4.2 Distinction between Representations and Terms

The importance of identifying those pre-contractual statements which do not form part of the contract arises from the question of the remedies that will be available in each case. If a statement amounts to a promise which forms part of a contract, then a person who conditions. The statement that the plaintiffs’ goods would be carried below deck was a contractual term, and the plaintiffs were entitled to succeed.

4.2.1 Was the claimant relying on the skill and knowledge of the defendant?

If there is an imbalance of skill and knowledge relating to the subject matter of the contract as between the claimant and defendant, this will be relevant in deciding whether an oral pre-contractual statement should be treated as a contractual term. The fact that the defendant is in a better position to be able to guarantee the truth of a statement will lend weight to its being regarded as part of the contract. If, on the other hand, it is the claimant who is the expert, then the reverse will be true.

Two cases concerning contracts for the sale of cars conveniently illustrate the two sides of this test. The first case to consider (though the later in time) is Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd. The plaintiff had bought a car from the defendants, relying on a pre-contractual statement as to its mileage, which later turned out to be untrue. The Court of Appeal held that the test to be applied was that of whether an intelligent bystander would reasonably infer from what was said or done that the statement was intended to be contractual (that is, «detached objectivity»). Applying this test, the court came to the conclusion that the statement as to the mileage was a term of the contract, on the basis that the defendant was a car dealer who should be taken to have better knowledge of such matters than the plaintiff, who was not involved in the motor trade. In reaching this decision, the court distinguished the earlier case of Oscar Chess Ltd v Williams. Here, the defendant was a private individual who had sold a car to a garage. The relevant pre-contractual statement was that the defendant had innocently told the garage that the date of the car was 1948, when in fact it had been first registered in 1939. The garage sued for breach of contract, but the Court of Appeal held that, on the basis of the fact that the plaintiffs here had the greater skill and knowledge of such matters, the statement should not be regarded as a term. The intelligent bystander, looking at all the circumstances, would not say that the seller intended to guarantee the age of the car. The seller was in no position to do so, since all he could rely on were the car’s registration documents, and he had no means of determining whether they were accurate. The purchaser, on the other hand, being in the motor trade could, for example, have taken the engine and chassis numbers and checked with the manufacturer.

It should be noted that a case such as Bentley v Harold Smith, if the facts recurred, would be more likely nowadays to be dealt with as a negligent misrepresentation under s 2 (1) of the Misrepresentation Act 1967. The remedy in damages for misrepresentations provided by this section was not, of course, available at the time.

Other cases where the greater skill and knowledge of the defendant has been relevant in giving contractual status to a pre-contractual statement include Birch v Paramount Estates Ltd (developer stating that a house would be as good as the show house), Schawel v Reade (owner selling a horse which he stated was «perfectly sound») and Harling v Eddy (owner selling a heifer stating that there was «nothing wrong» with her).