Ellul and Ellul v Oakes
(1972) 3 SASR 377, Supreme Court of South Australia
The Elluls purchased a house from Oakes. In doing so they relied on a statement contained in a real estate agent’s listing form that the property was sewered. This form had been signed by Oakes. The property was not sewered. Elluls claimed damages for breach of contract.
The statement was not part of the contract - no contractual remedy.
His Honour adopted the position set out in Oscar Chess Ltd v Williams and Dick Bentley Products Ltd v Harold Smith (Motors) Ltd where Lord Denning stated (at 627)
'If a representation is made in the course of dealings from a contract for the very purpose of inducing the other party to act upon it, and actually inducing him to act upon it, by entering into the contract, that is prima facie ground for inferring that it was intended as a warranty [term]. It is not necessary to speak of it as being collateral. Suffice it that it was intended to be acted upon and was in fact acted upon.'
Justice Zelling held that this was the case here – the representation as to sewerage was made to induce a purchaser to buy the property. It was successful in the case of the Elluls. This provide prima facie evidence that the representation was a term. It was then for Oakes to demonstrate it was not a term. Justice Zelling considered that the only way they could do this was by demonstrating the subsequent inspection of the premises displaced the impact of the warranty - that was not the case here.
Zelling J also accepted the position of law set out in Anson's Law of Contract:
… Courts can be said to take into account a number of factors. First, they may have regard to the time which elapsed between the time of making the statement and the final manifestation of agreement; if the interval is a long one, this points to a representation. Secondly, they may consider the importance of the statement in the minds of the parties; a statement which is important is likely to be classed as a term of the contract. Thirdly, if the statement was followed by the execution of a formal contract in writing, it will probably be regarded as a representation should it not be incorporated in the written document. Finally, where the maker of the statement is, vis-a-vis the other party, in a better position to ascertain the accuracy of the statement, the Courts will tend to regard it as a contractual term.
But all of these factors are at best only secondary guides, and they are subsidiary to the main test of contractual intention, that is, whether there is evidence of an intention by one or both parties that there should be contractual liability in respect of the accuracy of the statement. The question therefore is: On the totality of evidence, must the person making the statement be taken to have warranted its accuracy, i.e. promised to make it good? …
In this case, then, the question was whether ‘on the totality of the evidence’ the respondent should be taken to have warranted the accuracy of the statement in the listing – in other words, did he ‘promise’ to make good on the representation? His Honour held that Oakes did in this case, based (objectively) on the ‘effect that statement would have on the mind of a reasonable person so as to make him think that such a representation was contractual in its nature’. It does not matter that the misrepresentation may have been innocently made.
[The other members of the Court agreed with the position of law stated by Zelling J]