BUSN7052 Chap.7 Contract Terms and Exclusion Clauses
Contract Terms and Exclusion Clauses
Once a contract exists, the next question is what it contains. This chapter separates terms from representations and puffs, explains the parol evidence rule with its exceptions and the collateral contract route around it, and sets out when courts imply terms in fact using the five BP Refinery conditions, by custom and by statute.
It then treats exclusion clauses in two steps: whether the clause was incorporated by signature or reasonable notice, and whether, read against the party relying on it, its words cover the breach.
What this chapter covers
- 01
Terms, representations and mere puffs
- 02
Parol evidence rule and its exceptions
- 03
Collateral contracts after JJ Savage v Blakney
- 04
BP Refinery conditions and Codelfa's necessity test
- 05
Incorporation by signature or reasonable notice
- 06
Construing exclusion clauses and the s 64 overlay
Worked example · free
A retiree's estimate of a ute's distance
- +2“I believe” is the language of opinion rather than promise, the contrast Lord Denning drew in Oscar Chess v Williams.
- +1The statement came a month before the contract, and the maker had no special knowledge while the buyer was a dealer.
- +1The later written contract omits it, which points to a mere representation.
- +1It is likely a representation, not a term; any remedy lies in misrepresentation, probably innocent.
Key terms
- Mere representation
- A pre-contract statement that induced the contract without becoming one of its terms.
- Parol evidence rule
- The rule that extrinsic evidence cannot add to, vary or contradict a wholly written contract.
- Collateral contract
- A separate binding promise given in return for entering the main contract.
- Contra proferentem
- A rule of construction reading an ambiguous clause against the party relying on it.
- Business efficacy
- The quality of making a contract work commercially, required before a term is implied in fact.
- Implied term
- A term a court treats as part of the contract although the parties did not express it.
Contract Terms and Exclusion Clauses FAQ
How do courts decide whether a statement is a term?
They look for the parties' objective intention using factors the slides list: promissory wording, timing relative to the contract, importance to the decision to contract, the maker's special knowledge, and whether a later written contract left it out. Oscar Chess contrasts saying I believe with saying I guarantee.
Why was no term implied in Codelfa?
Both parties assumed work could continue around the clock, but an injunction stopped night work. The court declined to read in a term about who bore the extra cost because nobody could tell what the parties would have chosen. Courts imply a term only when necessary, not merely because it would be reasonable.
Does signing a document bind me to terms I did not read?
Generally yes. L'Estrange v Graucob binds a signer whether or not they read the document, and Toll v Alphapharm applies that where the signature sits beneath a request to read. Exceptions include a misrepresentation of the clause's effect, as in Curtis, and the narrow defence of non est factum.
Can a business exclude the consumer guarantees by contract?
No. Section 64 of the Australian Consumer Law makes the guarantees non-excludable, and in the ACT the Sale of Goods Act implied terms cannot be excluded either. Marking guides credit answers that first analyse incorporation and construction and then explain how statute overrides the clause anyway.
Exam move
Build two decision paths and practise them until they are automatic. The first sorts statements: puff, representation or term, using the slide factors, and then, if the written contract is silent, whether parol evidence exceptions or a collateral contract let the statement in.
The second handles exclusion clauses: incorporation first, through signature or reasonable notice before formation, then construction, through contra proferentem, the negligence rule in White v John Warwick, Darlington's clear-words rule and the four-corners cases.
Draw both paths from memory, then run three invented scenarios through each, varying one fact at a time, such as whether the document was signed or when a notice was displayed. Memorise the BP Refinery conditions in their source order and pair them with Codelfa so you can explain necessity in one sentence.
Keep a short list of statutory overlays, s 64 of the Australian Consumer Law and the non-excludable SGA terms in the ACT, and add them at the end of any exclusion analysis. Past marking guides gave credit for exactly that combination of contract and statute in questions about a party cruise business and an ultramarathon.
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