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Contracts Subject Guide

1

3

Diploma in Law

LEGAL PROFESSION

ADMISSION BOARDLAW EXTENSION COMMITTEE

LAW EXTENSION COMMITTEE SUBJECT GUIDE

04 CONTRACTS

WINTER SESSION 2017

This Guide includes the Law Extension Committees course information and teaching program and the Legal Profession Admission Boards syllabus. The syllabus is contained under the heading Prescribed Topics and Course Outline and has been prepared in accordance with Rule 27H(a) of the NSW Admission Board Rules 2015.

Course Description and Objectives

1

Lecturers

1

Assessment

1-2

September 2017 Examination

2

Texts and Materials

3

Lecture Program

4

Weekend Schools 1 and 2

5-6

Compulsory Assignment

6

Assignment Questions

6

Prescribed Topics and Course Outline

7-19

Problem Questions

20-34

Extracts from Legislation:

Civil Liability Act 2002 (NSW)

35-38

Australian Consumer Law

39-48

Contracts Review Act 1980

49-60

LAW EXTENSION COMMITTEEWINTER 2017

04 CONTRACTS

COURSE DESCRIPTION AND OBJECTIVES

The law relating to contracts is one of the pillars of the common law system. An understanding of the basic elements of contract law is thus a critical pre-requisite for the study of a number of later subjects, including Conveyancing, Commercial Transactions and Industrial Law. The course aims to provide students with an understanding of the basic principles of contract law that apply to nearly all contracts. In fulfilling this aim, the course focuses primarily on a study of relevant case law and statute law. The course covers the elements of formation of contracts, terms of a contract, matters affecting consent to a contract, discharge of contracts, remedies, and third party rights.

Special principles that apply to specific types of contracts are dealt with in later courses.

The objectives of the course are:

(a)to provide students with an understanding of basic principles of contract law; and

(b)to develop in students an ability to analyse fact situations and correctly identify the relevant principles of contract law that are applicable to the resolution of problems raised by particular factual situations.

LECTURERS

Alexander Kuklik, BJaps (ANU), LLB (Hons) (ANU), LLM (Sydney), Grad Dip Military Law (M) (ANU)

Alexander Kuklik a Barrister at Wentworth Chambers, Sydney practising in contract and commercial law.

Prof Peter Radan, BA, LLB, PhD (Syd), DipEd (SCAE)

Peter Radan is a Professor of Law at Macquarie Law School. He holds the degrees of Bachelor of Arts, Bachelor of Laws and Doctor of Philosophy from the University of Sydney, as well as a Diploma in Education from Sydney College of Advanced Education. He has been a teacher with the Law Extension Committee since 1984. His most recent published books include (with C Stewart) Principles of Australian Equity & Trusts (3rd ed, LexisNexis, 2016); (with C Stewart & I Vickovich), Principles of Australian Equity & Trusts, Cases & Materials (3rd ed, LexisNexis, 2016); and (with J Gooley & I Vickovich) Principles of Australian Contract Law (4th ed, LexisNexis, forthcoming, 2017).

ASSESSMENT

To be eligible to sit for the Boards examinations, all students must complete the LEC teaching and learning program, the first step of which is to ensure that you have registered online with the LEC in each subject for which you have enrolled with the Board. This gives you access to the full range of learning resources offered by the LEC.

To register with the LEC, go to www.sydney.edu.au/lec and click on the WEBCAMPUS link and follow the instructions. Detailed guides to the Webcampus are contained in the material distributed by the LEC, in the Course Information Handbook, and on the Webcampus.

Eligibility to Sit for Examinations

In accordance with the Legal Profession Admission Rules, the LEC must be satisfied with a students performance in a subject in order for the student to be eligible to sit for the examination, conducted by the Legal Profession Admission Board (LPAB). Assignments are used to assess eligibility.

Students are expected to achieve at least a pass mark of 50% in assignments to be eligible to sit for examinations. However, a category of deemed eligible has been introduced to offer students whose assignment mark is between 40-49% an opportunity to sit for the examination. In these circumstances students are often advised not to sit. A mark below 40% means a student is not eligible to sit for the examination.

Assignments as part of the Boards Examinations

Assignment results contribute 20% to the final mark in this subject.

The Law Extension Committee (LEC) administers the setting and marking of assignments. The LEC engages the LPABs Examiners to assess or supervise the assessment of assignments.

Submission

Assignments must be received by 11:59pm on the due date unless an extension has been granted. Extensions must be requested by email prior to the due date. Specific supporting evidence must be provided. Assignments that are more than ten days late will not be accepted. Late assignments attract a penalty of one mark out of 20, or 5% of the total marks available, per day.

Assessment

Assignments are assessed according to the Assignment Grading and Assessment Criteria outlined in the Guide to the Presentation and Submission of Assignments. Prior to the examination, assignments will be returned to students and results posted on students individual results pages of the LEC Webcampus. Students are responsible for checking their results screen and ascertaining their eligibility to sit for the examination.

Review

Where a students overall mark after the examination is between 40-49%, the students assignment in that subject will be included in the Revising Examiners review. The final examination mark is determined in accordance with this review. Assignment marks will not otherwise be reviewed.

SEPTEMBER 2017 EXAMINATION

Candidates will be expected to have a detailed knowledge of the prescribed topics. A detailed outline of the prescribed topics is set out below under the heading Prescribed Topics and Course Outline.

Candidates will be expected to have made a study of the prescribed materials in relation to those topics, and to have analysed the cases and statutory provisions referred to in the Law Extension Committee's course outline.

The examination will consist of three questions. Students will have to complete all three questions. Two of those questions will be worth 27 marks each; one will be worth 26 marks.

Questions will either be problem-type questions or short essay questions based around the case law or legislation studied.

The examination will constitute 80% of the final mark in this subject.

The examination will be a closed book examination. A case list will appear in the examination. The legislation appearing at the back of this outline will also be reproduced in the exam.

Please note: All questions in relation to the examination should be directed to the Legal Profession Admission Board, not the Law Extension Committee.

texts and materials

Course Materials

Guide to Presentation and Submission of Assignments (available on the LEC Webcampus)

Prescribed Materials

Radan, Gooley & Vickovich, Principles of Australian Contract Law, 3rd ed. LexisNexis, 2013 (together with up-dates available on the LEC Webcampus)

Radan, Gooley & Vickovich, Principles of Australian Contract Law, Cases and Materials, 3rd ed. LexisNexis, 2014

Cases underlined in the Prescribed Topics do not appear in the case book and students will need to obtain a copy of those cases.

Note those cases in the prescribed topics marked * are NOT compulsory cases. However, students will be expected to know the general principles of contract law that those cases stand as authority for.

Reference Materials

Carter, Carter's Guide to Australian Contract Law, 3rd ed, LexisNexis, 2016

Carter, Contract Law in Australia, 6th ed. LexisNexis, 2012

Carter, Cases and Materials on Contract Law in Australia, 6th ed. LexisNexis, 2011

Paterson, Robertson & Duke, Principles of Contract Law, 5th ed. Thomson Reuters, 2016

Paterson, Robertson & Duke, Contract: Commentary and Materials, 13th ed. Thomson Reuters, 2016

Seddon, Bigwood and Ellinghaus, Cheshire and Fifoot's Law of Contract, 10th Australian ed. LexisNexis, 2012

Journal of Contract Law

LexisNexis Questions and Answers Contract Law, 5th ed.

The cases and legislation listed under the heading Prescribed Topics and Course Outline should be read as a minimum for students to gain a grounding in the basic principles of contract law.

Students are encouraged to read beyond these materials, and in this respect the other cases mentioned in the textbook and casebook serve as a starting point.

LEC Webcampus

Once you have registered online with the LEC, you will have access to all the facilities on the LEC Webcampus including the problem questions for each class, plus any other materials that the lecturer may make available to students. These course materials as well as links to relevant cases and legislation can be found in the Course Materials section of the LEC Webcampus.

LECTURE PROGRAM

The first of 12 lectures will be held on Tuesday 9 May 2017. All lectures will be for 3 hours and will start at 6.00pm. (The day was incorrectly printed in the Handbook.)

For details as to the location of these venues (listed below), refer to the Course Information Handbook for a map of the University of Sydney main campus.

WEEK

DATE

VENUE

LECTURE

TOPICS

1

Tues

09 May

CLT 273

1

Prof Radan

Introduction

Fact of Agreement

2

Tues

16 May

CLT 273

2

Prof Radan

Fact of Agreement

Certainty and Completeness

3

Tues

23 May

CLT 273

3

Prof Radan

Consideration

4

Tues

30 May

CLT 273

4

Prof Radan

Estoppel

Intention to Create Legal Relations

Writing Requirements

5

Tues

06 June

CLT 273

5

Mr Kuklik

Express terms

Implied Terms

6

Tues

13 June

CLT 273

6

Mr Kuklik

Meaning of Terms

Construction of Exclusion Clauses

Privity

STUDY BREAK: Saturday 17 June 2017 Sunday 2 July 2017

7

Tues

4 July

CLT 275

7

Mr Kuklik

Misrepresentation

Mistake

Duress

8

Tues

11 July

CLT 275

8

Mr Kuklik

Undue Influence

Unconscionable Conduct

Rescission

Statutory Unconscionability and Unjust Contracts

Misleading or Deceptive Conduct

Unfair terms

9

Tues

18 July

CLT 275

9

Mr Kuklik

Discharge by Performance

Discharge by Agreement

Breach of Contract

Discharge by Breach of Contract

Discharge by Repudiation

10

Tues

25 July

CLT 275

10

Mr Kuklik

Termination

Discharge by Frustration

11

Tues

01 Aug

CLT 275

11

Prof Radan

Damages

12

Tues

08 Aug

CLT 275

12

Prof Radan

Actions for Fixed Sums and Debt

Rectification

Restitution

WEEKEND SCHOOLS 1 and 2

Classes in Contracts are held at both Weekend Schools 1 and 2. Classes for the first weekend school will be taken by Professor Radan. Classes for the second weekend school will be taken by Mr Kuklik.

The focus of these classes is the external students. Lecture students may attend on the understanding that weekend classes aim to cover the topics covered in weekly lectures and are principally for the benefit of external students.

It will not be possible to cover the entire course at the weekend schools. These programs are a general guide, and may be varied according to need. Readings are suggested to introduce you to the material to be covered in the lecture, to enhance your understanding of the topic, and to encourage further reading. You should not rely on them alone.

WEEKEND SCHOOL 1

TIME

MAJOR TOPICS

KEY READING

Friday 26 May 2017: 5.00pm 9.00pm in Eastern Avenue Lecture Theatre (EALT)

5.00pm-6.20pm

Fact of Agreement

Carlill v Carbolic Smoke Ball Co

Stevenson, Jacques & Co v McLean

Bressan v Squires

6.30pm-7.40pm

Consideration and Estoppel

Australian Woollen Mills Pty Ltd v Cth

Waltons Stores (Interstate) v Maher

Williams v Roffey Bros and Nicholls (Contractors)

7.45pm-8.45pm

Express and Implied Terms

Byrne v Australian Airlines Ltd (1995) 185 CLR 410

Oscar Chess v Williams

Toll (FCGT) v Alphapharm

Saturday 27 May 2017: 8.00am noon in Eastern Avenue Lecture Theatre (EALT)

8.15am-9.25am

Construction of Exclusion Clauses

Privity

Darlington Futures v Delco Australia

Trident General Insurance v McNiece

9.30am-10.40am

Misrepresentation

Mistake

Duress

Undue Influence

Unconscionable conduct

Rescission

Statutory Unconscionability and Unjust contracts

Misleading or deceptive conduct

Unfair terms

Edgington v Fitzmaurice

McRae v Cth Disposals Commission

10.45am-11.55am

Problem Solving

Questions on Course Outline

WEEKEND SCHOOL 2

TIME

MAJOR TOPICS

KEY READING

Friday 21 July 2017: 5.00pm 9.00pm in Eastern Avenue Lecture Theatre (EALT)

5.00pm-6.20pm

Discharge by performance, agreement and breach

Associated Newspapers Ltd v Bancks (1951) 83 CLR 322

6.30pm-7.40pm

Discharge by repudiation

Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1979] AC 757

7.45pm-8.45pm

Termination

Tropical Traders Ltd v Goonan (1964) 111 CLR 41

Saturday 22 July 2017: 8.00am noon in Eastern Avenue Lecture Theatre (EALT)

8.15am-9.25am

Damages

Commonwealth v Amann Aviation

Victoria Laundry v Newman Industries

9.30am-10.40am

Damages

Actions for Sums Fixed by the Contract

Restitution

Dunlop Pneumatic Tyre Co v Selfridge

Pavey and Mathews v Paul

10.45am-11.55am

Problem Solving

Questions on Course Outline

COMPULSORY ASSIGNMENT

In Contracts, there is only ONE ASSIGNMENT. This assignment is compulsory and must be submitted by all students. Students must submit the assignment by the due date. A pass mark is 50%. Refer to the Guide to the Presentation and Submission of Assignments for the assignment grading and assessment criteria. Students who fail to satisfy the compulsory requirements will be notified through the Results screen on the Webcampus before the examination period of their ineligibility to sit the examination in this subject. The maximum word limit for the assignment is 2000 words (inclusive of all footnotes but not bibliography).

The rules regarding the presentation of assignments and instructions on how to submit an assignment are set out in the LEC Guide to the Presentation and Submission of Assignments which can be accessed on the LEC Webcampus. Please read this guide carefully before completing and submitting an assignment.

Completed assignments should be lodged through the LEC Webcampus, arriving by 11:59pm on the following date:

Compulsory Assignment

Thursday 29 June 2017

(due in study break)

The assignment will constitute 20% of the final mark in this subject.

ASSIGNMENT QUESTIONS

To obtain the Contracts assignment questions for the Winter Session 2017, please follow the instructions below:

1. Register online with the LEC (see page 24 of the Course Information Handbook for detailed instructions). Once you have registered, you will have access to all the facilities on the LEC Webcampus.

2. Then go into the Webcampus, select the Course Materials section and click on the link to the assignment questions for this subject.

PRESCRIBED TOPICS AND COURSE OUTLINE

Cases underlined in the Prescribed Topics do not appear in the case book and students will need to obtain a copy of those cases.

Note those cases in the prescribed topics marked * are NOT compulsory cases. However, students will be expected to know the general principles of contract law that those cases stand as authority for.

LECTURE 1

Aims and Objectives

At the end of this lecture students should understand the following:

(a) the definition of contract;

(b) the sources of contract law;

(c) the various classifications of contracts;

(d) the basic principles relating to answering problem questions;

(e) the nature of an offer and the circumstances in which an offer is made

Introduction to Contract Law

Text: Gooley, Radan & Vickovich, Chapter 1 (see generally chapters 2, 3, 9, 26, 27, 28: note that you will NOT be given an exam question on the topics of capacity and illegality)

The introduction to the subject of Contracts looks at the following issues:

(a)The definition of contract;

(b)The sources of contract law;

(c) The classification of contracts.

(d) Freedom of contract

a. Capacity who can enter into a contract

b. Illegality and restraints of trade

Formation of Contract

The Fact of Agreement: Offers

Text: Gooley, Radan & Vickovich, (paras 4.1-4.73)

Australian Woollen Mills Pty Ltd v Cth (1954) 92 CLR 424

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) [1953] 1 QB 401

*Barry v Davies [2001] 1 All ER 944

*Blackpool and Fylde Aero Club v Blackpool BC [1990] 1 WLR 1195

LECTURE 2 Aims and Objectives

At the end of this lecture students should understand the rules of acceptance, the duration of offers and the concepts of certainty and completeness.

The Fact of Agreement: Acceptance

(a) Acceptance generally

Text: Gooley, Radan & Vickovich, Chapter 4 (paras 4.74-4.121)

R v Clarke (1927) 40 CLR 227

*Household Fire & Carriage Accident Insurance Co v Grant (1879) LR 4 Ex D 216

*Brinkibon v Stahag Stahl [1983] 2 AC 34

*Bressan v Squires [1974] 2 NSWLR 460

(b) Alternatives to Offer & Acceptance

Butler Machine Tool Co v Ex-Cell-O Corporation [1979] 1 All ER 965

(c) Termination of Offers

Stevenson, Jacques and Co v McLean (1880) 5 QBD 346

Dickinson v Dodds (1876) 2 Ch D 463

*Mobil Oil v Lyndell Nominees (1998) 153 ALR 198, at 222-228

Certainty and Completeness

Text: Gooley, Radan & Vickovich, Chapter 5

Booker Industries v Wilson Parking (Qld) (1982) 149 CLR 600

Whitlock v Brew (1968) 118 CLR 445

Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1

United Group Rail Services Limited v Rail Corporation New South Wales (2009) 74 NSWLR 618

Masters v Cameron (1954) 91 CLR 353

Meehan v Jones (1982) 149 CLR 571

LECTURE 3 Aims and Objectives

At the end of this lecture students should understand the concepts and rules relating to the doctrine of consideration.

Consideration


The element of consideration refers to the requirement that a contract is a bargain in the sense that there is an exchange between the parties of promises or an exchange of a promise for an act for the agreement to amount to a contract at law. The requirement of consideration is reflected in the major rule that unless a promisee has given consideration he or she cannot enforce the promisors promise. In such a case the promisee would be held not to have given consideration. The use of a deed allows for the enforcement at common law (but not in equity) of a promise for which no consideration has been given.

Australian Woollen Mills v The Commonwealth (1954) 92 CLR 424

Coulls v Bagot's Executor and Trustee Co (1967) 119 CLR 460

*Pao On v Lau Yi Long [1980] AC 614

Williams v Roffey Bros and Nicholls (Contractors) [1991] 1 QB 1

Foakes v Beer (1884) 9 App Cas 605

LECTURE 4

Aims and Objectives

At the end of this lecture students should have an understanding of the doctrine of promissory estoppel and its relationship to contract. In addition students should have an understanding of the requirement of an intention to contract as a necessary requirement to contract formation and a general understanding of writing requirements.

Equitable Estoppel


Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Je Maintiendrai v Quaglia (1980) 26 SASR 101

*Austotel v Franklins (1989) 16 NSWLR 582

Giumelli v Giumelli (1999) 196 CLR 101

*Sidhu v Van Dyke (2014) 251 CLR 505

*Delaforce v Simpson-Cook (2010) 78 NSWLR 483

*Saleh v Romanous (2010) 79 NSWLR 453

Formation of a Contract - Intention to Create Legal Relations


An integral element of a contract at law is that the parties to it must intend their agreement to have legal force in the sense that each party can take legal action to enforce it. Unless there is an express statement in the agreement on this matter, there is a presumption that agreements of a family, social or domestic character are not intended to have legal effect. In all other agreements (commercial agreements) the presumption is that the parties did intend it to have legal intent. In both situations the presumptions can be rebutted by evidence to the contrary.

Balfour v Balfour [1919] 2 KB 571

Jones v Padavatton [1969] 2 All ER 616

Esso Petroleum Ltd v Commissioners of Customs & Excise [1976] 1 All ER 117

Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95

The Requirement of Writing Do Contracts Have to be in Written Form?


At common law there is no requirement that any contract has to be in written form. However, statute imposes such a requirement in certain types of contract, a significant example being contracts involving land or interests in land. However, oral contracts for the sale of land can in some circumstances be enforced.

Conveyancing Act 1919 (NSW), s 54A

*Pirie v Saunders (1961) 104 CLR 149

*Khoury v Khouri (2006) 66 NSWLR 241

LECTURE 5

Aims and Objectives

At the end of this lecture students should understand the following:

(a) the circumstances in which pre-contractual statements amount to terms of a contract;

(b) the formation of collateral contracts;

(c) the principles for the incorporation of contractual terms; and

(d) the principles by which terms are implied into a contract.

Terms of a Contract(a) Express Terms


This topic is concerned with establishing the express terms of the contract between the parties to the contract. It needs to be established whether the parties intended pre-contractual statements to be express terms and were not merely representations. Alternatively such statements may amount to collateral contracts contracts that are collateral to the main contract between the parties. Even in situations where one party intends a statement to be a part of the contract, questions arise as to whether that party has done enough to have the term incorporated into the contract.

*Ellul and Ellul v Oakes (1972) 3 SASR 377

Oscar Chess v Williams [1957] 1 All ER 325

J J Savage and Sons v Blakney (1970) 119 CLR 435

*Hoyt's v Spencer (1919) 27 CLR 133

*SRA v Heath Outdoor Ltd (1986) 7 NSWLR 170

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 79 ALJR 129

Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805

Thornton v Shoe Lane Parking [1971] 2 QB 163

Parker v South Eastern Railway Co (1877) 2 CPD 416

D J Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749

La Rosa v Nudrill Pty Ltd [2013] WASCA 18

(b) Implied Terms


Terms may also arise by implication, either under common law principles or pursuant to statute. Furthermore, terms can also be implied because of the existence of a custom in a particular industry, trade or locality.

Codelfa Construction v State Rail Authority of New South Wales (1982) 149 CLR 337

Byrne v Australian Airlines Ltd (1995) 185 CLR 410

*Con-Stan Industries of Australia P/L v Norwich Winterthur Insurance (Australia) P/L (1986) 160 CLR 226

*Commonwealth Bank of Australia v Barker (2014) 253 CLR 169

LECTURE 6

Aims and Objectives

At the end of this lecture, students should understand the rules and principles by which terms of a contract, especially exclusion clauses, are construed or interpreted. Students will have an understanding of the parol evidence rule.

In addition, at the end of this lecture students should have an understanding of the operation of the doctrine of privity of contract. In relation to the doctrine of privity of contract the principle issues that arise include:

(a) the meaning of the doctrine of privity of contract;

(b) the relationship of the privity doctrine to the consideration rule that consideration must move from a promisee;

(c) the remedies available at common law and equity to a promisee when enforcing a contractual promise by a promisor to benefit a person who is not a party to the contract; and

(d) the exceptions by which a person not a party to a contract can take enforcement action in relation to a contractual promise for his or her benefit.

The Meaning of Terms

Text: Construction of Contractual Terms Paper on LEC WebCampus

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 33

The Construction of Exclusion Clauses


Darlington Futures v Delco Australia (1986) 161 CLR 500

*Alderslade v Hendon Laundry Ltd [1945] KB 189

*White v John Warwick & Co [1953] 2 All ER 1021

Sydney City Council v West (1965) 114 CLR 481

Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law) ss 64 and 64A

Privity of Contract


Coulls v Bagot's Executor and Trustee Co (1967) 119 CLR 460

Trident General Insurance Co v McNiece Bros (1988) 165 CLR 107

New Zealand Shipping Co v A M Satterthwaite and Co (The Eurymedon) [1975] AC 154

LECTURE 7

Aims and Objectives

This lecture deals with the topic of vitiating factors. This topic relates to factors that affect the quality of the consent given to the entry into a contract. In most cases the consequence of the relevant factor is that the contract is voidable. In some situations, such as of mistake at common law, the contract will be void as from the very beginning (ab initio). The distinction between voidable and void ab initio has particular consequences for the rights of third parties to the contract who have innocently acquired property that has in the meantime passed between the parties to the contract. This lecture deals with three vitiating factors, misrepresentation, Mistake and Duress.

Vitiating Factors

(a) Misrepresentation


Balfour & Clark v Hollandia (1978) 18 SASR 241

Edgington v Fitzmaurice (1885) 29 Ch D 459

Smith v Land and House Property Corp (1884) 28 Ch D 7

Redgrave v Hurd (1881) 20 Ch D 1

Nicholas v Thompson [1924] VLR 554

(b) Mistake


(1) Common Mistake

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377

Bell v Lever Brothers [1932] AC 161

(2) Mutual Mistake

(3) Unilateral Mistake

Taylor v Johnson (1983) 151 CLR 422

Cundy v Lindsay (1878) 3 App Cas 459

Lewis v Averay [1972] 1 QB 198

(4)Non est factum

Ford v Perpetual Trustees Victoria Ltd (2009) 257 ALR 658

(c) Duress


Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366

Barton v Armstrong [1976] AC 104

Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40

North Ocean Shipping Co v Hyundai [1979] QB 705

*ANZ v Karam (2005) 64 NSWLR 149

LECTURE 8

Aims and Objectives

This lecture continues the topic of vitiating factors and considers, Undue Influence, Unjust Contracts, Misleading and Deceptive Conduct and Unfair Terms. It also considers the remedy of rescission.

(d) Undue Influence


Johnson v Buttress (1936) 56 CLR 113

*Yerkey v Jones (1939) 63 CLR 649

Garcia v National Australian Bank Ltd (1998) 194 CLR 395

(e) Unconscionable conduct

Text: Gooley, Radan & Vickovich, Chapter 19 (19.1-19.58)

Commercial Bank of Australia v Amadio (1983) 151 CLR 447

*Kakavas v Crown Melbourne Limited (2013) 250 CLR 392

*Louth v Diprose (1992) 175 CLR 621

(f) Rescission


Alati v Kruger (1955) 94 CLR 216 (ch 31 case book)

(1) Affimation

Coastal Estates v Melevende [1965] VR 433 (ch 31 case book)

(2) Restitutio impossible

Vadasz v Pioneer Concrete (1995) 130 ALR 570 or (1995) 184 CLR 102 (ch 31 case book)

(3) Third parties

*Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525

(4) Lapse of time(g) Statutory Unconsionability


(1) Application of the Australian Consumer Law

Part XI (particularly s 131) and Sch 2 of the Competition and Consumer Act 2010 (Cth).

(2)Unconscionable conduct

Part 2-2 of the ACL: s 20 (general), s 21 (supplies to consumers) and s 22 (supplies to or acquisitions from certain businesses).

ss 232 (injunction), 236 (damages), 237, 238 and 243 (orders to compensate for loss or to prevent or reduce loss).

*Pritchard v Racecage Pty Ltd & Ors (1997) ATPR 41-554

ACCC v CG Berbatis Holdings Pty Ltd (2003) 197 ALR 153, (ch 36 case book)

(3) Application of the Australian Securities and Investments Commission Act 2001 (Cth) ss 12BA, 12BAB, 12BD, 12CA, 12CB, 12CC

(h) Contracts Review Act 1980 (NSW)


*Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 (ch 36 case book)

*Ford v Perpetual Trustees Victoria Limited (2009) 257 ALR 658 (ch 36 case book)

(i) Misleading or Deceptive Conduct

Text: Gooley, Radan & Vickovich, Chapters 15

Competition and Consumer Act 2010 (Cth), Schedule 2 (referred to as Australian Consumer Law) ss 2, 4, 18, 232, 236, 237, 238, 243. (*see also Australian Securities and Investments Commission Act 2001 (Cth) s 12DA)

Henjo Investments v Collins Marrickville (1988) 79 ALR 83 (ch 35 case book)

Taco Co of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177 (ch 35 case book)

* Contributory negligence and proportionate liability (Part VIA (ss 87CB-87CI) of the Competition and Consumer Act 2010 (Cth). Section 137B of the Competition and Consumer Act 2010 (Cth). Part 4 (ss 34-39) of the Civil Liability Act 2002 (NSW). See also Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367 at [84]ff (Macfarlan JA); Henville v Walker (2001) 206 CLR 459 (ch 35 case book).

(j) Unfair Terms


Competition and Consumer Act 2010 (Cth), Schedule 2 (referred to as Australian Consumer Law) ss 23-28, 232(3), 237, 250) (*see also Australian Securities and Investments Commission Act 2001 (Cth) ss 12BF, 12BG, 12BK)

*Jetstar Airways Pty Ltd v Free [2008] VSC 539

* Director-General of Fair Trading v First National Bank [2002] 1 AC 481

*Office of Fair Trading v Abbey National plc [2010] 1 All ER 667

LECTURE 9

Aims and Objectives

At the end of this lecture students should, as part of the broader topic of discharge, have an understanding of the following:

(a) the order of performance in relation to contractual obligations;

(b) the meaning of performance at common law and qualifications to its applications;

(c) the discharge of contract by agreement; and

(d) the discharge of contract by breach or repudiation.

Discharge

(a) Discharge by Performancce


Cutter v Powell (1795) 101 ER 573

Sumpter v Hedges [1898] 1 QB 673

Hoenig v Isaacs [1952] 2 All ER 176

Bolton v Mahadeva [1972] 1 WLR 1009

(b) Discharge by Agreement


*Crawford Fitting Co v Sydney Valve & Fitting P/L (1988) 14 NSWLR 438

*Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537

*McDermott v Black (1940) 63 CLR 161 at 183-184

(c) Breach of Contract

(d) Discharge by Breach of Contract


Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286

Associated Newspapers Ltd v Bancks (1951) 83 CLR 322

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115

*Louinder v Leis (1982) 149 CLR 509

*Sargent v ASL Developments Ltd (1974) 131 CLR 634

Foran v Wight (1989) 168 CLR 385

*Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315

(e) Discharge for Repudiation

Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1979] AC 757

Universal Cargo Carrier Corporation v Citati [1957] 2 QB 401

LECTURE 10

Aims and Objectives

This lecture considers the rules governing an election to terminate a contract for breach of repudiation as well at the effect of termination.

The lecture also covers the doctrine of frustration. At the end of this lecture students should, as part of the broader topic of discharge, have an understanding of the following:

(a) the discharge of contractual obligations by frustration;

(b) the effect of frustration.

Termination


(a) Requirement of an election

Tropical Traders Ltd v Goonan (1964) 111 CLR 41

(b) Estoppel as a restriction on the right to terminate

Foran v Wight (1989) 168 CLR 385

(c) Effect of termination

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457

Discharge by Frustration

Text: Gooley, Radan & Vickovich, Chapter 25 (paras 25.1-25.49 only)

Codelfa Construction v State Rail Authority of New South Wales (1982) 149 CLR 337

Taylor v Caldwell (1863) 122 ER 309

Krell v Henry (1903) 2 KB 740

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour [1943] AC 32

*Frustrated Contracts Act 1978 (NSW)

LECTURE 11

Aims and Objectives

Common law damages involve the innocent party accepting a breach of contract and being compensated for losses suffered as a result of such breach. Upon proof of a breach, an innocent party is entitled to an award of damages. The principles relating to common law damages are fundamentally concerned with assessment of the amount of compensation to be awarded to the innocent party. Equitable damages can also be awarded.

At the end of this lecture students should have an understanding of the following:

(a) the compensation principle as the basis for the recovery of damages;

(b) the nature of interests protected in an award of damages;

(c) the requirement that the breach must cause the losses sought to be recovered;

(d) factors that affect the quantum of damages awarded;

(e) the principles governing the recovery of equitable damages.

Remedies

(1) Damages


(a) Common Law Damages

*Johnson v Perez (1988) 166 CLR 351

*Howe v Teefy (1927) 27 SR (NSW) 301

Baltic Shipping Co v Dillon (1992) 176 CLR 344

The Commonwealth v Amann Aviation (1991) 174 CLR 64

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272

Victoria Laundry (Windsor) v Newman Industries [1949] 2 KB 528

*Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322

Koufos v Czarnikow Ltd [1969] 1 AC 350

Civil Liability Act 2002, (NSW), ss 5D, 11A, 16, 27-33

*Insight Vacations Pty Ltd v Young (2010) 241 FLR 125; (See note at end of the extract for Flight Centre Ltd v Louw)

*Flight Centre v Louw [2011] NSWSC 132

(b) Equitable Damages


*Supreme Court Act 1970, s 68

*Johnson v Agnew [1980] AC 367

LECTURE 12

Aims and Objectives

Apart from an action in damages at common law, a plaintiff may be able to recover sums of money by way of actions for the recovery of fixed sums and in debt.

At the end of this lecture students should have an understanding of the following:

(a) the principles governing the validity of the parties contractual agreement as to the measure of damages in the event of a breach; and

(b) the principles for the recovery of debts.

As an alternative to common law damages, equitable remedies to enforce the contract may be available to a plaintiff. At the end of this lecture students should also have an understanding of the following the equitable remedy of rectification.

Finally this lecture also considers remedy of restitution insofar as that remedy is relevant to ineffective contracts.

(c) Actions for Fixed Sums and Debt


Dunlop Pneumatic Tyre Co v New Garage [1915] AC 79

*Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457

White & Carter (Councils) Ltd v McGregor [1962] AC 413

*Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 333 ALR 569

(d) Rectification


*Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603

*George Wimpey UK Ltd v V I Construction Ltd [2005] EWCA Civ 77

(e) Restitution


Pavey and Mathews v Paul (1987) 162 CLR 221

*Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32

*Lumbers v W Cook Builders Pty Ltd (in liquidation) (2008) 232 CLR 635

Sumpter v Hedges [1898] 1 QB 673

*David Securities P/L v Commonwealth Bank of Australia (1992) 175 CLR 353

Problem Questions

Formation Questions

1. Greg visited the local supermarket and took from the shelf a bottle of cleaning fluid. Immediately after he placed the bottle in the trolley provided, it exploded, severely injuring him. He sued the supermarket alleging a breach of contract. Advise Greg.

2. The XYZ Furniture Store advertises that as it is ceasing business, it is holding a closing down sale. It states that "all goods must be sold. No reasonable offer refused." Jones sees a rocking chair which is labelled as priced at $200. When he says that he will buy the chair at that price, he is told that the manager of the store has decided to keep the chair for himself. Advise Jones.

3. Bill advertised that he would pay $100 to anyone supplying him with information as to the whereabouts of his lost bull. Jim went to Bill's home and told him he had seen it grazing on Sally's property. Before Bill could set out to recapture the animal, Sally telephoned Bill and informed him of the whereabouts of the bull. Advise Sally.

4. The following communications passed between NZ Imports Ltd, a New Zealand company, and NSW Exports Ltd, a company carrying on business in NSW:

a. Fax dated 1 November from NZ Imports Ltd: Please quote us price per tonne of canned peaches.

b. Letter dated 6 November, delivered 10 November from NSW Exports: We can supply canned peaches at $500 per tonne. Cans are in 150g, 400g and 850g and your order would consist of a fair distribution between these sizes. Delivery would be in equal monthly shipments commencing February 1.

c. Fax dated 11 November from NZ Imports: Your offer to supply one tonne canned peaches accepted. Formal order follows.

d. Order form dated 12 November, delivered 17 November from NZ Imports ordering one tonne, setting out the terms given in paragraph (b) and containing the following condition printed at the bottom of the form: All orders subject to the standard form contract terms of the International Fruit Trading Association.

e. Fax dated 14 November from NSW Exports: Thank you for your order. We note your acceptance of our terms.

What is the effect of each communication?

Is there a concluded contract between the parties, and if so, on what terms?

5. Connie writes to Debbie offering to sell her a rare book for $500. Debbie replies: Im quite happy to pay $500, but it may take me some time to find the money. However, I have $350 in the bank, and if you want a quick sale Im prepared to buy it straight away for $350. If thats OK, post it to me as soon as you can. Connie writes in reply: Im in no hurry for the money; so the book is yours at $500. But since you are so keen to have it at once, Ill post it to you later today. She posts the letter and then a parcel containing the book. The parcel, which is correctly addressed, reaches Debbie the following day. Debbie decides that she does not like the book, and sells it on the same day to Edward. The letter, however, is addressed with the wrong postcode, and does not reach Debbie for a week. How much must Debbie pay Connie?

Would the position be different if Connies letter bore the correct postcode, but was nevertheless delayed for a week in the post?

6. An electronics store has a sale on and advertises On the spot credit! NO DEPOSIT! Interest free for 12 months (on approval). You select a stereo, fill in the loan forms and receive approval from the manager, who gives you a copy of the documentation. When you go to collect the stereo the next day, they refuse to give it to you. They claim that the agreement was without consideration. Did you give consideration? How does this differ from Australian Woollen Mills?

7. Sybil is an eccentric 92-year-old matriarch with full possession of her mental faculties and considerable property holdings. She wishes to dispose of her assets before her death, since she wants nothing to do with wills and those leeches in the legal profession. At a family gathering she announces her plans. The family home is to be auctioned. The proceeds of the sale and the rest of her property are to be distributed amongst the family, except for her jewellery, paintings and wine.

The jewellery is to go to the first of her grandchildren who brings a member of the Richards family to justice. The Richards have been sworn enemies of Sybils family since one of their number killed her fourth husband in a squabble over mining rights. The present members are believed to be engaged in various criminal activities. The paintings are to go to Polly, her eldest daughter in recognition of her devoted service to me. Polly has been Sybils unpaid secretary and housekeeper for the past 45 years. As for the wine, Sybil promises it to Basil, her biographer. Basil has nearly completed work on the book and Sybil, who is pleased with the draft chapters she has seen, intends the wine as a bonus over and above the remuneration originally agreed.

Sybil has now undergone a change of heart and wishes to revoke these arrangements. Two of her grandsons have succeeded in apprehending members of the Richards family. First Manuel, a police officer, arrested a Richards during a police raid on a gambling den in Sydney. Then two days later Terry was mugged while walking through Hyde Park. In self-defence he overcame his attacker and handed him over to the authorities, the assailant turning out to be a Richards. Both those arrested are now awaiting trial. Meanwhile Basil has spent a considerable sum of money investing in wine-racks to hold the wine he was expecting to receive. There is no prospect of reselling them to recoup the expenditure.

Basil, Terry and Polly come to you for advice. They wish to know whether they are entitled to the benefits promised to them by Sybil and specifically, what arguments they might use to overcome any perceived difficulties in their claims. What is your advice?

8. Read the following extract from the judgment of Lindley LJ in Carlills case and then answer the questions that follow. This exercise is aimed at showing you how you should be going about dissecting a case.

Carlill v Carbolic Smoke Ball Co[1893] 1 QB 256(English Court of Appeal)

Facts. The defendants were the proprietors and vendors of a medical preparation called The Carbolic Smoke Ball. They inserted in a number of newspapers the following advertisement:

100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1000 is deposited with the Alliance Bank, Regent Street, shewing our sincerity in the matter.

During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ball.

One carbolic smoke ball will last a family several months, making it the cheapest remedy in the world at the price, 10s, post free. The ball can be refilled at a cost of 5s. Address, Carbolic Smoke Ball Company, 27, Princes Street, Hanover Square, London.

The plaintiff, on the faith of this advertisement, bought a smoke ball at a chemists shop and used it as directed, three times a day, for over eight weeks, when she was attacked by influenza. She sued the defendants to recover the 100 and Hawkins J held she was entitled to recover (see [1892] 2 QB 484). The defendants appealed.

Lindley LJ. We must first consider whether this was intended to be a promise at all, or whether it was a mere puff which meant nothing. Was it a mere puff? My answer to that question is No, and I base my answer upon this passage: 1000 is deposited with the Alliance Bank, shewing our sincerity in the matter. Now, for what was that money deposited or that statement made except to negative the suggestion that this was a mere puff and meant nothing at all? The deposit is called in aid by the advertiser as proof of his sincerity in the matter that is, the sincerity of his promise to pay this 100 in the event which he has specified. I say this for the purpose of giving point to the observation that we are not inferring a promise; there is the promise, as plain as words can make it.

Then it is contended that it is not binding. In the first place, it is said that it is not made with anybody in particular. Now that point is common to the words of this advertisement and to the words of all other advertisements offering rewards. They are offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the condition accepts the offer. In point of law this advertisement is an offer to pay 100 to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer. That rests upon a string of authorities, the earliest of which is Williams v Carwardine (1833) 4 B & Ad 621; 110 ER 590, which has been followed by many other decisions upon advertisements offering rewards.

But then it is said, Supposing that the performance of the conditions is an acceptance of the offer, that acceptance ought to have been notified. Unquestionably, as a general proposition, when an offer is made, it is necessary in order to make a binding contract, not only that it should be accepted, but that the acceptance should be notified. But is that so in cases of this kind? I apprehend that they are an exception to that rule, or, if not an exception, they are open to the observation that the notification of the acceptance need not precede the performance. This offer is a continuing offer. It was never revoked, and if notice of acceptance is required which I doubt very much, for I rather think the true view is that which was expressed and explained by Lord Blackburn in the case of Brogden v Metropolitan Ry Co (1877) 2 App Cas 666 at 691 if notice of acceptance is required, the person who makes the offer gets the notice of acceptance contemporaneously with his notice of the performance of the condition. If he gets notice of the acceptance before his offer is revoked, that in principle is all you want. I, however, think that the true view, in a case of this kind, is that the person who makes the offer shews by his language and from the nature of the transaction that he does not expect and does not require notice of the acceptance apart from notice of the performance.

We, therefore, find here all the elements which are necessary to form a binding contract enforceable in point of law, subject to two observations. First of all it is said that this advertisement is so vague that you cannot really construe it as a promise that the vagueness of the language shews that a legal promise was never intended or contemplated. The language is vague and uncertain in some respects, and particularly in this, that the 100 is to be paid to any person who contracts the increasing epidemic after having used the balls three times daily for two weeks. It is said, When are they to be used? According to the language of the advertisement no time is fixed, and, construing the offer most strongly against the person who has made it, one might infer that any time was meant. I do not think that was meant, and to hold the contrary would be pushing too far the doctrine of taking language most strongly against the person using it. I do not think that business people or reasonable people would understand the words as meaning that if you took a smoke ball and used it three times daily for two weeks you were to be guaranteed against influenza for the rest of your life, and I think it would be pushing the language of the advertisement too far to construe it as meaning that. But if it does not mean that, what does it mean? It is for the defendants to shew what it does mean; and it strikes me that there are two, and possibly three, reasonable constructions to be put on this advertisement, any one of which will answer the purpose of the plaintiff. Possibly it may be limited to persons catching the increasing epidemic (that is, the then prevailing epidemic), or any colds or diseases caused by taking cold, during the prevalence of the increasing epidemic. That is one suggestion; but it does not commend itself to me. Another suggested meaning is that you are warranted free from catching this epidemic, or colds or other diseases caused by taking cold, whilst you are using this remedy after using it for two weeks. If that is the meaning, the plaintiff is right, for she used the remedy for two weeks and went on using it till she got the epidemic. Another meaning, and the one which I rather prefer, is that the reward is offered to any person who contracts the epidemic or other disease within a reasonable time after having used the smoke ball. Then it is asked, What is a reasonable time? It has been suggested that there is no standard of reasonableness; that it depends upon the reasonable time for a germ to develop! I do not feel pressed by that. It strikes me that a reasonable time may be ascertained in a business sense and in a sense satisfactory to a lawyer, in this way; find out from a chemist what the ingredients are; find out from a skilled physician how long the effect of such ingredients on the system could be reasonably expected to endure so as to protect a person from an epidemic or cold, and in that way you will get a standard to be laid before a jury, or a judge without a jury, by which they might exercise their judgment as to what a reasonable time would be. It strikes me, I confess, that the true construction of this advertisement is that 100 will be paid to anybody who uses this smoke ball three times daily for two weeks according to the printed directions, and who gets the influenza or cold or other diseases caused by taking cold within a reasonable time after so using it; and if that is the true construction, it is enough for the plaintiff.

I come now to the last point which I think requires attention that is, the consideration. It has been argued that this is nudum pactum that there is no consideration. We must apply to that argument the usual legal tests. Let us see whether there is no advantage to the defendants. It is said that the use of the ball is no advantage to them, and that what benefits them is the sale; and the case is put that a lot of these balls might be stolen, and that it would be no advantage to the defendants if the thief or other people used them. The answer to that, I think, is as follows. It is quite obvious that in the view of the advertisers a use by the public of their remedy, if they can only get the public to have confidence enough to use it, will react and produce a sale which is directly beneficial to them. Therefore, the advertisers get out of the use an advantage which is enough to constitute a consideration.

But there is another view. Does not the person who acts upon this advertisement and accepts the offer put himself to some inconvenience at the request of the defendants? Is it nothing to use this ball three times daily for two weeks according to the directions at the request of the advertiser? Is that to go for nothing? It appears to me that there is a distinct inconvenience, not to say a detriment, to any person who so uses the smoke ball. I am of opinion, therefore, that there is ample consideration for the promise.

It appears to me, therefore, that the defendants must perform their promise, and, if they have been so unwary as to expose themselves to a great many actions, so much the worse for them.

Questions on Lindley LJ's Judgment in Carlill's

(1)Does the ratio of Lindley LJ's judgment allow you to speculate what his opinion would have been if the advertisement did not refer to the deposit of 1000.

(2)Why did he need to rely on that evidence to negative the suggestion that the advertisement was no more than a puff when he clearly concludes without that evidence that there was a 'promise' to pay 100.

(3)What has he got to say about communication of acceptance being a necessary requirement?

(4)Who does Lindley LJ say has the onus of proof to prove that the advertisement is too uncertain or vague to be the basis of a legal agreement?

(5)Do you think he confuses an issue of uncertainty with that of ambiguity?

(6)Do you think he is right when he construes the advertisement from the position of a reasonable business person and for the purposes of certainty asks whether it makes business sense?

(7)Does Bowen LJ take a different view: check it when you get home?

(8)How do you think Lindley LJ came to the conclusion that the advertisement contained a request to use the smoke ball?

(9)Why was this important?

(10)Do you not think the case really applies a reliance model of contract to bind a person to what was otherwise a gratuitous promise; given that she had to use the ball as instructed over a period of time before she accepted the offer? Moreover does it not appear as if the contractual obligation in fact matured over time during her acts of reliance? If so there is no formal point of formation and would not that have repercussions for the view that you can revoke an offer prior to acceptance?

(11)Do you think the case suggests a third model of contract that of reasonable expectation? That is, what the case really did was hold the Carbolic Smoke Ball Co to a gratuitous promise because of the reasonable expectation it engendered in Mrs Carlill.

(12)If that is correct, should we really have a problem accepting the legitimacy of Williams v Roffey?

(13)Given all the above what do you think of Lindley LJ suggesting that the consideration for the Company's promise was either the benefit of increased sales or the detriment she suffered in using it as instructed?

9. Read through the following question. After you have read it consider how you might answer it in point form and in terms of structure. You should then read through the answers to the questions contained on the following pages. These answers will give you an idea of different quality answers. Discuss in class what distinguishes these answers.

Question

Following lengthy negotiations for the acquisition of cable television rights to the 2016 Olympics, Alice and Bruce sign the following document:

Heads of Agreement Cable Television Rights

This document records the completion of negotiations of the Heads of an Agreement by virtue of which Alice and Bruce agree to execute a formal contract which gives effect to each of the terms set out below.

1. Alice agrees to acquire from Bruce, and Bruce agrees to grant, the exclusive right to exploit the licence which Bruce holds to televise the 2016 Olympics.

2. Alice agrees to televise all events at the 2016 Olympics and to provide facilities sufficient to enable appropriate overseas telecasts.

3. Alice agrees to pay a sum of $3 million on the signing of the formal contract.

4. Alice agrees to pay such sum as Bruce considers to be sufficient in respect of the revenue obtained from:

(a) approved sponsors; and

(b) overseas telecasters.

5. Such other terms as may be agreed between the parties, acting in good faith and in a spirit of cooperation appropriate to the event to which the Agreement relates. All such terms to be:

(a) necessary for the efficacy of the venture; and

(b) of a kind normally found in contracts of this type.

January 1, 2014

Prior to the Olympics Alice decided that the price was too high and refused to comment on a draft of the formal contract prepared by Bruce's solicitors. The draft in fact contained a large number of additional terms, including an obligation that Alice spend no less than $2 million in promoting the telecast and obtaining sponsors.

Advise Bruce whether he has any contractual rights against Alice.

PASS WITH MERIT UNDER EXAM CONDITIONS

Mostly answers the question

Contains no significant errors and highlights main issues fairly well.

Attempts a critical approach to the issues.

Demonstrates independent research and thought appropriate to addressing the main issues.

Has a clear structure and reasonably clear expression.

For B to have contractual rights against A it is necessary to prove there is a contract. For there to be a contract it is necessary for the parties to have reached an agreement. This can be proven by using the tools of offer and acceptance or by conduct. In this case the parties express the document to represent the completion of negotiations for the Heads of Agreement. From this it is reasonable to infer that an agreement has been reached with the offer and acceptance being the promises made in the document that has been signed.

Although the parties may have reached an agreement this will not be upheld by a court unless it can be said to be certain and complete. Whether or not it is certain and complete is determined objectively from the position of the parties. In this case the ultimate purpose of the transaction is the televised coverage of a sporting event which will require detailed drafting. That detailed drafting is not in the heads of agreement and the issue is whether the heads of agreement can stand on its own.

The agreement is expressed to made subject to the execution of a formal contract. The meaning of such a provision was dealt with by the High Court in Masters v Cameron. The court held that such a clause can have one of three meanings, first, that the parties intend to be immediately bound, second that the parties intend to be immediately bound but performance is suspended until execution and third, the parties do not intend to be bound at all until execution. There is a presumption that the latter applies. It is suggested that in this case the agreement falls into this third category as it is expressed in terms that the formal contract will be the contract that gives effect to clauses 1-5. The reference to the word terms should not be taken to suggest that parties intend the heads of agreement to contain statements to truth of which is guaranteed as that is giving to the term a technical legal meaning that the parties would not have envisaged.

In addition to the above it can be seen that not even the price has been finalised; the final price is left up to the discretion of B. This renders the agreement too uncertain. Moreover, the agreement cannot be saved by severing this term as the price for the right is crucial to the transaction. Severance would result in A being prima facie liable to only pay a 3 million dollar upfront payment for the rights.

Clause 5 also gives rise to uncertainty. It reads like an agreement to agree which cannot be given effect to as it is illusory. The placing of a duty of good faith, which is a developing doctrine in Australian contract law, cannot save an agreement to agree as it does not provide a criterion to make the parties agree. Even if the provision was construed as being no more than an agreement to negotiate in good faith towards a final contract it would not be upheld as negotiations for a final contract are not in evidence and the mechanism to resolve a break down in negotiations is uncertain in its operation, see Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd.

DISTINCTION UNDER EXAM CONDITIONS

Completely answers the question in an original or unanticipated way

Contains striking originality or creativity of approach or analysis.

Demonstrates exhaustive or innovative research.

Exceptionally well written.

Is otherwise exceptional in some way.

Whether or not B will have a cause of action for damages for breach of contract depends on whether the Heads of Agreement is itself an enforceable contract. Since A and B have executed the Heads of Agreement they themselves may have come to an agreement, and execution excuses the need to go through an offer and acceptance analysis to find an agreement. Moreover, the language of the document reflects this conclusion; it records the completion of negotiations for the Heads of Agreement. Nevertheless, as a matter of law, the parties must have reached a certain and complete agreement R. Under the objective theory of contract; it cannot be concluded that the parties have reached an agreement if it is impossible to ascertain the meaning and legal effect of the terms agreed. Moreover, despite the execution of a document, there will be no enforceable agreement if the contents of that document evidence a positive intention not to contract. In this case, the determining factor will be the efficacy of the good faith provision. To reach and understand that point it is necessary to investigate some of the earlier provisions of the agreement.

Clauses 1-3 of the agreement set out the basic obligations of the parties. The transaction involves the granting of rights to televise the Olympic Games. Such a transaction would ultimately require the settling of complex provisions under a formal contract. The parties have at most concluded an important part of their negotiations from which they intimate they will not go back on: they have agreed on a basic pricing structure and have agreed to negotiate exclusively with each other to finalise the deal, see Seppelt & Sons Ltd v Commissioner for Main Roads. Although that does not evidence a concluded contract to televise the games, it may be enough for B at this point if there is an effective agreement to continue to negotiate. That is, the Heads of Agreement impose no present duty unless it requires a commitment to negotiation, as it merely expresses an agreed expectation.

Clause 4 raises a problem for B as it shows that the ultimate price A must pay is at the discretion of B, with no obvious controls on that discretion. From the aspect of valuable consideration this is the reverse of the situation in Placer Development Ltd v Commonwealth. A has promised to pay but the amount is at the discretion of B, not A. Arguably, it is not a case of A promising to do nothing nor a case of B promising to do nothing, the ultimate consideration lying in the mutual promises contained in clause 1. Nonetheless, there is a strong argument that As consideration consists not only in the promises contained in clause 1 but also in clauses 2, 3 and 4, and that clause 4 provides illusory consideration even though it is B who must determine the amount, and not A, because there is no mechanism for working out the figure; it is equivalent to A promising nothing. If these clauses do reflect the intended consideration then it would not be possible to sever clause 4 from the more certain promises in clauses 1, 2 and 3 as that does not represent the intention of the parties. Moreover, the granting this discretion to B may evidence a lack of intention to contract with B. However, that lack of intention may only relate to the final transaction and does not negate the possibility of an intention to contract on the terms of the Heads of Agreement.

The entire agreement is expressed to be subject to the execution of a formal contract which gives effect to each of the terms. The effect of such provisions depends on construction, that is, the reasonable intention of the parties, see Masters v Cameron. Such provisions may evidence an intention to immediately contract, in some cases with performance being suspended until such execution, or they may evidence a lack of an intention to immediately contract. The provision states that the formal contract is for the purposes of giving effect to the terms set out in the Heads of Agreement. So it is arguable that the parties intend that the clauses are to have no effect until such a document is executed or at least performance is suspended until such time. Despite this, the subject to provision may also be simply referring to the more detailed contract, it being a document that will include the obligations agreed under the Heads of Agreement. Moreover, concluding that the subject to provision implies a lack of intention to contract until execution appears at odds with clause 5, which at least impliedly requires the further negotiations of the parties which must take place prior to the execution of the formal contract. It is at least arguable that the subject to provision does not inhibit the Heads of Agreement taking immediate effect.

Despite the above, clause 5 does introduce the principal difficulty for B. First, it is drafted in terms of an agreement to agree. Generally, such agreements are considered illusory; see May & Butcher Ltd v R, Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd. The rare instances in which they have been upheld are where the parties have evidenced a commitment to the transaction by partly performing and, in particular, by performing those obligations that are now being claimed by one party to render the contract void for uncertainty, see Foley v Classique Coaches. Perhaps such cases are now best seen are examples of estoppel, but in any case there is no evidence of reliance by either party in this case.

There is then an issue as to whether an express obligation of good faith and co-operation can save what would otherwise be an agreement to agree. It is submitted that it cannot; one cannot agree to negotiate to agree. If I am wrong on that point there is still an issue as to whether the good faith provision can save the uncertainties raised by the other clauses. At present in New South Wales a good faith negotiation provision can only be used to uphold the bargain if the negotiations for the agreement are well advanced and if there is a mechanism for resolving disputes should negotiations break down, see Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd. The Heads of Agreement expresses the ultimate intent of the parties but lacks any detail in what would be a complex transaction. It is irrelevant that negotiations may in fact be well advanced; this must be reflected in the terms of the Heads of Agreement as that is the transaction that B wants upheld as a contract.

The mechanism provided to resolve negotiation breakdowns will not save the situation. Terms necessary for the venture only captures those terms that are obvious. This mechanism will not allow for the implication of the complex terms that are necessary for this transaction. Reference to an external standard only helps if it exists; the Olympics are a rare event and the parties vary each time and technology varies between games. It is doubtful that one could produce a set of standard terms for such a contract, see Whitlock v Brew; nor that there is a trade in such contracts, see Three Rivers Trading Co Ltd v Gwinear & District Farmers Ltd.

Finally, B might argue that clause 5 could be upheld as a contract in its own right on the basis that it constitutes an agreement to negotiate. However, the language itself does not reflect such an agreement so as to sever it, and at present such clauses have only been considered are being relevant to the efficacy of the entire agreement on the principles discussed above. It follows that B has no contractual rights against A.

Construction

10. Helen owns a suburban parking station. At the entrance to the station, an automatic machine issues customers a ticket as they drive in and printed on the front is Customers are kindly requested to note that vehicles are parked only subject to the conditions displayed on the premises. The conditions are displayed on a notice attached to the wall of the office to which customers go to pay the parking fees prior to leaving the parking station. The notice reads:

Conditions of Parking

The station is open from 6am to 12pm midnight. Charges are $2 per hour or part thereof; for vehicles left overnight an additional fee of $200 is payable. Helen regrets that she cannot accept any responsibility for any harm, loss or damage whatsoever.

When customers pay the parking fees they are given a document headed Receipt which indicates the amount paid and also repeats the words of the notice on the wall.

Andrew, Joan and Peter all recently parked their cars in the parking station. They had each used the station about once a month over the past year, but had never read the ticket, the notice or the receipt (all of which have been used in exactly the same form throughout the period).

Andrews car was stolen when a thief persuaded Helen that he was the owner of the car and had lost his ticket, and Helen allowed him to take the car away. The car has not been recovered.

When Joan came to collect her car, Helen was assisting another customer who had trouble parking his car. Helen carelessly drove over Joans foot causing her considerable injury.

Peter had too much to drink after work at the pub, forgot about his car until the station had closed and was outraged the next morning when the cashier demanded payment of $200 in addition to the normal parking fee. He refused to pay the $200.

Helen is threatening to sue Peter for $200. Andrew is threatening to sue Helen for the value of his car and Joan is threatening to sue Helen for compensation for her injuries.

What would your advice be to all the parties?

Answer this question by reference to general principle; you need not consider statutory provisions.

11. John owned a truck and operated a business carrying goods within the Sydney metropolitan area. He sometimes drove the truck himself but often employed casual drivers to do this work.

Tom operated a small business manufacturing high quality clothing. In October he needed several cartons containing clothing to be delivered to a customer and, as the carrier he usually used could not do the job for several days, he telephoned John who agreed to deliver the goods that day at a price of $50. On that day John employed Bill (who had not worked for him before) to drive the truck. When he arrived at Toms premises to pick up the cartons, Bill handed to Tom a printed document headed Invoice. It contained handwritten details of Toms name and address and that of the firm to which the cartons were to be delivered, and of the price for the job. The invoice contained a printed statement that the price must be paid within 7 days and also contained, at the bottom, the following printed statement:

Important

All goods are accepted on the basis that the carrier is not liable for more than two times the contract price in the event of any loss or damage whatsoever. The benefit of this clause extends to all servants, agents and sub-contractors of the carrier, for whom the carrier contracts as agent.

Tom had dealt with John 10 times over the previous three years. On each occasion the agreement for the job was made over the telephone and the driver (who was sometimes John but often another driver) handed an invoice to Tom when the goods were picked up. On each occasion the invoice was (except for the handwritten details) identical to that handed over on this occasion. On none of these occasions did Tom read the notice at the bottom of the invoice.

The goods, valued at $5,000 were stolen when Bill stopped at a hotel for a drink while on the way to the destination.

John has paid Tom $100 but refuses to pay any more. Bill refuses to pay anything to Tom. Advise Tom.

Answer this question by reference to general principle; you need not consider statutory provisions.

Performance and breach

12. Dim agrees to pay Clever $20 an hour for ten one hour tutorials in contract. Clever concludes each tutorial 5 minutes early. Dim argues that he is under no obligation to pay for the tutorials. Is he right? What if the tutorials had finished 15 minute early?

13. Anna agrees to build a new kitchen for Robert. The contract provides that the kitchen cupboards are to be made of oak. Robert insists that the cupboards be constructed out of English oak but Anna claims that she is entitled to use Tasmanian oak. Robert maintains his position and Anna refuses to do the work. Advise Anna.

14. Betty is having a house built. She employs Allen to install electrical wiring. The contract specifies Emu brand wiring and requires four double power points to be installed in every room. Betty agrees to pay $10000 for the work.

Because Emu brand wiring is not available, Allen uses Koala wiring, knowing that it made by the same manufacturer as Emu. In fact the only difference between the two types of wiring is that they are distributed by different retailers. He does not tell Betty of the change. Due to an oversight Allen installs four single power points in each room.

Betty refuses to pay for the work. To replace the power points with double power points will cost $400. The cost of replacing the Koala wiring with Emu wiring which is now available is $5000. Allen is willing to replace the power points without cost to Betty but refuses to bear the cost of rewiring.

Advise Betty.

15. On 1 June Michael agrees in writing to manufacture three machines for Betty and to deliver them by three separate deliveries on 1 July, 1 August and 1 September. Michael delivers the first machine on 20 July and Betty accepts it. On 22 July Betty learns that Michaels factory is behind in its work and that delivery of the second machine will be delayed. Advise Betty? What if Michael ceased to carry on business on 22 July?

16. Lady Imogen consults Hugo, a celebrated and popular artist, to paint a portrait of her husband Sir Jasper for $10,000. The finished picture is to be presented to Kudos College, of which Sir Jasper is a Senior Fellow. Soon after the painting is begun, Lady Imogen discovers that Sir Jasper has been having an affair with his secretary. She declares that she will have nothing further to do with him, and instructs Hugo to stop work immediately. But Hugo, encouraged by Sir Jasper who continues to come for sittings, finishes the portrait and delivers it to Kudos College. The master and fellows receive it with great pleasure. When Lady Imogen receives Hugo's bill for $10,000, her indignation knows no bounds. Advise her.

17. James enters into a contract with Bruce for the construction of a swimming pool in Bruce's garden for $5,000. Of this, $2,000 is to be paid when the excavation is complete; $2,000 when the concreting has been done; and the balance "on final and satisfactory completion" of the work. The contract provides that the excavation is to be completed by April 1; that the concreting is to be done by May 1; and that the pool is to be finished and ready for use on June 1. It also provides that Bruce is to be entitled to cancel if at any stage James is more than 2 weeks behind schedule with the work. Soon after James has started to do the excavation, some of his workers fall ill, with the result that the work is delayed and the excavation is not completed until April 21. Bruce is aware of these delays but does not exercise his right to cancel until May 16 when James (by dint of great efforts to speed up the work) has nearly finished the concreting. On May 16, a reasonable person in Bruce's position would have concluded that it was impossible for James to finish the work before June 7 at the earliest. Bruce has paid James the $2,000 due on completion of the excavation, but has made no further payment. Advise James, as at May 17th.

18. On January 2 Seller in Sydney and Buyer in Melbourne enter into a written contract for the sale of wheat which includes the following terms:

1Price - $100 per tonne

2Payment - Cash on delivery at Buyers warehouse

3Quantity - 1000 tonnes

4Description - Grade A wheat

5Quality - Wheat to be of tiptop quality on arrival

6Delivery - March

On 12 January Buyer faxes to Seller: Stocks of wheat too great refuse to honour contract with you.

Seller receives this fax but makes no reply. On April 2 Seller tenders to Buyer a consignment of 1000 tonnes of Grade A wheat. Due to the wheat not being of tiptop quality its value is 10% less than that of wheat of tiptop quality. Buyer rejects the wheat.

Assuming the contract is governed by NSW law, what right, if any, do Buyer and Seller have against each other? If you consider that either (or both) of the parties has a right to damages, explain the basis on which those damages would be quantified.

Would your answer differ if Seller had failed to deliver any wheat at all because its stocks of wheat had been destroyed by a gale? Would it be relevant to know that stocks of A grade wheat were available from South Australia at $250 per tonne?

19. For the purpose of advertising its chocolate products the Deadly Delicacy Co Ltd entered into a contract with Plainwords Advertising Agency Ltd. The contract which was in writing and dated October 1 contained the following terms:

A. Plainwords will at its own expense prepare posters advertising the chocolate products of Deadly.

B. The posters will be displayed on billboards having a minimum height of 3m.

C. The billboards will be erected outside the University of Sydney and display of the advertisements will commence no later than November 1.

D. The advertisements will remain on display for 3 months and will be at all times and remain the property of Plainwords.

E. Deadly will pay to Plainwords a fee of $1000 per month payable on December 1, January 1 and February 1.

The following events have taken place. On October 15 Deadly decided that chocolate is harmful to health and discontinued manufacturing chocolate products. On the same day Deadly notified Plainwords that it was cancelling the contract. Plainwords refused to agree to the cancellation of the contract. However, no advertisements were displayed by Plainwords until November 3 due to a delay in the printing of the advertisements. When displayed the advertisements appeared on billboards measuring 2.8m in height.

Advise Deadly of what rights, if any, it has against Plainwords.

Would your advice differ if the contract had contained a term requiring Plainwords to obtain the approval of Deadly to the format of the advertisements and no such approval had been sought?

20. Construction Ltd was employed by Jock to construct some apartments on property owned by Jock. The agreed price was $1 million. This was to be paid by 10 equal $100,000 instalments which fell due under the contract on the first day of each month - payments therefore were not necessarily apportioned to work done. Construction Ltd had been told by Jock that it was imperative that the apartments be completed by the end of that 10 month period as he had already entered into lease agreements with tenants for the apartments and those tenancies were to commence soon after the 10 month period had elapsed.

On the fifth day of the eighth month the manager of Construction Ltd approached Jock and said 'the eighth instalment fell due on the first of the month, why have you not paid it? And by the way there is no chance of me being able to complete these apartments on time unless you agree to pay an extra $100,000 on top of the agreed contract price'.

At the time the manager made this statement, they had in fact completed 80% of the works. However, if Jock were to get a new builder to complete the works it would cost him 40% of the original contract price.

(a) What rights may Jock have against Construction Ltd in the above scenario?

(b) If the contract were to be discharged, can Construction Ltd sue for the 8th instalment that remains unpaid at this point?

What would you consider to be the rights of the parties if Jock agreed to pay the extra $100,000 requested by Construction Ltd and if Construction Ltd then completed all the building work on time?

21. The terms of a contract for sale of steel dated 21 February 2008 between Sally and Bruce provide:

1.Quantity: 100 tonnes.

2.Quality: Grade A.

3.Delivery: Two equal instalments in May and June.

4.Price: $100,000 (in total).

5.Payment: Cash, $50,000 on each instalment delivery.

On 1 May Bruce accepts delivery of (and pays for) the first instalment. The steel is Grade B, an inferior grade. On 8 May he emails Sally in the following terms:

First instalment not of contract quality. I claim compensation. Please confirm June instalment will conform to contract.

Sally replies, on 11 May:

Under our contract I am under no obligation to respond to your 8 May email. However, I suggest an additional payment of $20,000 if you require absolute protection in relation to June instalment.

On 13 May Bruce telexes Sally:

Your conduct under this contract justifies termination. I hereby exercise that right.

Advise Bruce whether he is justified in terminating the contract, and whether he may claim compensation from Sally.

Would your answer differ if Bruce had discovered on 14 May that Sally had sold her entire stock of steel to Zena on 10 May?

What would Bruce's position have been if, instead of accepting the first instalment, Bruce had rejected it and also purported to terminate the contract?

Remedies and Vitiating Factors

22. Alf, a poultry farmer, discovers a fault in the motor powering the ventilation system of his largest poultry house. He telephones the manufacturers, Bifco, explaining his predicament and places an urgent order for a replacement motor to be sent. Bifco mistakenly sends a motor of the wrong specifications and Alf, carelessly failing to notice this, installs it. The motor is too powerful and the entire system is damaged as the fan mechanism disintegrates. Advise Alf in the following alternative circumstances:

(i)The house contains an exotic strain of young peacocks which Alf has been rearing for Cliff under an exceptionally lucrative contract; the peacocks die of suffocation.

(ii)The house contains chickens which die after being infected by a rare virus to which poultry are susceptible only in very hot conditions.

23. Ian and Jo have worked together successfully for some years as professional dancing partners and are engaged to be married. Ian books a holiday for them both with Midi Tours Ltd, explaining to the manager that they are exhausted after a long tour of exhibition dancing and are in need of a good break before their wedding. The price of $500 each, which Ian pays, is inclusive of all travel and meals and accommodation at the Seaview Luxury Hotel, St Tropez. When they arrive at St Tropez, the Seaview Hotel has not been built and the Midi representative puts them instead in the Pension Pis-Aller, a third-rate hotel some miles inland, where they have a miserable time for the first few days and then succumb to food-poisoning after eating a meal prepared in the Pension's unhygienic kitchen. This causes Jo to have a nervous breakdown which lasts for three months after their return home. Thewedding has to be postponed and Ian is unable to earn any income without his dancing partner. Advise Ian and Jo as to their possible actions against Midi Tours Ltd. Would it affect the position if Jo had given Ian the $500 to pay for her own share of the holiday?

24. Jack is a retired airline pilot who owns a valuable executive jet aeroplane, which he charters to companies and individuals with himself as pilot.

On 1 September Jack entered into a contract with Ajax Ltd for the complete overhaul of the aeroplane, at a cost of $500,000. The contract provided that the work would commence on 20 September and had to be completed no later than 1 October. Jack had told Ajax that he was anxious that there be no delays as the aeroplane was his only source of income and I have some very special deals coming up.

On 28 September only about half of the work had been completed. Jack expressed alarm, but Ajax assured him that the work would be completed on time. In fact the work was not completed until 5 October. As a result of the unavailability of the plane, Jack was unable to fulfil a contract he had to fly Magdalena, a famous American rock star, on a whirlwind concert tour of Australia.

Had Jack been able to perform his contract, he would have been paid at twice his usual rate for charter work. As a result of losing this contract, Jack became depressed as he had been an ardent admirer of Magdalena for many years and was devastated at not being able to get to know her during the tour.

Jack seeks your advice as to what rights he may have against Ajax.

In addition, discuss what Jacks position would be in the following alternative situations:

(a) Contrary to all expectations, Ajax completed the work on time and on 2 October Jack agreed that the following day he would fly Julie from Sydney to Bali. Julie told Jack that she had to be in Bali the next day because she was one of the favoured contestants in the world yodelling championships, the first prize for which was $1million. Jack was reluctant to undertake the trip because he disliked flying overseas, but he relented when Julie agreed to pay him at the rate of $3000 per flying hour (his usual rate being $1000 per hour). Due to navigational error, Jack ended up landing the plane in Jakarta instead of Bali, as a result of which Julie was so late she was disqualified from the compe

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