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The difference between terms and representations 111

Example

Sarah buys a car from a dealer, and the terms of sale are spelt out in a standard form

contract. When both parties sign this contract they expressly agree to all of its terms. If

any of the terms are breached, then the injured party will always have a remedy for breach

of contract. However, if Sarah was persuaded to sign the standard form contract because

the dealer made an untrue statement (perhaps saying that all the cars would be going up

in price the following week, when this was not true) then the dealer has not breached a

term, but has only made an untrue representation. As no term has been breached, Sarah

will not be able to sue for breach of contract. She might, however, have a remedy for

misrepresentation.

Similarly, it might have been Sarah who made an untrue statement which caused the dealer
to make the contract. A customer who pays with a cheque impliedly makes the statement
that the cheque will be honoured. If this implied statement was untrue, because the cheque
was stolen and would be dishonoured, the customer would not be breaching a term of
the contract. The customer would, however, be making an untrue representation, and the
dealer might have a remedy for misrepresentation.
So when both parties have signed a written contract, there is not too much difficulty in
telling a term from a representation. Statements included in the written contract will be
terms, statements not included can only be representations.

Oral contracts

Where a contract is made orally it is much harder to tell a term from a representation. It is
still the case that a term is a part of the contract and a representation is not. However, it can
be much harder to tell exactly which statements were included in the contract.
By way of example, let us assume that a farmer, Giles, orally offered to sell his combine
harvester to Javed for £1,000. Javed accepted, because shortly before the sale Giles said
that the harvester had recently had a new engine fitted. After the contract was made Javed
discovered that the harvester had not had a new engine fitted. Was Giles’s statement about
the new engine a term of the contract, or only a representation?
The courts decide questions such as this by looking at the opinion of the reasonable
person. It asks whether the reasonable person would have thought that the parties intended
the statement to be a term or a representation.
This objective test is necessary because once again there is no point in looking for the
opinions of the parties themselves. If the court asks Giles whether he thought that the
statement about the new engine was a term or a representation, Giles is likely to say that
he thought it was just a representation. If the court asks Javed, he is likely to say that he
thought it was a term.
Over the years the courts have devised various tests to decide what the reasonable
person would have thought.

Strong statements are likely to be terms

The stronger the statement made, the more likely it is to be a term.