Master Notes Contract Law Improved)

8/3/2019 Master Notes Contract Law Improved)

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ƒ Master Notes Contract Law

Formation

Agreement

1.1 Offer

1.2 The Nature of the offer

1. In deciding whether an offer has been made an objective approach is taken. Would it appearthat a RP in position of the of foree that an offer was intended and that a binding agreement would be made upon accepting.(Carlill )

2. An offer can be made to an individual or the whole world ( Carlill v Smoke)

3. It does not matter whether the offeror in fact intended to make an offer; the court determines

the offeror’s intention objectively, according to outward manifestations (Carlill v Smoke)

4. It may be ambiguous as to who made the offer. Courts will look at the documents relied uponand construe from them their true construction. Words used promissory in nature?(Gibson v

Manchester* ’may’ sell council house)

5. Bilateral or unilateral? (one line)

6. The conventional approach to analyzing a contract in terms of offer and acceptance is not always satisfactory; can yield separate results (MacRobertson)

Also distinguish offer and asking for information (Macrobertson)

1.3 Offers distinguished from invitations to treat

An invitation to treat is a communication by one person to another inviting them to make an offer

or enter into negotiations. It is not an offer capable of being accepted such as to give rise to abinding contract (Pharmaceutical Society v Boots)An offer should also be distinguished from ‘mere puffery’(Carlill )

1.3.1 Specific types of offers

Auctions: A bid at an auction is considered an offer (Payne) regardless if there is areserve or not ( AGC (Advances))

Tenders: A call for tenders is usually an invitation to treat unless there is a fixed bid(highest price)which will then make it an offer ( Harvela Investments).

o A call to tenders with a collateral contract that gives a contractual right to have abid considered (Blackpool * pleasure flights from airport).

o A tender will also be not be deemed an invitation to treat if a separate “tender

process contract” is set out stipulating the way the successful tender will be

selected (Hughes Aircraft *traffic control contract)

May include battle of forms

1.4 Revocation of an offer

An offer ceases when it is revoked, lapses or is rejected.

Withdrawal of an offer must be communicated to be effective, it can be withdrawn at anytime before acceptance (Financings v Stimson* damaged car .Exceptions

…the indication by one person to another of his or her willingness to enter into a

contract with that other person on certain terms



Options: A promise to keep an offer open for a period is binding if consideration hasbeen given by the promisee in return for that promise ( Goldsbrough* 5 shillings keep

open land sale)

Lapse of an offer: An offer expressed for a particular period will lapse after that periodunless no specified time is given; then the offer will lapse after a reasonable period(depending on circumstances i.e. car v land)

Death of offeror: The death of the offeror will terminate the offer, at least when theofferee knows of the death before acceptance is communicated (Fong v Cilli *co signees).But when the offer is an option it can still be enforced (Laybutt v Amaco * sale of housewith option)

Failure of condition: An offer may be made subject to a condition that must be satisfiedbefore offer is accepted i.e. conditional on the car remaining undamaged ( Financings v

Stimson *damaged car before acceptance)

A document may appear to be an offer, however there may be an implied condition that the document will not be legally binding until formally executed by all relevant parties(Neill v Hewens *co signees)

Rejection by offereeo “kills” the offer o counter offer = rejection of orginal offero mere inquiry for info (not kill)

Unilateral contracts: The is no universal proposition that an offeror is not at liberty to revokean offer once the offeree commences performance of the sought act of acceptance (Mobil Oil Aus * problematic to determine when acceptance begins etc) But it may be unjust see case; if unjust

specifc court order?



2.1 Acceptance

Elements of acceptance are objectivity, indication of unconditional assent to terms andcommunicated to offeror through prescribed form.

2.2 Conduct Constituting Acceptance

The subjective motives of parties are irrelevant if they have to all outward appearances agreedwith sufficient certainty on the same terms (Taylor v Johnson *rezoning mistaken price per acre) *Crowne (subjective)

Regardless of the parties real intentions, if he conducts himself in a way that a reasonable manwould believe that he was assenting to the terms, and the other party relies on that belief, he willbe equally bound ( Smith v Hughes *oats)

…. Not subjective beliefs… that govern their contractual relations… reasonable person in the

position of the other party to believe… what a RP would understand.. what a RP would haveunderstood….. (Toll *HC authority )

Signing of a contract will bind you regardless of intentions (Fitness First )

2.3 Relationship between the offer and acceptance

o Exception of objective rule: Acceptance must be made in response to the offer. The personaccepting and performing must act on the offer (in faith of, in reliance) (Crown v Clarke

*criminal reward info to free)

2.4 Communication of acceptance

o An offer must be accepted before agreement is satisfied. The offer cannot be accepted untilacceptance is communicated (Latech Finance)

o An offer may expressly or impliedly provide for acceptance to be communicated in a

particular way. But it must be clear to both parties ( Latech Finance *unfettered discretion)

2.5 Silence and acceptance inferred from conduct

o Silence by the offeree will generally not amount to acceptance [unless offeree is underduty to communicate his rejection] (Felthouse v Bindley *horse)

Exception: Objective theory of contract requires outward manifestations. But the silence of anofferee in conjunction with other circumstances on the facts may indicate acceptance i.e.incurring benefit of the contract. Would a RP regard the conduct, inc silence, as signaling to

the offeror acceptance? (Empirnall Holdings *I don’t sign contracts – analogous to ticket casesi.e. R time)

2.6 Method of communication

Acceptance of an offer can be affected through different means, depending on how parties haveconducted negotiations

o Acceptance can be effective before actual communication as soon as the letter is postedonly if the partiers intended that the offer might be accepted by the doing of that act (Tallerman v Nathan, Bressen less restrictive approach * contemplation of parties aspossible mode)

Modern electronic Communication

Contract is made when and where acceptance is received ( Brinkibon v Stahag)

The Electronic Transactions Act 2000 (Vic): If have designated an information system for

An acceptance is an unqualified assent to the terms of an offer or a meeting of

the minds

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receiving information under 13(3) received when enters system, if no system under 13(4)deemed to be received when comes to recipients attentionalso applies to fax (Reese Bros) telex (Brinkibon)

Correspondence between offer and acceptanceOfferee can only accept or reject term proposed by offeror, (change would be a counter offer) thiscan create problems in commercial situations.

Battle of the forms

The ‘classical approach’ [preferred] (as opposed to synthesis approach) is used and the finalform is said to the complete agreement (Butler Machine Tools)

Agreement without “offer” and “acceptance”

The classical approach if applicable should be used, however if not applicable; take in allcircumstances, objectively inferred from the facts and determine if a RP would conclude abargain (mutual assent manifested) (Brambles Holdings* waste depot )

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3.1 Consideration

3.2 The Essential Elements

There must subsist the relation of a quid pro quo (be in exchange for) between the offer and theact ( AWM * policy not constitute bargain requirement)

It is possible that parties strike a bargain but the court does not recognize the acts/promises assatisfying the benefit/detriment requirement (Ballantyne *false claim to withdraw defamation

threat – not constitute detriment ** note dissent that it was sufficient consideration)

Simply acting in reliance of a promise does not necessarily mean that a bargain has been struck (may be estoppel ) in some cases the “bargain” will be so illusory or one-sided that a quid pro quowill not be found (Beaton v McDivitt *rezoning of land – frustrated ** that there was sufficient consideration – farming permaculture (detriment) and reduced rates (benefit))

3.3 Adequacy of consideration

The law requires that consideration be sufficient , but need not be adequate as it is impossiblefor courts to indulge in an evaluation (Woolworths *due to outside of expert knowledge,

uncertainty, economic freedom)

An example of ridiculous consideration is $1, it is a threshold question ‘of something the lawconsiders valuable (Thomas v Thomas *1 pound consideration for house)

3.4 Sufficiency of considerationPast consideration

o Past consideration is not sufficient consideration (Roscorla v Thomas *horse free fromvice)

o ExceptionsWhere a promise is made to pay for past services in circumstances that imply that they

will be paid for; the later promise ‘couples itslef’ with earlier request (Lampleigh *pardon fromKing, Ipex Software *given shares)

The existing legal duty rule

A promise to perform an existing legal duty will not constitute consideration ( already legally

obliged) ( Stilk v Myrick *sailors, bound by original terms bring ship back safely)

Payment of a lesser sum (installments) in satisfaction of a greater sum (interest) cannot be

good consideration (Foakes v Beer** but note Williams extension/inconsistency – Re Select

Move practical benefit does not apply)

5 Exceptions (Beneficiary – acquires benefit of modification, Modifying party – releasing thebeneficiary from an obligation)

1. Fresh consideration: Where party shows fresh consideration to the modifying partychanging the pre-existing contractual obligations (Hartley v Ponsoby * Dangerousvoyage)

2. Practical Benefit: where the beneficiary shows that the modifying party is incurring apractical benefit ; the benefit must be greater then the remedy(Willaims v Roffey * flats,

Benefit/detriment conferred/inferred by the promsiee in exchange for a promiseTwo essential requirements

1. It must consist of a detriment to the promisee or a benefit to the promisor ( benefit/detriment requirement); and

2. The detriment suffered or benefit conferred must be given by the promisee in

return for the promise (the bargain requirement)

e.g. payment of money – financial gain for promisor/loss for promisee




not find new worker, but note cannot be fraudulent; Musumeci *fruit shop, no emptyshop and no cost of litigation as the benefit) **If the principle in Williams is applied toFoakes the makes Foakes redundant

3. Third party: Where promise to perform existing legal duty is made to a third party. A

preexisting contractual obligation to a third party can be valid consideration because thepromisee obtains the benefit of a direct obligation. (Pao On)4. Bona fide compromise of a legal dispute (Wigan v Edwards * defects of house) 5. Original contract terminated and replaced



4.1 Intention

It is not asearch for uncommunicated subjective motives , all objective circumstances which bore on thewhether the parties intended to make a contract will be viewed (Ermogenous v Greek *pre-eminently spiritual character relationship)

4.2 Presumptions The onus rests upon the person seeking to enforce such an agreement to convince the court that there was no intention to create a legal relationship ( Hermogenous)

Except : Where the contract is social, commercial or government presumptions apply, but

can be rebutted.

May look to the circumstances of the agreement (conversations, documents, relationship) todetermine intention; cant subjectively not contract when a RP would assume you are intendingto contract ( Air Great Lakes *plane purchase)

A ‘subject of great importance’ (or when money has been paid) to a business will play a largerrole in deciding intention then lesser subjects ( Aus College *dermatologists training important)

4.2.1 Commercial Transactions

Agreements made in a commercial context are presumed to be made with an intention to createlegal relations. However is rarely an issue and is difficult to argue no intention.

Letters of comfort which are promissory in nature will prima facie be considered legally bindingunless they explicitly state otherwise (Banque Brussels *loan facility 90 days) Letters of comfort

that are not promissory in nature (i.e. policy) will not be considered legally binding; no morethan a moral responsibility (Kleinwort Benson *loan facility “it is our policy…..”)

4.2.3 Domestic and social agreement

Presumption against legal intentions in domestic and social agreements.

The presumption is capable of being rebutted on the facts, but must be something more thanmere mutual promises (Balfour * verbal agreement to pay wife 30 p month, Jones) “natural love

and affection counts for so little in these courts” Exceptions:

o Where a party relied on the contract to their detriment (e.g. moving countries) then alegal intention can be inferred (Todd v Nicol *Scotland move to Aus)

o Where the whole setting of the arrangement is commercial rather than social ordomestic then parties will be regards as intending legal relations (Roufos v Brewster

*tuck, goods delivery)

4.2.4 Government Agreements

What may appear to be a ‘contractual promise’ may just be a mere statement of policy,

all circumstances must be taken into account to discern whether it was merely policy or acontractual relationship ( AWM , Administration of PNG * dairy cows)

But it may be obvious that there was intention by the government to create legalrelations; the government may benefit from the contract or it may appear to be commercial innature (Placer Developments * timber subsidy )

4.2.5 Usefulness of presumptions questioned

Parties to an agreement must manifest an intention to create legal

relations in order for there to be a binding contract (note overlap

with offer and acceptance, consideration). These manifestations are

determined objectively by the courts; would a RP consider parties

intended to be legally bound (Ermogenous v Greek )



After Ermogenous presumption have been questioned; every case determined on facts; did not abolish all together

4.3 Preliminary agreements

Three types1. Parties have reached finality with all the terms and intend to be immediately bound,regardless of formal doc or not

2. Parties have completely agreed upon terms and our bound to bring formal doc intoexistence

3. Parties not intended to make a concluded bargain at all, unless they execute a formalcontract

Which category a case falls into depends upon the intention disclosed by the language the partieshave employed; “subject to contract” clause prima facie creates overriding condition that aformal contract must be formed before obligations are incurred by parties. (*NB can alsoconditional on rezoning, acquiring finance etc) (Masters v Cameron * farming prop ‘subject to

contract formed’ )

4. Parties bound immediately and exclusively by the terms which they agree upon whilst

expecting to make further contract with additional terms (Baulkham Hills)

There are really only 2 types, legally binding, and not.



5.1 Certainty

5.2 (1) Completeness *note : intention of courts upholding K and implying “writing K forthem (per Kirby Biotech Aus)

An agreement will be sufficiently complete only if the parties have reached agreement on theessential terms

No contract is concluded until the parties negotiating are agreed upon all the terms of theirbargain – unless indeed the terms left outstanding are “such that the law will supply” The morecomplex the contract the less likely the court will feel competent in ‘filling the gaps’

(Milne* mining venture)

Parties must agree on everything essential to make the contract commercially workable, plus anythe court is incapable of supplying by implication, what is essential depends on the facts of eachcase ( ANZ v Frost * not decide on style, design etc) ** price not always essential term can beimplied ( s 13 Goods Act )

An “agreement to agree” will be treated as if the parties were silent on that essential term – both result in an unenforceable contract due to incompleteness; even if courts can imply a termi.e. R price (May and Butcher * purchase of old tentage, arbitration of ‘reasonable price’, not set price because not intention of parties for court to do so)To set a price in the future parties must expressly state ‘price will be settled by a certain man’ or

‘under arbitration act’ (May and Butcher )

Exception:

o Courts are less likely to find agreement incomplete if it has been wholly or partlyperformed (Foley v Classique * petrol retailer, ** hard to reconcile with May onlydifference is time, no agreement on future price of petrol)

o Parties may defer agreement on an essential term if they provide an effectivemechanism/machinery/ formula for supplying the term in the event they fail to reachagreement (or formula). If it fails then contract is void for uncertainty ( George v

Roach)

5.3 (2) Certainty of meaning

A particular terms may be so vague and imprecise that a court cannot give it meaning.

The court does not take a pedantic approach, particularly in commercial contracts (Upper

Hunter * Suppliers cost )

A court will attempt to uphold commercial contracts – where a term has multiple meanings – as

long as they can give it a meaning (Upper Hunter )

Courts may import a requirement of reasonableness to overcome uncertainty. However, if noobjective criteria are available (unique transaction) the uncertainty cannot be overcome(Whitlock v Brew * lease of petrol station on land )

Reasonableness cannot be applied to the sale of land (Hall v Busst * depreciation of property on

an island **note dissent makes it even more uncertain what is certain! )

5.4 Agreement to negotiate

Agreement must be sufficiently certain and complete

1.agreement reached on all essential terms (completeness); 2.these terms must be certain and clear in meaning (certainty);3.and can’t be illusory (i.e., can’t be completely discretionary) 4. but note that courts will sometimes fill a gap (see implied terms below)



A promise to negotiate in good faith will be enforceable so long as the obligations of the partiesare clear and part of an undoubted agreement ( Coal Cliff *mining venture, which was too complex

to negotiate)An ‘agreement to negotiate in good faith’ is enforceable under law. Must be identifiable criteria of

how the parties would have acted in the negotiations. Parties not duty bound to accept, just anopen mind ( Aiton* negotiations frustrated by one of the parties)

5.5 (3) Illusory promises

An illusory promise makes a contract void for lack of certainty

Promisor who has unfettered discretion in relation to performance of promise means there is nocontract (Placer * gov’t subsidy meaningless due to absence of specific amount/mode of calculation, no R criteria to judge)

Exceptions:o principle does not apply where the discretion or option relates only to the fulfillment of

a condition upon which a contract depends (once the condition is satisfied then there isno discretion as to the performance of the contract) ( Meehan v Jones * ’subject to finance

on satisfactory terms’ not illusory criteria of honesty )

o Inserting terms by one party as may ‘reasonably be required’ is not illusory as theymust be reasonable; so not unfettered discretion (Godecke * one side insert terms)

o A promise may be void because it is both illusory and uncertain in meaning ; extrinsicevidence can be used to give meaning to the term(Biotechnology *senior staff equity

scheme)

o A clause that adds nothing of material value to a contract can be severed ( Fitzgerald )but not something material (Whitlock ) A party can remove an uncertain, illusory term if it benefits only them to make a contract certain ( Bradford )

Consequences of Uncertainty

Agreement is voido Courts reluctant to void if parties have partly performed – would try

and fill gap (see below)o Client may also not want K void!;

Ineffective term could instead be severed or waived )especially if not anessential term)



7.1 Formalities

7.2 Formalities required o A court action cannot be brought in relation to guarantees (secondary

obligation if debt is not paid; distinguished from indemnity : primary obligation

( Yeoman Credit ) and interests in land unless the agreement is in writing or a memorandum or note of the

agreement is in writing; and (s 126) (inc electronic s 126 (2))

is signed by the party whom is being sued (s 126)

o If multiple document are involved they must either be physically connected or

one document must refer to the other; if unclear oral evidence may be admitted(Tonitto v Bassal )

o The document must include all essential terms with precision (Pirie v

Saunders * note on leases not sufficient, which property? )

o Must be signed (by person that is being bound): courts take a liberal approach,where the name of the party (or agent) appears on a document, and it has been‘authenticated’ then is recognized as the final record of K ( Pirie v Saunders)

Electronic signatures are acceptable if method is approved by bothparties ( s 9 Electronic Transactions Act )

E mail can also be used as the K ( s 126 Elec Tran Act )

7.3 Consequences of non-compliance o The contract is not void if these formalities are not met; it simply means that no

action can be taken to enforce the contract in the court of law. But the dealingmay give rise to other enforceable rights outside of K law (equity – constructivetrusts)

o Exceptionso Part performance: If K has been ‘partially performed’ equity can intervene

2 tests The parties must have conducted themselves in a way whichunequivocally and in their own nature refer to the agreement (Ogilvie v

Ryan *cottage attached to cinema **the HC interpreted the narrow def’n;

there is also broad on ‘ balance of probabilities Steadman)o Restitution or debt: Where one party has paid money/performed services an

action to recover a reasonable amount may be available (Pavey v

Matthews*oral agreement to carry out building work which normally requires to

be in writing)o o END HERE START NEW PAGE

The CL does not require a K to be in any particular form… the plaintiff is

required to prove the existence of a contract by adducing evidence… the CL

has been modified by statute (s 126 Instruments Act 1958) which provides for some contracts to be in writing… (guarantees and land) (since this only

applies to K dealing in land or guarantee this part of course relates to only a

few exceptions)




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6.1 Privity

6.2 Identifying the contracting parties

A person not party to the K cannot enforce it nor incur obligations under it ( Coull’s * join signee’s

one not held to sign cant sue)

Usually an issue when benefit is given to a third party (C) and C wants to enforce

6.3 Circumventing the privity rule

Privity can lead to injustices, has been criticized, since we are not as smart as NZ who changed

law under statute CL exceptions must be used.

Trusts: (Trident General Insurance)

Misleading and deceptive conduct: s 52 TPA

Insurance: Does not apply to insurance contracts (Trident General Insurance* third party

covered )

Agency: A third party can establish themselves as an agent of one of the contracting parties that is protected by limited liability (Port Jackson *bill of lading)

“letter of comfort”: Extended Trident to a promise made to provide financial support to arelated third party (A promises B to provice financial supprt to C – C can enforce (Gate Gourmet )

Tort: ( Hill v Van Erp) solicitor duty of care to beneficiary of will

Specific performace: Where remedy not sufficient (Beswick ) although not suitable whenperformance is required at a particular time or defected performance had been tendered( Jackson v Horizen)

A person who is not party to a contract cannot enforce or incur obligations under that

contract… privitiy does not prevent a contract conferring a benefit on a third person.

Comment [JS1]: Contrast with Jason



8.1 Estoppel “I don’t think element 1, 3 are required here…”

Step 1 – CL or Equitable EstoppWalton Stores v Maher *independent cause of action

o Assumption CL example – one party assumes the other party wont enforce their strict

legal rights under a contract (Quaglia * hair dresser ) Assumption that a person will enter into a K (Walton *sword )

Silence when duty to speak (Walton) Need not be a legal relationship (W v G * lesbian)

o Inducement must be clear and unequivocal (Legione * ”think it will be alright” ) can be induced by silence but must be more then ‘mere silence’ (Walton)

o Detrimental reliance (substantial) The relying party (representee) must act on the (representors)

assumption to their detriment/changed their position on basis of assumption (Quaglia * Hair dresser **note circumstances ‘lump sum’ )

Must be of “material advantage” (Legione)

Detriment need not be financial (Verwayen * navy ship ‘stress of litigation’ )

o Reasonableness Court must be satisfied that relying party acted reasonably in adopting their

position (Walton) ** would it be more R to expect representee to accept

risk that promise may not be met?o Unconscionability

Must be unconscionable in the circumstances for the representing party todepart or threaten to depart from that assumption; knowledge andintention (Walton) NOT merely breaking a promise (2 factors)

Knowledge – representor knew or ought to have knownassumption had been adopted (Walton, Verwayan)

Benefit – representor did nothing to correct representeesunderstanding of situation (Walton, Legione)

o Departure Representor must depart or threaten to depart from the assumption

adopted by relying party

Effect of an estoppel

o Guiding principles: court will give the “minimum equity” to relieve against the detriment suffered;

starting point is for court to try and “make good” the assumption adopted; but minimum equity must be proportionate to the detriment suffered.

• Where estoppel is raised in context of contractual relationship:o estoppel could be used as a “shield” to estop one party from:

exercising a particular contractual right, or exercising it in a particular way (so that they are bound to act consistently with the representation that had induced therepresentee to adopt the assumption); or

denying that there is a particular term of the contract (e.g. because the ParolEvidence Rule excludes it by operation of the law of contract); or

perhaps even denying that an enforceable contract exists altogether (e.g. because

Estoppel is not apart of K law, it operates alongside it. Estoppel addresses detrimental reliance arising from unconscionable conduct.

Representor – party who represents a situation that the representee relies on

(assumption)

CL estoppel – representor leads representee to adopt an assumption of fact,

representee then relies on aussumption to his detriment, representor then denies truth

Equitable estoppel – operates in the same way except applies to representations and

assumption about future conduct “promise to do something"

Leadin case WS su est uni ied doctrine os esto in Aus no need distin uish Verwa




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legal consideration or formality requirements not satisfied when parties assumedthey had been).

o logical course for court to adopt in “making good” the assumption here is to hold the

Representor to his/her representation, which would necessitate a court order:

preventing the Representor from exercising strict legal rights under contract (e.g.right to rescind in certain circumstances, or right to terminate); or allowing other party to sue for breach of contract and to seek appropriate orders for

specific performance or damages.• Where estoppel is raised where there is no pre-existing contractual relationship (a Waltons

Stores scenario):o estoppel could be used as a “sword” – a cause of action in itself.o party suing would seek equitable relief by way of damages or order for specific performance

in relation to the promise not kept.• But note:

o minimum to do equity could require only reliance based damages, and not expectation baseddamages.



9.1 Express Terms

9.2 Identifying express terms

Statements made during negotiations (assuming no PER)o Is the statement a mere representation or promissory in nature?

Language used – is the language used promissory in nature ( Savage

* ’estimated speed ) Expertise of the parties – statement made by a party wil expertise is more

likely to be promissory in nature (Oscar Chess *2nd hand car ) – if statement is made to induce then prima facie inference was intended tobe a term (Dick Bentley *odo meter , Smythe * e-bay plane)

Importance of statement – is statement objectively important (Van den *white ants) Time – immediately before? (Van den, USSC v Hospital)) Form – if document is a formal clear set of parties intentions then PER will

apply, if they are less so oral evidence may be admitted, depends on thefacts of each case (Equuscorp * loan agreement )

Other relevant factors – intentions of the parties are ascertained objectivelyby placing RP in the same situation of the parties (Hospital Products)

Written terms and the effect of a signatureo Signature will be binding even if not read (L’Estrange * ciggie machine, Toll,

Fitness First ) Also applies internet (eBay v Creative)

o Exception: If document cannot be considered contractual in nature of there wasa misrepresentation that lead to signing (Curtis v Chemical Cleaning * wedding

dress, failure notify breadth of clause)

9.2 Incorporation of terms by notice

Where there is no signed contract parties may try and rely on terms incorporated by notice.Two main issues are timing and were reasonable steps were brought to attention of theparty to be bound.

o Timing

For written terms to form part of the contract, they must be madeavailable before the contract is made and be given a reasonableopportunity to read them (Oceanic Sun Line * Greece, ticket sold inSydney is option (terms of contract remain the same at time of purchase))

o Knowledge or notice

A party who actually knows that a delivered document displayedbefore the contract is made contains contractual terms they arebound (Parker * cloak room)

If party has no knowledge, party will be bound if the delivered termshave been available such that reasonable notice of them can be takento have been given (Parker )

If the displayed terms are not in a document reasonably thought to be‘contractual’ in nature then the party seeking to incorporate themmust take reasonable steps to bring them to the notice of the otherparty (Thorton v Show Lane Parking)

Where a term is particularly onerous the party seeking to enforce theterms must take special steps to reasonably bring them to theattention of the other party (Interfolio * onerous late fees)

Express terms are terms that have been expressly stated in words (oral or writing)…

‘representation’ mere representation will not be included in K but one promissory in nature will be

‘condition or warranty’ are both K terms, condition > warranty which is less

serious (not lead to K being cancelled)



If terms differ from the ones in the orgianl K, then orgianal ones are theproper ones (eBay v Festival* resell ticket )

Only applies to unsigned documents (Toll, Fitness)

9.4 Incorporation by course of dealingso Where parties have a history of dealings terms of an earlier contract can be

held to be terms incorporated into a later contract ’ even if not done explicitly(Balmian New Ferry *one penny ticket )

Course of dealing must be regular and uniform (DJ Hill * )

Document relied on must be reasonably capable of being considered acontractual document (DJ Hill )

o In course of dealings, time of signing matters (DJ Hill **Eggleston states it does

not, defeats purpose of course of dealings)

o A course of dealings involving the same document does not mean terms wereeffectively incorporated into any one of those contracts ( Rinaldi * freight boats)

9.5 Construing the terms

o Once the express terms of the contract are identified then the court must interpret what they mean, to i.d. parties rights/obligations

Courts will apply objective approach in construing the contract, withregard to RP in same position taking into account surroundingcircumstances (Pacific Carriers *back co signed bill of lading, subjective

bank officer not think binding)

Where terms are ambiguous courts will prefer an outcome that produces a reasonable commercial result the parties would haveprobably intended; note where words are capable of only one meaningthen that will prevail, even if ambiguous ( ABC )

Effect must be given to plain meaning of words (Quirke *”goods” used

instead of “services”



10.1 Exclusion Clauses

Exclusion clauses must be ‘clear’ and ‘specific’.

Exclusion clauses will be analysed by ordinary principles of construction, but if the termis ambiguous it will be construed contra proferentum against the party hiding behindthe clause (Darlington Futures * stock broker )

o Four Corners rule

exclusion clauses are unlikely to have been intended to apply to actsthat are unauthorized or outside of the K (Council v West * not exclude

negligence of car park attendant )

o Deviation rules

Party unlikely rely on EC that excludes liability for a loss during adeviation from the contractually agreed route/obligations (Thomas

Transport * fire at home)

o Negligence

Very clear words needed to exclude liability for negligence “damage

howsoever caused” on work if neg only thing captured by clause (Davis

v Pearce Parking)

o Deliberate breach

On the bases that an exclusion clause is incorporated into the contract, person is

privy and legislation has nothing to say then the issue ie whether the exclusion

clause, on its proper construction, limits the liability with regard to the situation at

hand.



11.1 Extrinsic Evidence (PER)

11.2 Is the document wholly in writing? (STEP 1) o Court has preferred the use of the broader approach in determining whether a

document is wholly in writing; writing which appears to represent a writtencontract between the parties is no more than an evidentiary foundation for a

conclusion that their argument is wholly in writing ( State Railway

Authority of NSW v Heath *advertisement ) o No (Hoyt’s)

STEP 2 Effect of PERo Cannot add of vary /contradict terms

Explain i.e 150 km only go 10km bad luck!

11.3 Exceptions to PER (STEP 3) o Collateral contract

Must be consistant with the main contract; cannot alter rights in maincontract (Hoyt’s v Spencer * rental leave earlier )

o Estoppel as a shield (stop statement not being included) Clear and convincing proof is needed (Whitter v Statebank NSW

* overdraft facility) Argument that extrinsic evidence cannot be used to estopp as it makes

PER redundant ( Aus co-op foods v Narco)

11.4 Extrinsic evidence in construing a contract o Relevance of surrounding circumstances

Where there is ambiguity in the K “factual matrix” making it hard forcourts to construe terms through reading alone evidence of surrounding circumstances (to either the written K, or the oralstaement) is admissible (Codelfa Construction v State Railway

Only applies to document wholly in writing and lmits EE being given to add to,

vary or contradict the terms of a K as they appear in K ( State railways v Heath)and limits EE to explain meaning of terms; so how do we know if doc is wholly in

writing?

1. If doc appears to be complete record prevents extrinsic evidence from being

given by a party to add to, vary or contradict the terms of the written K

( strict limb );

2. Court focuses on ascertaining the presumed intentions of the parties by

admitting EE ( flexible limb )

HC not decided on which approach to take ( Equuscorp * loan agreement –

written K superseded oral agreement giving intentions to obj behaviour of

signing final K )




Authority of NSW , Royal Botanic v Sotuh Sydeney Council , Pacific

Carriers, MacDonald, Appleby )

12.1 Implied Terms (gap filling)

12.2 Terms implied by common law o implied in all contracts of a particular class, are independent of parties

intentions; must include the following requirements Term must be applicable to a definable class (Liverpool ); and Must be suitable to be included in all contracts of that class by reason of

necessity (Liverpool City Council v Irwin* clean general area in line

with the contract ) (Byrne v Aus Airlines * pilfering)

12.3 Terms implied by fact o Tailored to the particular contract (unique)o Formal contracts

5 point test: Term must be reasonable and equitable, necessary to

give business efficacy, obvious, capable of clear expression and not

contradict any express term of K (Codelfa citing Bp Refinery ) ** not all elements are always relevant

Business efficacy case authority (Re Ronin * land title office check, 5

mins, Moorak *old authority)o Informal contracts

5 point test less rigidly applied: efficacy and reasonableness of theimplied term is overriding concern (Hawkins * will execution)

inferred from actual intention of parties implied from presumed intentions (harder then inferred)

12.4 Terms implied by custom o Four stage test per Con-Stan v Norwich * insurance broker

Existence of custom or usage is a question of fact Must be so notorious that everyone making K would inc it Not applied if runs contrary to original K Not matter whether parties have knowledge of it

Terms may overlap! ( Byrne v Aus Airline * pilfering workers)

12.4 Implied duty of good faith (HC undecided)

A contract can include terms that the parties have not referred to at all. In certain

situations, the law imply terms into the contract if they do not contradict an

express term. Also, the more complete the contract, the less likely the courts will

be able to find the implied terms.



o Good faith – “a party must not exercise discretion for an extraneous or improper

reason”: Burger King Corporation v Hungry Jacks Pty Ltd (acting to ‘destroy’ HJ wasextraneous to the purpose of a partnership). o Reasonableness – “a duty to act in an unbiased way, and to verify the reliability of

information. Mere honesty is not reasonableness”: Renard Construction v Minister for Public Works * cancel of contract, mis information

How are these implied into a contract? o Goof faith

Implied by fact Implied by law – “catergories of contracts’ (Burker King)

Gov’t contracts (Hughes)o Reasonableness

Implied by fact (Renard Construction v Minister for public works) Implied by lae (Renard *obiter )

o A duty of good faith or reasonableness does not prevent a party from having regard to his orher own legitimate interests.o “Legitimate interests” do not exclude terminating a contract where trust and confidence have

been undermined: Gary Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd

12.5 Terms Implied by Statute (overrides CL)

Trade Practices Act 1974, consumer protection legislation

Consider the following:

o Does the Act apply to the contract in question?

o If so, which term or terms is implied into the contract?

o To what extent, if any, can the liability of the supplier of goods or services under

those implied terms be limited or excluded?

Terms are only implied into contracts by Pt V, Div 2 of the TPA

The contract must be made by a corporation (or certain natural persons as set out in ss5 or

6) for the supply of goods or services to consumers

See definitions s4(1) of supply, goods and services

What is a consumer? See ss4B(1)(a) and (b) Goods or services acquired for personal, domestic, or household use or consumption

(PHDUC) is interpreted quite broadly

Objective test

It doesn’t matter if the goods were purchased for the purpose in which they are generally

used

s69 – terms as to title, possession, encumbrances

s69(1)(a) – supplier must have title to sell the goods

s69(1)(b) – covers you for things that jeopardise your possession of the goods after the sale

s69(1)(c) – requires there are no claims outstanding on the goods when they are sold

(encumbrances = mortgages)

s70 – correspondence with description Includes situations where you order goods from a catalogue

The goods you receive have to correspond with the goods you wanted/the description

S72 – correspondence with sample

Implied condition goods will correspond with the sample

Can’t rely on these terms in auction

s71(1) – Merchantable quality



Implied condition goods will be or merchantable quality, except in circumstances listed in

ss71(1)(a) and (b) – defects being drawn to customers attention, or reasonably found before

entering into contract

See s66(2) for what it means to be of merchantable quality

S71(2) – Fitness for purpose

Implies a term goods will be fit for a special purpose, provided such purpose was made

known to the seller

Provides a higher standard

Different terms are implied for contracts for services

Note contrast to contract of services (employment contract)

s74(1) – implied term that services will be provided with due care and skill

the standard of care increases with profession to be an expert

s74(2) – implied term that services will be reasonably fit for their purpose (qualified

architects and engineers exempt)

Attempts to exclude part 5 of the TPA are void under s68, but subject to s68A

By virtue of s68A if the goods are not PHDUC, the corporation can limit its liability (however,

only slightly)

Remedies:

o If the implied term is a condition, the consumer is entitled to rescind the contract

o If the implied term is a warranty, the consumer is only entitled to damages

Master Notes Contract Law Improved)

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Transcript of Master Notes Contract Law Improved)