Case Study of Bob Burke - Parol Evidence Rule - Parol Evidence Rule Exceptions - Law Assignment Help

Assignment Task:

Case Study Bob Burke:

Bob Burke is a graduate in marketing. After working for a well-known marketing firm for three years, he decides to establish his own business specialising in marketing
issues relevant to business websites. He inspects an office in a new shopping centre in Melbourne owned by Southfield Shopping Centre Ltd (Southfield). The Managing
Director of Southfield is Ken Keen.

Bob wants an assurance that no other similar business will be allowed to lease premises at the shopping centre before he signs the lease. This is verbally agreed to by Ken. Bob signs the lease agreement without reading it. The lease agreement contains a clause to the effect that the lease terms and conditions represent the entire agreement between the parties and excludes any oral or verbal representations by any representative of Southfield.

The shopping centre proves to be a financial failure for Southfield due to the high vacancy rate of the shops. Accordingly, six months later, the company allows another business that is similar to Bob’s to lease premises in order to help reduce the financial pressure. As a result, Bob’s business declines due to the competition.

When Bob complains to Ken, he is told that there is no clause in the lease agreement preventing the company from letting premises to a competitor in the same industry and that the verbal assurance given by Ken is not binding because of the disclaimer clause in the lease contract.

Parol Evidence Rule:
The Plaintiff needs to prove the written Contract was not in its entirety. In Mercantile Bank of Sydney v Taylor [1891] 12 LR (NSW) 252, Parol Evidence Rule is applied where a contract is reduced into writing and appears to be in its entirety, it can be presumed the writing contains all the terms within it and evidence will not be admitted of any previous agreement.

The court may presume in the Plaintiff’s case, the Contract did contain all the terms as the previous verbal agreement was not included.

Parol Evidence Rule Exceptions:

Under Common Law, Parol Evidence Ruling has potential to produce unfair results where factors separate to written Contracts such as assurances can affect the agreement itself. Due to this occurrence, exceptions to the rule may be implemented.

The courts will need to decide if the Defendant’s assurance did form part of the transaction. In Van Den Esschert v Chappell [1960] WAR 114, Exception 3 of the Parol Evidence Rule allows Contracts to be both written and verbal where terms are missing from written Contracts.

The courts don’t lightly disregard the Parol Evidence Rule, therefore, determining if statements form part of a contract is necessary. In Ellul v Oakes [1972] 3 SASR 337, Justice Zelling, accepted the position of Law set out in Anson’s Law of Contract and the following factors were considered.

Timings of the statement:

The longer a time-lapse between statements and contract, the greater the presumption the statement is representation. Limited information was available as to the timings prior to Contract and with the agreement being real estate based, which takes time to conduct, we could assume the Plaintiff signed the Contract well after negotiations. The courts may, therefore, concede the statement made by the Defendant was a mere representation to induce the Plaintiff into Contract entry as there was time to reduce the assurance into writing.

The importance of statements in the minds of the parties:

A claim operating in the minds of the parties when a contract is signed may be a term of the contract as well as a method to induce entry into the contract. Since the Plaintiff requested assurance regarding business practices, any reasonable person would assume the statement made by the Defendant would be of high importance to the Plaintiff and therefore be deemed part of the contract.

Whether a written contract is prepared, and the verbal statement was included. If the statement is followed by the execution of a formal Contract in writing, it will probably be regarded as representation should it not be incorporated into the written document. With limited information available, it would be safe to assume the Defendant, being a representative of a Commercial Centre would have a pre-established lease agreement prepared not containing the assurance.

With these factors considered, it would be difficult to assume the direction the court may decide as to the verbal statement being part of the main Contract, therefore, the Plaintiff should prove if the Defendant’s earlier verbal evidence could be used in determining if the Parties had a separate binding Contract? Pym v Campbell [1856] 6 EI & BI 370 provides an example of the 2 nd exception to the Parol Evidence Rule being a conditional precedent agreed upon may be part of the contract. Where one party claiming a representation is not included in a written contract, they may claim a Collateral Contract exists being a contract that is related to the main contract and part of the consideration for making the main contract.

Again, the courts do not take lightly to these exceptions, so the Plaintiff needs to prove the written contract is subject to this exception. It must be shown that the Collateral Contract is similar to the main Contract and representation was promissory in nature.

Effects of Signatures:

The defendant may wish to prove the plaintiff is bound to the agreement by Signature. In L’Estrange v F Graucob Ltd [1934] 2 KB 394, a party has presumed to have read and understood the contract and are bound by the terms including any exclusion clauses. The Court may favour the Defendant as the Plaintiff had signed the document. The Plaintiff may, however, try proving that exclusion clauses of signed documents are not enforceable.

In Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805, exclusion clauses in signed contracts may not be used if there has been misrepresentation regarding the nature of the exclusion preventing the party relying on it from using it. The court may determine the Defendant’s exclusions are not admissible due to their nature if the statements toward the Plaintiff are deemed misrepresentations.

Innocent Misrepresentation Under Common Law:

Misrepresentations are false statements made by one party regarding certain states of the affair to induce other parties to enter Contract. In Common Law, for parties to succeed in actions for misrepresentation, it must be shown the relevant statements are fact, the statements are false, and the statements induced Contract.

The Court must, therefore, rely on these assessments, as the potential remedy available to victims will depend on whether false statements are innocent, fraudulent or negligent. The Plaintiff may wish to prove actionable misrepresentation occurred. In Intrapreneur Pub Co & Sweeney [2002] EWHC 1060, future intention is not actionable for misrepresentation, as it will not amount to a statement of fact. As the Defendant’s statement regarded future intentions, the court may not deem it to be fact.

The Defendant may try to prove innocent misrepresentation occurred. In Derry v Peek [1889] 14 App Cas 337, honestly believing a representation to be true negates fraud. The Defendant’s statement was made with honesty and had no intention to deceive the Plaintiff and was only intending to induce entry into Contract. The court would most likely favour the Defendants claim of the statement being innocent misrepresentation and not valid against the exclusion clause.

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