The case of Oscar Chess Ltd v Williams is a leading authority in English contract law on determining whether a pre-contractual statement constitutes a contractual term (such as a warranty) or merely a representation. The Court of Appeal applied an objective test, focusing on the knowledge and expertise of the parties, and clarified the factors that influence whether a statement is binding in contract.
Facts of Oscar Chess Ltd v Williams
Williams, a private individual, sold a Morris car to Oscar Chess Ltd, a firm of motor dealers, for £290 as part of a trade-in arrangement. Williams described the vehicle as a 1948 Morris 10, relying on the car’s registration log book, which stated the same. Unknown to both parties, the log book was a forgery. In truth, the car was a 1939 model worth only £175.
Eight months later, the claimants discovered the true age of the car. They sued for breach of contract, alleging that the statement regarding the car’s age was a warranty. Williams, however, had made the statement in good faith, with no intention to mislead, and had no specialist knowledge of cars.
Procedural History
The matter came before the Court of Appeal after the trial judge ruled in favour of Williams. The primary question for the appellate court was whether Williams’ statement about the car’s age amounted to a term of the contract, or whether it was merely a representation, and thus outside the scope of contractual liability.
Legal Issue
Was the statement that the car was a 1948 model a contractual term (specifically a warranty) binding on the defendant, or was it a mere representation for which there could be no contractual claim?
Oscar Chess Ltd v Williams Judgement
The Court of Appeal, by a majority, held that the statement was not a term of the contract but rather an innocent misrepresentation.
Reasoning in Oscar Chess Ltd v Williams
Denning LJ (Majority)
- Meaning of ‘warranty’: Denning LJ noted that, in ordinary usage, “warranty” refers to a binding promise (as per Cross v Gardner), while in technical contract law it is distinct from a condition (as stated in Heilbut, Symons & Co v Buckleton).
- Key question: The real issue was not whether the statement was a warranty or condition, but whether it was a term of the contract at all.
- Objective test: The court must look at the objective intentions of the parties, judged by their words, conduct, and the circumstances. Here, any reasonable car dealer would not expect a private seller, with no expertise in the motor trade, to be guaranteeing the accuracy of such a statement.
- Knowledge imbalance: The buyers were motor dealers and therefore in a far better position to verify the age of the vehicle. The sellers, by contrast, were laypersons relying on apparently official documentation.
- Risk allocation: If the fraudulent party (who forged the log book) could be found, they could be sued. But where they could not, the loss should fall where it lay — in this case, on the buyers who had the expertise and opportunity to check.
Hodson LJ (Concurring)
- Agreed with Denning LJ, emphasising that the objective circumstances did not support treating the statement as a contractual term.
Morris LJ (Dissenting)
- Took the view that the statement was intended to be a warranty.
- Focused on the importance of the statement in the deal and the fact that it was specific and unequivocal.
- Considered that the buyers were entitled to rely on it, regardless of their own expertise.
Conclusion
In Oscar Chess Ltd v Williams, the Court of Appeal drew a clear line between contractual terms and mere representations, stressing the role of the parties’ relative expertise and the objective assessment of intention. The decision continues to inform modern contract law, reminding commercial parties of the importance of verifying key facts and of clearly recording warranties in writing where they are intended to be binding.
The case stands as a cautionary tale: the absence of clear contractual language, coupled with reliance on the word of a layperson, can leave even experienced traders without a remedy for what turns out to be a mistaken statement. Ultimately, Oscar Chess Ltd v Williams reinforces the principle that the law will not impose a contractual guarantee where the objective circumstances make it unreasonable to expect one.
