Oral statements are usually used in the course of negotiation between parties to a contract. Whether these statements amount to a representation or a term is a question based on the intention of the parties to a contract. Oral statements can give rise to two possible actions before the courts if proven to be untrue: an action based on misrepresentation or an action based on breach of contract. The courts however make use of the following guidelines when analyzing oral statements;
- Importance of the statement: A statement is likely to be seen as a term if the injured party has made the other party aware that had it not been for that statement, they would not have entered into the contract. The case of Bannerman v White (1861) is illustrative of this position.
- Special knowledge and skill: Where a statement is made by someone who has expert knowledge or skill that is relevant to the subject in hand, the courts will be more willing to deem that statement a term than if the same words were used by an amateur with no special expertise on the matter. This principle was illustrated in the case of Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965).
- Timing of the statement: In general, the more time that elapses between the statement being made and the contract being concluded, the less likely the courts will be to regard the statement as a term, though the cases show that this can only be an approximate guideline.
- Agreements in writing: Where the parties put their eventual contract in writing, any statement that appears in the written contract will usually be regarded as a term. Any statement made before the written contract but not included in it is likely to be regarded as a representation, on grounds that if the parties draw up a written contract which leaves out an earlier statement, it is likely that they did not regard that statement as an important one. This was the position raised in Duffy & Ors v Newcastle United Football Co Ltd (2000).
- Strength of the inducement: The more emphatically a statement is made, the more likely the courts will be to regard it as a term. In the case of Schawel v Reade (1913), the court held the strength and importance of a statement to mean it was a term.