Limitation And Exclusion In Contract - Express, Implied And Collateral Terms

Types of Terms in a Contract

Question:

Discuss About The Limitation Exclusion Retrieved September?

When any contract is required to be established by two parties, then, the presence of offer, accounting, legal intention, consideration and capacity of the parties are required to make a valid contract. When a contract is made amid the parties, then such parties should comply with the term of the contract. The contract terms establishes the rights and liabilities of the parties. The terms are broadly bifurcated as express and implied.  (ClarKe, 2013)

Those terms who are orally or by conduct or in written form is exchanged amid the parties and are mutually made part of the contract are express terms but the terms which are binding upon the parties under law, custom, trade, usage, statue  then such are implied terms. Both the terms are binding upon the parties.

The express terms are mutual decided terms by the parties. However, there are few terms which are exchanged amid the parties but are not considered as contractual. These are pre contractual terms. Now, a pre contractual term can be considered as part of the contract even if not made part of the contract depending upon its nature and the importance it is given by the parties prior making the contract. In such case an argument can be raised that the term since is not part of the contract is thus non-binding. But, at times pre contractual statements even if not made part of the contract is considered as contractual. Thus, a pre contractual term can be classified as:

Terms which are made part of the contract – These terms are promissory in nature. If any such term is not comply with then the aggrieved party has every right to consider the contract as violated and seek damages and equitable remedies (Ellul and Ellul v Oakes, 1972).

Collateral contracts – A collateral contract is a kind of oral contract which exist with a formal written contract. When pre contractual statements are made then collateral contract are formed in certain situations when the oral terms are not made part of the contract but still are binding in nature (JJ Savage v Blakney, 1970). A term is considered as part of the collateral contract only when:

That the oral statements that are made amid the parties must be promissory in nature

The terms were not intending to be part of the main contract;

Express Terms

The statements must be in compliance with the main contract (Hoyt's Pty Ltd v Spencer, 1919);

There must be consideration provided in support of the promise (Shepperd v The Council of the Municipality of Ryde, 1952).

The terms which are just representations – If any representation is made then it is not a contract term and thus there is no contractual remedy that is available. The aggrieved may sue the defaulter under common law. Under common law if the representation is found to be a misrepresentation, then the aggrieved party has every right to rescind the contract.

The terms that are considered as sales puffs – there are no remedy for sales puffs.

Now, many a times the terms are not made part of the contract but are considered as binding when the said terms are found on notice boards, displays, etc. Such terms are considered as part of the contract provided the same are brought to the notion of the party prier the establishment business contract (Thornton v Shoe Lane Parking Ltd, 1971).

One of such term is exclusion clause. An exclusion clause is a term which limits the liability of one party to the contract at the consent of another (Interfoto Pictures v Stiletto Visual Programs, 1989). When the exclusion clause is made part of the written contract then the parties are bound by the same even when the clause is not read by the parties (L'Estrange v F Graucob, 1934) & (Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd, 2004). If the contract is unsigned then the exclusion clause is binding upon the party only when the relying party brought the clause within the notice of the other party with reasonable notice. (Teacher, 2017)

However, a term in a written contract is not binding upon the party when there is presence of misrepresentation.

When statements are made by one party to another which does not became part of the contract but are able to induce the other party to establish a contract with the party who has made the false statements, then, it is an act of misrepresentation (Curtis v Chemical Cleaning Co , 1951). (Unistudyguide, 2017)

Thus, the main elements of misrepresentation are: (ashurst, 2017)

1. A false statements of fact is made by the defaulter to an aggrieved (Smith v Land & House Property Corp, 1884);
2. The statements must have induced the aggrieved to establish a contract with the defaulter;
3. The aggrieved has actually relied on the statement prior making a contract.

When any contract is based on misrepresentation, then, the aggrieved party has the right to terminate the contract and sue the party for damages.

The law is now applied to the facts of the case.

Implied Terms

 It is submitted that the promise that the air conditioning shall be installed must be considered as a part of the contract terms and is binding upon Maria.

It is submitted that when Miles and Angus (representative of Maria) were exchanging statements regarding the tractor, then, at that time there are various representations that are made by Angus to Miles. One of such representation was that Angus tells Miles that he will definitely be able to convince the manager of Farmquip to install a similar air conditioner unit in the cabin of his tractor if Miles agrees to sign a contract to buy it.

Now, it is clear that Angus was making a promise that the air conditioner will be installed provided a contract is signed which establishes that this promise is not intended to be made part of the contract ( (JJ Savage v Blakney, 1970).

But, the term is promissory in nature and the statements so made were in compliance with the main contract (Hoyt's Pty Ltd v Spencer, 1919). Further Miles has also agreed to pay the price of the tractor after considering that the conditioner will be installed. So there is presence of consideration (Shepperd v The Council of the Municipality of Ryde, 1952).

Thus, the oral term must be construed as a collateral contract and is part of the main contract.

Thus, the oral promise is binding upon Maria and he must fulfill the promise that is made by Angus on behalf of Maria.

It is submitted that the exclusion clause that was made part of the contract and that was also displayed is not binding upon Miles.

It is submitted that when the contract was signed amid Angus and Miles then term 18 of the contract submits that ‘Clause 18: I acknowledge that Farmquip’s Terms and Conditions apply to this contract and I agree to be bound by them’.

The terms were displayed on the wall and one of the term submitted that “Farmquip accept no responsibility for any motor or mechanical faults that may be found with its farming equipment while being offered for sale.”

 Now, since the document is a signed document thus as per (L'Estrange v F Graucob, 1934) any clause that is made part of the contract is binding upon Miles whether the same is read by him or not.

However, as per (Curtis v Chemical Cleaning Co , 1951), if any misrepresentation is made by Angus while formulating the contract then no exclusion clause is binding upon the parties which exclude such misrepresentation.

Collateral Contracts

Now, Angus has made a misrepresentation regarding its motor, that is, the tractor I serviced adequately or that is bets in price etc.

Thus, there is clear misrepresentation and such cannot be excluded.

Now, the terms that are displayed on the wall can only be binding upon Miles when the same are brought to the notice of Miles by reasonable means prior the contract formulation. But, there are no reasonable attempts that were made by Angus.

Thus, the terms on the wall are also not binding. So, the exclusion clause are not binning in nature.

 It is submitted that are various misrepresentation that are incurred upon Miles by Angus.

It is submitted that prior making any contract there are various representation that were made by Angus. Such as:

1. Angus is the best tractor for sale at the given price;
2. That the previous owner was the friend of Angus and that he took good care of the Miles;
3. That he will convince the manager of Farmquip to install a similar air conditioner unit in the cabin of his tractor if Miles agrees to sign a contract to buy it;

However the representations that were made by Angus were found to be false.

The Maria (owner) refused to install the air conditioner. Also, the tractor was mistreated from past two years and was not adequate services. Also, major repairs are done.

Thus, the statements made by Angus were false to his acknowledge and were made to induce Miles so that a contract can be established.

Thus, there is clear misrepresentation on the part of Angus

Thus, since the contract is made amid Angus and Miles is based on misrepresentation, thus, Miles has every right to cancel the contract and claim his money @ $68,000.00.

Also, Miles suffered $10,500. 00 to fix the mechanical fault and thus he also has right to claim the same from Maria.

Conclusion

It is concluded that the contract that is made amid Angus and Miles is based on misrepresentation, thus, the exclusion clause is not binding. Also, Miles can rescind the contract as the same is based on misrepresentation and thus he can claim $68,000.00 and $10,500. 00 as compensation.

References

ashurst. (2017). taxation-law and exclusion of liability. Retrieved September 29, 2017, from https://www.ashurst.com/en/news-and-insights/legal-updates/quickguide-limitation-and-exclusion-of-liability/.

ClarKe, J. (2013). Terms of a contract. Retrieved September 29, 2017, from Australian contract law: https://www.australiancontractlaw.com/law/scope-terms.html

Curtis v Chemical Cleaning Co (1951).

Ellul and Ellul v Oakes (1972).

Hoyt's Pty Ltd v Spencer (1919).

Interfoto Pictures v Stiletto Visual Programs (1989).

JJ Savage v Blakney (1970).

L'Estrange v F Graucob (1934).

Shepperd v The Council of the Municipality of Ryde (1952).

Smith v Land & House Property Corp (1884).

Teacher, T. L. (2017). Exclusion Clause. Retrieved September 29, 2017, from The business-law Teacher: https://www.lawteacher.net/cases/exclusion-clauses-cases.php.

Thornton v Shoe Lane Parking Ltd (1971).

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004).

Unistudyguide. (2017). Misrepresentation. Retrieved September 29, 2017, from https://www.unistudyguides.com/wiki/Misrepresentation