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Cases On Terms Of The Contract
1. THE PAROL EVIDENCE RULE
Burgess v Wickham (1836) B&S 669
It was held that a person who takes out a policy of marine insurance can show
that the insurer knew the ship to be unseaworthy, and so negative the usual
implied warranty of seaworthiness.
Pym v Campbell (1856) 6 E&B 370
A written agreement for the sale of a patent was drawn up, and evidence was
admitted of an oral stipulation that the agreement should not become operative
until a third party had approved of the invention.
City & Westminster Properties v Mudd  Ch 129
The defendant, who had been a tenant of the premises for six years, had
resided at the shop. When the lease fell for renewal, the plaintiffs inserted a
clause for use of the premises to be for business purposes only. The defendant
asked if he could sleep there, was told that he could and he signed the lease.
Even though this assurance contradicted the lease, evidence of it was held
admissible to prove a collateral contract which the tenant could plead in answer
to a claim for breach of contract.
2a. REPRESENTATIONS AND TERMS
Routledge v McKay  1 WLR 615
The defendant stated that a motor cycle, the subject matter of the proposed
sale, was a 1942 model. In the written contract, signed a week later, no mention
was made of the date of the model. The lapse of a week between the two events
weighed with the court as a factor militating against construing the statement
as a contractual term. (See further below)
Schawel v Reade  2 IR 64
The defendant told the plaintiff, who required a horse for stud purposes,
that the animal was ‘perfectly sound’. A few days later the price was agreed
and, three weeks later, the plaintiff bought the horse. The statement was held
to be a term of the contract, but here the defendant, who was the owner of the
horse, would appear to have had special knowledge.
Bannerman v White (1861) CB(NS) 844
The buyer of hops asked whether sulphur had been used in their cultivation.
He added that if it had he would not even bother to ask the price. The seller
assured him that it had not. This assurance was held to be a condition of the
contract. It was of such importance that, without it, the buyer would not have
In the written contract, signed a week later, no mention was made of the date
of the model. It was held, on this point, that what the parties intended to
agree on was recorded in the written agreement, and that it would be
inconsistent with the written agreement to hold that there was an intention to
make the prior statement a contractual term.
Birch v Paramount Estates (1956) 167 EG 196
The defendants made a statement about the quality of a house. The contract,
when reduced to writing, made no reference to the statement. The Court of Appeal
regarded the statement as a contractual term. But here the defendants had
Harling v Eddy  2 KB 739
The vendors of a heifer represented that there was nothing wrong with the
animal but, in fact, it had tuberculosis from which it died within three months
of the sale. A contributory factor leading the Court of Appeal to decide that
the statement was a term of the contract was that the vendors were in a special
position to know of the heifer’s condition.
2b. CONDITIONS AND WARRANTIES
Poussard v Spiers (1876) 1 QBD 410
Poussard was engaged to appear in an operetta from the start of its London
run for three months. The plaintiff fell ill and the producers were forced to
engage a substitute. A week later Poussard recovered and offered to take her
place, but the defendants refused to take her back.
The court held that the defendant’s refusal was justified and that they were
not liable in damages. What chiefly influenced the court was that Poussard’s
illness was a serious one of uncertain duration and the defendants could not put
off the opening night until she recovered. The obligation to perform from the
first night was a condition of the contract. Failure to carry out this term
entitled the producers to repudiate Poussard’s contract.
Bettini, an opera singer, was engaged by Gye to appear in a season of
concerts. He undertook to be in London at least six days before the first
concert for the purpose of rehearsals. He arrived three days late because of a
temporary illness. He gave no advance notice and Gye refused to accept his
It was held that the plaintiff had been engaged to perform for a 15-week
season and the failure to attend rehearsals could only affect a small part of
this period. The promise to appear for rehearsals was a less important term of
the contract. The defendant could claim compensation for a breach of warranty
but he could not repudiate Bettini’s contract.
The Mihalis Angelos  1 QB 164
The owners of a ship let it to charterers, undertaking that the ship would be
expected ready to load about 1 July, would proceed to a certain port for the
loading of cargo, and that the charterer would have the option of cancelling the
charter if the ship was not ready to load by July 20. The charterer was unable
to get a cargo by July 17 and cancelled the charter, alleging that it was
frustrated. The ship itself was not ready until July 23. At trial it was argued
that the charterer was entitled to avoid the contract on July 17 because of a
breach of contract by the shipowner, ie he had impliedly promised that he had
reasonable grounds for believing that the ship would be ready to load on July 1,
and that there were no such grounds. The trial judge held that there was a
breach of this term, but the term was not a condition and the breach was not so
fundamental as to give the right to terminate the contract.
The Court of Appeal held that the term was a condition and that the charterer
had properly avoided the contract even though he had done so on the ground that
the contract was frustrated when this was not the case. Lord Denning stated that
“The fact that a contracting party gives a bad reason for determining it
does not prevent him from afterwards relying on a good reason when he discovers
it.” Megaw LJ, discussing the term “expected ready to load… ”
“… such a term in a charterparty ought to be regarded as being a
condition of the contract, in the old sense of the word “condition”;
that is that when it has been broken, the other party can, if he wishes, by
intimation to the party in breach, elect to be released from performance of his
further obligations under the contract; and he can validly do so without having
to establish that, on the facts of the particular case, the breach has produced
serious consequences which can be treated as “going to the root of the
contract” or as being “fundamental,” or whatever other metaphor
may be thought appropriate for a frustration case.”
The Hansa Nord  QB 44
Citrus pulp pellets for use in animal food had been sold for £100,000 under
a contract which provided for “shipment to be made in good condition.”
Part of the goods had not been so shipped and in addition the market value in
such goods had fallen at the delivery date. The buyers rejected the goods which
were later resold pursuant to a court order and eventually reacquired by the
original buyers for just under £34,000. The buyers then used the goods for the
originally intended purpose of making cattle food, though the defective part of
the goods yielded a slightly lower extraction rate than sound goods would have
The Court of Appeal held that rejection was not justified. The term as to
shipment in good condition was neither a condition nor a warranty but an
intermediate term; and there was no finding that the effect of its breach was
sufficiently serious to justify rejection. The buyers seem to have tried to
reject, not because the utility of the goods was impaired, but because they saw
an opportunity of acquiring them at well below the originally agreed price. In
these circumstances their only remedy was in damages: they were entitled to the
difference in value between damaged and sound goods at the agreed destination.
Schuler v Wickman Machine Tools  AC 235
Wickman were the exclusive selling agents in the UK for Schuler’s goods. The
agency agreement provided that it was a condition that the distributor should
visit six named customers once a week to solicit orders. This entailed
approximately 1,500 visits during the length of the contract. Clause 11 of the
contract provided that either party might determine if the other committed ‘a
material breach’ of its obligations. Wickman committed some minor breaches of
this term, and Schuler terminated the agreement, claiming that by reason of the
term being a condition they were entitled to do so.
The House of Lords held that the parties could not have intended that Schuler
should have the right to terminate the agreement if Wickman failed to make one
of the obliged number of visits, which in total amounted to nearly 1,500. Clause
11 gave Schuler the right to determine the agreement if Wickman committed a
material breach of the obligations, and failed to remedy it within 60 days of
being required to do so in writing.
The House had regard to the fact that the relevant clause was the only one
referred to as a condition. The use of such a word was a strong indication of
intention but it was not conclusive. Lord Reid felt that it would have been
unreasonable for Schuler to be entitled to terminate the agreement for Wickman’s
failure to make even one visit because of the later clause. The word ‘condition’
made any breach of the clause a ‘material breach’, entitling Schuler to give
notice requiring the breach to be remedied. But not, as Schuler sought, to
terminate the contract forthwith without notice.
3. IMPLIED TERMS
Hutton v Warren (1836) 1 M&W 466
The tenant of a farm was given six months’ notice to quit. His landlord
insisted that he continue to cultivate the land during the notice period in
keeping with custom. The tenant successfully argued that the same custom
entitled him to a fair allowance for the seeds and labour he used on the land.
The Moorcock (1889) 14 PD 64
The owner of a wharf agreed to provide mooring facilities for ‘The Moorcock’.
The ship was damaged when it hit a ridge of rock at low tide. Although the
defendants had no legal control over the river-bed, they could ascertain its
state but they had not done so. The court held that honesty of business required
an implied undertaking on the part of the wharf owner that it was a reasonably
safe place to moor a ship. The wharf owner had broken his implied undertaking
and was, therefore, liable in damages to the ship owner.
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