parties, had they considered them. It is important to realise that the test of this
is a subjective one. It is not a matter of what a reasonable man may have
included, but what the parties themselves would have agreed. The use of
judicial power in this way must reflect the real intention of the parties.
Collateral contracts
We have already examined collateral contracts, but it will be seen here that
they can be used to invoke a representation which may otherwise be outside
the scope of the main contract. The use of the collateral contract can be
seen in some circumstances as an agreement to make a contract.
Also relevant is the case of Esso Petroleum Co Ltd v Commissioners of
Customs and Excise (1976) examined previously, where a collateral
contract for the supply of a ‘free’ coin would be enforceable provided the
customer bought a certain quantity of fuel. This approach obviously
tempers the apparent harshness of the parol evidence rule, and deals with
some of the problems of whether a statement is a term or a mere
representation.
Summary
Terms may be written, oral or a mixture. They may also express (clearly
expressed by the parties) or implied (incorporated in some other way, for
example by statute).
106 Contract law
Why do you think that the courts take such a strict approach to implying
terms into a contract?City and Westminster Properties Ltd v Mudd (1959)
The defendant leased a shop from the plaintiffs and was known by the
plaintiffs to be in the habit of staying overnight in one room of the
premises. When the lease was due for renewal a draft was produced
which only allowed the premises to be used for business purposes. The
defendant stated that he would sign the lease if the plaintiffs agreed that
he could continue to sleep on the premises. They did so, but later sued
the defendant for breach. He successfully relied on the collateral contract
to which the plaintiffs had agreed before he signed the main lease.