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Not every statement made by the parties in the course of negotiation leading to the
contract is a term of the contract. Those statements which have been incorporated into the
contract become terms while others remain as representations. Those that are terms
become contractually binding. The importance of the distinction between terms and
misrepresentations lies in the remedies available for their breach. Under normal
circumstances, if a statement is untrue the remedy is that of rescission, that is to say, the
innocent party may rescind the contract and treat it as if it has never existed. There is no
right to claim damages although in limited circumstances, such as where fraud is
involved in the misrepresentation, the representee may have a remedy outside contract
law as a claim for damages in tort. In contract, if a statement is a term of the contract,
damages may be claimed and there may also be the right to terminate the performance of
the contract. The basis of the distinction between a representation and a term is the
intention of the parties, and this is judged objectively by taking into consideration a
miscellany of factor such as the language used, the expertise or knowledge of the parties
and the precision of the statement. In respect of the last factor, the more imprecise the
statement, the less likely it is to be a term. Whether statement is a term or a representation
must ultimately depend on the context in which is was made.
In baker v. Asia Motor Co. Ltd [1962] MLJ 425 the high court in Singapore decided that
a statement made by the defendants that a car was a 1958 model when in fact it was a
1953 model had become a term of the contract of sale. Therefore the action against the
defendants for damages for breach of contract was allowed. Curiously, having decided
that the statement was a term of the contract, the court then went on to determine, quite
unnecessarily, the question of whether the representation was innocent or fraudulent. It
would certainly have been more appropriate if it had determined if the term was a
condition or a warranty.

The term’ exemption clauses’ and ‘exclusion clause’ are used synonymously and they
take a variety of forma. They range from a simple statement that a contracting party ‘
accepts no responsibility’ to the more elaborate and encompassing statement that it ‘is not
responsible or liable for any loss or damage or injury however caused resulting from the
use’ of a particular facility. An exemption clause may be defined as a term of a contract
that attempts either:
1. to modify the principle obligation or obligations arising under the contract
of that particular type; or
2. to limit or exclude the liability of a party which would otherwise arise as a
result of a breach by that party of his primary obligations to perform the
contract in accordance with its terms.

In standard from contract form contract, it has become increasingly common to find
exemption clause which often seriously disadvantage the unsuspecting consumer. The
motive for the inclusion of such clauses are many had probably the most compelling one
in a capitalist economy is the maximization of profit by reducing costs and risk. The court
are well aware of the fact that in such a situation, one side is in fact imposing a set of
term on the other party in a situation of inequality. The theory that the latter has the
freedom to reject on the terms is a myth simply because there is no other viable source
willing to contract otherwise. For example, insurance companies or banks often used the
same format in their dealing with customers. The observance of the basic legal dogma of
contract does mean that courts generally do not meddle with what the parties have freely
agreed upon. This underlying philosophy undoubtedly severely limited the ability of the
court to intervene but nonetheless, the courts have adopted certain attitudes in respect of
exemption clauses where the inequality of bargaining power has been present.