference to a sample. Furthermore, the written contract appeared, on its face, to be a complete and workable agreement, providing for all matters necessary for such a transaction. In these circumstances the court will apply the parol evidence rule, which excludes

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Oscar Chess v Williams

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Facts: Y’s mother owned a second-hand Morris Minor motor car which she believed was a 1948 model. In 1955, at his mother’s request, Y took the car to a used-car dealer to trade it in. The documents that Y showed to the dealer contained a statement that the car was a 1948 model. In fact it was a 1939 model. When the dealer discovered the true age of the car, he sued Y for breach of contract. The dealer claimed that the statement about the age of the car in the document was a promise and was intended to be contractually binding.

Issue: Was the statement in the documents regarding the age of the car a term of the contract?

Decision: Denning and Hodson LJJ held that the statement as to the age of the car was a mere representation rather than a contractually binding promise.

Reason: Because the dealer had special knowledge of and expertise in cars and Y did not, it could not be inferred that the parties intended Y’s statement to be a legally binding promise. A dealer would be expected to

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Handbury v Nolan

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Facts: An auctioneer offered a cow, the Glen Nola, for sale at an auction. Before the sale, the auctioneer announced that a pregnancy test had been done on the cow and that the result of the test was “positive”. The buyer bid $3,200 to buy the cow. However, the cow was not pregnant — and, worse, she proved to be infertile.

Issue: Was it an expressly agreed term of the contract of sale that the cow was fertile and pregnant when sold?

Decision: The auctioneer’s statement was an express term of the contract.

Reason: The announcement of the test result was not a mere opinion. It was a statement of fact that the cow had been tested and was pregnant. In deciding whether this statement was intended to be contractually binding as a promise, the court took account not only of the statement itself, but also of the circumstances in which it was made. In particular, the statement was made at a breeders’ sale where higher prices would be paid for a cow that was pregnant.

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Associated Newspapers Ltd v Bancks

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Facts: Y, a cartoonist, agreed to produce a weekly full-page drawing for X. X agreed to pay Y a salary and to publish the drawing on the front page of the newspaper’s comic section. However, for three weeks, because of paper shortages and consequent production problems, Y’s drawings appeared on page 3 of the comic section. Y protested but X ignored him. Y then decided to terminate further performance of the contract.

Issue: Was the promise to publish Y’s drawings on the front page of the comic section an essential term, breach of which would justify terminating further performance of the contract?

Decision: The term was an essential one (a condition) and Y was therefore justified in terminating further performance.

Reason: The promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent.

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Bettini v Gye

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Facts: X, a singer, contracted to sing for Y, a promoter, at various events over a 15-week period. It was a term of the contract that X arrive six days before the first engagement and attend rehearsals. Being ill, X arrived late and missed four days of rehearsals. Because of this breach Y wanted to terminate the future performance of the contract.

Issue: Was the term requiring attendance at rehearsals for six days a condition, breach of which would justify terminating performance of the contract, or a mere warranty?

Decision: The term was a warranty, not a condition, and Y was not entitled to terminate further performance of the contract in response to X’s breach.

Reason: X had been engaged to sing at a number of events over a long period. The requirement of attending rehearsals did not go “to the root” of the contract because, in view of the number of performances over a long period of time, attendance at initial rehearsals would not vitally affect the whole contract.

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L'Estrange v F Graucob Ltd

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Facts: Y sold a cigarette vending machine to X. X signed the 'Sales agreement' that included a clause to exclude warranty and conditions. X signed the document without reading it.

Issue: Was X bound by the provision in the contract that excluded any additional implied warranties or conditions, even though she had not read the contract before signing it?

Decision: X was bound by the terms of the document she had signed.

Reason: When a person signs what is clearly a contractual document, and they have not been induced to do so by any fraud or misrepresentation, they cannot later say that they did not agree to be bound by the terms of that document, even if they did not read them before signing. The reasonable inference in these circumstances is that they have agreed to be bound by the terms contained in the document they have signed.

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Causer v Browne

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Facts: X took his wife’s dress to Y for dry cleaning. X was handed a “docket” on which the following statement was printed: “No responsibility is accepted for loss or injury to articles through any cause whatsoever”. X did not read what was written on the docket and the statement was not specifically drawn to his attention. During dry cleaning the dress was stained. X claimed damages from Y to compensate for the ruined dress. Y defended the claim, relying on the statement printed on the docket.

Issue: Had the statement on the docket that excluded Y’s liability become a term of the contract?

Decision: In the circumstances, the statement had not become a term of the contract.

Reason: The document handed to X did not appear to be a contractual document, or a document that was likely to contain contractual terms. It was reasonable in the circumstances for X to assume that the document was only an identifying docket which he would have to produce to collect.

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Codelfa Construction Pty Ltd v State Rail Authority of NSW

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Facts: Codelfa Construction agreed to build two tunnels in Sydney for the State Rail Authority for an agreed price. When contracting, both parties believed that nothing could prevent construction from continuing 24 hours a day. In particular, they thought that a provision in the NSW Electric Railways Act protected Codelfa against the possibility of injunctions. However, the high levels of noise disturbed the local residents who obtained an injunction, placing limits on the hours during which Codelfa could work. Having to do the work more slowly would cost Codelfa extra money. Codelfa therefore claimed extra payment from the State Rail Authority.

Issue: Was a term implied into the contract in the circumstances, obliging the State Rail Authority to pay Codelfa for extra costs associated with the limited construction hours?

Decision: The court held that no such term was applied.It could not be inferred that they intended to include a term in the contract regarding extra costs caused

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Moorhead v Brennan

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