Contract Law & Exclusion Clauses

The assignment delves into the principles of contract law, focusing on the distinction between express and implied terms. It uses case studies to illustrate how courts interpret implied terms based on business efficacy. Furthermore, it analyzes the enforceability of exclusion clauses, particularly in situations involving misrepresentation by the seller.

COMMON LAW
STUDENT ID:
[Pick the date]

COMMON LAW
Question 1
Issue
The critical issue here is to determine whether the statement made by Samantha about the
chair being best in the market is a term or representation.
Relevant Rule
During the contract negotiation, a host of statements are made. Some of these subsequently
become contractual terms while the others remain mere representations. In order to
distinguish between the two, the following four factors need to be taken into consideration.
 Parole evidence rule: As per this rule, if the contract is written, then only the written
clauses would be classified as contractual terms and those which are essentially oral only
are classified as representations1.
 Relative expertise of the representor: In accordance with this, the greater the knowledge
possessed by the representor in the context of the product or service being represented, the
higher is the chance of the underlying statement being a term rather than representation as
highlighted in the verdict of Dick Bentley v Harold Smith Motors2case. It is essential that
this expertise of representor is measured on the basis of the expertise of the representee3.
 Statement overall importance and reliance by the representee: When the representee
indicates to the representor the significance of the statement, then it becomes highly likely
that the same would be considered as a term in accordance with the verdict of Bannerman
v White4 case.
 Timing: The shorter the time elapsed between the statement being made and contract
being entered, the higher the likelihood for the statement to be considered a term in line
with the decision undertaken in Routledge v Mckay5 case.
Application & Conclusion
For the given case, the parole evidence rule is not applicable as the contract for buying of
chair is essential oral. Considering that Samantha is a representative of the furniture
1 Andy Gibson, Douglas Fraser, Business Law (Pearson Publications., 8th ed, 2014)
2 Dick Bentley v Harold Smith Motors [1965] 1 WLR 623
3 Callie Harvey, Foundations of Australian law (Tilde University Press, 3rd ed, 2009)
4 Bannerman v White (1861) 10 CBNS 844
5 Routledge v Mckay [1954] 1 WLR 615

COMMON LAW
company, hence it would be fair to expect that her knowledge about the quality of chairs
would be significantly superior in comparison with that of Peter. Further, based on the
description given, it is apparent that Peter decides to buy the chair as soon as Samatha makes
the claim of being the best and available at a ‘cheap price’ of $ 350. Based on the above
evidence in totality, it can be concluded that the statement made by Samantha would be
categorised as a term since later after use Peter did find out that the chair given was not the
best one. Hence, there was a misrepresentation of a fact.
Question 2
Issue
The central issue is to determine if the statement made with regards to the chair providing
adequate support to the lower back of Peter for all day long can be classified as a term or not.
Relevant Rule
In order to decide whether there has been a breach of the contract or not, it is essential to
outline whether a statement made during contract negotiation is a term or is restricted to
being a mere representation. While the four factors which are relevant to differentiate
between the two have been outlined above, the key factor which needs to be highlighted here
is the overall importance and reliance of the representee on the same.
A leading case in this regard is Bannerman v White6. In this case, the claimant entered into a
contract for purchase of hops which were for the purpose of beer making. The claimant
before making the purchase had made it clear that the hops needed to be treated with sulphur
or else he would not buy the same. The defendant assured him that the hops were sulphur
treated while in reality they were not. The claimant sued the seller and the court held that
considering the importance of hops being sulphur treated for the buyer, it would be
considered as a term to the contract7.
6 Ibid.4
7 Robert Bryan Vermeesch, Kevin Edmund Lindgren, Business Law of Australia (Butterworths, 12th ed. 2011)

COMMON LAW
Application
In the given case, it is apparent that Peter has a back problem which he has specified to
Samantha also. Further, he has clarified that his requirement is of a chair which could provide
him ample back support which would aid him in pursuing writing for which one requires
sitting on the chair for long hours. Hence, from this statement, it is evident that this is a key
criterion which needs to be fulfilled or else it is apparent that the chair would not serve any
purpose for Peter. Therefore, considering the verdict in the Bannerman v White case, it is fair
to conclude that the providing adequate back support for the length of the day would be
classified as a contractual term owing to the underlying importance for Peter.
Conclusion
On the basis of the above discussion, it may be concluded that the back support to be
provided by the chair for the length of the day is a contractual term on account of the
emphasis Peter put on the same while buying the chair.
Question 3
Issue
The key issue is to determine the nature of term with regards to the chair being able to
provide comfort to Peter’s lower back for the whole length of the day.
Relevant Rule
Terms may be of two types i.e. express and implied. An express term is one which has been
clearly stated and agreed to by the other party or has been drafted in the written contract. An
example of an express term is apparent in the Bannerman v White8 case where the buyer of
hops clarified to the seller that if the hops would not be sulphur treated, then he would not
buy the same. Hence, in this case, it is apparent that treatment with sulphur is a term for the
hops under sale as the same has been clarified by the buyer before enactment of the contract9.
8 Ibid. 4
9 Ibid. 7

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However, there are other times when the terms are not express but are rather implied. In these
cases, the terms may be either implied by custom or as fact. In order for the given term to be
implied as fact, the intention of the contracting parties must be taken into consideration. A
relevant case in this regards is The Moorcock10 . In this case, it was highlighted that there was
an implied term in regards to the river bed being safe for mooring considering the river
Thames. This is known as business efficacy test11.
Application
In the given case, based on the emphasis put by Peter on the chair providing comfort to the
lower back so that he can comfortably work for the whole length of the day, it can be
deciphered that any such chair which does not adhere with this would not be of use for Peter.
Hence, business efficacy with regards to Peter would be served only if the comfort to lower
back is provided. Therefore, it would be fair to conclude that this is an implied term since he
has not expressly stated that he would not buy a chair which does not provide back support.
Conclusion
The given term is an implied term based on business efficacy test.
Question 4
Issue
The core issue is to determine if exclusion clause would prevent liability for Forever
Furniture.
Relevant Rule
Exclusion clause refers to a clause which is meant to minimise or nullify the liability of a
particular contractual party in case a particular event or situation occurs. One of the key
10 The Moorcock (1889) 14 PD 64
11 Shayne Davenport, Business and Law in Australia (Thomson Reuters, 4th ed, 2012)

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conditions in relation to making the exclusion clause enforceable under common law is that
the particular clause should be brought to the notice of the other party12.
A relevant case which needs to be highlighted is L'Estrange v Graucob13 case. In this case,
the court opined that when any document which highlights the contracts terms is signed, then
the contractual party which has signed it would be bound by the same with no importance
being given to the fact whether the terms were actually read by the concerned or not. The
only exception to the above rule is when there has been misrepresentation by the party
inserting the exclusion clause which has been inserted for immunity against deceptive
conduct14. The above stance was reiterated in the Parker v South Eastern Railway15 case
where the honourable judge reflected that in case a document is signed by the customer
which contains the terms of the agreement, then the customer would be bound by the same
irrespective of the fact that he may choose not to read the applicable clauses.
Application
The fact that Peter did not read the clause is not a valid argument against the exclusion clause
as it was a sales agreement which he knew would be containing contractual terms. However,
the exclusion clause would not be valid in this case on account of the misrepresentation by
the Samantha with regards to the quality and attributes of the chair. Thus, this reflects
fraudulent content due to which the exclusion clause would not be enforceable.
Conclusion
Hence, Peter can sue the company as exclusion clause would not be valid.
12 Ibid. 1
13 L'Estrange v Graucob [1934] 2 KB 394
14 Ibid. 11
15 Parker v South Eastern Railway (1877) 2 CPD 416