Chapter 9 Express Terms

Introduction [9.10]

• Part II deals with the content of the contract, the terms both parties agreed to, specifying rights and obligations.
• Contractual terms define the specifics of the agreement (e.g., goods, quality, delivery, price).
• Breach of these terms provides a cause of action for damages.
• Breach of an important term may allow the aggrieved party to terminate the contract.

Two-Stage Process [9.20]

• Identifying the term: Determining what terms were agreed upon.
• Construing the meaning: Interpreting what the terms mean using contractual language.

Categories of Terms [9.30]

• Express terms: Explicitly stated by the parties.
• Implied terms: Terms implicitly agreed to, including those implied by law, fact, custom, or usage; also consumer guarantees under the Australian Consumer Law.

Statements & Terms [9.40]

• Statements during negotiations can be oral or written (signed or unsigned).
• Contracts can be wholly oral, wholly written, or a combination.
• Some contracts legally require written form and signatures.
• Written agreements provide clarity and proof of terms, often including essential terms like subject matter, consideration, and clauses requiring written and signed modifications.

Pre-Contractual Statements [9.50]

• Not all statements become contractual terms; they must be promissory.
• Pufferies: Exaggerated advertising claims with no contractual effect.
• Mere Representation: Not contractually binding, but misrepresentations allow contract rescission (restoring parties to original positions without damages).
• Statements that amount to a clear promise or warranty are binding terms, giving rise to damages (and termination for important terms).

Determining a Term [9.60]

• Distinguishing between representations and terms involves an objective test: would a reasonable person consider the statement promissory?
• Factors include:
  • Words and language used.
  • Relative knowledge and expertise of the speaker.
  • Importance and timing of the statement.
  • Whether the agreement was reduced to writing.

Ellul and Ellul v Oakes [9.70]

• Facts: Oakes' real estate agent listed his house as sewered when it used a septic tank. The purchasers, the Elluls, sued for breach of warranty.
• Issue: Was the statement in the listing form a term of the contract?
• Held: The statement amounted to a warranty; the purchasers were entitled to damages.
• Key Extracts (Zelling J):
  • Oakes made the representation to induce the Elluls to buy the property.
  • Factors considered:
  • Time elapsed between the statement and agreement.
  • Importance of the statement.
  • Whether a formal written contract was executed.
  • Relative knowledge of the parties.
  • The main test is contractual intention: whether the speaker warranted accuracy.
  • The question is the effect of the statement on a reasonable person, not the speaker's intent.

Words Used [9.80]

• Intent to make a promise is objectively determined by the words used.
• Specific and strong language indicates a term; imprecise, explanatory, or opinion-based language does not.
• Promissory words include