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When a Contract Is Being Negotiated

In: Business and Management

Submitted By gloverdj
Words 1196
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When a contract is being negotiated, one party may make statements designed to encourage the other party to enter into the agreement without intending the statements to become contractual promises (Lambiris, 2010, 44). When a statement is made that is not intended to be legally binding it can be regarded as a representation. This is outlined in the case Oscar Chess Ltd v Williams [1975] 1 All ER 325 whereby Williams was selling the car to Oscar who was a car dealer. Williams stated that the car was a 1948 Model as per the documents he supplied to the car dealer. When the dealer ascertained that the car was in fact a 1939 model he sued Williams for breach of contract. The issue was whether William’s statement about the age of the car was a term of the contract or a representation. In this case two judges stated that William’s statement about the age of the car was a mere representation and that the dealer with his specialist knowledge should have verified the age of the car. The third judge disagreed stating it was a vitally important term within the contract (Lambiris, 2010, 217).
When negotiating a contract both parties must distinguish between those statements that are made as a matter personal opinion and those made as a matter of fact. Opinions are not intended as promises or terms to a contract (Lambiris, 2010, 44).
Statements can often be made by a person selling goods or services to excite others to enter into contracts to purchase those goods or services. These statements are not intended to be taken seriously, do not amount to a promise or term of the contract and are often referred to as “puffery”. These statements are often easily recognised by both parties (Lambiris, 2010, 44).
The moment someone decides to sign a contract that contains terms, it is deemed that they are agreeing to be bound by the terms stated in the contract therefore making the…...

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